Cuaderno De Documentacion

SECRETARIA DE ESTADO DE ECONOMÍA,

MINISTERIO SECRETARÍA GENERAL DE POLÍTICA ECONÓMICA DE ECONOMÍA Y ECONOMÍA INTERNACIONAL Y HACIENDA SUBDIRECCIÓN GENERAL DE ECONOMÍA INTERNACIONAL

CUADERNO DE DOCUMENTACION

Número 91º ANEXO VIII

Alvaro Espina Vocal Asesor 6 de Septiembre de 2010

BACKGROUND PAPERS

1. German media report: EU to prepare bail out Spain …7 2. The eurozone’s tragic small-country mindset, FT.com by Wolfgang Münchau…10 3. EU might need to amend treaty, says Van Rompuy, FT.com by Tony Barber …12 4. Mispaced Optimism, The Conscience of a Liberal…13 5. La Nueva Alianza Flamenca supera todas las expectativas en las legislatives belgas, El País de Ricardo Martínez de Rituerto…16 6. El Gobierno frena a los partidos que piden más tiempo para negociar la reforma laboral, El País …18 7. Retrato de un país en crisis, El País de Phil Bennett…20 8. Lo que Merkel propone es matar el crecimiento, El País de Andreu Missé…29 9. Francia quiere reducir el gasto público en 45.000 millones hasta 2013, El País de Antonio Jiménez Barca…31 10. Austeridad o crecimiento, El País de Claudi Pérez…33 11. El ladrillo también, pero de otra forma, El País de Luis Doncel…36 12. Jugando con fuego, El País de Antón Costas…39 13. Mañana es hoy, El País de Luis Garicano…41 14. Apostaremos por España otros 40 años, El País de Santiago Hernández …43 15. Holanda, paraíso del pleno empleo, El País de Isabel Ferrer…45 16. Lecciones del vertido del BP, El País de Kenneth Rocoff…47 17. La Unión Europea debe prepararse para una suspensión de pagos, El País de Alejandro Bolaños…49 18. El mundo y 4,6 millones de parados nos contemplan, El País de Ángel Laborda…52 19. Mismos contratos, distintos despidos, El País de Carmen Sánchez-Silva…55 20. Una oleada de paros en demanda de mejores salarios y condiciones laborales agita el este de China, El País de José Reinoso…57 21. Los 25 gloriosos, El País de Francisco G. Basterra…59 22. Rajoy obvia la ola europea y promete que nadie del PP subirá impuestos, El País de Carlos E Cué…61 23. Las autonomías del PP rebajan pese al desplome de ingresos, El País de CEC/Jp…63 24. Las claves de la reforma laboral, El País de A Romero…64 25. Los buenos resultados de Wall Street, la mejora de las previsiones de la economía germana y el dato de IPC empujan al Ibex 35 a cerrar la jornada en el 3,95%, El País de EFE…67 26. Medidas serias en el ámbito laboral y financiero, El País de IB…68 27. La economía mantiene su ritmo de recuperación en el inicio del segundo trimestre, El País …69 28. Zapatero defiende que su reforma laboral mantiene básicamente los derechos del trabajador, El País de Miguel González…70 29. Seis meses de pérdidas para despedir más barato, El País de I Abellán y MV Gómez…71 30. Los sindicatos exigen cambios o habrá huelga general, El País de Manuel V Gómez…74 31. El Gobierno sólo encuentra rechazo a la reforma en IU en el primer contacto, El País de Fernando Garea…75 32. Comienzo aceptable, El País …77 33. El Gobierno crea un nuevo fondo para financiar despidos de trabajadores fijos a partir de 2012, El País de Lucía Abellán…79

1 34. CCOO critica que el despido improcedente se pague con dinero público, El País …80 35. El Gobierno responsabiliza a CEOE del fracaso en la negociación laboral, El País de I Abellán y M González…81 36. Casi 11 horas intensas, duras e infructuosas, El País de MA Noceda…83 37. Generalización del contrato de 33 días, El País de MVG…84 38. Acuerdo en bonificaciones, jóvenes y modelo alemán, El País de MVG…85 39. ¿Otra reforma laboral inútil?, Cinco Días de Juan José Dolado…86 40. El Gobierno responsabiliza a CEOE del fracaso en la negociación laboral, El País de IA Abellán y M González…88 41. Turquía, Europa y la flotilla de ayuda a Gaza, El País de Hugh Pope…90 42. Geithner testifies; US and China continue negotiations on currency policies, The Washington Post by Howard Schneider …93 43. US firms build up record cash piles, The Wall Street Journal by Justin Lahart…94 44. Federal Budget deficit in may totals €135.93 billion, The Wall Street Journal by Jeff Batear…96 45. Enough with the economic recovery: It’s time to pay up, The Washington Post by Steven Pearlstein…97 46. Van Rompuy caves in: he now accepts Berlin’s position of no institutional change, Eurointeligence Daily Mornign Newsbriefing…99 47. Trichet says ECB to keep buying bonds to fight crisis (correct), Bloomberg.com by Simone Meier and Jana Randow…102 48. Europe’s antipathy to stress tests is well founded, FT.com by Gillian Tett…104 49. BA threatens to favour Madrid, FT.com by Pilita Clark and Richard Milne…105 50. Has muddling Merkel lost her touch?, Spiegel On Line by Charles Hardey…107 51. Merkel’s austerity program is faint-hearted and unbalanced, Spiegel On line…110 52. Prune and grow, The New York Times by David Brooks…113 53. SEC approvers curbs to avoid repeat of flash crash, The Washington Post by Zachary A Goldfarb…115 54. Chinese Exports surge: How sustainable?, Roubini To 5 Today…117 55. Bernanke warns US of unsustainable debt level, The Washington Post by Jin Lynn Yang…119 56. Economic and financial conditions and the federal budget, Board of Governors of the Federal Reserve System…120 57. Workers at Chinese Honda plan March in protest, The New York Times by Keith Bradsher…124 58. Victory for the austerity parti, Daily Morning Newsbriefing…128 59. Don’t blame the euro by Heleen Mees…131 60. Asian data boost hopes of demand recovery, FT.com by Jamie Chisholm…133 61. Switzerland’s new reputation for currency manipulation by James Mackintosh…135 62. Derivatives: A tricky pick, FT.com by Jonathan Ford and Sam Jones…137 63. The global transmission of European austerity, The Conscience of a Liberal…142 64. The General theory of employment, interest, and money, John Maynard Keyes…145 65. The new lesson for resilient Asia, FT.com by Stephen Roach…152 66. Power grows for striking Chinese workers, The New York Times by David Barboza and Hiroko Tabuchi…154 67. As China’s wages rise, export prices could follow, The New York Times by David Barboza…156 68. Labor reform talks in Spain appear at a Stalemate, The New York Times by The Associated Press…159

2 69. Greek default seen by almost 75% in poll doubfull about Trichet, Bloomberg.com by Rich Miller…160 70. A lurch to the right –and to more austerity- forecast in today’s Dutch election, Eurointelligence Daily Morning Newsbriefing…162 71. Fear must not blind us to deflation’s danger, Ft.com by Martin Wolf…165 72. El Gobierno acelerará la reforma de las pensiones “en torno al verano” El País de Andreu Missé…168 73. Les désaccords franco-allemands auront coûté cher à la zone euro, Coulisses de Bruxelles, UE Jean Quatremer…170 74. Patos cojos que se quieren, Project Syndicate by Harold James…172 75. The Nixon shock doctrine revisited by Harold James…174 76. Euro zone finalizes terms of rescue package, The Wall Street Journal by Charles Forelle…176 77. Across Europe, Austerity moves at different speeds, The Wall Street Journal by Marcus Walker…178 78. Finance panel accuses Goldman of stalling, The Wall Street Journal, by John D Mckinnon and Susanne Craig…181 79. Tax Hikes and the 2011 economic collapse, The Wall Street Journal by Arthur Laffer…183 80. Fitch: UK fiscal challenge formidable, The Wall Street Journal by Laurence Norman and Art Patnaude…185 81. Bernanke says economy seems to be on track, The Wall Street Journal by Jon Hilsenrath and Luca Di leo…187 82. While Strauss-Kahn understands the problems of the eurozone, von Rompuy does not, Daily Morning Newsbriefing…188 83. IMF urges swift action to restore confidence and growth in Euro Area, International Monetary Fund…191 84. Concluding statement of the IMF Mission on Euro-Area policies, International Monetary Fund …193 85. La rencontre Merkel-Sarkozy reportée, Libération.fr…197 86. Merkel restaure son leardership national au détriment du leadership européen, Les Echos.fr…199 87. L’austérité généralisée menace-t-ell la reprise européenne ?, Coulisses de Bruxelles, UE de Jean Quatremer…200 88. Doubts raised about ECB bond buying, FT.com by David Oakley and Ralph Atkins…201 89. Push to underpin clearing house foundations, FT.com by Jeremy Grant…203 90. Europe’s illusions, FT.com …206 91. Presidential vote could turn into a disaster for Merkel, Spiegel On Line …207 92. German government agrees on historic austerity program, Spiegel On line …210 93. Oh no, another stability pact beckons, Daily Morning Newsbriefing…212 94. Madmen in authority, The New York Times…215 95. Lost decade, here we come…216 96. Policy and the Tinkerbell principle…216 97. Rashomon in the OECD…217 98. I do not think that word means what you think it means, OECD edition…218 99. Pre-refuting William Galston…218 100. Martin wolf is not a serious person…219 101. GFC to GSC – part 2: nowhere to run to, nowhere to hide by Satyajit Das…220

3 102. Confidencial de Michael Cembalest: Chief investment officer JP Mongan Private Banking…224 103. Frankfurt’s shroud of secrecy should be shed, FT.com by Wolfgang Münchau…225 104. A un minuto de la Guerra, El País.com de Juan Carlos Sanz…227 105. Crisis de Gobierno, sí: elecciones, aún no, El País.com de Fernando Garea…228 106. El 77% quiere nuevos candidatos, El País de F.G.…230 107. Despido más barato, pero menos fácil, El País de Lucía Abellán…231 108. Alemania siempre gana, El País de C.P. …233 109. Un gesto político, El País …235 110. G20 drops support for fiscal stimulus, FT.com by Chris Giles and Christian Oliver…236 111. G20: All change on the fiscal front, Ft.com by Chris Giles …237 112. Global rebalancing policies need coordination: IMF, Reuters by David Lawder and James Pomfret…239 113. Debtor’s prism: who has Europe’s loans?, The New York Times by Jack Ewing…241 114. Finding a bolthole in a risky world, FT.com …245 115. China takes interest in Osborne’s reading list, Ft.com by Chris Giles…246 116. Eurozone woes hit US reform agenda, FT.com by Alan Beattie …247 117. Europe,s banks gasping for breathing space, Ft.com by James Mackintosh…248 118. G20 to delay tough bank regulations, Ft.com by Chris Giles …250 119. Morgan Stanley’s Stephen Roach heading back to New York, Business Briefing by Nisha Gopalan and Jamie Miyazaki…252 120. ECB advocates tightening as US urges domestic demand growth, Bloomberg.com by Mark Deen and Timothy R. Homan…253 121. La UE y Budapest consideran salvajemente exagerados los pronósticos sobre la quiebra de Hungría, El País de Agencias…256 122. Accidente húngaro, El País …257 123. El peligro de quiebra en Hungría agudiza la crisis de la deuda, El País de Andreu Missé…258 124. Hungría agrava la crisis de la deuda, El País de Andreu Missé…259 125. The rebellion against Merkel, Eurointeligence Daily Morning Newsbriefing…261 126. El ejecutivo busca redefinir las causas objetivas del despido, El País de MV Gómez…265 127. Nada garantiza que los mercados se contentes con la reforma laboral, El País de Manuel V Gómez…266 128. El drama es doble: el paro y su factura, El País de Manuel V Gómez…269 129. La colaboración en la búsqueda de empleo como solución. El País de Francisco Aranda…272 130. Modernizar los servicios públicos, El País de Maravillas Rojo Torrecilla…273 131. La sostenibilidad del Estado del Bienestar: congelar menos, reformar más Luis Garicano …275 132. Greetings from RGE, Roubini…282 133. Dettre: la banque centrale doit créer de la monnaie et prêter à 0% aux Etats, Le Monde.fr…284 134. Austerity pays off for Estonia, Spiegel On Line by Jan Puhl…286 135. Why the optimists are wrong about the eurozone, FT. by Wolfgang Münchau…289 136. I very rumeri della manovra, Lavoce Conti Publici di Tito Boeri e Massimo Bordignon…291

4 137. Si el mal banco BCE?, Zeit Online de Mrcos Schieritz…294 138. Report: more than 1,400 former lawmakers, hill staffers are financial lobbyists, The Washington Post by Dan Eggen…296 139. Economy growing slowly but steadily, The Washington Post by Neil Irwin…297 140. CDS, spreads etc, it is all getting worse again, Eurointelligence Daily Morning Newsbriefing…299 141. What do markets want?, Eurointelligence Syndicated Column by Kevin O’Rourke…302 142. German austerity program offers chance for new beginning, Spiegel On Line by Spiegel Staff…304 143. Dette souverainte: la crise n’est pas terminée, Coulisses de Bruxelles, UE …310 144. La desagradable aritmética del ajuste fiscal, http//www.fedeablogs.net/economía, de Jesús Fernández Villaverde…311 145. Estructuras impositivas: España frente a Suecia, http//www.fedeablogs.net/economía, de Jesús Fernández-Villaverde…317 146. Europe must focus on what Works, FT.com by Chris Patten…322 147. European banks: leaning lenders, FT.com by Sarah Gordon and Megan Murphy…325 148. A plan to live with imbalances, Ft.com by Samuel Brittan…330 149. Lessons to be learnt from Kazakhstan, Ft.com by Gillian Tett…331 150. Obama hopes oil spill boosts support for climate bill, The Washington Post by Steven Mufson and Michael D Shear…334 151. The danger of a government with unlimited power, The Washington Post by George F Will…336 152. ¿Poner el parche antes de la herida?: claves para entender y gestionar el riesgo corporativo, Universia Knowledge Wharton…338 153. El tigre enfermo: ¿por qué Irlanda sigue sin ver la luz?, Finanzas e Inversión …341 154. La búsqueda urgente de nuevas estrategias para financiar el sistema de jubilación, Seguros y Pensiones…345 155. Smaller euro nations trail Germany’s locomotive, The Washington Post by Howard Schneider…350 156. Spain struggles to agree on a path to recovery, The New York Times by Raphael Minder and Landon Thomas Jr…353 157. Foxconn raises pay by 30% in China, Ft.com by Kathrin Hille and Tom Mitchell…356 158. Bundesbank suspects a French conspiracy, Eurointelligence Daly Morning Newsbriefing…357 159. Les Allemands ne reconnaissent plus leur BCE, Le Monde de Maria de Vergès…360 160. Perspectivas, desempleo alemán cae ligeramente en mayo, Faz.net …361 161. Christian Noyer juge les banques centrales trop dépendantes des agences de notation, Le Monde.fr de AFP…362 162. The EU and the limits of the austerity hairshirt, Naked Capitalism …363 163. Parenteau: on fiscal correctness and animal sacrifices (leading the PIIGS to Slaughter, part 1) …365 164. Parenteau: leading PIIGS to Slaughter; part 2 by Rob Parenteau…368 165. Fitch downgrades a slew of Spanish banks, Financial Times by Joseph Cotterill…372 166. The Spanish waterfall, Financial Times by Tracy Alloway…373

5 167. Germany’s Bank-Asset-Berg, Financial Times by Tracy Alloway…374 168. Horst Köhler has acted with extreme negligence, Spiegel On Line…375 169. German Central Bankers suspect French intrigue, Spiegel On Line by Wolfgang Reuter…377 170. Despite US deficit concerns, investors still pour money into Treasury bonds, The Washington Post by Neil Irwin…381 171. Spain’s dropout generation, Mises Daily by Jaime Levy Moreno…384 172. Axel Weber blames stimulus for crisis, criticizes ECB decision to by bonds, and rejects common bond, Eurointelligence Daily Morning Newsbriefing…386 173. 31 may 2010 Financial stability review, June, Banco Central Europeo…389 174. ECB warns of hazardous contagion, Ft.com by Ralph Atkins…391 175. La prima de Riesgo de España marca un Nuevo máximo desde la entrada en el euro, El País …392 176. Axel Weber en guerre ouverte contre Jean Claude Trichet, Coulisses de Bruxelles, UE de Jean Quatremer…394 177. GFC to GSC – Part 1 : The year of wishful thinking by Satyajit Das…396 178. Our Epic foolishness, The New York Times by Bob Herbert…401 179. Bernanke says global recovery depends on emerging markets, central banks, The Washington Post by Tomoeh Murakami…403 180. Austrian light on the history of bubbles, Mises Daily by Andy Duncan…404 181. Did hoover really slash spending?, Mises Daily by Robert P Murphy…409 182. The false of austerity and a weak euro, Ft.com by Wolfgang Münchau…415 183. Europe will save its way into the next recession, Spiegel On Line…417 184. Greek lessons for the world economy, Project Syndicate de Dani Rodrik…420 185. Chuck schwab is worried about small investors. Should we worry too?, Bloomberg Businessweek…423

Período: de 12/04/2010 a 14/06/2010 en orden inverso a la fecha

6 Eurointelligence Daily Morning Newsbriefing German media report: EU to prepare bail out Spain

14.06.2010 Frankfurter Allgemeine says talks will start before this week’s summit, as the situation in the inter-bank markets has deteriorated once again; the focus of the package is the state of the Spanish banking sector, as new figures emerge showing massive exposure by French and German banks to the private sector in Spain; the paper says in a comment that the €750bn rescue package looks like another bank rescue package; Le Monde worries about a declassement, as the spread of French bonds over German bonds rises above 50bp; the end of Belgium has a come a step closer as the two Flemish separatist parties score near 50V% of the votes in Flanders – a political tsunami; NVA is now the largest party in Belgium, but its leader says he wants to reach out to the French-speaking Socialist and make a deal to break the gridlock; Herman van Rompuy tells the FT that in his experience, budget consolidation has no effect on growth; Wolfgang Münchau writes in his column that the economic experience of men like van Rompuy is entirely irrelevant; Paul Krugman, meanwhile, advocates that the US slaps tariffs on China and Germany for their egocentrical policies.

14.06.2010 German media report: EU to prepare bail out Spain

This is a rare one newspaper-only scoop. Frankfurter Allgemeine reports this morning that EU officials will start talks about a bail out for Spain, citing unnamed sourced in Berlin. The paper said the situation had deteriorated so much that they did not want wait until the EU summit on Thursday. It also said neither the European Commission nor the ECB excluded an aid package. The paper quoted Spanish officials as denying that they are about to ask for EU aid, and immediatedly pointed out that Greek officials made the same claims before. The trigger is the freeze in the inter-banking market last week as the markets have lost confidence in the Spanish banking sector. In a separate news report, Frankfurter Allgemeine writes that Barroso and Trichet were worried about the state of Spanish banks, and pleaded for aid. The paper also cites the

7 latest statistics from the BIS, according to which German banks had given credits to Spain of $202bn, more than half of which to Spanish banks. The exposure of French banks is $248bn – mostly to companies and households. The Spanish central bank estimates the extent of the bad loans to be €166bn, of which only a quarter has been written off so far. The Spanish bank bailout fund is €99bn. One of the problems now is that Spain has immediate finance needs at a time when market interest rates are rising sharply. The paper also reports that France is getting nervous about the effect of the crisis on its own liquidity. In a short comment, the paper makes the point that the €750bn rescue umbrella is just another bank bailout package. There is no whiff of any of this in the Spanish press this morning. El Pais reports on the latest BIS statistics, citing that the total exposure of European banks to Spain is €600bn (enough to bring the house down). Spain has been the beneficiary of intra-EU credit flows to a much larger extent than Greece, Portugal, and Ireland. Last week, the inter-banking market froze again in parts. The articles quotes that BIS as saying that while the single currency brought a greater diversification of risk, it warned of a contagion if any of the countries were facing solvency problems. Le Monde worries about a declassement The French are getting worried about bond spreads with Germany, which have risen above 50bp for the first time since the start of monetary union. In particular there is now concern that the country might lose the AAA status, despite the promises by the government that the French consolidation is even higher than Germany’s (what consolidation?). Le Monde recalls the situation in 1974 – the last budgetary incident! – since when the country has more or less adhered to a fiscally conservative stance. The end of Belgium has come a step closer This would normally be our main item. In the Belgian elections the separatist NVA has gained a surprisingly strong 30% of the votes, significantly more than the polls projected, and has become the single largest parties in Flanders. Jean Quatremer makes the point that if you add the other separatist parties, 46% of the Flemish people have voted for separation, and if you add the votes of the Christian Democrats, who want a system of confederation, that number goes up to 64%. He says the evaporation of the kingdom continues. In French- speaking Wallonia, the Socialists regained their pole position, which they lost to the liberals last time, and have already announced that they want to work with the NVA. La Tribune has a good news report on the story, quoting socialists as saying that the results constitute a political tsunami. Bart de Wever, the head of the NVA, said he would be ready to reach out to the Francophones, and to agree a modus operandi to unblock the gridlock that has characterised Belgian politics for the last three years. It said the most quoted scenario is for the two election winners – the NVA and the Walloon Socialists to form a joint government. Mr de Wever held out the possibility that he might support a francophone prime minister (as a separatist he does not care too much about running Belgium. What he wants is a deal that would give Flanders a much higher degree of political and economic independence from the central state.)

