Quotulatiousness

June 6, 2013

IMF forced to admit that the Greek bailout “included notable failures”

Filed under: Economics, Europe, Greece — Tags: , , , , — Nicholas @ 08:58

In the Guardian, Larry Elliott, Phillip Inman and Helena Smith round up the IMF’s self-criticisms over the handling of the bailout package imposed on Greece:

In an assessment of the rescue conducted jointly with the European Central Bank (ECB) and the European commission, the IMF said it had been forced to override its normal rules for providing financial assistance in order to put money into Greece.

Fund officials had severe doubts about whether Greece’s debt would be sustainable even after the first bailout was provided in May 2010 and only agreed to the plan because of fears of contagion.

While it succeeded in keeping Greece in the eurozone, the report admitted the bailout included notable failures.

“Market confidence was not restored, the banking system lost 30% of its deposits and the economy encountered a much deeper than expected recession with exceptionally high unemployment.”

In Athens, officials reacted with barely disguised glee to the report, saying it confirmed that the price exacted for the €110bn (£93bn) emergency package was too high for a country beset by massive debts, tax evasion and a large black economy.”

Under the weight of such measures — applied across the board and hitting the poorest hardest — the economy, they said, was always bound to dive into an economic death spiral.

May 30, 2013

Latest EU legal move may drive support to UKIP

Filed under: Britain, Europe, Law — Tags: , , , , — Nicholas @ 08:13

Mats Persson explains why Nigel Farage and UKIP may see a spike of support when the latest legal challenge gets going:

The European Commission will today take the UK to the European Court of Justice — the body meant to police the EU treaties — over its rules on EU migrants’ access to benefits. The Commission says the UK’s so-called “right to reside” test — a filter used to make sure that EU migrants are eligible to claim benefits — is illegal under EU law as British citizens pass it automatically. The UK Government is disputing this claim saying it is clear that the UK rules “are in line with EU law.” In other words, the folks in Brussels are about to throw a hand grenade into the already red-hot domestic EU debate.

The legal details around this case are hugely complex as are the rules governing EU migrants’ access to benefits […] But essentially, this is about the EU’s one-size-fits-all model sitting poorly with the UK’s ‘universalist’ welfare system, which is largely made up of means tested benefits rather than contribution-based benefits — unlike many other systems in Europe. The UK government feels it needs a filter — practically and politically — to make sure migrants come here to work rather than to claim benefits. Legally this is a grey area but it’s clear that the Commission is taking the strictest interpretation.

As I’ve argued before, claims that EU migrants come here in droves to claim benefits are widely exaggerated — and free movement of workers has been largely beneficial for the UK and Europe. However, it’s clear that the combination of immigration, Europe and benefits is one of the potentially most toxic ones in modern day politics, so needs to be treated with kid gloves. Even if all the evidence suggests EU migrants are less likely to claim benefits than British citizens, the perception of “benefit tourism” is still absolutely explosive.

May 16, 2013

You don’t have to be a “Little Englander” to think the UK would be better off outside the EU

Filed under: Britain, Europe — Tags: , , , — Nicholas @ 08:03

In sp!ked, Rob Lyons explains that it’s not just the neanderthal throwback Tories who are questioning whether the UK should leave the European Union:

Over the past week, there has been the most serious discussion about Britain leaving the European Union since it first joined in 1973, and since the British electorate voted in its only referendum on EU membership, under Harold Wilson’s Labour government, in 1975. This discussion a good thing, because it really is time we made a collective dash for the exit from the EU.

[. . .]

The EU doesn’t only elevate technocrats in the economic sphere. More and more political and social policy is also effectively being guided from Brussels. Consider an opinion piece [in the] Guardian this week, by the head of policy at Friends of the Earth UK, Craig Bennett. Bennett argues that the ability of the EU to impose rules and regulations on Britain has improved our health and environment. To be explicit: Bennett thinks it is better that people outside Britain impose these things upon us, even over the heads of our elected representatives. Where a national government might have to balance costs and benefits, and take into consideration the stated desires and priorities of voters, regulations and directives from Brussels can be imposed free from such consequences and accountability. From the point of view of NGOs and lobbyists, this is great news. Why try to change popular opinion when you can simply get the green light from some unelected body of technocrats?

