Last Days Of 2012: Europe And The US Are Struggling With Self-Created Problems
By Countercurrents.org
30 December, 2012
Countercurrents.org
Europe's economy remains troubled as 2012 comes to its end. Moreover, there is the US fiscal cliff. These important parts of this world system are struggling with problems they created. Developments in Europe in the last days of the year are important for observation.
There are reports of tax scandal in Greece, increased unemployment and no growth in France, initiatives to chart new electoral map in Italy, question of Brexit, Britain’s exit from EU, the Spanish prime minister’s warning of a tough 2013 and a leading Greek politician criticizing market while eurozone is in a double-dip recession.
Graeme Wearden reported*:
French GDP growth cut
In France, new GDP data showed its economy barely grew in the third quarter of 2012. GDP increased by a paltry 0.1%, not the +0.2% first estimated.
The revision means France’s economy failed to post any growth at all over the last 12 months, and reinforces the fact that the eurozone itself is in a double-dip recession.
The number of people out of work in France has risen for the 19th month in a row, to its highest level in nearly 15 years.
The total French unemployment rose by 29,300 in November, to 3.13 million. France's unemployment rate is already 10.3%, rather worse than the UK, Germany or the US, but still below the eurozone average.
Kit Juckes, global macro strategist at Société Générale, is concerned by France's weak growth and Japan's shrinking industrial output. He writes:
Japan is stuck with deflation, Europe is stuck with recession. French Q3 GDP is flat y/y, which makes for a stagnant core and shrinking edges to the Euro Zone.
With a Dickensian flourish, Kit argues that Japan could be the Marley to Europe's Scrooge:
Europe has much to learn from Japan's woes.
The consequences of Europe's weak economy continue to be felt in Japan, where industrial output has slipped again.
Industrial production in the world's third-largest economy fell by 1.7% in November, compared with a year ago.
Japan already in recession and battling deflation, it's another reason to be downbeat about 2013.
2013 will be tough for Spain
Mariano Rajoy defended his austerity program, claiming Spain would be in an "immeasurably worse situation" without it. The Spanish prime minister was giving his end-of-year press conference.
Rajoy said: We are not thinking of asking the European Central Bank to intervene and buy bonds in the secondary market...But we can't rule it out in the future. Spain will ask for help if needed.
Rajoy said: 2012 was tumultuous, 2013 will be tough, particularly the first half of the year as the ongoing recession continues to bite.
Rajoy pinned the blame for the economic crisis on his predecessors.
He said: Things have been more difficult than we expected. Austerity has been very unpopular.
There came news of another fall in Spanish retail sales.
Retail sales across Spain slumped 7.8% in November, compared with a year earlier. That's the 29th monthly fall in a row.
Spanish retailers have already admitted that Christmas did not go well, as the public suffered from the recession, austerity cut backs and tax rises.
Economist Shaun Richards fears that Spain will continue to suffer in 2013:
Whilst there has been an export improvement this also represents a fall in imports due to economic weakness.
In a country with unemployment rate already at 25.02% as of the official numbers for the third quarter that is a prospect beyond chilling which sends a shiver down the spine. Unemployment of 5,778,100 is already far too high.
European markets lose ground
Europe's stock markets have closed, many for the last time in 2012. And, they lost ground.
Closing prices were: FTSE 100: down 28 points,
German DAX: down 43 points, French CAC: down 54 points, Spanish IBEX: Down 149 points and FTSE MIB: down 134 points.
Monti’s new bid in Italy
In Italy, Mario Monti has decided to lead a group of centrist parties into next year's general election.
Monti's decision to run as a prime ministerial candidate has surprised experts and commentators.
The immediate reaction is that this new centrist coalition will not win February's election.
Monti said: I'll challenge the traditional left-right politics.
"The traditional left-right split has historic and symbolic value" for the country, but "it does not highlight the real alliance that Italy needs - one that focuses on Europe and reforms," Monti said after a meeting with centrist politicians.
After weeks of speculation, and negotiations with various parties, Monti has decided to create a new political group.
Monti said he will oversee the creation of a coalition of centrist parties. They will run under his reform program – Agenda Monti – for seats in both the lower house of parliament and the senate.
Now, Italy's left-leaning Democratic Party, led by Pier Luigi Bersani, holds a solid lead in the opinion polls.
Brexit developments
The UK's Europe minister has called for a settlement with the rest of Europe that leaves Britons "comfortable" with their place in the EU.
In the latest part of the Guardian's series on the 40th anniversary of Britain joining the EEC, David Lidington insisted London could hammer out a new settlement.
He said: While we could survive outside, that would not be the best outcome for British interests, either economic or political.