8 Herman van Rompuy talks to the FT – and attacks the financial markets The FT had an interview with Herman van Rompuy, who made the extraordinary statement that, in his experience, fiscal consolidation “has no real effect on economic growth.” (An extraordinary statement of complacency. It seems that the experience of running of Belgium may, after all, not have prepared him for the job). He also criticised that the financial markets were too complacent for a decade, and were now overreacting. He said: “Most of us are not happy with excessive market developments. But when you look at this in a broader perspective, the markets are sanctioning bad policies, sometimes excessively, disproportionately and based on rumours and prejudices.” In a separate article drawing from the same interview, Mr van Rompuy said he did not prioritise, nor rule out the possibility of Treaty change. But he also made clear that the changes that are about to come will be done within the existing treaty. “I personally am not in favour, because I see all the problems ahead. But my position is not the most important. If there is a consensus on treaty change, I will not oppose it. We are in a crisis. We are in one of the most difficult situations you can imagine. So to exclude certain solutions would not be wise.” Wolfgang Münchau on the small country mindset in the EU You can take Barroso and van Rompuy out of the small open economy, but you can’t take the small open economy out of Barroso and van Rompuy, who babble about competitiveness, and simply do not understand that the EU, the world’s largest economy, is not the sums of its parts. Wolfgang Münchau writes in his FT column that they defend austerity programmes because, in their experience, whatever a small country does has no effect on the rest of the world. But when the EU does it, it is different. Germany, too, has the mindset of the small open economy, which leaves France as the only country, where there is a semblance of macroeconomic thinking at the top levels of government. He concludes that it will be critical for the future of EMU how France will behave – whether it will follow Germany into austerity, or risk a break. Paul Krugman on how to deal with Germany and China Paul Krugman’s blog entries have been getting progressively aggressive of late. He is now advocating a full trade war against China and Germany on the grounds that those two countries pursue egocentral policies with no regard for the rest of the world. In the case of China, the problem is obviously the exchange rate, and in the case of Germany, the drive into austerity. Mark Schieritz observed in his blog Herdentrieb that while the Europeans fully bought into the so-called non-Keynesian effects, the Americans went back to pure Keynesians. They are from Mars, we are from Venus. (should it not be the other way round?) http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2821&tx_ttne ws[backPid]=901&cHash=c246cd672a#

9 COLUMNISTS The eurozone’s tragic small-country mindset By Wolfgang Münchau Published: June 13 2010 23:05 | Last updated: June 13 2010 23:05 The European Union is a tyranny of small countries, and this has served it well. But the small-country syndrome is counterproductive when it comes to macroeconomics. I was struck last week by two remarks from Herman Van Rompuy, the president of the European Council. He defended the fast spreading austerity programmes on the grounds of the robust economic recovery. And on intra-eurozone imbalances, he said it was mostly a problem of countries with current account deficits. Mr Van Rompuy, like the majority of EU leaders, hails from a small country – in his case, Belgium. When small-country politicians talk about economics, they naturally talk within the framework of a small open economy. One of the most important characteristics of a small open economy is that its own actions have little impact on the rest of the world. In a small open economy, success boils down to competitiveness, more or less. Running the Irish economy is like running a very large business, or a football club. In depth: Euro in crisis - Jun-13 EU might need to amend treaty, says Van Rompuy - Jun-13 Lex: Ireland’s financial lessons - Jun-13 Merkel pleads for calm amid coalition disputes - Jun-13 Deal on mechanism for eurozone rescue - Jun-07 To paraphrase a hoary old saying, you can take the Portuguese or Belgian prime ministers out of their small open economies but it seems you can’t take the small open economy mindset out of these men. Mr Van Rompuy does not give the impression that he is about to recommend a policy framework for the world’s largest economy. He has briefly, and bravely, toyed with the idea of a common European bond, but immediately gave up on the idea when he ran into German opposition. There is no vision for the global economy and Europe’s role in it. We have returned to the habit of navel-gazing that has characterised the first 10 years of the euro. Governments now implement austerity packages without any consideration of the effect on other countries. Austerity started in Greece, spread to Portugal, Spain, Italy and Germany. The winner of last week’s elections in the Netherlands, the liberal-conservative VVD, campaigned for an extreme version of austerity – and succeeded. The Bank of Italy last week estimated that the effect of the austerity package would be to reduce the country’s already anaemic economic growth by 0.5 percentage points. In other words, the package is very likely to throw Italy back into recession. The same is almost certainly going to happen in Greece and Spain. The Dutch plan will probably also be significant. Germany’s austerity programme amounts to about half a percentage point of gross domestic product in 2011. The only good news is that France will not be joining in and will not do so until after the presidential elections in 2012. From my own conversations with French politicians and economists, I have no doubt that the majority of them think the German obsession with austerity is crazy. France is probably the

10 only country in the eurozone with a large-country mindset. It is France’s tragedy – and possibly that of the eurozone – that France is not the largest country. The rush to austerity creates a formidable dilemma for France. The strategic alternative is either to accept it or risk a break with Germany, thus reversing more than 25 years of Franco- German monetary and fiscal convergence. It is a deeply serious choice. Nicolas Sarkozy, the French president, last week criticised the European austerity policies as recessionary. He is right. My guess is that he – or his successor – will end up accepting austerity, because of a lack of viable strategic alternatives. But I am not too sure of it. The situation is not the same as it was in the early 1980s, when former president François Mitterrand embarked on a policy of fiscal and monetary rigour. At that time, there was the supposed benefit of a joint economic and monetary future. Today, we know the reality. And if the next French leader were to conclude that a monetary union based on austerity without growth is unsustainable, he or she might decide not to follow suit. Another aspect of the small-country syndrome is the way the European Union approaches the question of growth. While most people seem to agree that growth matters somewhat, the prevailing view in Brussels and Frankfurt is that the growth problem is 100 per cent structural. I do not deny the presence of structural obstacles to growth, but the EU’s strategy is likely to fail for two reasons. First, it is insufficiently focused. The European Commission’s agenda is not primarily geared towards growth, but competitiveness. For an economy with a more or less balanced current account, this is an odd choice. The second reason is lack of sufficient macroeconomic support. The exit strategies have come prematurely, and were unco-ordinated. There will be no co-ordination of wage-setting procedures, no common bond and no common or co-ordinated European approach to bank resolution. There may even be a case for another interest rate cut by the European Central Bank or an extension of the bond purchasing programme to a policy of quantitative easing, but this is not going to happen. The message the EU sends to the rest of the world is that it does not care about growth. But sustainable debt reduction is extremely difficult in the absence of growth. It is the tragedy of the eurozone that it is run as a collective of small countries. http://www.ft.com/cms/s/0/91ea6aaa-7720-11df-ba79-00144feabdc0.html

EU might need to amend treaty, says Van Rompuy By Tony Barber in Brussels Published: June 13 2010 22:05 | Last updated: June 13 2010 22:05 European Union leaders should not rule out changing the EU’s governing treaty as a way of driving forward economic integration and emerging from the present crisis, says Herman Van Rompuy, president of the European Council. In a Financial Times interview, Mr Van Rompuy said treaty change – backed by Angela Merkel, German chancellor, but by few other leaders – was not a priority in his view, but might be required in future. In depth: Euro in crisis - Jun-13 Wolfgang Münchau: Eurozone’s small-country mindset - Jun-13 Lex: Ireland’s financial lessons - Jun-13 Merkel pleads for calm amid coalition disputes - Jun-13 Deal on mechanism for eurozone rescue - Jun-07 Treaty change is a highly charged issue. It took EU governments eight years to agree on the Lisbon treaty, which took effect last December after various political shocks, including failed referendums in France, Ireland and the Netherlands. “If we agreed on it, that would be the next step, but it will take a long time. There is no taboo on it. But for now we are working within the framework of the existing treaties,” said Mr Van Rompuy. “I personally am not in favour, because I see all the problems ahead. But my position is not the most important. If there is a consensus on treaty change, I will not oppose it. We are in a crisis. We are in one of the most difficult situations you can imagine. So to exclude certain solutions would not be wise.” EU leaders would have no choice but to revise the Lisbon treaty if they were to introduce far- reaching changes, such as the possibility of expelling fiscally delinquent countries from the eurozone – as many German politicians want. But Mr Van Rompuy and colleagues such as José Manuel Barroso, European Commission president, fear that a decision to rewrite Lisbon would spur the UK and other governments to demand changes tailored to their national interests. Mr Van Rompuy made clear that he was sympathetic to the concerns of member states in central and eastern Europe about a proposal to cut off EU regional aid funds from nations that persistently broke EU fiscal rules. These countries are more reliant than wealthier western states on EU aid programmes and therefore regard the proposal, backed by Germany and like-minded countries, as unfair. Mr Van Rompuy noted that, when he had presented his ideas about eurozone governance at an EU meeting on May 21, he had talked about withholding “EU funding in general” rather than regional funds as such. He said financial markets’ worries that the fiscal austerity programmes across Europe would choke economic growth were exaggerated. “Fiscal consolidation, in my experience, has no real effect on economic growth. Certainly, when it is gradual, it can even be beneficial for economic growth,” he said.

12 He predicted that eurozone leaders would not merely strengthen their budgetary rules but introduce systems for monitoring national competitiveness and enforcing structural reforms. If annual evaluations of a government’s performance showed it was avoiding measures needed to raise competitiveness, the government would come under pressure from its eurozone peers, public opinion and financial markets, he said. “This can be a major contribution to strengthening economic growth.” http://www.ft.com/cms/s/0/9bca7dce-7718-11df-ba79-00144feabdc0.html LEX: Ireland’s financial lessons Published: June 13 2010 20:23 | Last updated: June 13 2010 20:23 A profligate government in thrall to out-of-control property developers lavishes incentives on the construction industry to keep tax revenues flowing. Clueless banks raid wholesale markets for funds, and drop lending standards as the cash is pushed towards those favoured developers. Deferential regulators merely look on. That, in a nutshell, is how the seeds of Ireland’s financial crisis – the most severe of any country outside Iceland – were sown between 2003 and 2008. Now two reports into the fiasco flesh out the narrative. Their joint and separate conclusions are that this vicious circle meant the crisis was almost entirely home-made. Much of the Irish banking sector – and especially the two chief victims of the crisis, Anglo Irish Bank and building society Irish Nationwide – was heading straight towards insolvency even before the collapse of Lehman Brothers.

June 11, 2010, 3:49 am Misplaced Optimism I wish I could believe in this Macroeconomic Advisers claim that there is a zero chance of a double-dip recession. But when they say that this probability is estimated as a function of the term slope of interest rates, stock prices, payroll employment, personal income, and industrial production I immediately lose all confidence. When short-term interest rates are up against the zero lower bound, a positive term spread tells you nothing; as I explained a year and half ago, it’s something that has to happen given the fact that short rates can go up, but not down. Failure to understand this point led to excess optimism in late 2008. I’m a bit surprised to see Macroeconomic Advisers falling into the same fallacy now. http://krugman.blogs.nytimes.com/2010/06/11/misplaced-optimism/

June 11, 2010, 3:29 am

Dealing With Chermany June 11, 2010, 3:29 am So here’s where we are: China has done nothing to change its policy of massive currency manipulation, and its exports are surging. Meanwhile, Europe is going wild for fiscal austerity. Angela Merkel says that budget cuts will make Germany more competitive — but competitive against whom, exactly? You know the answer, don’t you? Yep: everyone is counting on the US to become the consumer of last resort, sucking in imports thanks to a weak euro and a manipulated renminbi. Oh, and while they rely on US demand to make up for their own contractionary policies, they’ll lecture us on how irresponsible we’re being, running those budget and current account deficits. This is not going to work — and the United States has to take steps to protect itself. Let’s start with China. Back in April we were told to lay off on the currency manipulation charges; the grownups would work something out with China. How’s that going, exactly? Yes, threatening an anti-dumping duty would be a big step, and might pose some risks. But doing nothing is not an acceptable option. The economic recovery is in great danger of stalling — and if it does, the consequences will be a lot worse than a diplomatic tiff. And it’s also important to send a message to the Germans: we are not going to let them export the consequences of their obsession with austerity. Nicely, nicely isn’t working. Time to get tough. Dealing With Chermany June 11, 2010, 3:29 am http://krugman.blogs.nytimes.com/2010/06/11/dealing-with-chermany/

14 June 10, 2010, 12:38 pm

Oy, Canada Marshall Auerback points out that the new UK government, in arguing that fiscal austerity won’t destroy the economic recovery, is pointing — wrongly — to Canada’s experience in the 1990s. Actually, it’s even worse than Auerback says.

As he points out, Canada was able to offset the contractionary effects of fiscal austerity through increased exports to a booming US economy. What he doesn’t point out is that this export boom had a lot to do with this: Yep, you can have fiscal austerity without contraction if you have a massive devaluation against your main trading partner. So we can have austerity without a new depression as long as all the world’s major economies devalue against … oh, wait. And monetary policy, of course, wasn’t up against the zero lower bound, so the Bank of Canada could and did offset fiscal austerity with looser monetary policy (which partly explains the drop in the loonie.) I do feel a sense of despair here. Ever since the crisis began, some of us have been trying to get across the point that you have to be very careful with your historical precedents, that things work very differently when you have a synchronized severe financial crisis, with interest rates near zero everywhere. And here we are, two years in, and it’s as if we’ve been talking to a wall.

La Nueva Alianza Flamenca supera todas las expectativas en las legislativas belgas El partido, que ambiciona la independencia de Flandes, obtiene un 30% de los votos, según las proyecciones.- Los socialistas vencen en la Bélgica francófona RICARDO MARTÍNEZ DE RITUERTO - Bruselas - 13/06/2010 El paisaje político belga ha dado un vuelco espectacular que augura largos tiempos de incertidumbre con el arrollador triunfo de la Nueva Alianza Flamenca (N-VA), el partido republicano y conservador que ambiciona la independencia de Flandes. El grupo de Bart de Wever ha superado todas las expectativas al obtener del orden del 30% de los votos, según las primeras proyecciones. Es ya el primer partido de Bélgica. Los francófonos viven el veredicto de las urnas como un drama y se plantean ya cómo formar un frente ante las reformas del Estado que reclamará la N-VA. Encuentran un mínimo consuelo en el factor de estabilización que ofrece la sólida victoria de los socialistas en la Bélgica francófona, que les convierte en la primera fuerza política nacional. El carácter histórico del triunfo de la N-VA viene subrayado por el desfondamiento del partido Cristiano Demócrata y Flamenco (CD&V) del primer ministro en funciones Yves Leterme, tradicional fuerza de hegemónica de referencia en Flandes que se ve degradada a número dos en Flandes con un humillante 17,% de los votos. A falta de las confirmación de los resultados y de las reacciones de los dirigentes políticos, se abre ahora en Bélgica un complicado periodo para formar Gobierno con muchas alternativas posibles. El joven historiador De Wever ha capitalizado la frustración de los flamencos con un sistema federal que no termina de funcionar, y en particular con la irritación constante que produce la circunscripción de Bruselas-Hal-Vilvoorde (BHV), una mancha mestiza de flamencos y francófonos en torno a la capital que rompe con el principio de que el país está dividido nítidamente en dos partes por una frontera lingüística al norte de la cual (Flandes) solo hay vida para el universo neerlandófono, mientras en el sur (Valonia) el país es exclusivamente francófono. Bruselas, asentada geográficamente en Flandes y francófona al 90%, tiene un estatuto especial bilingüe. Elección directa En este soleado domingo de la primavera bruselense una pancarta, escrita en las tres lenguas oficiales del país (neerlandés, francés y alemán), abre una marcha: "Sí, queremos vivir juntos". Es el grito ahogado de quienes temen que el país desaparezca laminado por los separatistas flamencos. Más de siete millones de electores han sido convocados a las urnas para elegir a 150 diputados y 40 senadores de elección directa. Las 15.391 oficinas electorales han abierto sus puertas a las 8.00 y han cerrado entre las 13.00 y las 15.00 en función de si contaban con equipamiento para permitir el voto electrónico (el 40% de ellas) o manual. El voto es obligatorio en Bélgica, por lo que el elector que incumple su deber sin justificación es castigado con una multa económica mínima de unos 50 euros. El complejo mapa político belga , dividido en dos mitades por una frontera lingüística que exige partidos y electores neerlandófonos en la norteña Flandes y partido y electores

16 francófonos en Valonia, con una concesión al bilingüismo en la región de Bruselas, saltó por los aires inesperadamente en mayo ante la imposibilidad de que unos y otros se pusieran de acuerdo en cómo abordar una minúscula excepción, en torno a Bruselas, que permite a unos electores francófonos en tierra de Flandes votar por partidos francófonos. Esta crisis forzó el adelantamiento de los comicios en un momento económico crítico para el país y a pocas semanas de que Bélgica asuma la presidencia rotatoria de la Unión Europea. Situación difícil La marcha bruselense tiene un aire funeral, como la columna de un ejército que arrastra la derrota hacia la retaguardia. La víspera se ha celebrado el Día del Orgullo Gay y decenas de miles de personas han llenado ruidosa y jocosamente durante horas el centro de la ciudad. "Hubo 35.000 manifestantes para los gays y lesbianas y no hay suficientes personas en favor de Bélgica", se lamenta un ciudadano. Estimaciones oficiales cifraban después en menos de 2.000 los movilizados en defensa de la unidad nacional. Más que el contraste con los manifestantes del día anterior, les duele recordar que dos años y medio antes una manifestación análoga arrastró a otros 35.000 belgas, también entonces fundamentalmente francófonos. Aquella expresión de voluntad popular contra la deriva descentralizadora quedó en nada y ahora solo quedan la impotencia y el hastío. El panorama político belga cambia más rápidamente de lo que el país puede soportar. Un personaje notable, que prefiere ocultar su nombre por ocupar un alto cargo en un organismo multinacional, vaticina: "Estamos asistiendo al final de una generación política, la que estaba al timón tras las elecciones de 2007. En un par de años todos habrán desaparecido". Prueba de ello es el N-VA, nacido en 2001 y hoy a punto de convertirse en la primera fuerza política belga. En 2007, el partido de De Wever iba en coalición con el histórico movimiento Cristiano Demócrata y Flandes. El 4% de los sufragios que obtuvo entonces en Flandes va en camino de convertirse en el 30% si se consolidan las proyecciones. Relaciones envenedadas La excepción de BHV, declarada no conforme a la Carta Magna por el Tribunal Constitucional, envenena la relación entre el norte y el sur, enzarzados en una guerrilla institucional con constantes golpes bajos, políticos y sociales, en ese territorio. A esa guerra de desgaste se suma la distinta evolución socioeconómica de Flandes y Valonia, que lleva a los norteños a acusar a sus vecinos del sur de ser poco menos que parásitos. Desde hace 40 años, cuando el Estado unitario dio lugar al federal, Bélgica ha realizado cinco reformas institucionales a costa del centro, y ahora prepara la sexta, que no será la última. Las negociaciones para formar Gobierno se prevén largas. De Wever, que ha hecho a los demás bailar a su ritmo en esta campaña, se dice dispuesto a aceptar que el próximo primer ministro sea el líder socialista francófono Elio di Rupo para compensar las exigencias políticas que piensa presentar y para dar confianza a los francófonos. En cuanto a si Bélgica se parte, políticos y politólogos son unánimes: "No". Solo el 9% de los flamencos y el 4% de los valones están por la separación. http://www.elpais.com/articulo/internacional/Nueva/Alianza/Flamenca/supera/todas/exp ectativas/legislativas/belgas/elpepuint/20100613elpepuint_2/Tes?print=1

17 Las consecuencias del ajuste económico El Gobierno frena a los partidos que piden más tiempo para negociar la reforma laboral José Blanco los emplaza a que digan antes del miércoles qué reforma es la que ellos plantean.- "El Ejecutivo está dispuesto a negociar, pero no a perder el tiempo", señala el ministro EL PAÍS - Madrid - 13/06/2010 El ministro de Fomento y vicesecretario general del PSOE, José Blanco, ha frenado esta mañana en seco a quienes reclaman más tiempo para negociar la reforma laboral que el Gobierno tiene previsto aprobar el miércoles en un Consejo de Ministros extraordinario. De esta forma el Ejecutivo ha querido dejar claro que "no habrá prórroga" para modificar su propuesta y que mantiene su intención de enviar el proyecto al Congreso de los Diputados el próximo día 22. "El Ejecutivo está dispuesto a negociar, pero no a perder el tiempo", ha subrayado Blanco. El último en reclamar un aplazamiento de la aprobación del cambio de las condiciones del mercado laboral español ha sido el portavoz de CiU en la Cámara baja, Josep Antoni Duran Lleida. En una entrevista en el programa de la cadena SER A vivir que son dos días, Duran Lleida se ha quejado de las prisas del Ejecutivo para dar luz verde cuanto antes al borrador, que ha calificado de "churro", porque ha alegado, no define las causas objetivas de despido, no aclara las reducciones en la cuota de la Seguridad Social para los empresarios y no entra a combatirel absentismo laboral. "Es mejor que salga una semana más tarde", que se negocie y que se ofrezca un texto "más contundente y llamativo para los mercados". Según el portavoz convergente, el presidente del Gobierno da un escaso margen de negociación a los grupos parlamentarios, cuando ha estado meses hablando con la patronal y los sindicatos. En un acto celebrado en Santiago, José Blanco ha pedido a los críticos con el texto presentado por el Ejecutivo que digan antes del miércoles qué reforma es la que ellos plantean, porque no habrá más tiempo. El vicesecretario socialista recordó que si PP y CiU "decían hasta hace dos días que había que darse prisa, que llegábamos tarde, ahora piden una prórroga que no habrá". El ministro de Fomento ha afirmado que si a estas formaciones "no les vale" la propuesta del Gobierno, lo lógico es que "pongan las cartas encima de la mesa y digan lo que quieran", aunque ha avisado: "Estamos dispuestos a favorecer la reación de empleo, pero no dialogaremos sobre los derechos básicos de los trabajadores". Una dura negociación El Gobierno desea alcanzar el mayor respaldo posible en la votación que se celebrará en el Congreso sobre la reforma laboral, de forma que el acuerdo amortigüe el rechazo popular a los cambios en el mercado de trabajo. Sin embargo, el PSOE no cuenta con alianzas estables en la Cámara baja, por lo que las próximas horas serán vitales en las negociaciones con el resto de los grupos. El panorama no es muy alentador: el acuerdo con ERC podría estar cerca y CC tampoco se sitúa muy lejos. Aunque un pacto con PNV y los partidos de izquierdas se presenta complicado. El PP, una incógnita. Por su parte, CiU, que ya había exigido cambios en el

18 texto, ha asegurado esta mañana que "ahora mismo no apoyaría" la reforma laboral que el Gobierno prevé aprobar el miércoles en un Consejo de Ministros extraordinario. El Ejecutivo pidió ayer un esfuerzo de comprensión a los sindicatos ante la reforma laboral que ultima y a la que el Ejecutivo dará luz verde el próximo miércoles. Un proyecto con el que nadie parace estar contento. Después de que los sindicatos amenazaran con una huelga general, los empresarios se sumaron al rosario de críticas y en un comunicado, la CEOE, aseguró que los planes del Ejecutivo no servirán para crear empleo. El presidente José Luis Rodríguez Zapatero, envió un mensaje de firmeza, pero también de tranquilidad a los trabajadores y a los agentes sociales sobre los planes del Ejecutivo. Zapatero fue interrogado sobre los detalles del proyecto. El presidente defendió que será una reforma "sustancial y equilibrada" que mantendrá "básicamente la red de derechos" de los trabajadores. Entre las medidas que contempla la reforma está la posibilidad de que una empresa con seis meses de pérdidas ininterrumpidas pueda justificar despidos económicos, mucho más baratos que los improcedentes, y un nuevo fondo financiará parte del despido de los fijos a partir de 2012. http://www.elpais.com/articulo/espana/Gobierno/frena/partidos/piden/tiempo/negociar/r eforma/laboral/elpepuesp/20100613elpepunac_4/Tes?print=1

19 REPORTAJE: RETRATO DE LA CRISIS Retrato de un país en crisis Tras recorrer España en las últimas semanas, el periodista estadounidense Phil Bennett ofrece su retrato de la crisis. El relato incluye entrevistas a Salgado, Rajoy y Rato, pero también a empresarios, trabajadores y parados. Esta es la visión de España del ex director adjunto del 'The Washington Post' El periodista estadounidense Phil Bennett ofrece su retrato del problema español. El relato incluye entrevistas a Elena Salgado, Mariano Rajoy y Rodrigo Rato SALGADO: "Si decimos que vamos a hacer algo, lo hacemos" RAJOU: "El cambio de Gobierno generaría confianza" PHIL BENNETT 13/06/2010 La crisis económica de España no tiene una zona cero. El visitante tiene la impresión de que todos en el país parecen narrar una parte distinta de un drama nacional, una poderosa mezcla de dificultades y obsesiones universales. Pero si hubiera que empezar la historia en un lugar en el que los orígenes y las consecuencias del desastre estén más claros, una buena opción es el pueblo de Villacañas. Hasta hace unos años, el rasgo más característico de Villacañas eran sus silos. Generaciones de agricultores pobres vivían en unos búnkeres subterráneos, en muchos casos excavados con herramientas de mano en el suelo calcáreo de La Mancha. Los silos eran baratos y ofrecían calor en invierno y fresco en verano. En los años cincuenta del siglo pasado seguía habiendo centenares en uso, pero hoy existen pocos visibles. El motivo es que, de la noche a la mañana, Villacañas se enriqueció de manera asombrosa. La gente se compró pisos en Madrid, casas en la playa, y construyó nuevas viviendas sobre las cuevas de sus antepasados. La opulencia llegó a través de una industria cuya audacia y simplicidad estaba a la altura de los silos: Villacañas fabrica puertas. No unas cuantas, sino 11 millones de puertas en 2006, más del 60% del mercado nacional en pleno apogeo de la construcción. Las ventas aportaban a este pueblo de 10.000 habitantes ingresos de más de 600 millones de euros al año. El sector proporcionaba 5.000 puestos de trabajo bien remunerados, daba empleo a familias enteras en turnos que cubrían los siete días de la semana e hizo que chicos de 16 años abandonaran el colegio, deseosos de poder comprarse un Audi nuevo para cruzar a toda velocidad el primer y único semáforo de Villacañas. Como es natural, la crisis amenaza con dejar todo esto en chatarra. En una mañana reciente de domingo, Raimundo García caminaba por la nave silenciosa de la fábrica de Puertas Visel, de la que es director general. Hijo de un carnicero local, estudió Económicas en la Universidad de Chicago y luego regresó para convertir Visel en una empresa de enormes beneficios. En 2007, la empresa fabricó casi un millón de puertas y tenía 830 empleados. Hoy, la fábrica cuenta con 320 trabajadores y sólo funciona cuatro días a la semana. Como casi la mitad de las 10 empresas de puertas que sobreviven en la región, está en suspensión de pagos y corre peligro de desaparecer. "Mi gran pena es que no nos reorganizáramos antes de la crisis", dice García. "Ahora podríamos tirar todo esto a la basura". Villacañas quizá tenga que soportar ya siempre la etiqueta de Ícaro -voló demasiado alto, sus alas se fundieron y cayó-, si no fuera porque lo que sucede aquí hoy parece tan significativo como su edad de oro. Como en otros lugares de España, los habitantes de Villacañas se hacen preguntas fundamentales sobre su comunidad y su país, a menudo con angustia, ira y