To be anti-EU does not mean being anti-Europe. True, there is a fair degree of parochialism and anti-immigrant sentiment among many of those in Britain who want out. But those of us who believe in having closer ties with Europe and greater freedom of movement across the continent should also be opposed to the EU. Because, thanks to its anti-democratic institutions and its imposition of draconian policies on unwilling citizens, the EU is now doing more harm than good for the cause of creating a sense of European common interest. It might be uniting national elites, allowing them to take refuge from their electorates in the citadels of Brussels, but it is disempowering and even dividing the peoples of Europe — Germans vs Greeks, for example, or enlightened Western Europeans against allegedly backward, racist Hungarians.

Despite the creation of the European Parliament in 1979, there is no meaningful European demos. But the ability to move and trade freely is a good thing — something we could surely retain without the bureaucratic honeypot of the EU’s institutions. It’s time for all Europeans to reimagine how we might live and work together — and Britain marking a sharp exit from the anti-democratic, pseudo-unifying mess that is the EU could be the perfect catalyst for that.

May 5, 2013

An independent Scotland might not have an easy path to EU membership

Filed under: Britain, Europe, Government — Tags: , , — Nicholas @ 00:01

At the EUobserver, Benjamin Fox outlines the potential trouble spots for a post-independence Scottish government in any attempt to join the EU directly:

Scottish first minister Alex Salmond has indicated that he wants to keep the pound sterling rather than join the euro despite the fact that a commitment to join the single currency is in all recent EU access treaties.

Meanwhile, with Scotland having a large fisheries sector and being one of the largest claimants of EU structural funds in the UK, it would be likely to seek its own country-specific exemptions and opt-outs.

There has already been confusion over whether Scotland would have to negotiate its own accession treaty with the rest of the EU. Although Scottish ministers have claimed that this would be a formality, it admitted that it has not sought legal advice. In response to parliamentary questions, European Commission President Jose Manuel Barroso said that “a new state, if it wants to join the EU has to apply to become a member of the EU, like any state.”

The committee concluded that “it is clear from these statements that there is no formal, automatic right to Scottish membership of the EU.”

It noted that regarding Scottish EU membership as a formality “seems to us to misjudge the issue and underestimate the unease that exists with the EU member states … about Scottish independence.”

It said Scotland could also struggle to secure the same opt-outs as Britain together with new Scotland-specific exemptions.

May 3, 2013

A “bunch of fruitcakes, loonies and closet racists” finished second in UK by-election, gain seats in local elections

Filed under: Britain, Politics — Tags: , , , , — Nicholas @ 09:44

The initial reports from the UK’s local elections yesterday were certainly encouraging for the UK Independence Party:

Britain’s populist United Kingdom Independence Party made sweeping gains in local elections and finished second in a parliamentary by-election, according to results announced Friday, shaking mainstream political parties, consolidating its position as an emerging political force and claiming a “sea change” in national life.

Once scorned by Prime Minister David Cameron as “a bunch of fruitcakes, loonies and closet racists,” the party, which wants Britain to leave the European Union and strictly control immigration, gained about a quarter of the vote in a series of elections in different areas of the country on Thursday, according to an initial count. The outcome represented the party’s fourth electoral advance in six months.

“We have been abused by everybody, the entire establishment,” Nigel Farage, the Independence Party leader, told the BBC, “and now they are shocked and stunned that we are getting over 25 percent of the vote everywhere we stand across the country. This is a real sea change in British politics.”

A government minister, Kenneth Clarke, had also dismissed party members as “clowns,” prompting Mr. Farage, in a string of TV and radio interviews, to parry with, “Send in the clowns.”

April 27, 2013

The misplaced outrage over Amazon’s tiny tax bill in the UK

Filed under: Books, Britain, Business, Economics, Europe, Media — Tags: , , , , — Nicholas @ 08:40

Tim Worstall explains that the current efforts by various campaigners including Stephen Fry are not only a waste of time and effort, but betray a fundamental misunderstanding of how the EU is set up:

There are several points that could be made. One being that selling to Brits from Luxembourg is not tax dodging, it’s exactly what the EU intends the Single Market should be. A, umm, single market across 27 countries. A second might be that even if we start to whine about UK warehouses, tax is still not due here. Our double taxation treaty with Luxembourg means that such warehouses do not lead to tax being due. And that’s from 1968 or so when Wilson ruled: it’s also a standard part of all double taxation treaties and for good reason.