As the Daily Telegraph's Bruno Waterfield reported:
The former European Commission president, who is credited as the architect of the modern EU and the euro, has broken ranks with other European leaders to offer Britain an exit from the Union.
"The British are solely concerned about their economic interests, nothing else. They could be offered a different form of partnership," he told Handelsblatt, a German financial newspaper.
"If the British cannot support the trend towards more integration in Europe, we can nevertheless remain friends, but on a different basis. I could imagine a form such as a European economic area or a free-trade agreement."
Flaws in eurozone
A Greek politician has raised the eurozone issue.
The Guardian’s correspondent Helena Smith reported from Athens:
The architect of Greece’s admittance into the eurozone has ended the year with a damning indictment of the single currency bloc.
Greece’s former prime minister Kostas Simitis, who oversaw the country’s entrance to the euro zone in 2001, slammed what he described as the “structural flaws” of the euro zone in an article published in December 28, 2012 issue of Frankfurter Allgemeine Zeitung.
Electing to use the prominent German daily to make the point that it was wrong to single out Greece as the sole instigator of the worst economic crisis to befall Europe since the Second World War, the German-educated erstwhile socialist leader said the entire architecture of the euro zone had to change. The founders of monetary union, he charged, had wrongfully believed that banks would automatically stop lending to euro zone states that had become overly indebted. “Trust in the power of the market to regulate everything was overly excessive,” he wrote.
A permanent solution to the crisis could only come “through deeper economic and political union,” said Simitis, a revered modernizer in his time even if Greece was later exposed to have cooked the books to get into the cherished common currency bloc. Reality, he argued, was now pressing for “a mutual contribution [to solving the crisis], the extent of which can not be foreseen only by legal texts.”
The biting commentary from one of Greece's leading Europeanists will add fuel to the argument that Berlin will ultimately have to change tune if the euro zone is ever to properly function.
Tax cheat in Greece
Reuters quoted unnamed Athens court officials who confirm that the names of three Papaconstantinou relatives appear to have been removed from the Lagarde List: Greek tax cheats list altered to hide names.
That doesn't prove that the ex-finance minister was involved, of course.
George Papaconstantinou has been dropped from the Pasok party following allegations – which he denies – that he removed relatives' details from the Lagarde List.
In a statement, the junior coalition party said:
It is regrettable that according to the prosecutors' investigation there are clear indications that the list has been tampered with... there is, therefore, a major issue regarding the responsibility of Giorgos Papaconstantinou since he is the one who handled the issue in the worst possible way and after two years declared he had lost the original CD...
Papaconstantinou was succeeded as finance minister by Evangelos Venizelos, who is now Pasok's leader.
Helena Smith reported:
In a full page statement the former finance minister denounces as "appalling" the process of leaks and descriptions of names that have taken place in the last few hours.
"I categorically declare that I had and have no relationship with any account on the list," he says.
Helena Smith has full details of the allegations that broke against Papaconstantinou, related to the list of alleged tax evaders.
Helena wrote:
Drama has erupted over revelations, now being made by the leading Greek daily Ta Nea, that the three names linked to Papaconstantinou in the famous Lagarde list are in fact relatives he allegedly sought to protect.
The three have been named as the two daughters of his politician uncle, the late Michalis Papaconstantinou, and one of their husbands with Ta Nea describing the account of at least one of the holders at the Geneva branch of HSBC as containing $US 1.222.000.
"These individuals, who had been dropped from the [original] list, allegedly held two accounts one of which included $US 1.222.000 while the movement of sums on the other [account] do not appear as it was a closed [account]. This is what emerged from the comparison of the two lists as a result of the investigation by the economic prosecutors," Ta Nea wrote on its website.
As reported earlier, the new list arrived in cinematographic fashion in Athens a few days before Christmas. Ever since prosecutors have been earnestly studying whether it differs from the original handed to Papaconstantinou in April 2010.
Helena added:
The latest list reportedly contains the names of 2,062 individuals according to prosecutors who will study whether any of the depositors actively evaded taxes.
The reports have the potential to rock Brussels too.
Papaconstantinou, who was finance minister when IMF chief Christine Lagarde handed over the list, has robustly denied the suggestion that he manipulated the list in any way.
Track the US Fiscal Cliff
The US Fiscal Cliff is a big news now.
The US president and senior senators are making one last effort to reach a breakthrough.
There are rumors that Barack Obama is proposing a last-ditch 'mini-deal' to ward off the imminent spending cuts and expiring tax exemption that await America once 2013 begins....
The US fiscal cliff drop is driving down shares. The Dow Jones has dropped 100 points in early trading while the main European indices are also in the red.
*guardian.co.uk, “Eurozone crisis live: Mario Monti to lead centrist coalition into Italian elections”, Dec. 28, 2012
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