20 frustración: ¿qué nos ha pasado?, ¿quién tiene la culpa?, ¿qué va a ocurrir ahora?, ¿cómo va a ser nuestro futuro y cuánto podemos controlar? Llegué a España a finales de mayo, procedente de Estados Unidos, con preguntas similares. En Estados Unidos, la crisis económica ha suscitado un debate sobre el papel del Estado, sobre la justicia y la responsabilidad, sobre los valores sociales y la identidad. ¿En qué está cambiando España por culpa de la crisis económica más compleja desde su transición a la democracia? ¿Por qué un 20% de desempleo no ha desencadenado un conflicto social? ¿Cómo están preparando los líderes del país la salida? Sea justo o no, los mercados mundiales y los medios de comunicación tienden a dividir el mundo en dos categorías: los países que tienen problemas y los que son problemas. Y hoy consideran que España es un problema. Una consecuencia de ello es que los titulares nacionales desatan temblores por todo el sistema, como ocurre casi a diario desde principios de mayo. Otra, quizá más útil, es que empuja a ver cada parte concreta de la crisis como un elemento relacionado con los demás. En un análisis publicado al día siguiente de mi llegada, uno de esos titulares que sacuden el sistema: el Fondo Monetario Internacional lo hacía con este breve párrafo: "La economía de España necesita reformas exhaustivas y de largo alcance. Los retos son graves: un mercado de trabajo disfuncional, el estallido de la burbuja inmobiliaria, un gran déficit fiscal, un sector privado y una deuda externa que pesan mucho, un crecimiento de la productividad anémico, una competitividad débil y un sector bancario con bolsas de debilidad". El país necesita una "estrategia integral", decía, y "hay que hacerlo cuanto antes". No he hablado con una sola persona, dentro o fuera del Gobierno, que esté fundamentalmente en desacuerdo con este análisis. Es un caso poco frecuente de consenso. En casi todo lo demás, España ofrece la imagen de unos responsables políticos profundamente divididos. Existe la obsesión de restaurar la confianza de los extranjeros en el país. Pero impresiona todavía más la falta de confianza de los propios españoles en sus dirigentes y sus instituciones. Es lo que sucede en Villacañas. El joven alcalde del pueblo, Santiago García Aranda, me recibió en su despacho, que da a la modesta plaza de España, con ocho sucursales de bancos herencia de la época de apogeo y filas de parados cada mañana ante la oficina de empleo. García Aranda, del PSOE, observa el debate político actual con abierto desprecio. "La intensidad de la crisis que estamos viviendo no es de hoy. La estamos viviendo de forma brutal desde 2008. Este pueblo habla de la crisis desde 2008. El país, no", dice. "Todos, incluyendo la prensa, están obsesionados con las elecciones y no con el futuro del país. No es sólo Zapatero quien no está comunicando bien. Las universidades, los medios de comunicación, también nos han fallado". Los costes humanos de la crisis ya son graves, dice. Durante el boom, Villacañas tenía una de las mayores tasas de abandono escolar del país. "Hay en Villacañas personas de 40 años que habían trabajado desde los 16", explica García Aranda. "Y ahora ya no trabajan y carecen por completo de las cualificaciones profesionales y humanas y de los instrumentos de adaptación para salir adelante". El alcalde, cuya madre tenía un puesto de periódicos en el pueblo, y que trabajó a tiempo parcial en el sector de las puertas cuando era estudiante, dice que también se daba el fenómeno opuesto: por primera vez, muchos padres de Villacañas habían podido enviar a sus hijos a estudiar, como él, a obtener títulos universitarios. Y me contó esta historia:

21 "Hace dos semanas tuve a un padre exactamente donde tú estás sentado. Su esposa y él están en paro. Sus dos hijos están estudiando en la universidad: la hija, ciencias veterinarias, y el hijo, aeronáutica. Y el padre tenía que decidir a cuál de sus dos hijos le debe permitir continuar sus estudios. Y se decidió por su hija porque le faltaba solo su último año. Así que sacó a su hijo". Al alcalde se le empañaban los ojos. "Ojalá pudiera poner a los que toman las decisiones en el pellejo de ese padre", dijo. Durante el periodo de prosperidad -parte de una transformación general que el embajador de España en Estados Unidos llamó hace poco "los mejores años de nuestra historia colectiva de los últimos cinco siglos"-, lo extraordinario se convirtió en corriente. Como consecuencia, hoy es normal oír a la gente sorprenderse e indignarse por la crisis económica actual, algo que ha sucedido muchas veces en muchos países, y, en cambio, calificar el asombroso ciclo de cambios anterior como completamente normal. Economistas de todo el espectro político dicen que los dos periodos están unidos. La historia se resume así: más de 10 años de préstamos baratos de Europa ayudaron a alimentar un fantástico aumento del gasto y las inversiones. España construyó un ferrocarril y unas carreteras de primera categoría y llevó a cabo proyectos turísticos. Construyó más viviendas nuevas que Alemania, Francia e Italia juntas... y vio cómo se duplicaban los precios de las casas. El gasto de consumo se incrementó dos veces más que la media europea durante esa década, y los salarios subieron un 30%. Cinco millones de inmigrantes nuevos se incorporaron al mercado laboral. En una especie de maquinaria en movimiento perpetuo, se necesitaba a los inmigrantes para que construyeran casas para sí mismos. "Cuando la economía va bien, España crea más empleo que ningún otro país", dice Joaquín Arango, director del programa de Migraciones Internacionales y Ciudadanía en el Instituto Universitario Ortega y Gasset. "Cuando la economía va mal, España destruye más empleo que ningún otro". A finales de 2009, la deuda exterior total de España era de 1,735 billones de euros, equivalente al 170% del PIB. La banca privada, que evitó los peores excesos de la crisis financiera de 2008, posee en la actualidad aproximadamente la mitad de las viviendas vacías españolas. El Gobierno, mientras tanto, aumentó el gasto público un 7,7% anual a partir de 2005. Esto, unido al descenso de los ingresos, convirtió el superávit presupuestario de 2007 en un déficit del 11%. Más de cuatro millones de trabajadores perdieron su empleo; la tasa de paro española, del 20%, es más del doble de la tasa media en Europa. Las prestaciones de desempleo, las más generosas de Europa, cuestan al Estado otros 32.000 millones de euros al año. Cuando estalló la crisis crediticia griega en abril, las preocupantes cifras de España se volvieron tan imposibles de ocultar como los bosques petrificados de grúas que vigilan las entradas a tantas ciudades. Los economistas en España suelen destacar los factores internos para describir la anatomía de la crisis y justificar los cambios estructurales que dicen que son necesarios. "La hora de la verdad llegará cuando nos demos cuenta de que las principales causas de la crisis son internas", dice César Molinas, director de la consultora Multa Paucis, que ha ocupado varios cargos económicos en el Gobierno español. Las autoridades y otros políticos, por el contrario, tienden a prestar más atención a las raíces internacionales. Para el Gobierno de Zapatero, esa respuesta parece ser casi un reflejo. Cuando le pregunté a Elena Salgado, la animosa y elegante vicepresidenta económica, sobre los obstáculos al crecimiento de la economía, lo primero que dijo fue: "A nosotros nos está penalizando el desconocimiento internacional de dos cuestiones importantes...", y emprendió

22 una explicación del estado constitucional de las comunidades autónomas y la solidez de las cajas de ahorro. Al final acabó diciendo que, cuando se completen la reestructuración de las cajas y la reforma del mercado laboral, "habremos puesto las bases para recuperar nuestro crecimiento potencial, que en España es alto". La decisión entre buscar las claves de la recuperación económica dentro o buscarlas fuera puede reflejar las diferencias sobre la urgencia y la dimensión de las reformas estructurales necesarias para conseguirlo. En cualquiera de los dos casos, muchos economistas se han vuelto pesimistas sobre las perspectivas de crecimiento. Después de contraerse un 3,9% en 2009, la economía española será la única del G-20 que no va a crecer en 2010. El Gobierno ha reducido sus proyecciones de crecimiento para 2011 al 1,8%; la agencia de calificaciones Fitch las sitúa a un nivel aún más bajo. Molinas y otros creen que la recuperación será en "L", más parecida a la de Japón en los últimos 20 años que a la de Estados Unidos. "El mayor riesgo es que en 2013-2015 la renta per cápita vuelva a ser la que era hace 10 años", dice Emilio Ontiveros, presidente de Analistas Financieros Internacionales. "Va a ser una economía más delgada con peligro de anorexia". Fernando Ballabriga, director del departamento de economía en la Escuela de Negocios ESADE, también ve un "horizonte de estancamiento". "Lo que es más preocupante no es la crisis inmediata, sino el estancamiento a largo plazo", asegura. "Es muy importante que la solución sea un paquete. Yo estoy convencido de que hay que hacer todo a la vez. Que la política esté o no preparada para eso, es la gran pregunta". "Todo a la vez" significa llevar a cabo reformas estructurales, además de medidas de austeridad. Incluye una reforma laboral que cree flexibilidad salarial y más igualdad para el 30% de trabajadores con contratos temporales; la reforma de las cajas de ahorros, que albergan el 50% de los depósitos, consolidar su número y proporcionar los medios para la recapitalización; crear una financiación pública sostenible; ocuparse de una población mayor cada vez más numerosa; impulsar la productividad, que se redujo bruscamente durante los últimos 10 años. Rodrigo Rato, ex ministro de Economía y ex director del FMI, que este año ha sido nombrado presidente de Caja Madrid, me dijo que "lo que tiene que hacer España es tomar decisiones sobre su política tanto macroeconómica como microeconómica, y explicarlas a la gente. Esas decisiones son difíciles. Lo importante es que las decisiones no sólo resuelvan nuestros problemas inmediatos, sino que introduzcan correcciones en la forma de abordar nuestros problemas a largo plazo". Rato confía en que la reforma de las cajas va a seguir adelante. "Estoy seguro de que de aquí a dos o tres años tendremos menos cajas en activo, mayores y más capitalizadas". Pero ninguna medida es por sí sola una contraseña mágica para salir de la crisis. La reforma del mercado laboral, por ejemplo, no es un medio para crear nuevos puestos de trabajo. Y algunos de los mecanismos que los Gobiernos utilizaban en el pasado para restablecer la competitividad -como las seis devaluaciones de la peseta entre 1977 y 1997- desaparecieron con la creación de la eurozona, lo cual supone una presión añadida para la unión monetaria y España. Javier Vallés, principal asesor económico de Zapatero, dice que en estas circunstancias no existen buenos modelos que España pueda imitar. "Entre los economistas suelen hacer papers con economías de laboratorio", explica. "España es un ejemplo real de una economía que va a ser estudiada en los próximos cinco años. Ahora es el momento de la consolidación fiscal y un ajuste que marque el crecimiento de la próxima década. Las decisiones que estamos tomando ahora tendrán impacto en los próximos 10 o 20 años".

23 Para Salgado, la eurozona realza la "dicotomía" entre austeridad y crecimiento. "El problema es que nosotros tenemos que financiar nuestro déficit en los mercados y no estamos en la situación de Estados Unidos ni estamos en la situación de los países de fuera del euro, que, aunque no hagan una devaluación, pueden ver cómo su moneda se deprecia, en términos relativos, y eso les origina una ventaja competitiva", dice. "Nosotros estamos en una zona económica que está ligada a una moneda y, por tanto, las herramientas que tuvimos en los años noventa ya no las tenemos. Entonces, claro, siendo verdad que debiéramos hacer más por el crecimiento, lo cierto es que, día a día... los mercados en este momento están primando más la austeridad en el gasto". "Es cierto que la confianza es muy difícil de construir y muy fácil de perder. Así que vamos a pagar un precio por la pérdida de confianza", dice Rato. "Algunos de nuestros problemas deben resolverse al nivel del euro. Seamos francos: no sólo hay falta de confianza en España, sino falta de confianza en el sistema del euro y en su capacidad de resolver sus propios problemas. Y ahí creo que necesitamos una definición clara de lo que debe ser una política fiscal del euro. Algo que en estos momentos está faltando". En España es frecuente comparar a los políticos, y de forma desfavorable, con el sector empresarial del país. España posee un plantel de grandes compañías de categoría internacional: Banco Santander, BBVA, Telefónica, Ferrovial, Iberdrola, FCC, ACS y otras. Cuenta con tres de las mejores escuelas de negocios del mundo. La inversión en energías renovables le ha dado fama internacional por parques eólicos como el que está cerca de la universidad de mi hija en Pensilvania, operado por Gamesa, que ha obtenido millones de dólares de los fondos de estímulo en Estados Unidos. Por el contrario, los dirigentes políticos españoles son objeto de críticas feroces por parte de la opinión pública. Las informaciones constantes sobre la corrupción política, la incomprensible alergia -curada hace muy poco- del Gobierno de Zapatero a la palabra "crisis", el ferviente empeño de la oposición en buscar ventajas electorales a costa del consenso, han acabado con la fe en que las autoridades puedan conducir al país hacia la recuperación. "Las soluciones requieren o un gran consenso o un Gobierno fuerte. Y no tenemos ninguno de los dos", dice Fernando Fernández, profesor de economía en la IE Business School. Añade: "Que tenemos un problema de competencia profesional en la clase política, es objetivamente cierto... Nunca hemos tenido un Gobierno más débil, nunca en la historia de España". Gran parte del problema de credibilidad del Gobierno al hablar de economía tiene que ver con que todavía hoy no ha ofrecido una visión clara y global del camino que tiene España por delante. Y la montaña rusa del último mes no ha ayudado. Zapatero no ha explicado del todo por qué declaró el 5 de mayo que la economía no necesitaba un ajuste "drástico" y a continuación anunció ajustes drásticos e "imprescindibles" una semana después. De hecho, los miembros del Gobierno siguen dando la impresión de que su fe en la austeridad es resultado de una conversión obligada. Salgado dice que el Gobierno cree, como proclamó Zapatero el año pasado, que la salida de la crisis "será social, o no será". Al preguntarle si el gasto social actual es sostenible, contesta, con brevedad, que "es sostenible porque según nuestras prioridades lo hemos puesto en el máximo lugar". "Nosotros estamos resistiendo lo máximo posible antes de afectar a ninguna partida del gasto social. Ahora hemos tenido que afectar mínimamente a un 0,5% del gasto social, pero queremos quedarnos ahí", añade. La endeble convicción del Gobierno parece corresponderse con el celoso oportunismo de la oposición. Me entrevisté con Mariano Rajoy en su despacho de la planta alta de la sede del Partido Popular en la calle de Génova. Con amabilidad y después de apartar su cigarro, Rajoy

24 se lanzó a enumerar las diferencias entre su estrategia para la economía y la de Zapatero con el fervor de un fiscal que sabe que él también está siendo sometido a juicio. En el fondo, dice Rajoy, "el problema del Gobierno no es su posición, sino su inacción". Y en el fondo, cada vez más, parece que el plan económico de Rajoy consiste en apartar a Zapatero del poder. "Nosotros pensamos que el principal factor de desconfianza que hay en este momento en la economía española es el Gobierno", dice. "El principal, por encima de cualquier dato objetivo o económico". Rajoy explica por qué votó en el Parlamento contra las medidas de austeridad del Gobierno no sólo por las medidas en sí, sino como parte de una estrategia para obligar a que se presente una moción de confianza. Las encuestas dan al Partido Popular suficiente apoyo para lograr la mayoría absoluta. Algunos analistas políticos dicen que una gran derrota del PSOE en las elecciones catalanas de otoño pondría en peligro los dos años que le quedan a Zapatero en su puesto. Pero las cifras de la opinión pública también contienen trampas para la oposición. Los votantes han perdido la confianza en todos los líderes. Y, como prueba del ansia de soluciones que tienen, una gran mayoría insta a la oposición a apoyar las medidas económicas del Gobierno, aunque dichas medidas sean impopulares. Rajoy se ha negado. Algunos teóricos alegan que, como ocurre en la economía, la política española sufre unos profundos desequilibrios estructurales, que van desde la promoción interna en los partidos hasta la relación entre el Gobierno central y las comunidades autónomas. Las comunidades representan el 57% del gasto público. Más de la mitad de los casi tres millones de funcionarios públicos trabaja para los Gobiernos regionales, muchos en una red burocrática opaca (685 entidades autónomas solo en Cataluña). Los intereses políticos regionales desempeñan un papel crucial en las cajas de ahorros. "La crisis deja al descubierto los límites de las relaciones entre el Gobierno central y las autonomías", dice Joan Subirats, catedrático de ciencia política en la Universidad Autónoma de Barcelona. "No hay entrenamiento para gobernar el país colectivamente". Menciona, como un ejemplo positivo, la cooperación entre las autoridades centrales y regionales en el asunto de la gripe porcina. La situación económica requiere algo más. "Esta no es una crisis, es un cambio trascendental", dice. "El país no puede ser el mismo". Es de destacar que el electorado no está tan polarizado como los políticos, dice Jordi Capo, politólogo y especialista en votaciones en la Universitat de Barcelona. Ese puede ser un factor que contribuye a la paz social pese a la escasez de recursos, la incertidumbre sobre el futuro y las frustraciones de la vida cotidiana. Quizá llegue el estallido social -algunos afirman que la tardanza del Gobierno en abordar la crisis puede hacer que el estallido sea todavía más explosivo-, pero, por ahora, cualquier agitación está soterrada. Para un estadounidense, sobre todo, el caso de los inmigrantes parece especialmente revelador. Los inmigrantes constituyen más o menos el mismo porcentaje de la población en España y en Estados Unidos. En España, que ha tenido una mayor entrada de extranjeros que ningún otro país europeo salvo Irlanda, donde se calcula que el 20% de todos los recién nacidos son de madre extranjera y el desempleo entre los inmigrantes es al menos un 30% superior al de los españoles, no hay un Arizona, no hay indignación nacional sobre quién tiene derecho y quién no tiene derecho a estar. "En España, a pesar de todo, no ha habido rechazo y hostilidad, no ha habido partidos xenófobos", dice Joaquín Arango. Ahora bien, añade, el país tendrá que reabsorber a un

25 millón de inmigrantes desempleados en la economía, sobre todo porque la mayoría parece dispuesta a quedarse. Y, a largo plazo, debe resolver cómo seguir atrayendo a nuevos inmigrantes. "Hay que reflexionar sobre el futuro. No va a ser igual", dice. "La economía tiene que cambiar y volverse más productiva. Va a necesitar un nuevo tipo de inmigrante". El 29 de abril -13 días antes de que Zapatero anunciara el primer gran paquete de austeridad del Gobierno-, Raimundo García habló en una nave de su fábrica de Villacañas y anunció un último esfuerzo para salvar Puertas Visel. Trescientos empleados, incluido él, votaron a favor de reducirse el salario a un máximo de 900 euros al mes y prestar el resto a la empresa durante los próximos ocho años para que pueda pagar su deuda, además de ganar tiempo para elaborar una estrategia a largo plazo que le permita sobrevivir. "En cierto modo, están votando conservar sus puestos de trabajo", dijo García más tarde. "Mi preocupación es que no se cierren las fábricas para no perder nuestro tejido industrial". La industria de las puertas en Villacañas tiene un padre fundador -Abilio Cuesta, un carpintero que abrió el primer taller en los años setenta- y un momento en el que los residentes dicen que vieron el principio del fin: el 5 de enero de 2008, cuando circularon las noticias de los primeros despidos. A lo largo de los dos años siguientes se evaporaron 3.000 de los 5.000 puestos de trabajo locales. Fue un derrumbe monumental. Desaparecieron los sueldos iniciales de hasta 40.000 euros anuales y los puestos de director comercial que llevaban a casa hasta 300.000. En otra época, Puertas Mavisa patrocinaba a un equipo en la Vuelta a España. Hoy, en la puerta de su fábrica cuelga un cartel: "Liquidación de maquinarias por cierre". A pesar de su éxito, García dice que la industria local no supo adaptarse. Algunas empresas llevaron a cabo transacciones con dinero negro. No supieron modificar su estilo de puertas para responder a nuevas demandas. Y el 95% de sus ventas se hacían en el mercado interior. Dice que el Gobierno ahora debería ayudar al sector a consolidarse. "Lo que están haciendo con las cajas de ahorros tienen que hacerlo con nosotros", afirma. "Pero predico en el desierto". Era inevitable que la velocidad de transformación de Villacañas tuviera consecuencias positivas y negativas. Creó riqueza y oportunidades de mejorar. También atrajo las drogas y provocó un elevado índice de abandono escolar. Desechó una cultura conservadora y rural para adoptar otra más moderna, urbana y materialista. García dice, riéndose, que ha visto cómo el pueblo pasaba de ser un lugar en el que "se iba a la iglesia" a otro en el que "se va al banco, también para confesar". Desde su elección en 2007, el alcalde García Aranda ha contratado a asesores económicos y ha obtenido una subvención del Fondo Europeo de Ajuste a la Globalización. Sin embargo, dice, "la responsabilidad de la autoridad es anticipar lo que puede venir. La crisis era impensable, pero todo el mundo decía que esto no era sostenible. Debimos haber actuado en 2004". La matriculación en educación de adultos se ha triplicado en Villacañas. Antes, los residentes despreciaban el empleo en el sector público porque estaba mal pagado; cuando el pueblo anunció hace poco una bolsa de trabajo para funcionarios, hubo 170 solicitantes. También han aumentado ligeramente, dice el alcalde, los casos de violencia doméstica, así como la demanda de atención psicológica.

26 El alcalde cuenta, entre risas, que un psicólogo le había dicho de su paciente que "me dijo que el diagnóstico de este señor era clarísimo, y la medicina para curarlo, también: un trabajo y 1.200 euros al mes". La gente menciona varios factores familiares que mantienen unida la comunidad: generosas prestaciones de desempleo, que a menudo se complementan con los ahorros o alguna chapuza; una red familiar y social que sigue siendo fuerte, aunque se haya debilitado; la contribución de la sociedad civil, y por último, una resignación pasmada pero persistente, que algún día se disipará. Rufino López, de 39 años, que invirtió lo que había ganado en la fábrica para establecerse como carpintero independiente, está sin trabajo, como su mujer. Y ya no cobra el paro. Sobreviven gracias a sus ahorros, pero tienen que pagar los 400 euros de hipoteca para no perder la casa. Han vendido el coche y han aplazado tener un segundo hijo. "Yo veo que la gente pone el grito en el cielo", dice. "Pueden y deben surgir conflictos. Es la única manera de ver la gravedad de la situación". Cuando le pregunté a Elena Salgado lo que el Gobierno podía ofrecer a Villacañas, contestó: "Primero, una cierta dosis de realismo: la actividad de la construcción no va a volver a ser lo que era". Y concluyó: "Yo creo que se trata, primero, de ganar en productividad y tecnología, y después, encontrar los nichos de mercado... pero con una posición realista de incrementar la formación para tener la capacidad de encontrar empleo en otros sectores". Según el alcalde García Aranda, las soluciones deben ir más allá de la creación de empleo. Ahora es el momento de convertir la comunidad en algo mejor, algo duradero. "En tiempos de crisis, uno ve las cosas más grandes y duras de la condición humana", dice. "Lo que está pasando aquí no se resuelve solamente con volver a crecer. Si se hace eso, sería perder una oportunidad de reflexionar sobre aspectos de la cultura social y sobre el papel que debe desempeñar la ciudadanía". España no ha producido todavía una literatura de la crisis como la que ha dominado las listas de libros más vendidos en Estados Unidos. A medida que vayan surgiendo títulos, uno que debe estar incluido es Jóvenes en tierra de nadie. Se trata de una tesis doctoral recién terminada por Cecilia Eseverri, una estudiante de posgrado en la Universidad Complutense. Los jóvenes de los que habla son hijos de inmigrantes que viven en el barrio madrileño de San Cristóbal de los Ángeles, un dominó de bloques de pisos densamente poblados que cuenta con 17.000 residentes y el mayor porcentaje de inmigrantes de toda la ciudad. Eseverri comenzó sus investigaciones en él en 2005; fue maestra en el colegio local y vio cómo el barrio tenía que enfrentarse a dos pruebas, "la de la inseguridad económica y la de la transformación demográfica". La "tierra de nadie" que describe Eseverri es, más que un lugar, una etapa de lo que significa hacerse mayor en la España actual. Los jóvenes inmigrantes a los que estudió y sobre los que ha escrito se alejan de un futuro productivo, abandonan la escuela y pierden el empleo, y luego vuelven gracias a su sólida identificación con el barrio y la red de apoyos con que cuentan. "Con los jóvenes hay este tiempo muerto y después su reenganche, pero han dejado pasar mucho tiempo para encontrar un trabajo", explica. "La creación de asociaciones es una enseñanza política muy importante; es una forma de apoyo social bastante barata y una inversión que crea un contagio".