(For example, the metals trade uses warehouses in Rotterdam as the point at which a contract is concluded. The cut flowers business warehouses in a small village near Schipol. Should Holland get all the tax from the world’s metals and flower businesses? Or should everyone be taxed where they really are, not the warehouses?)

But there’s much worse than this. We’ve had the Margaret Hodges screeching that we’re talking about immoral, not illegal. The TJN and other fools similarly scream about how awful it is that people can do business without paying tax. And it is precisely all of this activism that leads these gentle booksellers to spend their year collecting signatures. To absolutely no avail whatsoever.

For in the year they are complaining about, last year, 2012, Amazon did not make a profit. A $39 million loss in fact according to their accounts. It’s simply not true that “tax dodging” by Amazon is leading to the crucifixtion of the independent book shop. That’s a lie that’s been foisted upon people by the obfuscations of the campaigners.

April 24, 2013

More on the currency choices facing an independent Scotland

Filed under: Britain, Economics, Europe — Tags: , , , , , — Nicholas @ 10:49

John Kay works through the short list of options about money that a newly independent Scotland would need to decide about:

Speculation about Scotland’s currency future would begin on the day Scotland voted for independence — or the day on which a poll showed that this result was likely. Scotland would have three main options — the euro, the pound sterling, or its own distinct money.

The euro is the official currency of the EU, and Scotland would in principle be committed to its adoption. But there would be little enthusiasm for that course in either Edinburgh or Brussels, and Scotland — like the UK — would not meet the criteria on debt and deficits for joining the euro. A vague Scottish aspiration to join the single currency at some distant date would probably satisfy everyone.

The sensible outcome would be continued currency union with England — or with the entity that, in deference to Wales and Northern Ireland, participants in the Scottish debate call rUK — rest of UK. Scotland might ask for — and get — a Scottish economist on the Bank of England’s Monetary Policy Committee (not a representative of Scotland — the rules of the committee preclude representative roles). But that would be the extent of Scottish influence on monetary policy.

[. . .]

If I represented the Scottish government in the extensive negotiations required by the creation of an independent state, I would try to secure a monetary union with England, and expect to fail. Given experience in the eurozone, today’s conventional wisdom is that monetary union is feasible only as part of a move towards eventual fiscal union. But desire to break up fiscal union was always a major — perhaps the principal — motive for independence in the first place.

Scotland could continue to use the pound unilaterally, whether the Bank of England liked it or not — as Ecuador uses the dollar and Montenegro the euro. But this is not really an attractive course, and the only countries that have adopted it are those — such as Ecuador and Montenegro — whose monetary histories are so dire that they prefer to entrust their policies to foreigners.

April 23, 2013

Independent Scotland would not be in currency union with the UK

Filed under: Britain, Economics — Tags: , , , — Nicholas @ 09:08

In the Guardian, Patrick Wintour and Severin Carrell cover the latest provocative notion coming out of London, directed at the Scottish separatists:

An independent Scotland would be forced to adopt new currency arrangements that would be a “very deep dive into uncharted waters”, George Osborne has warned. The chancellor said an independent Scotland would be unable to operate with a currency linked to sterling, let alone be able to form a currency union with it.

“The best arrangement is if they stay in the UK,” he said.

Osborne said he thought it “unlikely” the rest of UK would agree to a currency union with Scotland, noticeably hardening his rhetoric against Alex Salmond’s proposal.

Speaking on BBC Radio Scotland, the chancellor said: “Why would it want to risk a currency union? We’ve got a currency union in Europe and it’s called the euro, and look at all the problems that has had trying to co-ordinate the economic policies of different countries.”

Setting out the options, the chancellor said: “I think Scotland could either join the euro, and Alex Salmond is very nervous of saying that, or Scotland can set up its own currency. That is what lots of countries do, but Alex Salmond is again nervous of saying that.

“They can use the pound without our consent, like Panama uses the American dollar, or they can negotiate with the rest of the UK to form a currency zone. But Britain has had poor experience with things like the ERM [exchange rate mechanism], when it has tried to lock or peg its currency together with other currencies. So it is not clear that it would be in the rest of the UK’s interest to enter into a euro-style currency zone with the rest of Scotland.”