27 Los frentes de batalla de la crisis económica de España están llenos de jóvenes. Me dicen que pertenecen o a una generación perdida -excluidos de escuelas y carreras, y buscándose como pueden algún trabajito- o a una generación estrella: muy preparados, productos de la vitalidad de estos años de cambio, comprometidos con Europa y abiertos al mundo. De cómo sorteen estos dos grupos la escasez de oportunidades dependerá cómo sale España de la crisis. ¿Qué les ofrecerá el país? ¿Se arriesgarán como lo hizo, por ejemplo, un inmigrante dominicano de 21 años llamado Dailán Santana al inscribirse en un curso de ordenadores en San Cristóbal? ¿O Cecilia Eseverri cuando optó por seguir adelante con su carrera académica pese a que hay plazas de profesor disponibles en la universidad? También está el caso de Manuel Huete, un joven de 26 años que reconoce con timidez que "tengo que decir que la crisis ha sido buena para mí". Huete creció en Villacañas. La industria de las puertas colocó a su familia en una situación acomodada. "Toda la familia trabajaba en las puertas: mi padre, mi hermana, mi cuñado, mi tío", dice. "Teníamos que diversificar un poco". Pese a las objeciones familiares, estudió Empresariales en la Universidad Complutense en Aranjuez y Economía en la Carlos III. Cuando se graduó, el verano pasado, y no consiguió trabajo, se fue al Reino Unido a aprender inglés y le contrató Luis Garicano, un economista español que trabaja en la London School of Economics. Hoy, Huete trabaja en el Banco de España, en un proyecto de tecnología de la información para el Banco Central Europeo. "Si no hubiera sido por la crisis, quizá estaría haciendo puertas", dice. Ahora "quiero ser economista. Es una ciencia muy noble. Intentamos resolver los problemas de las necesidades, en especial las necesidades más básicas". ¿Y cómo ve el futuro de Villacañas? "Yo espero que Villacañas tenga futuro", responde. "Es un pueblo que se ha arriesgado y ha sido fértil. Durante unos años no va a vivir de las puertas. Dará pasos atrás. Pero no regresará a los silos". http://www.elpais.com/articulo/reportajes/Retrato/pais/crisis/elpepusocdmg/20100613elp dmgrep_1/Tes?print=1

28 ENTREVISTA: Poul Nyrup Rasmussen / Presidente del Partido Socialista Europeo "Lo que Merkel propone es matar el crecimiento" ANDREU MISSÉ - Bruselas - 13/06/2010 Poul Nyrup Rasmussen, 1943, Ejsberg, (Dinamarca), economista, primer ministro de su país entre 1993 y 2001, es uno de los políticos más destacados del panorama del centro izquierda europeo. Desde hace seis años preside el Partido de los Socialistas Europeos (PES). Propulsor de la flexisecurity, que combina la seguridad para el trabajador y flexibilidad para la empresa, que se ha convertido en un referente europeo para el mercado laboral. Rasmussen ha sido una de las pocas voces que había advertido desde hace años de los graves riesgos de la desregulación financiera. Ha sido un pionero en la denuncia del papel de los hedge funds (fondos especulativos) y promotor del mecanismo de rescate europeo, finalmente adoptado por la UE. Ahora impulsa una tasa para las transacciones financieras para desincentivar las operaciones especulativas. Pregunta. ¿Cómo explica que a pesar del desastre que está causando las crisis financiera y económica y las respuestas de las políticas conservadoras contra el estado del bienestar, la izquierda sigue perdiendo terreno? Respuesta. Creo que el factor miedo es la respuesta a esta cuestión. Mucha gente tiene miedo a la incertidumbre sobre el futuro. Miedo a la emigración, a perder el empleo, al futuro de la educación de sus hijos. P. ¿Y cuál es su respuesta a esta incertidumbre? R. Nuestro mensaje es que no nos podemos dejar ganar por el miedo. Hay otras soluciones. Debemos explicar a las personas que pertenecen a una comunidad más grande. Hay que reformular la comunidad dando más espacio al individuo, explicando que la emigración tiene cabida en una comunidad más grande, en la que el ciudadano debe percibir que forma parte de una comunidad en la que tendrá empleo y educación. P. ¿Pero cómo se pueden asumir estos cambios? R. Tenemos que aceptar que las cosas no serán como en el pasado. Antes cuando nuestros padres perdían el empleo sabían que volverían a encontrar otro igual o en el mismo sector. Ahora hay que darse cuenta que tendremos que cambiar de empleo muchas veces a lo largo de la vida por esto deberemos disponer de una mejor política social que cuide a los trabajadores durante estos cambios. No podremos detener los cambios, por lo tanto, deberemos asegurar que el empleo, la educación y la vida social estén garantizados durante los mismos. P. En este clima de incertidumbre como percibe la presión que está ejerciendo la UE sobre España. Todas las reformas que propone el Gobierno español saben a poco en Bruselas. R. Esto es una cuestión política. Tiene que entender que la Comisión Europea no es una Comisión socialdemócrata sino conservadora. Barroso pronuncia algunas palabras bonitas pero es un tipo conservador. Lo que ha hecho Zapatero es notable, ha levantado la sociedad española enormemente, pero está sólo. En este momento echamos en falta la solidaridad de Europa con España. P. ¿Cuáles son las raíces de esta falta de actuación por parte de Europa?

29 R. Creo que Alemania está defraudando a la Unión Europea. Lo que Alemania debería hacer es actuar como un socio europeo. El Gobierno de Berlín piensa equivocadamente que oponiéndose a las acciones comunes europeas están salvando la economía alemana. Pero esto es un error porque Alemania es una economía exportadora que no puede sobrevivir por sí sola como si estuviera en una isla. Si los otros países se hunden Alemania será golpeada también. P. ¿Alemania ha optado por un gran recorte del gasto público para que los demás tengan que hacer lo mismo? R. Lo que Ángela Merkel está promoviendo es matar el crecimiento. Todas las pequeñas flores que están apareciendo en el camino del crecimiento están siendo matadas por esta política de recortes. Lo que quiero es construir una alternativa al recorte y al plan de austeridad. Nosotros tenemos una estrategia de salida de la crisis distinta, que implica un equilibrio entre la consolidación presupuestaria, por una parte, y el empleo y el crecimiento por otra. P. ¿Pero la presión para más recortes y más flexibilidad es muy insistente? R. No vamos a crecer sólo con recortes del gasto público y reformas del mercado laboral. Mi experiencia como primer ministro en Dinamarca fue la puesta en marcha de la llamada flexisecurity. Lo que digo es que una reforma del mercado laboral no puede funcionar sin un crecimiento fuerte. Es lo que hicimos en Dinamarca, lanzamos el crecimiento económico y al mismo tiempo las reformas. Los Gobierno conservadores no han comprendido bien esto y sólo se centran en la flexibilidad y olvidan la seguridad. No se puede hacer sólo reformas, recorte del gasto público y nada más. Por esto el FMI está equivocado y por esto advierto al G-20 y a la UE diciéndoles por favor no repitamos los errores del pasado. P. Usted es muy crítico con los hedge funds, los fondos especulativos que están encareciendo la deuda. ¿Cuál es el verdadero peligro de estos fondos? R. Los hedge funds presionan a un país hasta el límite. Son capaces de forzar a los países a recortar su sistema de bienestar. Vemos que en España y Grecia tendrán que pagar más intereses por la especulación de los hedge funds sobre la deuda. José Luis Rodríguez Zapatero está en una situación muy difícil porque lo 25 hedge funds más grandes del mundo están haciendo un presión masiva sobre el Gobierno español que tiene que refinanciar su presupuesto. Los hedge funds son como cazadores en el bosque que tratan de matar todo lo que necesitan. http://www.elpais.com/articulo/internacional/Merkel/propone/matar/crecimiento/elpepu int/20100613elpepuint_8/Tes?print=1

Francia quiere reducir el gasto público en 45.000 millones hasta 2013 El primer ministro no adelanta el contenido de la reforma de las pensiones y carga contra los socialistas, que "desde hace 20 años multiplican los consejos" pero es la derecha quien toma "las decisiones difíciles" ANTONIO JIMÉNEZ BARCA - París - 12/06/2010 Francia se suma a la marea ahorradora que recorre Europa. Así lo ha asegurado en París el primer ministro francés, François Fillon, quien en un discurso dirigido a los militantes de su partido, la UMP, fijó por primera vez la cantidad de dinero que el Estado francés tiene previsto ahorrar en tres años a fin de alcanzar en 2013 el déficit público exigido por Bruselas, el 3,5% del Producto Interior Bruto (PIB). Fillon señaló que para esa fecha, el Estado francés, cuyo déficit es del 8% en estos momentos, habrá reducido su gasto en 45.000 millones de euros, además de ingresar 50.000 millones más y se habrá embolsado 5.000 millones extra provenientes de ciertas exenciones fiscales que serán anuladas. Es decir, en 2013 Francia contará con 100.000 millones más de euros, que ayudarán a aligerar una mastodóntica deuda que actualmente roza el 85,7% del PIB. El pasado 7 de mayo, Fillon -que es el encargado siempre de dar este tipo de malas noticias en el Gobierno francés, ahorrándoselas a Sarkozy- adelantó que el Estado francés congelará el gasto durante los próximos tres años. Días después, añadía que los distintos ministerios ahorrarán un 10% en los denominados "gastos de intervención", partidas especiales relacionadas, con lo general, con asuntos sociales. Entonces se desató un debate casi puramente semántico entre los líderes políticos franceses sobre si esas medidas se podían considerar o no un verdadero "plan de austeridad". Con posterioridad, Fillon adelantaba que los contribuyentes franceses dejarán de gozar de muchas de las 400 tipos diferentes de exenciones fiscales que actualmente procuran deducciones en el Impuesto sobre la Renta galo. Ya entonces el primer ministro francés contabilizó la cuantía de esta medida: 5.000 millones de euros. Ahora, a falta de otras iniciativas (Fillon no adelantó ninguna), hay que entender que Gobierno francés se compromete a gastar 45.000 euros menos en tres años gracias sólo a la congelación anunciada y a la reducción de las partidas especiales de intervención. En el capítulo de ingresos, Fillon piensa aumentar la recaudación de impuestos en 35.000 millones de euros gracias al aumento de ingresos consecuencia de la mejora de la economía. Reforma de las pensiones Francia tuvo el pasado año un déficit del 7,5% del PIB y el Gobierno espera que este año llegue a un pico del 8%, antes de proceder a una severo recorte hasta el 6% en 2011, el 4,6% en 2012 y en 2013 el 3%, que era el tope fijado en el Pacto de Estabilidad de la UE. En lo que respecta a la deuda pública, que fue del 78,1% del PIB el pasado ejercicio, la previsión es que toque techo en 2012 con el 87,1% antes de iniciar un descenso en 2013 al 86,6%. Fillon no ha dado más detalles de los que ya se saben sobre el contenido de la reforma del sistema de pensiones, que se dará a conocer el martes o el miércoles próximo, y cuyo principal punto será la elevación de la edad de jubilación, que ahora es de 60 años con carácter voluntario. El primer ministro se ha centrado en atacar a la oposición de izquierdas, y así ha reprochado al Partido Socialista que "desde hace 20 años multiplica los consejos y las críticas sobre el

31 futuro de las pensiones" pero son ellos los que toman "las decisiones difíciles". "Sería cobarde de nuestra parte decir a los franceses que se puede garantizar su pensión sin prolongar el periodo de actividad y sin tocar la edad legal (de jubilación) y el símbolo de los 60 años", ha indicado. Le Figaro informa de que el Gobierno ha abandonado la idea de crear un impuesto para financiar las pensiones que grabe a quienes tengan ingresos mensuales superiores a los 11.000 euros mensuales, y que sigue buscando una alternativa diferente pero siempre con la idea de que al menos simbóliamente los más ricos tienen que contribuir. El recorte del gasto público y la reforma de las pensiones son dos bazas que tiene previsto llevar el presidente francés, Nicolas Sarkozy, a su encuentro el próximo lunes con la canciller alemana, Angela Merkel, entrevista que fue suspendida la semana pasada en medio de rumores sobre las desavenencias franco-alemanas. http://www.elpais.com/articulo/economia/Francia/quiere/reducir/gasto/publico/45000/mi llones/2013/elpepueco/20100612elpepueco_3/Tes?print=1

32 REPORTAJE: La primera crisis del euro Austeridad o crecimiento El dilema entre los drásticos planes de ajuste de Europa y el mantenimiento de los planes de estímulo en EE UU marca la política económica CLAUDI PÉREZ - Madrid - 13/06/2010 Ronald Reagan creía que las nueve palabras más aborrecibles que se pueden pronunciar son estas: "Soy del Gobierno y he venido a prestarles ayuda". Su legado y el de Margaret Thatcher inauguró una era que ha dominado la política económica durante 30 años con un lema claro y sencillo, aquel más mercado y menos Estado que acabó abrasando incluso la socialdemocracia. En estas llegó la crisis y en apenas tres años lo puso todo patas arriba: el Estado salvó a los mercados, el péndulo se fue justo al extremo contrario, el Fondo Monetario Internacional (FMI) desenterró a un tal Keynes y hasta los bancos miraban hacia otro lado cuando los políticos amenazaban con la refundación del capitalismo, con volver a regular los mercados para ponerlos en vereda. Evidentemente, esa etapa toca a su fin. "Íbamos a reformar los mercados y los mercados nos han reformado a nosotros", aseguró el presidente Zapatero tras presentar un drástico plan de recortes para calmar los ataques de los inversores, inquietos con la posibilidad de que España, junto con varios países europeos, pueda incumplir sus compromisos. Hace un año, los bancos eran el problema; ahora el problema son los Estados, su deuda pública. Una deuda que, paradójicamente, los Gobiernos se vieron obligados a acumular para salvar a los mismos mercados que ahora atacan duro. La política económica está en una encrucijada. Esta vez el dilema no es exactamente mercado o Estado, pero se le parece. Austeridad o crecimiento, esa es la cuestión. Ajustarse el cinturón para reducir los enormes déficits públicos o perseverar en las políticas de estímulo hasta que el crecimiento económico vuelva a ser lo suficientemente robusto. Alemania ha hablado: Europa opta por el culto a la austeridad. Estados Unidos, por mantener los estímulos. La receta que demuestre más efectividad marcará el equilibrio de poder de los próximos años en el mundo mal llamado desarrollado. Pero a día de hoy no hay consenso. Ni nada que se le parezca. - Los tumbos del FMI. El Fondo, y no solo el Fondo, llevaba muchos, muchos años cegado por los destellos del libre mercado, convencido de los mecanismos autoestabilizadores de los "mercados eficientes". Con la crisis y bajo el ascendente de un socialista francés -Dominique Strauss-Kahn-, se olvidó de su ortodoxia y aconsejó activismo fiscal para evitar una Gran Depresión. Ahora está tan despistado como la mayoría: hasta hace nada aún advertía de que una salida prematura de los estímulos perjudicaría la recuperación, pero en las últimas semanas combina ese mensaje con la necesidad de acelerar la consolidación fiscal. Es decir, se apunta al culto a la austeridad, pero también a la medicina contraria. "El Fondo ha vuelto a esas políticas de austeridad que usaba en los países emergentes, que no funcionan. Vuelve a correr detrás de los mercados", critica Raj Patel, autor de Cuando nada vale nada (Los libros del lince). Patel pensaba hasta hace poco que la recesión era la forma de enseñar al mundo un poco de economía. "La pura verdad es que lo que regresa otra vez es esa apoteosis de la supuesta racionalidad de los mercados". - Europa y el calvinismo. Los expertos consultados coinciden en el enorme peligro de que unos mercados financieros que se han vuelto excesivamente cautos (tras años de tomar excesivos riesgos) fuercen a los Gobiernos a tomar la puerta de salida de los estímulos

33 fiscales tal vez demasiado pronto. "Las medidas de austeridad representan una vuelta a la economía prekeynesiana, a Hoover en EE UU, a la victoria de los halcones antidéficit en Europa. Todo conduce a ese viejo error de reducir el gasto público y subir los impuestos mucho antes de que la economía se haya recuperado. Ese resurgir del conservadurismo está directamente relacionado con la fuerza de los intereses financieros, los mismos que nos metieron en la crisis en 2007. Callaban cuando fueron rescatados, pero ahora dictan la política en toda Europa, incluido Reino Unido. Ese calvinismo tan alemán de la austeridad es extremadamente peligroso en estos momentos y puede conducir a Europa a un largo, largo estancamiento", vaticina Costas Lapavitsas, del think tank londinense Research on Money and Finance. Toda Europa parece correr detrás de una fórmula que se basa en drásticos recortes mezclados con las promesas de mejorar la competitividad combinando bajos salarios y reformas del mercado de trabajo y las pensiones en una dirección: más recortes. Grecia es el ejemplo más evidente. Se trata de la receta alemana: "Pero si Alemania quisiera de veras rescatar el euro y que esas medidas funcionaran en otros países, debería tomar el camino contrario al túnel al que conduce ese ajuste drástico", critica Lapavitsas. "La aplicación universal de recortes drásticos va a exacerbar los desequilibrios que existen en el corazón de la eurozona", sentencia. - Norte y Sur. Paul de Grauwe, profesor de la Universidad de Lovaina, asegura que si un único país adopta medidas de austeridad eso no es mayor problema, "pero si Alemania obliga a toda Europa a hacerlo está condenando a la UE a una recaída a la recesión". El Nobel Paul Krugman ha calificado los planes europeos de "masoquismo". Pero en Europa conviven dos visiones: "En el Norte se cree que el dilema entre austeridad y crecimiento es falso: esa visión se basa en que los planes de austeridad de hoy permitirán el crecimiento de mañana porque devuelven la confianza a los mercados. La periferia de Europa ha aplicado los ajustes por obligación, pero en el fondo el Sur de Europa piensa que aplicar ajustes para reducir el déficit tendrá efectos sobre la demanda y precipitará a la eurozona a una nueva recesión. Comparto esa segunda vía sureña", asegura De Grauwe en una entrevista con este diario. - Alemania o EE UU. La crisis fiscal es evidente en Europa, pero esconde otros problemas: serios desequilibrios en la balanza comercial, países con enormes superávits (encabezados por Alemania y Holanda, con un gran potencial exportardor) y países con déficits sensacionales (España y Grecia, por ejemplo, que importan más de lo exportan desde la noche de los tiempos). En el mundo ocurre lo mismo, con China y EE UU a ambos lados de la balanza comercial. "Los planes de austeridad y las reformas estructurales son una forma de que economías como la española o la griega reduzcan esa brecha. Si Alemania hace incomprensiblemente lo mismo, condena a toda Europa a una década perdida. EE UU está actuando con mayor pragmatismo. Pero si Alemania no incentiva el consumo, será imposible hacer ese reajuste en Europa", señala Vicente Pallardó, analista de coyuntura del Instituto de Economía Internacional. Alfredo Pastor, del IESE, atribuye ese fetichismo del déficit que se va instalando en toda Europa "a la pura superstición". "Los Gobiernos creen que así se ganarán la confianza de los mercados. Cuando alguien está muy endeudado, sus prestamistas deciden su futuro. Eso le ocurre a Europa: los prestamistas deciden la política económica, los mercados han prestado mucho dinero a los Gobiernos y ahora reclaman el cetro de mando; la confianza no va a volver así como así", remacha. - El BCE y los halcones. El Banco Central Europeo (BCE) desempeña un papel fundamental en esta historia. Su gestión es más heterodoxa que nunca, y sin embargo la política monetaria sigue siendo restrictiva: no hay crédito a pesar de las compras de bonos, a pesar de la barra

34 libre de liquidez, a pesar de todas las medidas para ayudar a la banca. Al final, "su política no es lo suficientemente laxa: deberían acercar los tipos de interés al 0%, comprar más bonos, ayudar a debilitar el euro", aconseja esta semana el economista Nouriel Roubini, el gran gurú de la crisis. Pallardó sugiere que los halcones del déficit siguen mandando en el BCE, a pesar del salto dramático que supuso la compra de deuda pública. "La Reserva Federal ha comprado centenares de miles de millones de dólares en deuda pública, mientras que las cantidades del BCE son mucho más modestas. ¿La razón? Esa es la forma de poder de obligar a hacer ajustes más drásticos y reformas a los países del Sur, que de otra manera se resistirían a encajar ese duro golpe", dice. - Las dudas y la reencarnación. El Nobel Joseph Stiglitz lo tiene claro: "Europa va directa al desastre si continúa con la manía de la austeridad", una opinión que comparte con Krugman. El presidente del BCE, Jean-Claude Trichet, tampoco tienen dudas, pero en sentido contrario: "Es una completa falacia decir que la consolidación fiscal reduce el crecimiento. Es exactamente al contrario. Es la ausencia de credibilidad fiscal lo que reduce el crecimiento". EE UU, de momento, opta por la vía Krugman-Stiglitz; Europa entera, en plena crisis fiscal, parece fiarse de Trichet. Aunque en realidad la inspiración tal vez no sea Trichet. Uno de los asesores económicos de Bill Clinton decía: "Antes pensaba que me gustaría reencarnarme como presidente o como jugador de béisbol. Pero ahora quiero reencarnarme en el mercado de bonos. Así puedo intimidar a cualquiera". http://www.elpais.com/articulo/economia/Austeridad/crecimiento/elpepieco/20100613elp epieco_2/Tes?print=1

35 REPORTAJE: Vida & Artes - SOSTENIBILIDAD DEL ESTADO DE BIENESTAR Y 10. EL NUEVO MODELO El ladrillo también, pero de otra forma No hay que dejar el turismo o la construcción, sino aumentar su competitividad - La clave para el cambio es la educación LUIS DONCEL 13/06/2010 El Gobierno no tiene la capacidad para cambiar el modelo productivo de la noche a la mañana, pero sí puede impulsar las reformas estructurales imprescindibles para dar el salto hacia un patrón de crecimiento más avanzado: la educativa y la laboral. Cuando José Luis Rodríguez Zapatero habló hace medio año de la necesidad de "una renovación profunda del patrón productivo" podía estar pensando perfectamente en Ángel Cano. "A los 18 años me puse a trabajar en un almacén. Con una titulación mínima ganaba 900 euros. Me parecía suficiente, pero el tiempo me ha demostrado que no es así", dice este tarraconense. Como él, una multitud de jóvenes abandonaron los estudios en busca de un dinero fácil con el que pagarse el coche. Un capital humano que España ha perdido y nunca recuperará. Ese día que compareció en el Congreso, el presidente del Gobierno también tendría en la cabeza las estadísticas que muestran cómo el país que gobierna desaprovechó la época de bonanza al mantener prácticamente intacta la productividad. Dos asuntos que no parecían importar demasiado cuando la economía y el empleo crecían más que en el resto de Europa, pero que ahora aparecen como vitales. Y que hacen pensar que España ha perdido unos años fundamentales para asegurarse un futuro próspero. El problema es que el nuevo modelo ahora tan deseado no aseguraba el alud de trabajo que creó el boom. Según el estudio Cambio en el modelo productivo y reformas laborales, escrito por cuatro profesores de la Universidad de Valencia, si la productividad por ocupado hubiera crecido al mismo ritmo que en la UE-10, España habría generado 3,5 millones de empleos frente a los siete millones creados entre 1994 y 2007. Es decir, la bajísima competitividad en sectores como la construcción o los servicios sirvió como motor para llegar en 2007 a la tasa de paro más baja que se recuerda, del 8%. "El momento idóneo para dar el salto era entonces. Algunos se plantean la disyuntiva entre cambiar el modelo productivo o el mercado de trabajo. Es un falso debate, porque ambos son imprescindibles y no se entiende el uno sin el otro", señala uno de los autores del estudio, Javier Andrés. A falta de conocer los detalles de la reforma que el Gobierno aprobará este miércoles, algunos expertos desconfían de su contenido. "Si se aprueba lo que conocemos, va a ser bastante decepcionante y nuestros acreedores volverán a atacar. El problema es que aquí los indefinidos y los funcionarios (yo mismo) tenemos una protección como si estuviéramos en la antigua URSS, mientras que los eventuales habitan en el Hong Kong moderno. La nueva norma no parece que vaya a solucionar esta perniciosa dualidad que impide la especialización en productos de alto valor añadido. Las empresas punteras de Silicon Valley se basan en la prueba y error, algo incompatible con nuestros contratos muy rígidos. Y los muy precarios incentivan la baja formación, de ahí que nuestro modelo se base en sol y ladrillo", sostiene Juan José Dolado, de la Universidad Carlos III. Además de la reforma laboral, este profesor de Economía añade la educativa como requisito sine qua non para saltar al nuevo patrón de crecimiento. "¿Por qué en los años noventa Finlandia se especializa en innovación y España en ladrillo? Porque aquí el factor productivo

36 más abundante era la mano de obra poco cualificada, y allí habían emprendido una reforma educativa ejemplar", responde. "Ni trabajamos pocas horas ni por salarios muy altos, nuestra productividad es baja porque la escuela y la universidad no proporcionan la formación adecuada", añade Dolado para sintetizar los problemas de un sistema educativo que, pese a recibir una proporción cada vez mayor de dinero público (casi el 5% del PIB en 2009), no ha solucionado el alto fracaso escolar. El gasto en I+D español, pese a haberse disparado en los últimos años, todavía se quedó en 2008 en el 1,3% del PIB, por debajo de la media europea. Pero el debate sobre el cambio de modelo que muchos economistas llevaban años reclamando y que el Gobierno puso sobre la mesa el año pasado no se agota en las reformas estructurales necesarias para impulsarlo. Desde algunos sectores se interpretó que el nuevo patrón de crecimiento suponía dar la espalda a los motores que hasta ahora habían tirado del carro -la construcción y los servicios- en favor de las nuevas tecnologías, las energías renovables, la biotecnología, etcétera. Y no es eso. Se trata de aumentar la productividad y el valor añadido tanto en las actividades tradicionales como en las más avanzadas, como insistía esta semana el Servicio de Estudios de La Caixa. "No es tan importante especializarse en sectores punteros como contar con empresas competitivas en cada sector. Para ello es necesario un marco flexible, que favorezca la innovación y premie el talento", asegura el informe. "Discrepo del discurso del Gobierno que pide menos ladrillos y más ordenadores. Necesitamos más ladrillos con ordenadores. Hay que introducir talento en lo que sabemos hacer para hacerlo de manera distinta", insiste Jordi Sevilla, ex ministro socialista y ahora asesor de PwC. Aunque la construcción ha perdido un millón de empleos en los dos últimos años, todavía ocupa a 1,6 millones de personas. "Para mantener y crear empleo hace falta dualizar la producción: por ejemplo, aguantar en el tejido tradicional e incentivar los nuevos tejidos ignífugos y artificiales; en el mercado alimentario, apostar por la marca blanca y las delicatessen; en el turismo, por el tradicional y el temático. No te lo puedes jugar todo a un segmento nuevo, sino apoyar la transformación gradual del viejo", añade Guillem López-Casasnovas, catedrático de la Pompeu Fabra. Es cierto que ningún sector sobra en el nuevo modelo. Pero también lo es que la hipertrofia inmobiliaria no fue perjudicial solo por inflar una burbuja que ha terminado por estallar salpicando a millones de personas. El problema es que absorbía buena parte de las inversiones y del ahorro nacional que, en otras circunstancias, se habría destinado a sectores con más valor añadido. En 2006 se iniciaron 760.000 viviendas y el año pasado menos de 160.000: un desplome del 80% en tres años. Para completar el cuadro de un sector con perspectivas devastadoras hay que añadir el problema de una masa de casas vacías sin vender que ronda el millón. Una de las salidas para que vuelva a crear empleo es la rehabilitación, el elemento estrella de la Ley de Economía Sostenible que el Gobierno aprobó en marzo. Pero su retraso en la tramitación parlamentaria corre el riesgo de dejar la norma que pretendía servir de palanca para el cambio al borde de la irrelevancia. Además, algunas medidas recientes del Gobierno pueden convertirse en palos en las ruedas para el nuevo modelo. "No tiene sentido rebajar el sueldo de todos los funcionarios por igual. Al que no trabaje hay que echarlo y al que lo haga bien, pagarle más. Gravar aún más a los que ganan 100.000 euros es otro despropósito. ¿A quién perjudica? A los profesionales liberales, que no son ricos de verdad, pero sí tienen una renta media-alta que procede de su trabajo y formación. Una pésima señal para los profesionales con ofertas en el extranjero", protesta el catedrático de la Pompeu Fabra José García Montalvo. ¿Se le ocurre alguna idea para impulsar el cambio de modelo a corto plazo? "Algo que está en la mano del Gobierno: reformar la función pública. Establecer incentivos en función de la productividad; y eliminar organismos inútiles, como las diputaciones", responde.

37 Un modelo basado durante años en echar más horas y emplear a más gente cuando había que aumentar la producción no se cambia en un chasquido de dedos con la acción de un Gobierno. Como mucho, los políticos pueden retirar incentivos insanos. Es el caso de la deducción por compra de vivienda, que ha acabado por beneficiar sobre todo a los promotores inmobiliarios. El Ejecutivo planea eliminar este incentivo al ladrillo el próximo año. La pregunta es si esta decisión no llega demasiado tarde. Las 'fuerzas del mal' lo impidieron en 2004 "El objetivo es sentar las bases de un crecimiento equilibrado y sostenible [...] que se traduzca en aumentos de la productividad y del ahorro [...] de una economía altamente endeudada y enladrillada". Parece el discurso actual de cualquier responsable del Ministerio de Economía, pero se trata del programa con el que el PSOE ganó las elecciones de 2004. ¿Por qué no se aprovechó la victoria electoral de ese año para pinchar una burbuja que acabó por estallar violentamente en 2007? "Ya sabíamos que el modelo productivo no era sostenible, pero creo que todavía no hemos desarrollado la capacidad técnica para desinflar poco a poco las burbujas. Siempre acaban por estallar", responde Jordi Sevilla, ministro en los primeros gabinetes de Zapatero. "Nunca vi más fácil quitar la deducción fiscal por compra de vivienda que entre 1997 y 2004, cuando mucha gente compraba pisos sin fijarse en los precios, sino en las expectativas de revalorización. Miguel Sebastián y yo queríamos eliminar este ayuda que beneficiaba a los promotores", responde David Taguas, director de la Oficina Económica de La Moncloa entre 2006 y 2008 y actual presidente de Seopan. La entonces ministra de Vivienda, María Antonia Trujillo, destaca la aprobación de un plan de choque para impulsar el alquiler y recuerda que trató de recuperar la deducción fiscal por alquiler que el PP había eliminado en 1998. "No se quiso poner el cascabel al gato. El Ministerio de Economía impidió que se aprobara esta medida por los cuantiosos ingresos que llegaban a las arcas públicas de la construcción", añade Trujillo, que aprobó una Ley del Suelo que trataba de luchar contra la especulación. Pero si se quería enfriar el sector, eliminar las ayudas no era la única vía. El profesor de la Universidad de Valencia Javier Andrés opina que se debería haber sido más cuidadoso con la política fiscal, y considerar los ingresos del ladrillo como algo excepcional, y engordar el superávit para momentos de dificultad. "Es lo que hizo Chile con la exportación de cobre", añade. Una de las medidas más criticadas por su impacto en el actual déficit es la devolución de los 400 euros a los asalariados. Taguas recuerda su gestación. "La tasa de ahorro de las administraciones públicas era la mayor de la historia mientras que el ahorro de las familias estaba en mínimos. Sabíamos que muchas familias estaban pasando dificultades para pagar las hipotecas por los altos tipos de interés y dado que habían pagado demasiado impuestos decidimos devolverles algo de dinero". El entonces asesor económico de Zapatero trató de reformar el IRPF -"En 2004 cumplió 25 años; era el momento de reformarlo para los próximos 25"- y de eliminar algunas subvenciones ineficientes. ¿Y por qué no se adoptaron estas medidas? "Las fuerzas del mal lo impidieron", responde con ironía. http://www.elpais.com/articulo/sociedad/ladrillo/forma/elpepisoc/20100613elpepisoc_1/T es?print=1

38 TRIBUNA: Laboratorio de ideas ANTÓN COSTAS Jugando con fuego ANTÓN COSTAS 13/06/2010 El panorama económico europeo se ha oscurecido considerablemente en las últimas semanas. El riesgo de recesión prolongada y alto desempleo cotiza al alza. Las consecuencias para la sostenibilidad del euro y del propio proyecto político europeo no son despreciables. Sin embargo, las autoridades políticas y monetarias europeas parecen no ser conscientes de este riesgo. El plan de austeridad de la canciller Angela Merkel es una mala noticia para la economía europea y para la propia Alemania. No tanto por su contenido como por la filosofía económica que le sustenta: la idea de que la austeridad es en sí misma una buena política en cualquier circunstancia y lugar. La austeridad alemana funcionó antes de la crisis porque con el ahorro alemán los demás europeos consumíamos productos que comprábamos a Alemania. Pero ahora que los demás tenemos que ser austeros y exportar, la política de Merkel puede hacer que la economía europea acabe como el rosario de la aurora. Es aún más preocupante si cabe la situación que están viviendo los mercados financieros. La sensación de estar a las puertas de un colapso agudo de los mercados monetarios europeos donde la banca se refinancia sus posiciones de corto plazo se hace cada vez más intensa. El escenario se parece cada vez más al de los días posteriores a la caída de Lehman Brothers. O el Banco Central Europeo (BCE) cambia su actitud e interviene de forma radical para hacer retornar el dinero a esos mercados o el "crash bancario" y el "credit crunch" (sequía de crédito) dejarán de ser un fantasma para convertirse en realidad que golpeará especialmente al crédito minorista. De no cambiar, todo presagia que nos dirigimos hacia una recesión o estancamiento prolongado acompañado de alto desempleo. En estas situaciones la reducción del paro es lenta. Hay que recordar que en medio de la Gran Depresión, entre 1930 y 1938, la tasa de desempleo medio se mantuvo en Francia en el 10,2% y en Alemania en el 21,2%. Las consecuencias políticas son conocidas. Aquellos que ahora no valoran las consecuencias sociales y políticas de una recesión y de un paro prolongado están jugando con fuego. Es decir, están jugando con el euro y con la propia unión política europea. ¿Por qué nuestras autoridades no toman en consideración ese riesgo? Probablemente por tres razones. Primera, no valoran el efecto de la austeridad sobre la incertidumbre de la gente ante el futuro. El miedo al futuro lleva a la anorexia de consumo y a la avaricia de ahorro. Pero, si como dijo Adam Smith, "el consumo es el único fin y propósito de toda producción", donde no hay consumo no hay producción; y donde no hay producción no hay empleo. Segunda, confunden esta recesión con otras previas. Las crisis de los años setenta, ochenta y noventa las provocó un exceso de demanda de consumo que incrementó la inflación y desequilibró la economía. Los remedios fueron la restricción de crédito y el aumento de impuestos para reducir el gasto privado, así como el recorte de gasto público. Pero esta es una crisis originada por el pinchazo de una enorme burbuja especulativa, que al explotar ha producido por sí misma la caída de precios de los activos, desplome del consumo, recesión y paro. Como la enfermedad es diferente, la medicina no puede ser la misma.

39 Tercera, no toman en consideración la situación de "deflación de deuda" que acompaña a esta crisis y que, por sí sola, acentúa las tendencias recesivas. Imagine que usted compró un piso por 300.000 euros y que lo financió con un crédito por el mismo importe. Aunque está endeudado, su balance está equilibrado. Imagine (no hace falta demasiado esfuerzo) que surge de repente una fuerte crisis y los precios de esos activos se desploman un 30%. Ahora el valor de su piso es de 210.000 euros, pero la deuda se ha quedado colgada en 300.000 euros. Técnicamente está quebrado. Alguna inquietud le producirá, y seguramente usted ante la incertidumbre disminuirá su consumo para hacer frente a contingencias imprevistas. La cosa se puede complicar cuando la caída de precios (deflación) aumenta el valor real de la deuda, dado que ahora tendrá que hacer un mayor esfuerzo para pagarla. Los bancos europeos, y en particular los de aquellos países donde la burbuja inmobiliaria fue mayor, están viviendo con especial intensidad las consecuencias de la deflación de deuda. Los descapitaliza, y esto les lleva a embalsar la liquidez que les suministra el BCE y restringir el crédito, especialmente el minorista. A una situación de este tipo, Irving Fisher, prestigioso economista norteamericano de los años treinta, la llamó "deflación de deuda", y la consideró como una de las causas básicas, sino la principal, de la intensidad de la recesión y el paro durante la Gran Depresión de los años treinta. ¿Por qué las autoridades europeas están cometiendo estos errores? Algunos pensaran que por intereses. Otros, que es el miedo a asumir riesgos y ser acusados de intervencionistas. Pero hay otra explicación: el poder de las ideas, de las malas ideas. A ellas se refirió John Maynard Keynes al señalar que "las ideas de los economistas y los políticos, tanto cuando son correctas como cuando están equivocadas, son más poderosas de lo que comúnmente se cree. En realidad el mundo está gobernado por poco más que esto. Los hombres prácticos, que se creen exentos por completo de cualquier influencia intelectual, son generalmente esclavos de algún economista difunto". El mundo ha cambiado con la crisis financiera de 2008, pero las ideas sobre las políticas han quedado ancladas en el mundo que se fue. Espero, sin embargo, que la fuerza de los hechos haga cambiar las cosas antes de que el fuego sea irreparable. http://www.elpais.com/articulo/primer/plano/Jugando/fuego/elpepueconeg/20100613elpn eglse_5/Tes?print=1

40 TRIBUNA: Laboratorio de ideas LUIS GARICANO Mañana es hoy Para pagar la deuda, hay que crecer, y para ello hace falta una reforma ambiciosa del mercado de trabajo La crisis permite abordar cambios cuya necesidad y urgencia no se perciben en épocas de bonanza LUIS GARICANO 13/06/2010 Los inversores extranjeros siguen sin fiarse de España. ¿Por qué? Básicamente, por tres razones. Primero, porque no entienden lo que está pasando en el sector financiero. Con una crisis inmobiliaria gigantesca, se preguntan: ¿Cómo es posible que la mora de las cajas no haya crecido? ¿Es posible que los créditos vivos a promotores sigan siendo 325.000 millones tras un año de crisis, sugiriendo que se están refinanciando préstamos impagables? Finalmente, ¿cómo es posible que el precio de la vivienda casi no haya caído? Segundo, no ven claro el ajuste del gasto público, a corto y medio plazo. A corto tenemos un déficit extremadamente elevado. A medio plazo tenemos un problema demográfico importante que requiere ajustes en el sistema de pensiones y de sanidad. Y tercero, porque no ven una senda clara de crecimiento de nuestra economía que permita emplear a los muchos parados y generar empleo para ellos. Y sin embargo, la sociedad sigue sin ver la urgencia de la situación, principalmente porque nadie se lo ha explicado Así, el entendimiento racional se sustituye por oscuras teorías de la conspiración, por una sensación general de injusticia e incomprensión ante el supuesto ataque "conjunto del Financial Times y de la City" en frase que, solo medio en broma, hemos escuchado recientemente. Lo que está pasando es muy sencillo. La posición deudora bruta de la economía española frente al exterior, privada y pública en conjunto, es de aproximadamente el 180% del PIB. Un deudor necesita del acceso a los mercados continuo, para refinanciar sus deudas. Si este acceso se corta, la situación termina en una crisis de balanza de pagos a la argentina, con recurso al nuevo fondo de inversión Europea y al FMI. Por ello, creemos que lo más importante es, hoy mismo, lo más urgente. Las consecuencias de dejar para mañana -o de decepcionar a nuestros acreedores con versiones descafeinadas- una sola de las cuatro reformas estructurales que nos exigen nuestros socios europeos pueden ser terribles. España tiene que restaurar la confianza de sus prestamistas en su capacidad de pago de la deuda. Para ello debe consolidar las finanzas públicas a corto plazo, dando más credibilidad al objetivo de reducción del déficit al 3% del PIB en 2013, y también a largo plazo, reformando las pensiones públicas, porque son el mayor factor de desestabilización presupuestaria en horizontes más largos. Para pagar la deuda, la economía debe crecer, y para crecer es necesaria una reforma del mercado de trabajo ambiciosa. Y hace falta un saneamiento efectivo de nuestro sistema financiero porque la mayor parte de nuestra abrumadora deuda exterior no es pública, sino privada, y hay que restaurar la confianza de los mercados internacionales en la solvencia y viabilidad de nuestras instituciones financieras. Estas reformas no son caprichos arbitrarios de unos supuestos especuladores financieros. No. Son condiciones necesarias para que nuestros prestamistas y acreedores, que financiaron la expansión de la economía española entre 2000 y 2007, recobren la confianza en nuestra capacidad de pago y nos sigan prestando, algo que -no olvidemos- no están en absoluto obligados a hacer.

41 El Gobierno parece andar dando tumbos, proponiendo reformas que son parches. Debe abandonar esta ruta y orientarse hacia la reforma estructural profunda. Lo contrario nos somete al vaivén de los planes repentinos, que son, como Grecia ha aprendido, efímeros. El país necesita hacer reformas en cuatro áreas para restablecer la confianza: presupuesto, pensiones y sanidad, mercado de trabajo y sector financiero. Estas reformas deben hacerse en profundidad y con creatividad, y deben servir para dejar la economía española en condiciones de recuperar la senda de crecimiento verdaderamente sostenible. 1. Gasto público. Las medidas tomadas para reducir el déficit hasta el 3% del PIB en 2013 son un primer paso loable en la buena dirección. Pero hay peros. En primer lugar, no está claro que las medidas adoptadas sean cuantitativamente suficientes. Para llegar al 3% en 2013 hay que reducir el déficit de 2009, que fue del 11,2% del PIB, un 8,2%. En la opinión de muchos expertos, lo harán sólo en un 6%. Queda por reducir un 2,2%, y ello debería hacerse principalmente recortando gastos: la evidencia internacional ilustra que el crecimiento económico se impulsa mejor así que subiendo impuestos. En segundo lugar, las medidas adoptadas son cualitativamente insuficientes. No se ha suprimido ningún programa de gasto, con la esperanza implícita de que cuando amaine el temporal financiero, todos ellos volverán a crecer. ¿Acaso tiene España una Administración pública austera, en la que no hay gasto superfluo, personal sobrante o duplicidades de gestión? Las crisis como la actual son dolorosas, pero ofrecen grandes oportunidades para hacer los cambios cuya necesidad y urgencia no se percibe en épocas de bonanza. ¿Qué mejor momento para hacer un presupuesto de base cero en el que todos, absolutamente todos los programas de gasto y los organismos que los gestionan sean puestos en cuestión? 2. Pensiones y sanidad. En lo que serán en los próximos años con toda seguridad las dos fuentes principales de crecimiento del gasto, la sanidad y las pensiones, las políticas planteadas hasta ahora (congelación de pensiones, congelación de plantilla sanitaria) son políticas cortoplacistas, de congelación, no de reforma. Y sin embargo, los problemas demográficos van a requerir mayores ajustes fiscales en España que en el resto del mundo. De acuerdo con un reciente informe del FMI, en España, a largo plazo, crecen más que la media los gastos relacionados con la demografía, y a la vez nos encontramos con la necesidad de hacer uno de los ajustes fiscales más duros del mundo. La combinación de ambas características hace necesario introducir reformas estructurales en estas dos áreas. Algunos de los planes propuestos van en la dirección adecuada, pero son insuficientes. El copago en la sanidad, ya presente en los países de nuestro entorno, la subida de la edad de jubilación y el cambio en la fórmula de cálculo de las pensiones deben ser la base de un cambio en profundidad. 3. Reforma laboral. La información que ha circulado en los últimos días sobre reforma laboral sugiere que esta puede ser insuficiente. Se proponen reformas en los márgenes, que mejoran un sistema que está completamente roto. La reforma debe tener tres elementos fundamentales. Primero, la descentralización de la negociación colectiva debe ser la prioridad absoluta, para permitir que las condiciones de cada empresa se puedan ajustar a su realidad económica. Segundo, la mayor desjudicialización posible, eliminando la intervención judicial, que genera muchos costes y, paradójicamente, inseguridad jurídica. Y tercero, la disminución del desnivel entre contratos temporales y fijos para limitar la dualidad. Todo ello sin subir los costes de contratar trabajadores eventuales, algo que sería absurdo en un momento de tanto desempleo. 4. Reestructuración financiera. Finalmente, no es posible que el sistema financiero empiece a funcionar sin que incremente dramáticamente la certidumbre de los inversores extranjeros sobre los riesgos a los que se enfrentan si prestan a un banco o caja españoles. Para ello sería

42 necesario, primero, culminar cuanto antes el mapa final de entidades y el acceso al FROB. A continuación habrá que poner en marcha un proceso de saneamiento del balance por el lado de los activos. Sin esto difícilmente el sistema crediticio volverá a dar crédito y persistirán las dudas entre los inversores extranjeros. - http://www.elpais.com/articulo/primer/plano/Manana/hoy/elpepueconeg/20100613elpne glse_9/Tes?print=1

ENTREVISTA: MICHAEL QUEEN Presidente del fondo de capital riesgo 3i "Apostaremos por España otros 40 años más" SANTIAGO HERNÁNDEZ 13/06/2010 El fenómeno del capital riesgo no atraviesa uno de sus mejores momentos. A pesar de ello, hay firmas que asumen que las crisis son cíclicas y que ya hay oportunidades de inversión en el mercado español tan castigado por los organismos de calificación y por los foros de expertos. Así lo entiende el presidente ejecutivo de 3i, Michael Queen, quien afirma que la empresa "lleva 20 años en España y la intención es apostar por ella otros 20 o 40 años más". Para este directivo, que asumió recientemente la presidencia de 3i, "no es lo mismo entrar en un nuevo mercado en una situación como la actual, a estar asentado en él, como lo estamos nosotros. Nosotros nunca nos hemos planteado dejar España porque cuando entramos lo hicimos para quedarnos, no estar solo al humo de una operación interesante", afirma Queen. La firma británica llegó a España en el año 1990 cuando el capital riesgo era prácticamente desconocido en este mercado. La empresa llevaba invirtiendo en Londres desde 1945 en empresas independientes y se abrió a Alemania y Francia en 1984. "En los 20 años que llevamos en España hemos realizado 138 operaciones con una inversión total de 1.900 millones de euros. Como operación emblemática yo destacaría la realización en 1995 del primer MBO de cierto tamaño que se hizo en España: Transportes Gerposa, que nos supuso una rentabilidad del 600%". Otras operaciones estrella que resalta Queen son las inversiones en Imaginarium, Clínica Baviera, Renta Corporación o AC Hoteles, en las que desarrolló planes de expansión. Más recientemente se han producido inversiones en Café& Té, GES, Boomerang, Everis o Unión Radio. El presidente de 3i recalca que "nosotros invertimos para crear valor, y no solo aportamos recursos sino que aportamos conocimientos y fortalecemos los equipos directivos. La desinversión se produce solo cuando se cumplen los objetivos marcados. El tiempo de permanencia en las empresas depende de la propia evolución de las empresas aunque suele estar entre los tres y los siete años". El fondo de inversión británico cuenta en la actualidad con 16 empresas españolas en cartera con una inversión global de 1.049 millones de euros. Es una cartera relativamente joven ya que hace dos años se hicieron varias desinversiones. "El ciclo de grandes ventas ya lo pasamos en los años anteriores. En el año 2007 hicimos 22 desinversiones y en el año 2006 hicimos 24 debido al ciclo alcista de los precios y logramos tasas de retorno por encima del 45%. Pero en 2008 las ventas de participaciones cayeron más del 60%, solo se vendió la firma Sampletest y esa tendencia siguió en 2009". Cuando se pregunta a Michael Queen por la pérdida de imagen y fuerza de la economía española reconoce que ha habido "muchas firmas que han dejado la economía española dadas las nuevas circunstancias económicas. La economía española atrajo el doble de la inversión en capital riesgo en dos años. Esto provocó que grandes fondos europeos y americanos se interesaran por este mercado. Esto provocó mayor competencia y aumento de precios lo que