April 21, 2013

EU banking governance as situational comedy

Filed under: Bureaucracy, Economics, Europe — Tags: , , , — Nicholas @ 09:14

In the Telegraph, Jeremy Warner pokes a bit of fun at the EU’s self-inflicted media pratfalls over the Cypriot banking “bailout”:

For the last time, I never used the word “template”. Thus said Jeroen Dijsselbloem, President of the Eurogroup, at his IMF press conference on Saturday. This is about whether the troika’s disastrous mishandling of the Cypriot bailout should be used as a model for future banking insolvencies in the eurozone. The row shows no sign of abating. OK, so Mr Dijsselbloem never did use the word “template” in originally welcoming the Cypriot defenestration, but that’s what he meant, forcing him quickly to backtrack when it was pointed out to him that his remarks might prompt a run on banks elsewhere in the eurozone.

But hold on a moment. Wolfgang Schauble, the German finance minister, said on Friday that Cyprus did provide a model in terms of bailing in depositors, so who’s right? Well it is sort of a model, Mr Dijsselbloem said at his IMF press conference, in the sense that common principles would in future be applied to banking resolution, but each case would no doubt be different and have its own defining characteristics. All clear now?

April 15, 2013

Why UKIP has been drawing support away from the Conservatives

Filed under: Britain, Politics — Tags: , , , , — Nicholas @ 09:59

In the Telegraph, Ed West explains some of the reasons for UKIP’s rise in support at the expense of David Cameron’s Tories:

Across the North of England, Ukip is able to appeal to a wide range of socially conservative people who hate the Tories as the people who destroyed their towns and yet are voting for Thatcher’s heir.

The key to David Cameron’s failure, in 2010 and since, has been the pursuit of the centre ground. The key to Ukip’s success is their understanding that there’s no such thing, and that on a range of issues — health, transport and jobs — the public are more Left-wing than the powers that be, and on several others — crime, Europe and immigration — they’re considerably more Right-wing. Whether Ukip’s economic policies would help working-class people is open to debate, although restricting unskilled immigration would help.

The cornerstone of Ukip’s support is the subject of mass immigration, which is not only an unpopular process in itself, but tends to create a code of dishonesty and cant in the political class, further driving them apart from the public. It is an issue inescapably tied up with the European Union, and Ukip has successfully (so far) negotiated a middle course close to the centre of public opinion; most people do not share the political elites’ talk about “Britain’s diversity is its strength”, but neither do they dislike immigrants or wish to support the politics of hate. They just don’t want their country changed beyond recognition, and don’t see why they should be condemned for this.

None of this would matter, of course, if people had particular confidence that one of the major parties knew what they were doing with the economy. As it is, Labour got us into this mess, while having George Osborne in charge rather feels like being on an aeroplane where the company owner’s 12-year-old son has insisted on being the pilot. I hope he knows what he’s doing, but I’m prepared to let someone else have a go.

April 1, 2013

QotD: The Social Democratic Moment

Filed under: Europe, Government, Quotations — Tags: , , , , — Nicholas @ 00:01

The 1960s saw the apogee of the European state. The relation of the citizen to the state in Western Europe in the course of the previous century had been a shifting compromise between military needs and political claims: the modern rights of newly enfranchised citizens offset by older obligations to defend the realm. But since 1945 that relationship had come increasingly to be characterised by a dense tissue of social benefits and economic strategies in which it was the state that served its subjects, rather than the other way around.

In later years the all-encompassing ambitions of the Western European welfare state would lose some of their appeal — not least because they could no longer fulfill their promise: unemployment, inflation, ageing populations and economic slowdown placed insuperable constraints upon the efforts of states to deliver their half of the bargain. Transformations in international capital markets and modern electronic communications hamstrung governments’ capacity to plan and enforce domestic economic policy. And, most important of all, the very legitimacy of the interventionist state itself was undermined: at home by the rigidities and inefficiencies of public-sector agencies and producers, abroad by the incontrovertible evidence of chronic economic dysfunction and political repression in the Socialist states of the Soviet bloc.