43 ha llevado a un momento de falta de apalancamiento y ha terminado con la salida de muchos de esos fondos". Para el máximo responsable de este fondo de inversión "esta salida es un error. Yo creo que es precisamente en estos momentos de inestabilidad cuando nos convertimos en un jugador fundamental. Nosotros nunca nos hemos planteado dejar España porque cuando entramos lo hicimos para quedarnos no al humo de una operación interesante. Por eso continuaremos buscando oportunidades de inversión en España. Seguimos buscando empresas bien gestionadas y con capacidad de crecimiento. Llevamos 20 años aquí y la intención del grupo es seguir apostando por España otros 20 o 40 años más". Aparte de España este fondo de capital riesgo ha apostado fuerte por el desarrollo internacional en Europa y en Estados Unidos donde cuenta con dos oficinas pero sobre todo en Asia donde se han abierto oficinas en Bombay, Singapur y Pekín. La firma trabaja intensamente para fortalecer la conexión entre España y Asia ayudando en todo lo posible a las empresas españolas. En China e India tiene un equipo que trabaja exclusivamente en la conectividad para ayudar a las empresas europeas. http://www.elpais.com/articulo/empresas/sectores/Apostaremos/Espana/otros/anos/elpep ueconeg/20100613elpnegemp_6/Tes?print=1

44 REPORTAJE: economía global Holanda, paraíso del pleno empleo Una economía dinámica y un mercado laboral flexible demandan trabajo en abundancia El gran número de autónomos ayuda a consolidar el mercado El trabajo temporal con intermediarios privados es un pilar del sistema ISABEL FERRER 13/06/2010 Para empezar, unas cifras descarnadas sobre Holanda, el país del crecimiento imparable al que la crisis "destruyó su confianza en el mundo financiero", según el informe parlamentario elaborado al respecto. La economía holandesa entró en una profunda recesión en 2009, con una contracción del 4% (la peor desde el 3,6% de 1930). "La crisis es responsabilidad de todos, pero el sector bancario asumió riesgos inaceptables y careció de capacidad de autocrítica", reza la misma investigación. Por eso, y porque las entidades debieron ser rescatadas a costa de inseguridad laboral, despidos y recortes en la Seguridad Social, educación, salud y cultura, los próximos Gobiernos "deberán controlar mejor a partir de ahora a los bancos". La confianza herida y el duro revés sufrido por las exportaciones, uno de los pilares de la economía patria, se ha traducido en la adopción de estrictas normas presupuestarias. Con todo, en 2009, Holanda fue uno de los que registraron menor déficit público de la UE, un 3,4% del PIB. Tampoco la deuda pública total fue demasiado alta, con un 61% del producto bruto. Pero lo que más destaca de Holanda, a pesar de necesitar un recorte estructural de 29.000 millones de euros hasta 2015 para salir a flote, es el índice de desempleo. Con un 4,1% de la población activa, es el más bajo de la Unión Europea. Hablamos de una economía abierta, con su motor del puerto de Rotterdam -el mayor de Europa- algo tocado por un descenso del 8,5% del volumen de mercancías en 2009. "El paro no lo contiene solo el hecho de que una economía sea más o menos abierta. La clave es la flexibilidad del mercado laboral. Durante la crisis económica se ha mantenido la oferta de empleo. Menos, desde luego, porque el sector de la construcción aún no se ha recuperado y no se invierte en nuevos edificios de oficinas, tiendas o infraestructuras. Pero se encuentra trabajo porque hay dinamismo", asegura el economista Peter Hein van Mulligen, de la Oficina Central de Estadística. Trasladada a la calle, su explicación se traduce en una red de empleos temporales, entre seis meses y un año de media, que pueden ser o no renovados hasta tres veces como máximo. Luego debe tomarse la decisión de contratar de forma más permanente, o bien prescindir del trabajador. Esos contratos los gestionan unas oficinas especializadas del sector privado (uitzendbureau) que se encargan de atender la demanda de las empresas. Es más, trabajan con grupos de compañías a las que proveen de mano de obra, sobre todo en el sector administrativo y sanitario. Para el patrón, el proceso resulta algo más caro. Al sueldo debe añadir el porcentaje pedido por el intermediario para operar y mantener siempre lleno el cajón de solicitudes. El sistema no es único ni tampoco novedoso, pero su solidez y su arraigo "permiten reaccionar con mayor soltura y menores riesgos ante una amenaza de crisis o contracción de la economía", dice Van Mulligen. "Claro que los que más sufren son los jóvenes, como en todas partes. De ahí que haya un vivo debate a derecha e izquierda. La primera querría flexibilizar aún más la

45 temporalidad. La izquierda, por el contrario, puja por reducir estas contrataciones. Pero lo importante es su carácter estructural, porque en Holanda mueven el mercado". Según la Oficina de Políticas Económicas, el paro crecerá en los próximos años. Hasta un 6,5% en 2011 (alrededor de 500.000 personas, contra las 379.000 de 2009). Otros cálculos hablan ya de 675.000 parados para 2010. En la Oficina sostienen que la existencia de muchos trabajadores autónomos también ha contribuido a flexibilizar el mercado. "Junto a ello, las previsiones señalan un aumento de empleo en el sector sanitario, mientras que en el estatal caerá un 1% anual a partir de 2011", dicen en la Oficina. En el primer trimestre del año en curso, la mayoría de las empresas holandesas han empezado a respirar de nuevo, aunque con mesura y baches evidentes en la construcción y las exportaciones. Pero vuelve el movimiento de cargas hacia China y Asia. En particular de productos químicos, maquinaria y metales como acero y cobre. "Para 2010 se prevé un crecimiento económico de un 1,5%. En 2011 puede llegar al 2%. No está mal. Lo que habrá que atajar es el recorte financiero. Y para decidir cómo ahorrará el Estado, lo más probable es que se aplique el famoso modelo pólder holandés: todos juntos afrontando la misma responsabilidad. Tal vez por eso una huelga general, como la española, o al estilo francés, no encaje tanto aquí", aventura Van Mulligen. Aunque el alabado consenso se imponga para aplicar los ajustes, los gastos sanitarios derivados del envejecimiento de la población crecerán un 4% anual en términos reales. Es otra realidad insoslayable y se llevará un buen pellizco del PIB. "Sin cambios, el déficit presupuestario crecerá de forma desmesurada y la deuda pública será insostenible". Así reza el informe para 2010 de la Oficina de Políticas Económicas, cuyo eco no deja de resonar en el arco político nacional. Un espacio hoy más convulso que nunca en busca de una coalición gubernamental que mantenga el empleo, a pesar de los recortes. Flores otra vez En momentos de grandes crisis, los lápices labiales y las flores siguen vendiéndose bastante bien. Tal vez sea porque, con un desembolso moderado, el ánimo se levanta enseguida. En febrero de este año, los mayoristas holandeses de flores y plantas anunciaron que el mercado había experimentado "una frágil recuperación". En 2009, las exportaciones cayeron más de un 4%, hasta sumar 4.900 millones de euros. El valor de las flores cortadas bajó un 8%, situándose en 3.000 millones. Incluso cuando flaquean, las cifras del sector son abultadas. No hay más que consultar las importaciones de 2008. Con una reducción del 2,8%, llegaron a 6.400 millones de euros. Pero aunque el malestar de las finanzas mundiales y un invierno severo han ralentizado el crecimiento, el empleo se mantiene estable. El año pasado, el sector daba trabajo a 73.280 personas, entre cultivadores y vendedores al por mayor y al detalle, una cifra ligeramente inferior a la de 2008. A pesar del descenso en las ventas por segundo año consecutivo y de un menor volumen de operaciones en las subastas -Holanda maneja la mitad de las flores vendidas en el mundo-, se prevé una recuperación a medio plazo. Lejos quedan los tiempos de la especulación, que en el siglo XVII crearon una burbuja económica. Un auténtico mercado de futuros, con bulbos de tulipán no cosechados vendido por 100.000 florines. Por cierto, el tulipán sobrevivió a la especulación del Siglo de Oro. El 88% del cultivo mundial sigue en los Países Bajos. - http://www.elpais.com/articulo/economia/global/Holanda/paraiso/pleno/empleo/elpepuec oneg/20100613elpnegeco_1/Tes?print=1

46 TRIBUNA: economia global KENNETH ROCOFF Lecciones del vertido de BP KENNETH ROCOFF 13/06/2010 Los paralelismos entre el vertido de petróleo y la reciente crisis financiera son demasiado dolorosos

Mientras el pozo de petróleo dañado sigue soltando a borbotones millones de galones de crudo desde las profundidades del golfo de México, el problema inmediato es cómo mitigar una catástrofe medioambiental que aumenta por momentos. Sólo podemos abrigar la esperanza de que se contenga el vertido pronto y no se materialicen las hipótesis peores.Sin embargo, el desastre plantea una amenaza aún más profunda a la forma como las sociedades modernas regulan las tecnologías complejas. La acelerada velocidad de la innovación parece estar superando la capacidad de los reguladores estatales para afrontar los riesgos, y más aún para prevenirlos. Los paralelismos entre el vertido de petróleo y la reciente crisis financiera son demasiado dolorosos: la promesa de innovación, la complejidad insondable y la falta de transparencia (los científicos calculan que sólo conocemos una pequeña fracción de lo que ocurre en las profundidades del océano). Grupos de presión adinerados y políticamente poderosos ejercen presiones enormes sobre las estructuras de gobierno más sólidas. Constituye un enorme apuro para el presidente de EE UU, Barack Obama, que propusiera -presionado por la oposición republicana, cierto es- aumentar en gran medida las perforaciones en busca de petróleo en el mar justo antes de que se produjera la catástrofe de BP. La historia de la tecnología del petróleo, como la de los instrumentos financieros exóticos, era muy convincente y seductora. Los ejecutivos de las empresas petroleras se jactaron de que podían perforar hasta una profundidad de dos kilómetros y después un kilómetro en sentido horizontal y acertar en el blanco con un margen de error de unos metros. De repente, en lugar de un mundo en el que se hubiera llegado a la tasa máxima de extracción de petróleo y con recursos cada vez más escasos, la tecnología ofrecía la promesa de aumentar el abastecimiento para otra generación. Los funcionarios occidentales se dejaron influir también por la preocupación por la estabilidad del abastecimiento en Oriente Próximo, que representa una gran proporción de las reservas mundiales. Algunos países en desarrollo -y muy en particular Brasil- han descubierto posibles yacimientos enormes frente a sus costas. Ahora todo está en el aire. En EE UU, las perforaciones marinas parece que seguirán el mismo camino que la energía nuclear, pues se dejarán durante decenios los nuevos proyectos en un cajón y, como ocurre con frecuencia, una crisis en un país puede llegar a ser mundial si muchos otros países reducen drásticamente los proyectos de perforaciones marinas ilimitadas. ¿Pondrá de verdad en peligro Brasil su espectacular costa por el petróleo, ahora que lo sucedido ha recordado a todo el mundo lo que puede ocurrir? ¿Y Nigeria, donde otros riesgos resultan intensificados por las luchas intestinas? Los expertos en petróleo sostienen que las perforaciones marinas nunca tuvieron posibilidades de representar más que una pequeña proporción del abastecimiento mundial, pero ahora va a haber más preocupación por las perforaciones profundas en cualquier medio delicado, y el problema no se limita al petróleo. El problema básico de la combinación de complejidad, tecnología y regulación se da también en muchos otros sectores de la vida moderna. La

47 nanotecnología y la innovación en materia de creación de organismos artificiales ofrecen una posible bendición para la humanidad, al prometer la creación de nuevos materiales, medicinas y técnicas de tratamiento. Aun así, con todas esas tecnologías apasionantes, resulta extraordinariamente difícil lograr un equilibrio entre el riesgo muy pequeño de un desastre muy grande y el apoyo a la innovación. Las crisis financieras son casi consoladoras en comparación. Las burbujas especulativas y las crisis bancarias han sido una característica periódica del paisaje económico durante siglos. Pese a ser espantosas, las sociedades les sobreviven. Cierto es que quienes pensaban "esta vez es diferente" antes de la reciente gran recesión, resultaron estar equivocados, pero, aun cuando no estemos mejorando en nada a la hora de afrontar las crisis financieras, tampoco ha empeorado necesariamente la situación. Tal vez los dirigentes de los Estados que componen el G-20 no hayan hecho un trabajo tan brillante como afirman al tapar el agujero existente en el sistema financiero. Los pavorosos problemas de la deuda soberana en la Europa continental y los que están fraguándose en EE UU, Japón y otros países lo demuestran más que de sobra, pero, comparados con los esfuerzos de British Petroleum para tapar su agujero de petróleo en las profundidades marinas, los dirigentes del G-20 parecen omnipotentes. Si alguna vez ha habido una llamada para despertar a la sociedad occidental a fin de que se replantee su dependencia de una innovación tecnológica cada vez más acelerada para aumentar sin cesar el consumo de combustibles, no cabe duda de que lo ha sido el vertido de BP. Incluso China, con su estrategia de "aprovechemos el auge ahora y ya abordaremos más adelante la cuestión del medio ambiente", debe observar detenidamente el golfo de México. La economía nos enseña que, cuando hay una enorme incertidumbre en materia de riesgos catastróficos, es peligroso confiar demasiado en el mecanismo de los precios para acertar con los incentivos. Lamentablemente, los economistas saben mucho menos sobre cómo adaptar la regulación a lo largo del tiempo a los sistemas complejos con riesgos en constante transformación y mucho menos aún cómo concebir instituciones reguladoras sólidas. Hasta que se entiendan mejor esos problemas, podemos estar condenados a convivir con un mundo de la regulación con objetivos constantemente desproporcionados, ya sea por exceso o por defecto. El sector financiero ya está avisando de que la nueva regulación puede ser desproporcionada, es decir, tener el efecto no deseado de dificultar profundamente el crecimiento. Ahora bien, pronto podríamos afrontar las mismas preocupaciones en materia de política energética, y no sólo en relación con el petróleo. Dadas las dimensiones de lo que está en juego financieramente, lograr un consenso mundial será difícil, como lo demostró el fracaso de la conferencia de Copenhague sobre el cambio climático. Los países avanzados, que son los que mejor pueden permitirse una limitación del crecimiento a largo plazo, deben dar ejemplo. El equilibrio entre la tecnología, la complejidad y la regulación es, sin lugar a dudas, uno de los mayores imperativos que el mundo debe adoptar en el siglo XXI. No podemos permitirnos el lujo de seguir equivocándonos. http://www.elpais.com/articulo/economia/global/Lecciones/vertido/BP/elpepueconeg/201 00613elpnegeco_2/Tes

48 ENTREVISTA: economia global ANDRÉ SAPIR Catedrático de la Universidad Libre de Bruselas "La Unión Europea debe prepararse para una suspensión de pagos" "Grecia está en una situación que recuerda a la de Argentina en 2001" "El impago no es bueno; un impago descontrolado es aún peor"

ALEJANDRO BOLAÑOS 13/06/2010 André Sapir (Bélgica, 1950), catedrático de la Universidad Libre de Bruselas, ha colaborado con la Fundación Ideas en un estudio sobre impuestos al sector financiero dirigido por el Nobel de Economía Joseph Stiglitz (EE UU). Sapir y Stiglitz pertenecen al comité científico de la fundación del PSOE y abogan por gravar a las entidades financieras, pero también discrepan. En la presentación del estudio, hace dos semanas en Madrid, Stiglitz enfatizó que los planes de ajuste europeos traban la recuperación. Sapir, que asesora al presidente de la Comisión Europea, José Manuel Durão Barroso, replicó que el coste del Estado de bienestar en Europa cambia la perspectiva. En un receso, Sapir abunda en que reducir el abultado déficit público es prioritario y llama a prepararse para el caso de que un país europeo (Grecia tiene todas las papeletas) suspenda pagos. Pregunta. En un artículo del centro de estudios Bruegel advertía de que hay "Argentinas potenciales en la zona euro", en referencia al impago de 2001. Además de Grecia, ¿hay otros países en riesgo? ¿España? Respuesta. No, no creo. Lo que dijimos es que Europa debía estar preparada en caso de impago. No era una predicción, aunque es verdad que yo creo que existe la posibilidad de que eso ocurra con Grecia. Lo que queríamos es extraer lecciones de las dificultades que ha tenido la UE para aprobar un mecanismo de asistencia a países en problemas. Ha sido un proceso doloroso, porque los países tenían distintos intereses. Y lo que decimos es: si la posibilidad de impago está ahí, hay que desarrollar ya un sistema para hacerlo de forma ordenada. El impago no es bueno; un impago descontrolado es aún peor. P. Los Gobiernos aprueban duros planes de ajuste, la UE acuerda un fondo de asistencia de 750.000 millones, pero el castigo de los mercados no cesa... R. Hay todavía mucha incertidumbre. Miremos los números de Grecia: la UE y el FMI pronostican que la deuda pública seguirá creciendo para alcanzar el 150% del PIB en 2013. Digamos que en ese momento, Grecia está pagando un 5% de interés de media por todo su stock de deuda: eso implica que se gastará el 7,5% de su PIB solo en pagar los intereses. Y si el ajuste que ha iniciado el Gobierno griego no es suficiente o el crecimiento es débil, el tipo de interés será mayor y deberán pagar más. Grecia empieza a estar en una situación que recuerda a la que vivió Argentina. Y la suspensión de pagos se convierte en una posibilidad. La UE tiene que prepararse para esa posibilidad. P. Que el impago se produzca en la zona euro, ¿facilita o dificulta la solución? R. Imagine que no se diseña antes un sistema de resolución común. Y supongamos que Grecia o cualquier otro país entra en suspensión de pagos. Por seguir con el caso griego, la

49 mayoría de sus acreedores están en la zona euro: son bancos de otros países miembros, aseguradoras, fondos de inversión... Si no existe ese mecanismo, el Gobierno griego tendría que entablar negociaciones con cada gran acreedor, y finalmente, con los Gobiernos de esos países, que asumirían el problema de sus bancos. Grecia empezaría a negociar con su mayor acreedor, que en este caso sería Francia, y después con Alemania, y así hasta el último de la lista, con lo que habría condiciones distintas y mucha tensión política. Sería además un proceso que llevaría tiempo, lo que supone también incertidumbre y coste económico. P. ¿Cuál es la alternativa? R. Lo que planteamos es poner en marcha un sistema que permita anticipar cómo distribuir entre los países acreedores las consecuencias de una posible suspensión de pagos. Sería parecido a lo que la UE acaba de lograr con el fondo de asistencia a Grecia: en él, las condiciones no se han diseñado a partir de una negociación bilateral, sino en unas conversaciones en las que la Comisión Europea y el Banco Central Europeo han negociado con Grecia en representación de toda la UE. P. ¿Y tiene constancia de que se prepare algo parecido? R. Es normal que nadie quiera hablar de eso, porque los mercados reaccionarían. No sé, ni quiero saber, si hay gente de la Comisión o del BCE trabajando en ello, pero espero que sí. Desde luego, merece la pena intentarlo. P. ¿Cree posible un impuesto a la banca en la UE, o se optará por soluciones nacionales? R. Hay discusión sobre si ese impuesto a la banca debe servir para recuperar el dinero público con el que el Estado auxilió a las entidades, como ha hecho el Gobierno de mi país. Creo que esta opción es totalmente legítima. Y también está el planteamiento de la Comisión Europea de usar los impuestos para dotar una red de fondos nacionales de resolución de problemas, que se utilizarían en futuras crisis. Las virtudes de esta opción no me convencen mucho. Donde sí creo que hay un problema serio, y la Comisión no se ha definido aún, es con los grandes bancos que tienen presencia en varios países. ¿Qué ocurre si estas entidades tienen problemas serios de solvencia? P. En teoría, el G-20 debía poner en marcha normas para afrontar esa situación. R. No hablo siquiera de intentar resolverlo a escala mundial, sino de buscar soluciones al menos en Europa: aquí un banco de cualquier país miembro de la UE puede operar en otro país de la UE, pero no tenemos supervisor único, ni, sobre todo, una autoridad común para la resolución de crisis bancarias. ¿Qué pasó con Fortis? Se dividió la entidad en dos: la autoridad holandesa reestructuró la parte del negocio asignada a Holanda, y en Bélgica se hizo lo mismo. La próxima vez que un banco grande con actividad en varios países, incluidos los nuevos países miembros de la UE, tenga problemas serios, ¿vamos a dividirlo por países para que cada autoridad nacional afronte la reestructuración? ¿Será posible en Rumania, o en Hungría? De nuevo, sería mucho mejor que tuviésemos un mecanismo de actuación definido antes. Porque, si no, tenemos que confiar en que los Gobiernos se sienten y logren un acuerdo en el fin de semana, que es lo que ocurrió con Fortis, para que los mercados no se hundan el lunes. Pero si el problema involucra a cuatro, cinco países, algunos están en la zona euro, otros no... ¿Podremos resolver eso con un acuerdo de fin de semana? P. Usted mantiene que España tiene problemas de competitividad, que los salarios han crecido demasiado. Eso es difícil de entender aquí, donde buena parte de los trabajadores son mileuristas. R. Rechazo que la discusión sobre competitividad se focalice sólo en reducir salarios, hay que mirar también a la productividad y a la relación con las normas del mercado laboral. En

50 España es claro que hay un sistema dual. En los contratos temporales, ni los trabajadores ni los empresarios tienen incentivos para invertir en la mejora de la productividad. En el caso de muchos trabajadores fijos, tampoco, porque creen que si hay problemas, los despidos serán para los trabajadores temporales. Es el peor sistema para incentivar la productividad, y cambiar las reglas del mercado laboral ayudará a mejorar eso. P. ¿Y a cambiar el modelo productivo? R. En España, la construcción atrajo muchísimos recursos. Se debe facilitar que el mercado reasigne, a través de niveles salariales distintos, trabajadores a actividades con mejores perspectivas de futuro, y en eso la negociación colectiva no lo está haciendo bien. Es un proceso muy difícil, porque supone dejar tocar fondo a la construcción y a todo lo que tiene que ver con ese sector, para que el capital y la mano de obra vayan a otras actividades. - http://www.elpais.com/articulo/economia/global/Union/Europea/debe/prepararse/suspen sion/pagos/elpepueconeg/20100613elpnegeco_4/Tes?print=1

TRIBUNA: ÁNGEL LABORDA El mundo y 4,6 millones de parados nos contemplan Sería bueno que la inflación se mantuviera baja y que los salarios no se desviaran mucho de ahí Con la subida del IVA en julio, los precios podrían terminar el año algo por encima del 2% ÁNGEL LABORDA 13/06/2010 No ha sido mucha la información estadística sobre la economía española publicada la semana última. El indicador estrella fue el IPC de mayo. Además, Funcas publicó los resultados de la encuesta de junio al panel de previsiones sobre las perspectivas para este año y el próximo. El IPC se desvió una décima al alza respecto a lo previsto. Esperábamos una inflación anual del 1,7% y fue del 1,8%, tres décimas más que en abril. Básicamente, la desviación respecto a las previsiones cabe atribuirla a los precios del turismo y la hostelería, que en este año se vieron afectados de una forma algo diferente que en otros por haber caído la Semana Santa a caballo entre marzo y abril. En este último mes la desviación fue a la baja y, además, ello provocó que la inflación subyacente pasara a zona negativa, encendiéndose todas las alarmas nacionales e internacionales sobre la caída en deflación de la economía española. Pero, como advertimos los analistas, ahora este efecto se ha compensado y la inflación subyacente ha subido al 0,2%. No hay, por tanto, deflación, y sería bueno que la inflación se quedara ahí por unos cuantos años y que los salarios nominales no se desviaran mucho de media de esta cifra, pues esto permitiría corregir uno de los desequilibrios que generó la economía española en los años gloriosos de expansión, la pérdida de competitividad-costes. En torno a esta media macroeconómica, los salarios podrían y deberían fluctuar al alza o a la baja en el ámbito de las empresas particulares en función de la evolución de su productividad, de la situación competitiva de las mismas y de la cuenta de resultados. Así funciona más o menos esa parte de la economía siempre olvidada, la llamada economía social (cooperativas, fundamentalmente), con resultados notablemente mejores que la media en relación con el empleo, los salarios y la competitividad empresarial. Esto debe ser una parte fundamental de las reformas laborales que se están pergeñando estos días entre las fuerzas políticas (esperemos que con el máximo consenso), una vez que no ha sido posible el acuerdo entre las económicas. Otra es el sistema de contratación y despido. Aquí también es fundamental no quedarse en meros parches. Sencillamente, hay que eliminar los contratos temporales (excepto, obviamente, los que deban ser de esta naturaleza por motivos de causalidad) e implantar un contrato indefinido único con indemnización variable en función de la antigüedad, que podría complementarse con un sistema parecido al austriaco. Los objetivos prioritarios de todo ello deben ser la eliminación de obstáculos a crear empleo, sobre todo indefinido, incentivar los aumentos de productividad y permitir que las empresas puedan adaptarse a las condiciones competitivas de un mundo globalizado dentro, además, de una zona monetaria europea a la que España transfirió su soberanía monetaria hace ya 11 años, aunque muchos no se hayan dado cuenta todavía de lo que ello implica en cuanto a derechos y obligaciones. Los derechos de los trabajadores seguirían estando suficientemente protegidos, sobre todo si a las políticas de empleo se les da también un vuelco y, en vez de dedicar los recursos a las de carácter puramente pasivo (pagar las prestaciones y subsidios por

52 desempleo y poco más), se orientan a las de naturaleza activa. Es decir, a la orientación y formación del trabajador y a una mayor eficacia en la intermediación, que debería abrirse de una vez a la iniciativa privada en plena competencia y colaboración con los servicios públicos de empleo. Volviendo al IPC, el repunte de la inflación total en tres décimas porcentuales se reparte a partes casi iguales entre los alimentos, los bienes industriales no energéticos y los servicios. En este último caso, la subida se debe al efecto Semana Santa señalado, y en el de los dos primeros, a que los precios ya no se moderan tanto como lo hicieron un año antes cuando el consumo estaba cayendo a plomo. Al introducir los últimos datos, las previsiones apenas cambian. En junio la inflación podría bajar al 1,4%, pero esto sería transitorio, pues a partir de julio se orientaría otra vez al alza (subida del IVA) para terminar el año ligeramente por encima del 2%. La inflación subyacente quedaría en la mitad.

54 REPORTAJE: Carreras & capital humano Mismos contratos, distintos despidos Catedráticos y laboralistas alaban la reforma, pero dudan que reduzca la temporalidad CARMEN SÁNCHEZ-SILVA 13/06/2010 La cuenta atrás (se supone que definitiva) ha empezado. Dentro de tres días el Gobierno aprobará la reforma laboral sin el apoyo de la mesa del diálogo social, que lleva dos años de negociaciones. Acuciado por las exigencias de los organismos internacionales y a cuatro días de la rendición de cuentas en Bruselas, el equipo de Rodríguez Zapatero se empeña en contentar a las dos partes, empresarios y sindicatos, para, como algunos dicen, pactar el desacuerdo y trasladarlo al real decreto. Sin que el documento sea definitivo aún pues quedan tres días para ultimarlo amén de su tramitación parlamentaria (que el Ejecutivo dice que "casi con certeza será convalidado el próximo día 22"), quienes esperaban un cambio sustancial en el variopinto mapa de la contratación español, se han encontrado con que el sistema sigue siendo el mismo. Y que la anunciada generalización del contrato de 33 días difícilmente será tal si se mantienen los contratos temporales, aunque limitados. "El problema de nuestro mercado de trabajo es que tiene una enorme gama de contratos para los que siempre se buscan trampas y esto no se ha resuelto", mantiene el catedrático de Economía de la Universidad Carlos III de Madrid, Juan José Dolado, miembro del denominado M100 que defiende el contrato único para acabar con la temporalidad. De los más de cuatro millones de contratos firmados entre enero y abril de este año, los fijos no llegan ni al 5% del total (unos 200.000 convenios, de los cuales solo 61.000 son de 33 días), según las últimas estadísticas del Ministerio de Trabajo e Inmigración. Las empresas no se arriesgan a integrar en su equipo al personal permanentemente, aunque sus necesidades sean permanentes. Hay mucho fraude de ley con los contratos por obra y los eventuales (más de tres de los cuatro millones de convenios sellados hasta abril), sostienen CC OO y UGT, lo mismo que la catedrática de Economía de la Universidad del País Vasco e investigadora de Fedea, Sara de la Rica. La Inspección de Trabajo y Seguridad Social lo tiene claro y por eso el control de este tipo de contratos se ha convertido en una de sus prioridades en los últimos años, según su director general, Raimundo Aragón. Su departamento realiza una media de 13.000 actuaciones anuales. En 2009 esta vigilancia supuso la conversión en indefinidos de 42.000 contratos temporales y casi 800 actas de infracción a empresas. Sin embargo, quienes esperaban que el Gobierno introdujese cambios en el despido sí los van a encontrar. "La reforma laboral es bienvenida. No se va a resolver el tema de la temporalidad, pero sí se va a rebajar el coste del despido económico y se va a flexibilizar el procedimiento", sostiene Iñigo Sagardoy, socio director de Sagardoy Abogados, para quien avanzar en el uso del despido objetivo (con indemnizaciones de 20 días por año en lugar de los 45 ordinarios y hasta ahora poco utilizado porque suele judicializarse y, en este caso, resultar bastante más caro a las empresas ya que los juzgados generalmente dan la razón al trabajador) es todo un avance, lo mismo que tratar de desjudializar la relación laboral. Y es que, en opinión de Fernando Moreno, director general del Instituto Internacional Cuatrecasas de Estrategia Legal en Recursos Humanos, "en el despido actualmente nada cumple la función que debería cumplir. Abrir la vía para que se pueda utilizar con seguridad el despido objetivo reducirá mucho su coste". Y la intención del ministro de Trabajo de que

55 las pérdidas continuadas de una empresa durante seis meses sean motivo de utilización es abrir esa vía. Igual que intentar precisar la causa en el caso del despido colectivo. Para David Díaz, socio de Baker & McKenzei, el hecho de dejar menos discrecionalidad a los jueces es lo más relevante de la reforma que ultima el Gobierno. "En el despido objetivo individual, que exigía un preaviso por parte del empresario y poner los 20 días por año a disposición del trabajador, se ha recortado a la mitad el tiempo de preaviso. Pero, si se pretendía reducir las formalidades para que el despido no fuese declarado nulo, eso no se ha conseguido con la redacción actual", mantiene. A su juicio, otro de los pasos importantes que da el borrador es la creación del fondo de capitalización (el modelo austriaco) que está esbozado como un plan de pensiones que se lleva el trabajador de una empresa a otra en caso de despido. Aunque no se especifica si en algún momento va a haber participación de las empresas en su financiación, parece que va a ser un fondo público costeado por el Fondo de Garantía Salarial (Fogasa). Y ese es uno de los aspectos que preocupan a los expertos consultados. Si es el Fogasa el que asume el abaratamiento del despido (paga 8 de los 20 días u 8 de los 12 días de los contratos temporales) y, además la financiación del fondo de capitalización, ¿cómo va a poder mantenerse con las cuotas sociales actuales?, se preguntan. Y otra cosa, puede que haya fondos en el Fogasa para financiar dos años de esta especie de plan de pensiones, pero, ¿y luego qué?. El real decreto que finalmente aprueben el Gobierno y el Parlamento lo dirá. Y luego los españoles veremos si la reforma acaba con la elevada temporalidad y se crea empleo sobre la base del abaratamiento del despido. http://www.elpais.com/articulo/carreras/capital/humano/Mismos/contratos/distintos/des pidos/elpepueconeg/20100613elpnegser_1/Tes?print=1

56 Las huelgas sacuden la fábrica del mundo Una oleada de paros en demanda de mejores salarios y condiciones laborales agita el este de China JOSÉ REINOSO | Pekín 11/06/2010 ¿Es el fin de una época dorada? Una ola de huelgas para pedir subidas salariales y mejores condiciones de trabajo se ha extendido en los últimos días por empresas extranjeras en diferentes provincias de China, en un movimiento que ha llevado a analistas e inversores a interrogarse sobre la continuidad del país asiático como fábrica del mundo. Las movilizaciones, que han afectado a compañías como la automovilística japonesa Honda, se han encadenado debido a lo que parece un efecto dominó tras las subidas de sueldos llevadas a cabo en otras empresas en las que se han registrado paros reivindicativos. Las protestas se han multiplicado después de que la taiwanesa Foxcom incrementara un 67% el salario de sus varios cientos de miles de trabajadores en China y una de las filiales de Honda lo subiera un 24% para poner fin a una huelga. Foxcom, que fabrica los teléfonos iPhone y las tabletas iPad de Apple, reaccionó de esta forma al escándalo surgido tras el suicido de 11 de sus empleados ?10 de ellos, en la ciudad sureña de Shenzhen?, según activistas laborales por las duras condiciones de vida en sus factorías. La ola de movilizaciones supone un desafío para el Gobierno, ya que si por un lado se ha comprometido a reducir las fuertes diferencias sociales creadas por el proceso de desarrollo económico puesto en marcha hace 30 años, por otro teme que deriven en inestabilidad social, desemboquen en la petición de sindicatos que puedan desafiar al partido, eleven el precio de la mano de obra y disminuyan la rentabilidad de las empresas en China. Esto podría llevar a los inversores a mirar hacia otros países. Las huelgas se han intensificado esta semana, con paros, entre otros, en el fabricante taiwanés de material deportivo Smartball, en la provincia sureña de Jiangxi; en la empresa taiwanesa del sector del caucho KOK, en Jiangsu, y en la compañía japonesa de máquinas de coser Brother, en Xian, donde 900 trabajadores paralizaron la producción en dos plantas. Las manifestaciones han afectado a miles de personas, y en general han sido pacíficas. Sin embargo, alrededor de 50 huelguistas de KOK resultaron heridos el miércoles en la provincia costera de Jiangsu, cuando las fuerzas de seguridad intentaron impedir que protestaran en la calle. Los trabajadores exigían compensaciones por las altas temperaturas, un seguro completo, ayudas para alojamiento y que trabajar los sábados sea voluntario. "Tenemos que trabajar a 40 ó 50 grados y se niegan a hacer nada para solucionarlo", se quejaba uno de los obreros al diario de Hong Kong South China Morning Post. La mayoría de los paros han sido suspendidos después de negociar. No es el caso en Honda. El grupo japonés dijo ayer que dos de sus plantas de montaje en el sur de China han vuelto a funcionar, tras la paralización intermitente de las últimas semanas por huelgas en las filiales de transmisiones y de tubos de escape. Pero añadió que la protesta que mantienen los empleados de su subsidiaria Honda Lock en Guangdong, que produce cerraduras, no ha sido resuelta. Varios cientos de obreros de la empresa, que emplea a 1.500 personas, se concentraron ayer a las puertas de la factoría. Honda ha ofrecido un aumento de 100 yuanes

57 (12 euros) al mes sobre un salario de unos 1.700 yuanes (206 euros), mientras los empleados piden un sueldo superior a 2.000 yuanes. Los trabajadores de Honda Lock demandan también la creación de sindicatos independientes, algo tabú en este país, donde están prohibidos. Las asociaciones de defensa de los derechos laborales existentes en China están ligadas al Partido Comunista y actúan, normalmente, al servicio de los empresarios. Las huelgas que se han registrado en las tres filiales de Honda y en otras empresas de capital extranjero ponen de manifiesto la creciente concienciación de los trabajadores chinos sobre sus derechos, ante el rápido progreso que ha experimentado el país. Especialmente, en un momento en el que la crisis económica parece haber quedado atrás en la tercera economía del mundo, y algunas fábricas tienen dificultades para encontrar trabajadores. El Gobierno está realizando grandes inversiones en el interior y oeste de China y está incentivando a las empresas a que se instalen en estas regiones. Esto ha originado que, debido las crecientes oportunidades de trabajo, muchos emigrantes chinos prefieran quedarse cerca de casa ?donde los costes de vida son menores? si los salarios en las factorías de las provincias más industrializadas de la costa y el sur del país no son lo suficientemente atractivos. De vuelta a Taiwan El Gobierno de Shenzhen, ciudad de la provincia de Guangdong fronteriza con Hong Kong, ha anunciado esta semana que incrementará una media del 16% el salario mínimo, hasta situarlo en 1.100 yuanes (133 euros). La medida se produce al calor de la ola de huelgas que han afectado en las últimas semanas a una serie de fábricas extranjeras en varias ciudades chinas y la polémica por los suicidios registrados en la compañía taiwanesa Foxcom. Las autoridades de Pekín se han apresurado a negar que los crecientes costes laborales vayan a marcar el principio del fin de la fábrica del mundo. Lu Kejian, director del departamento de Asia en el Ministerio de Comercio, dijo el jueves pasado que China sigue teniendo ventajas competitivas si se compara con sus vecinos. Según Lu, las políticas del Gobierno para incentivar el consumo de la población son una nueva razón para invertir y estar presente en el país asiático. Sin embargo, Terry Gou, presidente de Foxcom, ha asegurado esta semana que el grupo podría desplazar algunas de sus fábricas a Taiwan si Taipei ofrece ventajas adecuadas. Según la empresa, las cada vez menores diferencias con los costes laborales en China pueden justificar la decisión. http://www.elpais.com/articulo/internacional/huelgas/sacuden/fabrica/mundo/elpepuint/ 20100611elpepuint_13/Tes?print=1

58 FRANCISCO G. BASTERRA Los 25 gloriosos FRANCISCO G. BASTERRA 12/06/2010 Los franceses suelen referirse con nostalgia a los Trente Glorieuses, las tres décadas transcurridas entre 1945, al final de la II Guerra Mundial, y 1973, justo antes del choque petrolífero. Una larga etapa de crecimiento económico y bienestar recordada con orgullo. España, sin darse cuenta ni valorarlo apenas, celebra precisamente hoy sus 25 años gloriosos, el cuarto de siglo dorado que comenzó en la tarde del 12 de junio de 1985 con la firma, en el Salón de Columnas del Palacio de Oriente, de nuestra plena integración en las entonces llamadas Comunidades Europeas. Horas antes, en Lisboa, los portugueses firmaban el acta que les acogía en Europa. Esta efemérides, que merece ser recordada con orgullo, nos pilla inmersos en una crisis de la moneda y del proyecto europeo en la que aparecemos, a pesar nuestro, como protagonistas estelares. España apura sus últimas semanas de la presidencia rotatoria de la Unión Europea. Tenía razón el alto cargo de Exteriores que hace meses pronosticaba: "Esto va a ser un calvario". Nos correspondió en el peor momento posible: con la economía en caída libre, récord de paro, con un Gobierno falto de liderazgo y una crisis política que ya asomaba doblando la económica. No podíamos dar lecciones a ninguno de nuestros socios europeos. Nuestro peso internacional, en directa relación con el económico, era mínimo. Solo hace seis meses se celebraba que, tras una década perdida, Europa contaba con una nueva arquitectura institucional, el Tratado de Lisboa. También estrenábamos nuevos líderes, los que quisieron Alemania y Francia para no hacer sombra a su eje hoy gripado. Medio año después está claro que debimos escoger mejor. Se hablaba del euro como moneda de reserva en progresiva sustitución del dólar: hoy parece el sueño de una noche de verano. Europa es el enfermo de la economía mundial, el continente donde ha explotado finalmente la crisis financiera generada en Estados Unidos. Pero pongamos las cosas en un contexto más amplio. Celebremos hoy los 25 años de España en Europa, los mejores de nuestra historia contemporánea. Multiplicamos por siete la renta per cápita y, gracias a las generosas transferencias europeas, fundamentalmente alemanas, modernizamos nuestras infraestructuras convirtiéndonos en un país en el que era difícil soñar hace un cuarto de siglo. Integrado en un proyecto supranacional, con todas las consecuencias, es absurdo creer que somos un protectorado, ni que España esté intervenida. Hace 25 años hicimos una feliz cesión de soberanía económica, monetaria, social y política. Ocurre que no acabamos de superar el debate nacional y seguimos viendo el mundo desde nuestro pequeño campanario. La Unión Europea es un club afectado por el comportamiento particular de sus miembros, lo que explica la vigilancia mutua de los pasos que da cada país. Y hoy es Alemania, por su peso económico y demográfico, quien pone más dinero y quien manda. Alemania siempre ha pagado, pero también ha sido el gran ganador en Europa. Resulta paradójico que el campeón de la moneda fuerte sea el más beneficiado por la devaluación del euro. Las ventas a Estados Unidos de Mercedes Benz se han incrementado en un 25%. La canciller Angela Merkel, convertida en la estricta gobernanta de Europa, da ejemplo e impone su cultura de la austeridad. Berlín, con su genética aversión a la deuda y a los déficits, marca el paso en su pretensión de que todos seamos alemanes y adoptemos el principio de la estabilidad. El crecimiento puede esperar y Alemania se cubre las espaldas como potencia

59 exportadora. Es el triunfo del capitalismo renano, protestante, frente al católico mediterráneo que gastó en exceso y no supo atesorar para el invierno. "Si añadimos austeridad a austeridad, entraremos en recesión", advierte el presidente francés, Nicolas Sarkozy, enfrentado a Merkel en un intento de imponer un gobierno económico de Europa. Europa ya no es el centro del mundo. "Si el modelo europeo no se adapta a la situación del siglo XXI, morirá lentamente", advierte Felipe González. Si no reaccionamos podríamos convertirnos en un parque temático de viejos, museos y catedrales. Falta un relato europeo que llegue a la ciudadanía. Europa no tiene quien le escriba. El relato nos lo están escribiendo los mercados, los especuladores financieros pulsando órdenes en las pantallas de los ordenadores. Hay que contar el porqué de la necesidad de más Europa y cómo esta crisis justifica el modelo europeo de Estado providencia, legítimo árbitro de las reglas económicas, frente a un capitalismo desbordado de casino. El politólogo francés Pierre Hassner lo explica muy bien en Le Point. "Debemos de ser los griegos del Imperio romano y vender al resto del mundo nuestro modelo". [email protected] http://www.elpais.com/articulo/internacional/25/gloriosos/elpepiint/20100612elpepiint_3/ Tes?print=1

60 Las consecuencias del ajuste económico Rajoy obvia la ola europea y promete que nadie del PP subirá impuestos Tras las críticas de González a su irresponsabilidad, asegura que no es la vía - El líder contactó con todos sus barones y prometió que no tocarán las tasas CARLOS E. CUÉ - Ciudad Real - 12/06/2010 Una ola de subida de impuestos recorre Europa. Hasta los Gobiernos más liberales en materia económica, como el del conservador David Cameron, están preparando una subida del IVA para contrarrestar la brutal caída de ingresos públicos derivada de la crisis económica. Una ola de subida de impuestos recorre Europa. Hasta los Gobiernos más liberales en materia económica, como el del conservador David Cameron, están preparando una subida del IVA para contrarrestar la brutal caída de ingresos públicos derivada de la crisis económica. Y eso es lo que Felipe González utilizó el jueves para reprochar al PP su "irresponsabilidad": "Son los únicos en Europa que aún hablan de bajar impuestos. Como su amigo Cameron, que va a bajar el IVA al 20%". Lejos de arredrarse, Mariano Rajoy y su portavoz económico, Cristóbal Montoro, se reafirmaron ayer en Ciudad Real en su receta: bajada selectiva de impuestos y no subir ninguno. El líder del PP fue más lejos. Después de una ronda de consultas con sus barones autonómicos coordinada estos días por Javier Arenas, Rajoy contestó a González y a las comunidades socialistas que han planteado subidas de impuestos del tramo más alto del IRPF con un compromiso formal: "Ninguna comunidad del PP va a subir los impuestos en los próximos tiempos. Eso es malo para el crecimiento económico y para el empleo". El público, en su mayoría militantes locales muy animados ante las elecciones de 2011 -Ciudad Real es la provincia clave- aplaudió a rabiar. A Rajoy, admiten en su entorno, le ha hecho daño en el discurso que una persona de su cúpula, como el alcalde de Madrid, Alberto Ruiz-Gallardón, haya subido la tasa de basuras o el impuesto de bienes inmuebles para tratar de pagar la enorme deuda del Ayuntamiento. Otros alcaldes del PP han hecho cosas parecidas. Unidad en el discurso Rajoy quiere evitar que las comunidades le rompan también ese discurso. Cada vez que habla de impuestos en el Congreso, el PSOE le saca a Gallardón, y cuando habla de deuda, le recuerdan que la Comunidad Valenciana es la más endeudada -y ahora con polémica por el sobrecoste de 600 millones de euros de la Ciudad de las Artes, precisamente cuando el PP centra su discurso en el "despilfarro de Zapatero"-. Para Rajoy es clave que ningún barón autonómico se salga del guión. "Con los Ayuntamientos es diferente, están en otra situación, si alguien tiene que subir tasas que lo haga. Pero los barones autonómicos son muy políticos, y el discurso de que el PP baja impuestos mientras el PSOE los sube a nosotros nos da hecha la campaña de las autonómicas", señala un dirigente. Rajoy no ha fijado posición sobre algunos debates económicos que recorren Europa, en especial la tasa a los bancos que cada vez plantean más gobernantes, entre ellos su muy apreciada Angela Merkel, o la regulación de los mercados para limitar las compras en corto o la especulación con los seguros de deuda. El líder del PP concentra su discurso en cuestiones

61 domésticas para llegar al electorado y recordar, como hizo ayer, que el 1 de julio "sube el IVA dos puntos [hasta el 18%, aún por debajo de la media de la UE], sube la luz un 4% y recortan el sueldo a los funcionarios. Todo por los errores cometidos por Zapatero. Porque tiene que pagar su política de primas y subvenciones [a las energías alternativas] mientras quiere cerrar la central de Garoña. Pagamos todos su demagogia". "Con el PP la luz no subió. Hoy está por encima de la media de la UE. Por eso le preguntaré a Zapatero en el Congreso por qué sube la luz", sentenció Rajoy. El PP insiste en que sus comunidades no suben impuestos y que algunas los bajan. Pero a la vez, estas reclaman al Ejecutivo, al que Rajoy exige recortes, deudas millonarias. Esperanza Aguirre ha recurrido a la vía judicial para exigir 5.600 millones de euros al Estado en concepto de "deuda histórica", y Arenas y Rajoy han hecho campaña en Andalucía para que el Estado devuelva en dinero, y no en terrenos como plantea el PSOE, la "deuda histórica" de esta comunidad. Iglesias y Barreda no elevan el IRPF Los presidentes de Aragón, Marcelino Iglesias, y Castilla-La Mancha, José María Barreda, no se plantean subir el IRPF a las rentas más altas, como sí lo han confirmado el resto de comunidades autónomas donde gobierna el PSOE. No obstante, el consejero de Economía de Aragón, Alberto Larraz, quiso matizar que, mientras no se cierren los presupuestos de la comunidad, "es difícil" hablar sobre este asunto. El presidente de Extremadura, el socialista Guillermo Fernández Vara, anunció el miércoles una subida de un 0,5% en el tramo autonómico del IRPF para rentas superiores a 60.000 euros, de un 1% para las mayores de 100.000 y de un 3% para quienes ganen más de 120.000 euros. También el miércoles, el presidente andaluz, José Antonio Griñán, anunciaba tres nuevos tramos: entre 80.000 y 100.000 euros tributarán al 22,5%, un punto más; entre 100.000 y 120.000 euros, al 23,5%, y las rentas superiores a 120.000 euros, el 24,5%. Además de Extremadura y Andalucía, solo Cataluña, Baleares y Asturias se han planteado subir impuestos a las rentas más altas a partir de 2011. En Navarra, el Gobierno de Miguel Sanz (UPN) ha descartado una subida de impuestos, porque, dice, los ingresos fiscales están creciendo un 3,4%. http://www.elpais.com/articulo/espana/Rajoy/obvia/ola/europea/promete/nadie/PP/subir a/impuestos/elpepuesp/20100612elpepinac_2/Tes