Tony Judt, “The Social Democratic Moment”, Postwar: A History of Europe Since 1945, 2005

March 29, 2013

Cyprus has become the EU’s “lab rat”

Filed under: Bureaucracy, Economics, Europe — Tags: , , , — Nicholas @ 09:59

In sp!ked, Bruno Waterfield talks about the EU’s most recent involuntary experimental subject, Cyprus:

Every negative European political trend has deepened in the latest round of the Eurozone crisis, as Cyprus has been treated by the EU with a disdain for self-determination worthy of the high age of imperialism. It is this which is really troubling, not the haircuts for depositors or the bank closures. In effect, an entire island nation has been made a laboratory rat for a new Eurozone experiment in rebalancing economies in the EU single currency — whether the Cypriots like it or not.

Cyprus is the perfect fall guy for the EU and IMF experts who, despite the mess in Greece and elsewhere in southern Europe, still believe they know best how to run a nation’s affairs. That’s because, as well as being too small to count, especially for the markets, Cyprus is easily painted as a bad guy, a swarthy, even Levantine crook which launders dirty Russian money (nearly a third of Cypriot bank deposits) for ‘dodgy’ oligarchs. This whiff of corruption (nothing new to Cyprus, or other European banks for that matter) provides the perfect pretext for treating Cyprus as a case apart. This is meant to soothe the fears of senior northern European debt holders — it is corrupt Cyprus, and not failed private risk in general, that has been targeted.

So, because it is small, and in the eyes of the Eurozone social engineers, easily contained, Cyprus has been selected to be an experiment, potentially a model for Portugal or Spain. And if it all goes horribly wrong… well, Cyprus is small and a dodgy special case, so who cares? The EU doesn’t.

March 25, 2013

The Cyprus “deal” decoded

Filed under: Economics, Europe, Russia — Tags: , , , — Nicholas @ 09:04

With a blog post entitled “THE CYPRUS HEIST GOES THROUGH: And it’s an Orwellian masterpiece“, you could say that this is an unfair summary of the situation:

Somewhere, George Orwell is spinning in his grave — although he wouldn’t be even remotely surprised by the 1984-style nonsense being hailed as a compromise by the Troikanauts and Nicosia’s embarrassed leaders.

This is the deal: the levy is called something else scrapped, and none of the deposits below €100,000 will be stolen included.

The new lunacy idea sees Laiki Bank closed. The entirety of its €4.2bn in deposits over €100,000 will be placed in a “bad bank”: why you would put healthy deposits in a bad bank eludes me, but we’re really just moving the stash around here: the bad bank’s resources will be confiscated. We’re talk a 100% haircut for all these savers.

And don’t be fooled by the Berlin propaganda about Russian money-laundering. First up, being a rich Russian doesn’t automatically make you a crook; and secondly, nowhere near all — possibly under half — are Russian anyway: UBS, several Israeli banks, a number of French banks will have depositor’s money taken out of them to pay for the ambitions of Brussels-am-Berlin.

There’s more: all the bondholders in Laiki also take a 100% haircut.

[. . .]

Entirely appropriate however was the choice of Wolfgang Schäuble to face the cameras and ‘explain’ why none of this would need the approval of the Cypriot Parliament. Just “approved by the 17 eurozone finance ministers comparatively quickly, after about two hours of further deliberations”. As to why it needed FinMin approval (but not that of the citizens’ representatives) get a load of this for jargonised bollocks:

“This plan will not require the approval of the Cypriot parliament because the losses on large depositors will be achieved through a restructuring of the island’s two largest banks and not a tax.”

Update: I think Tyler Cowen gets it exactly correct here:

The capital controls will have to be strict. What will the price of a Cypriot euro be, relative to a German euro? 50%? I call this Cyprus leaving the euro but keeping the word “euro” to save face. And yet they fail to reap most of the advantages of leaving the euro, such as having an independent monetary policy.

March 24, 2013

The domestic economy of Cyprus is slowing to a stop

Filed under: Economics, Europe — Tags: , , , , — Nicholas @ 10:09

In the Telegraph, Colin Freeman looks at how the banking crisis is impacting ordinary Cypriots and retired EU citizens in Cyprus:

Last weekend, the small Mediterranean island was plunged into the epicentre of the eurozone crisis when Brussels finance chiefs, led by Germany, demanded a levy of up to ten per cent of savers’ deposits in return for a 10bn euro bail-out of the country’s ailing banks. The move left many of Cyprus’s 60,000-strong British community facing heavy losses on retirement nest eggs — and as the week rolled on, that looked like being just the least of their worries.

On Thursday, unhappy at the Cypriot parliament’s rejection of the deal, Europe’s Central Bank then threatened to cut financial life support for the island altogether, a move that would have led to its banking sector collapsing, and savers losing not just a percentage of their money, but all of it. It was only thanks to a last-minute agreement hammered out on Friday night, which is expected to restructure the country’s banks and restrict the levy to deposits of more than 100,000 euros, that all-out chaos was averted. For now, anyway.

[. . .]

Since last weekend, when all of Cyprus’s banks were shut to stop a run on withdrawals, work has ground to a halt, as the repair man has been unable to buy in the materials he needs from suppliers, who are all now demanding cash. The job symbolises the malaise of the wider Cypriot economy, built on shaky foundations, and now in a state of paralysis, with thousands of shops, businesses and restaurants unable to operate properly because of the financial uncertainty.

“None of my food and drink suppliers are taking bank payments any more,” said Yiota Vrasida, 43, who owns a café in the winding streets of the capital, Nicosia. “We can keep going until this weekend, but that is about it.”

[. . .]

“Nobody will want to leave so much as 10 euros in any Cypriot bank any more,” said Dino Karambalis, 49, an IT worker, standing at the end of a 30-people-long queue at the Laiki Bank, where he had 90,000 euros in savings. “They say this levy is only for Cyprus, but why should anyone believe that? This is undermining confidence in the euro as a whole, and in the whole EU project itself. I was pro-European before, but not now.”

This weekend, the Cypriot parliament sought to reassure smaller savers, saying those with less than 100,000 euros would face at most a levy of less than one percent. State television also talked of a one-time charge of up to 25 percent on savings of over 100,000 euros held at the Bank of Cyprus. With that in mind, capital controls will be imposed to stop a run on the banks when they reopen next week.

But whatever new measures come in, some damage has already been done by declaring savers’ accounts to be fair game in the first place. Britain’s Business Secretary, Vince Cable, warned on Friday that it could lead Northern Rock-style runs on banks all over the eurozone in future.

March 22, 2013

Cyprus: the state of play on Friday

Filed under: Economics, Europe — Tags: , , , — Nicholas @ 08:35

In the Telegraph, Thomas Pascoe summarizes the situation in Cyprus as of Friday morning:

As it stands this morning, there is a Plan B on the table after parliament voted down the proposal that every bank deposit in the country be subject to a deduction. The new plan only affects those with deposits over €100,000; however, it will require those depositors to take a loss of up to 40pc. As part of this package, the nation’s two large banks will be saved. However, the structure of the deal requires that one of the pair, Laiki, will be split into “good” and “bad” banks, with large depositors left to chance it in the bad bank.

A word on the thinking behind it. While you and I perceive deposits as secure money (and I have argued that to touch them is an abuse of power), technocrats in Brussels take a different view. They tend to view deposits in the technical sense of being loans to banks. You give the bank your money in exchange for interest, and can call the loan at any time (provided not everyone else is doing the same thing, which is the situation now). The bank loans most of your deposit on again. When countries struggle with too much debt, those who have loaned them money get “haircuts”, or less back than they gave. Following this thinking, the EU’s argument is that if we lend money to failing banks, we too must take a haircut to keep them solvent.

[. . .]

So the compromise deal is an ugly one, involving a precedent (confiscation of deposits) which will cast a pallor over the entire European banking system. But the problems are equally great with any other solution. If the banks are left to fail, depositors lose everything except the scraps recovered by administrators. To argue that they, and the country, must be funded directly by the EU, requires the continued willingness of Germany to act against its own economic interests and support an entire continent on its shoulders, impossible without fiscal and political consolidation which no electorate would assent to at present (not that they are asked, usually).

In my opinion, there is no faster way to destroy confidence in your retail banking sector than stealing the money from depositors with no recourse. I have no idea why the European Union is so hell-bent on crushing the banks, but perhaps they have some looney-tunes notion that they can supplant the existing bank system with something directly operated by the ECB or the EU itself.

« Newer Posts — Older Posts »

Powered by WordPress