62 Las consecuencias del ajuste económico Las autonomías del PP rebajan pese al desplome de ingresos C. E. C. / J. P. - C. Real / Santiago - 12/06/2010 "Hay comunidades que creen que lo mejor es pagar más impuestos. Nosotros creemos que lo que hay que hacer es rebajar los impuestos a las rentas bajas". Con esta frase, Alberto Núñez Feijóo, presidente de Galicia y uno de los más destacados barones del PP -citado siempre como el dirigente de su generación con más futuro en el partido- ejercía el jueves como jefe de la oposición autonómica al PSOE. "Hay comunidades que creen que lo mejor es pagar más impuestos. Nosotros creemos que lo que hay que hacer es rebajar los impuestos a las rentas bajas". Con esta frase, Alberto Núñez Feijóo, presidente de Galicia y uno de los más destacados barones del PP -citado siempre como el dirigente de su generación con más futuro en el partido- ejercía el jueves como jefe de la oposición autonómica al PSOE. Mientras las comunidades socialistas suben impuestos a las rentas altas que pagan IRPF -no todas, porque Aragón y Castilla-La Mancha han anunciado que de momento no piensan subirlos-, las del PP llevan meses anunciando pequeñas bajadas y ni siquiera el desplome de la recaudación y sus importantes deudas les han forzado a cambiar de idea. De hecho, cuatro de ellas, Madrid, La Rioja, la Comunidad Valenciana y Murcia rebajaron a partir de 2007 los tipos en el tramo autonómico. Sin embargo, no siempre se cumplen las promesas de rebajas. Núñez Feijóo prometió en marzo de 2009 bajar los impuestos a las clases medias. Su propuesta era muy concreta: se trataba de bajar el tramo autonómico del IRPF a todos aquellos sueldos con una base liquidable inferior a 53.407 euros. La bajada serviría para beneficiar a más de 600.000 familias y sería progresiva. Tendría un coste de 100 millones que Feijóo contaba compensar con un plan de austeridad y ahorro. Todas esas promesas siguen en el cajón, con la excusa de unos supuestos agujeros contables heredados del bipartito. Lo que sí anunció el jueves es una reducción del 25% del impuesto de Actos Jurídicos Documentados (cuya recaudación se ha desplomado en todas las autonomías) para la adquisición de nuevas viviendas y un 33% cuando se trate de una primera compra para la vivienda habitual. Evitar las subidas Son recortes muy similares a otros planteados ya antes por Madrid y la Comunidad Valenciana. Tanto que el consejero de Economía madrileño, Antonio Beteta, augura que muchas personas de otras autonomías trasladarán a Madrid su beneficio desde las comunidades gobernadas por el PSOE para evitar la subida de impuestos y eso provocará que Madrid recaude más. Aguirre, en línea con Francisco Camps, que lo hizo ya en 2009, ha incrementado en un 10% los mínimos por descendientes aplicables en el IRPF para el tercer hijo y siguientes. Además, ha instaurado una nueva deducción de hasta 1.000 euros para los menores de 35 años que abran su propio negocio. http://www.elpais.com/articulo/espana/autonomias/PP/rebajan/pese/desplome/ingresos/e lpepiesp/20100612elpepinac_1/Tes?print=1

63 La reforma del mercado de trabajo Las claves de la reforma laboral Desde la extensión del contrato con indemnización de 33 días hasta los límites a los temporales pasando por la liberalización de los servicios públicos de empleo A. ROMERO - Madrid - 11/06/2010 El proyecto que ha presentado el Gobierno introduce grandes novedades en el mercado laboral. Consulta aquí sus principales claves y los cambios más importantes que, si finalmente se aprueba en los mismo términos, introducirá el próximo decreto ley. Contratos temporales: - Los contratos de obra y servicio tendrán una duración máxima de dos años, ampliables otros 12 meses si así se recoge en el convenio colectivo del sector. Transcurridos dichos plazos, ya sea en la misma empresa o en una del mismo grupo o a través de una Empresa de Trabajo Temporal (ETT), los trabajadores adquirirán la condición de trabajadores fijos. La medida supone volver a la primera propuesta del Gobierno, ya que durante las negociaciones llegó a aceptar una duración máxima de dos años y seis meses, más próxima a las tesis de los sindicatos. También será aplicable en caso de subrogación empresarial. La patronal advierte de que penalizar la contratación temporal podría incidir negativamente en el paro. - Las indemnizaciones de los contratos temporales se amplía de los 8 días por año a 12 de forma progresiva. Hasta el 31 de diciembre de 2011, del 89%. De 10 días para los que se firmen a lo largo de 2012 y 2013. De 12 días para los que se celebren a partir del 1 de enero de 2014. Causas objetivas de despido: - A la espera de lo que pueda acordar el Gobierno durante su negociación con el resto de grupos, donde podría fijar un periodo mínimo de seis meses en pérdidas continuadas para una empresa, el texto reconoce que concurren causas económicas que justifican una reducción de plantilla "cuando los resultados de la empresa arrojen pérdidas económicas no meramente coyunturales". "A estos efectos, la empresa tendrá que acreditar objetiva y documentalmente los resultados alegados y justificar que de los mismos se deduce mínimamente la razonabilidad de la decisión extintiva", añade el documento. - Los despidos procedentes o justificados tienen una indemnización de 20 días por año trabajado para todo tipo de contratos. En caso de aprobarse, la ampliación de los supuestos para que las empresas puedan acogerse a causas económicas, con el consiguiente recorte del dinero a pagar por despedir, afectará tanto a los indefinidos comunes como a los de fomento del empleo. Contrato de fomento de la contratación indefinida: - Este tipo de contrato, ya en vigor menos para los hombres de entre 31 a 45 años pero muy poco utilizado, se extiende a todos los trabajadores que lleven más de tres meses en paro. En el caso de que lleven menos tiempo sin trabajo, también se podrán realizar si ha estado contratado de forma temporal durante los dos años previos a su entrada en el desempleo. Solo podrán realizar este tipo de contratos las empresas que no hayan reducido empleo en el año previo a la firma del mismo. Un fondo para pagar las indemnizaciones:

64 - El Gobierno creará un fondo, que entrará en vigor a partir de 2012, para abonar parte de las indemnizaciones por los despidos de quienes firmen un contrato de fomento del empleo desde ese momento. - El dinero a aportar en este instrumento, que se prolongará a lo largo de la vida laboral del trabajador independientemente de la empresa, será igual a un determinado número de días por año trabajado a concretar. El fondo se nutrirá con aportaciones empresariales y se podrá hacer efectivo en caso de despido, reduciendo una parte de lo que deben pagar las empresas, movilidad geográfica o para el desarrollo de actividades de formación. La parte que no se emplee pasará a cobrarse en la jubilación. Participación del Fogasa: - Hasta la constitución del fondo, las extinciones de los contratos de fomento del empleo, con una indemnización de 33 días por año trabajado, se dividirá entre la empresa y el Fondo de Garantía Salarial, de carácter público, ya sean justificados o no. La empresa abonará 22 días y el Fogasa, los restantes 8. Los sindicatos critican esta medida, ya que entienden que se sufragarán despidos improcedentes con dinero público. Flexibilidad interna: - Se autoriza a las empresas a modificar las condiciones laborales -jornada laboral, imposición de turnos o cambios en la renumeración acorde con las nuevas horas de trabajo- en periodos de debilitamiento económico para reducir el nivel de producción con el objetivo de evitar que el ajuste se traduzca únicamente en el empleo. - En caso de falta de acuerdo entre empresa y trabajadores sobre las medidas, un árbitro dictará la modificación de las condiciones de trabajo o acordará, en su caso, medidas alternativas. Cambio en las bonificiaciones: - De 16 a 30 años: Hasta el 31 de diciembre de 2011, si se contratan de forma indefinida, se beneficiarán de una bonificación en la cuota empresarial a la Seguridad Social de 800 euros durante tres años. Solo es aplicable a los jóvenes con un año en paro y que no hayan completado la escolaridad obligatoria o carezcan de titulación profesional. En el caso de las mujeres, aumenta a 1.000 euros. - Mayores de 45 años: Si llevan en paro un año, tendrán derecho a una bonificación de 1.200 euros durante tres años. Si se contratan a mujeres, sube a 1.400 euros. Esta medida es aplicable hasta antes de 2012. - Las empresas transformen en indefinidos contratos formativos, de relevo y de sustitución por anticipación de la edad de jubilación, cualquiera que sea la fecha de su celebración, tendrán derecho a una bonificación de 500 euros durante tres años. Para las mujeres es de 700 euros. - Las empresas que quieran acogerse a estas bonificaciones, salvo las referidas a contratos de relevo, deberán aumentar su nivel de empleo fijo. También están obligadas a mantenerlo a lo largo del periodo que dure la bonificación. Inclusión de las ETT: - Se liberalizan los servicios de empleo dando entrada a las Empresas de Trabajo Temporal en todos los sectores para orientar, asesorar y colocar a los desempleados. No obstante, para suavizar el rechazo de los sindicatos a esta medida, las ETT deberán garantizar que sus usuarios entran en igualdad de condiciones en las empresas. Es decir, tendrán el mismo sueldo que sus compañeros y disfrutarán de los mismos derechos y condiciones: duración de la

65 jornada, horas extraordinarias, descansos, trabajo nocturno, vacaciones y festivos. También deberán tener los mismos beneficios en cuestiones sociales como lactancia, guardería o permisos de maternidad. http://www.elpais.com/articulo/economia/claves/reforma/laboral/elpepueco/20100611elp epueco_11/Tes

66 La Bolsa española cosecha el segundo mayor ascenso del año Los buenos resultados de Wall Street, la mejora de las previsiones de la economía germana y el dato de IPC empujan al Ibex 35 a cerrar la jornada en el 3,95% EFE - Madrid - 11/06/2010 La Bolsa española ha cerrado la sesión con un estirón del 3,95%, el segundo mayor ascenso del año, animada por el avance de la banca. Así, el índice de referencia del mercado español, el Ibex 35, ha ganado 363,50 puntos, equivalentes al 3,95%, y ha finalizado la jornada en los 9.561,70 puntos. En la semana sube el 3,95%, en tanto que las pérdidas anuales disminuyen hasta el 19,92%. En Europa, con el euro a 1,206 dólares, Milán ha ganado el 1,39%; el índice Euro Stoxx 50, el 1,13%; París, el 1,11%, y Londres, el 0,61%, mientras que Fráncfort ha retrocedido el 0,14%. La subida del 2,75% de Wall Street en la víspera -el índice Dow Jones de Industriales recuperaba el nivel de 10.000 puntos- ha permitido que la bolsa española iniciara la jornada con una ganancia cercana al 1%. Con el concurso de las plazas europeas y mientras se conocía que el IPC español había crecido tres décimas en mayo hasta el 1,8%, según la tasa interanual, la Bolsa iba incrementado sus ganancias. Suben los grandes valores La mejora de las previsiones para la economía alemana por parte del Bundesbank -banco central germano-, el alza de la banca y el repunte del precio del petróleo -el Brent subía a 75,6 dólares-, la Bolsa escalaba hasta 9.600 puntos y subía más del 4%. Todos los grandes valores han subido: Banco Santander, el 7,17%, después de decir que repetirá resultado este ejercicio; BBVA, el 5,55%; Repsol, el 2,92%; Iberdrola, el 2,56%, y Telefónica, el 2,05%. La mayor subida del Ibex ha correspondido a Abengoa, con un alza del 8,55%, mientras que Bankinter ha ganado el 8,46%; Sacyr, el 8,43%, y Banco Sabadell, el 8,32%. http://www.elpais.com/articulo/economia/Bolsa/espanola/cosecha/segundo/mayor/ascens o/ano/elpepueco/20100611elpepueco_10/Tes

Medidas "serias" en el ámbito laboral y financiero Í. DE B.. - Santander - 12/06/2010 El todopoderoso presidente del Santander, Emilio Botín, uno de los cinco bancos que más dinero gana en el mundo, abordó la situación política actual sin alabar al Gobierno, como ha hecho en otras ocasiones. Ayer aprovechó la junta de accionistas para exigir a José Luis Rodríguez Zapatero ajustes profundos y "serios" en el ámbito laboral y financiero, así como la reducción del déficit público. Botín padece en sus carnes estos problemas porque la acción del Santander sufre y la financiación se encarece más que la de sus competidores. "La economía española atraviesa serias dificultades, que se reflejan en los problemas de acceso a la financiación, el aumento de los diferenciales de nuestra deuda y la caída de la Bolsa. Estos efectos se unen a la muy elevada cifra de paro y a la pérdida de competitividad", dijo. "Si se adoptan las medidas necesarias España tiene todas las capacidades para salir adelante de la crisis", concluyó con una dosis de optimismo. Un total de 17 accionistas intervinieron para quejarse de los elevados sueldos de los directivos, de los ajustes de plantilla, de la precariedad laboral, de la inversión en empresas armamentísticas, del apoyo de Botín al Gobierno y sus créditos al PSOE. El presidente del Santander negó trato de favor al PSOE, dijo que el solo hablaba de economía y que las remuneraciones "son transparentes y están en línea con las internacionales. Son producto de los excelentes resultados del grupo". También aclaró que no necesitan comprar sucursales ahora en venta en el mercado porque pueden captar depósitos y aclaró que tienen 34.000 millones en deuda española y 3.000 millones en deuda de Portugal. Sobre las decisiones adoptadas por el Gobierno para reducir el déficit, el presidente del Santander comentó: "Van en la dirección correcta para cumplir con los compromisos contraídos con Europa, aunque requerirán firmeza y continuidad en el tiempo". Sobre las cajas de ahorros Emilio Botín dijo que hay que completar la reestructuración "y dotarlas de una nueva normativa que les permita captar capital en condiciones de mercado". En suma, darles herramientas para que pueda fluir el crédito. También pidió reformas en el sistema educativo y en el sector energético. http://www.elpais.com/articulo/economia/Medidas/serias/ambito/laboral/financiero/elpe pieco/20100612elpepieco_8/Tes?print=1

La economía mantiene su ritmo de recuperación en el inicio del segundo trimestre El índicador compuesto de la OCDE avanza por octavo mes consecutivo.- El índice para el conjunto de la organización modera su ritmo de crecimiento EL PAÍS - Madrid - 11/06/2010 La economía española ha empezado el segundo trimestre del año con una leve moderación en su ritmo de recuperación, según el indicador compuesto de la Organización para la Cooperación y el Desarrollo. Este índice, que el conocido como Club de los países desarrollados elabora a partir de una serie de indicadores parciales de la economía, ha subido del 101,7 que marcó en mayo al 101,8 de abril, lo que supone un recorte frente al ritmo de los últimos meses en línea con la evolución experimentada en el conjunto de países de la OCDE. España rebasó la cota de los 100 enteros, que separa el crecimiento de la contracción, el pasado septiembre. Desde entonces, ha continuado avanzando de forma constante hasta abril, cuando en lugar de crecer dos décimas lo hizo en una. Un nivel muy similar al de la media de la OCDE o Estados Unidos. Alemania, cuyo índice ha cerrado el cuarto mes del año en el 102,4, cuatro décimas más que en marzo, lidera la clasificación seguida muy de cerca por Francia (102,3). Italia se sitúa en una cota similar a la de España con un 101,9. España salió de la recesión en el primer trimestre del año tras transitar en terreno negativo desde finales de 2007. El Producto Interior Bruto subió un 0,1% entre enero y marzo gracias a la recuperación del consumo y el gasto público. Sin embargo, la próxima subida del IVA en julio y el recorte de gasto anunciado por el Gobierno para acelerar la corrección del déficit incidirán a la baja en la economía, según ha reconocido el propio Ejecutivo. En cualquier caso, confía en que la eventual reducción del consumo de los hogares motivada por el cambio del impuesto indirecto y la menor inversión se compensen a lo largo del ejercicio, por lo que no contempla que afecte a la media del año. http://www.elpais.com/articulo/economia/economia/mantiene/ritmo/recuperacion/inicio/ segundo/trimestre/elpepueco/20100611elpepueco_6/Tes?print=1

69 La reforma del mercado de trabajo Zapatero defiende que su reforma laboral mantiene "básicamente" los derechos del trabajador El presidente asegura que las medidas generarán confianza a medio plazo.- Asegura que resultaba incomprensible que el 70% de los despidos sean disciplinarios "cuando todo el mundo sabe que respondían a causas económicas" MIGUEL GONZÁLEZ | Madrid 12/06/2010 El presidente del Gobierno, José Luis Rodríguez Zapatero, ha enviado esta mañana un mensaje de firmeza, pero también de tranquilidad para empresarios, trabajadores y sindicatos en referencia a la reforma laboral que ultima su Gabinete. En una rueda de prensa conjunta con el presidente de la Autoridad Nacional Palestina, Mahmud Abbas, Zapatero ha sido interrogado sobre los detalles del documento que aprobará la próxima semana el Ejecutivo. El presidente ha defendido que será una reforma "sustancial y equilibrada" que mantendrá "básicamente la red de derechos" de los trabajadores. Con este mensaje, el Gobierno pretende atemperar los ánimos de los sindicatos, que han amenazado con una huelga general si se da luz verde a un proyecto que, según denuncian UGT y CC OO, "lesiona los derechos de los trabajadores y sirve para despedir más barato". El presidente ha señalado que con las medidas del Gobierno, "que afrontan los cambios más importantes que necesita el mercado laboral", se incentivará la movilidad y ayudará a "mantener el empleo cuando las circunstancia sean difíciles". "La reforma es sustancial y equilibrada porque mantiene básicamente la red de derechos de los trabajadores y favorece las expectativas de que el empleo precario se transforme en indefinido y a los empresarios les da oportunidad de adaptarse a la situación económica. Resultaba incomprensible que en 2009 más del 70% de los despidos sean disciplinarios, cuando todo el mundo sabe que respondían a causas económicas. Había una anomalía en la ley", ha dicho. El presidente del Gobierno explicó que los cambios de la normativa promoverán la movilidad laboral al incorporar el modelo austríaco, que conlleva la creación de un fondo constituido con las aportaciones de las empresas para pagar las indemnizaciones por despido de los trabajadores. También defendió que beneficiará a los empleados al recoger la reducción de jornadas y de salarios para evitar despidos. Además de este mensaje para trabajadores y empresarios, el presidente también ha querido dirigirse a los mercados y a los organismos internacionales, y ha señalado que la reforma del mercado de trabajo en España generará confianza a medio plazo. "Una reforma laboral no produce una generación de empleo inmediata, pero va a ayudar a generar y generará confianza en la capacidad de crecimiento en la economía española", ha subrayado. Por último, Zapatero volvió a apelar al consenso para sacar adelante la propuesta, y reclamó el "máximo apoyo parlamentario". http://www.elpais.com/articulo/economia/Zapatero/defiende/reforma/laboral/mantiene/b asicamente/derechos/trabajador/elpepueco/20100612elpepueco_1/Tes

70 La reforma del mercado de trabajo Seis meses de pérdidas para despedir más barato Corbacho aboga por incluir ese supuesto en el decreto, pero lo condiciona al pacto parlamentario L. ABELLÁN / M. V. GÓMEZ - Madrid - 12/06/2010 El Gobierno comienza a preparar el terreno para la reforma laboral que llegará el próximo miércoles. Por primera vez desde que arrancó este proceso, el ministro de Trabajo, Celestino Corbacho, compareció ayer tras el Consejo de Ministros para explicar las grandes líneas del decreto que ultima y convencer de que no degrada los derechos laborales. El Gobierno comienza a preparar el terreno para la reforma laboral que llegará el próximo miércoles. Por primera vez desde que arrancó este proceso, el ministro de Trabajo, Celestino Corbacho, compareció ayer tras el Consejo de Ministros para explicar las grandes líneas del decreto que ultima y convencer de que no degrada los derechos laborales. El ministro aclaró con un ejemplo uno de los asuntos más polémicos de la reforma: seis meses de pérdidas ininterrumpidas en la empresa deberían bastar para justificar despidos económicos, mucho más baratos que los improcedentes. La reforma laboral, concretada ayer en un texto que será el germen del decreto del próximo miércoles, pretende aligerar el coste del despido a las compañías que tengan dificultades para que abonen 20 días por año trabajado frente a los 45 ordinarios del despido improcedente. Una de las claves del fracaso de la negociación con sindicatos y empresarios ha residido en esa definición de las causas de despido procedente por razones económicas. Tras su comparecencia, Corbacho aclaró a los periodistas que el criterio de seis meses de pérdidas fue una propuesta de CEOE bien vista por el Gobierno. Pero el ministro ha preferido excluirlo del documento entregado ayer a empresarios y sindicatos para dejarlo abierto a la negociación parlamentaria, que comienza ahora. La legislación actual ya contempla el despido objetivo por causas económicas, con una indemnización de 20 días por año. Pero en la práctica el 80% de los casos se resuelven como improcedentes porque el empresario prefiere ahorrarse el proceso judicial y la incertidumbre que conlleva. El borrador del decreto define así las causas económicas: "Cuando los resultados de la empresa arrojen pérdidas económicas no meramente coyunturales". La redacción final de este supuesto, aclaró el ministro, "no llevará hasta extremos de limitar el papel del juez a verificar el cumplimiento de la norma", pero sí acotará más la capacidad de decisión sobre si un despido está o no justificado. La antelación mínima para comunicarlo se reducirá a la mitad: de 30 a 15 días. La concreción de las causas de despido es crucial para la valoración que hagan los sindicatos del documento y la posible convocatoria de una huelga general. A falta de ese detalle, lo cierto es que el Gobierno se ha empleado a fondo en los últimos días en conseguir una reforma laboral más ponderada de lo que se aventuraba y que tanto UGT como Comisiones Obreras tendrán difícil emplear un arma tan potente como un paro general para responder al decreto. "El diálogo no ha sido baldío; buena parte de los ejes de la reforma son fruto de la negociación con empresarios y sindicatos", subrayó la vicepresidenta María Teresa Fernández de la Vega tras el Consejo de Ministros.

71 Prueba de ese hilado fino que hace menos evidente la posible pérdida de derechos de los trabajadores es la solución hallada para financiar el despido. El Gobierno ha propuesto un modelo que permite al empresario pagar menos sin que el trabajador vea mermada su indemnización. Se trata de que el Fondo de Garantía Salarial (Fogasa), de carácter público aunque engrosado con aportaciones empresariales, financie ocho días de despido de los 33 que percibe el trabajador, hasta ahora a cuenta de la compañía. La subvención regirá solo para los nuevos contratos suscritos bajo la fórmula del indefinido con despido de 33 días, lo que hará más atractiva esta figura, ahora infrautilizada. Además se amplían los supuestos para poder suscribir ese contrato, de forma que los parados que lleven tres meses en desempleo y los trabajadores temporales podrán convertirse en fijos bajo el paraguas de los 33. De esta forma se pretende generalizar poco a poco esa indemnización para el empleo fijo. El Fogasa solo se hará cargo temporalmente de esos ocho días. A partir de 2012, se creará otro fondo de capitalización, para nuevos indefinidos, destinado a financiar una parte del despido aún por determinar. La novedad conocida ayer es que, si ese fondo no llega a utilizarse porque el empleado nunca sea despedido, las aportaciones, realizadas por la empresa, no caerán en saco roto. El trabajador las recuperará al jubilarse, como ocurre con los fondos de pensiones. También será posible destinar ese dinero a formación durante la vida laboral. Una vía intermedia se ha encontrado también en la flexibilidad interna empresarial. Las compañías en apuros podrán modificar rápidamente las condiciones de trabajo de sus empleados y renunciar a las subidas salariales pactadas sin necesidad de acordarlo con los trabajadores. Para ello se crea la figura de un árbitro que, en caso de discrepancia, emitirá en 15 días un laudo de obligado cumplimiento. La principal contrapartida a esa flexibilización laboral consiste en endurecer la temporalidad. El Ejecutivo ha puesto coto al contrato de obra, un auténtico coladero de eventualidad injustificada, con un límite de dos años ampliable a tres en la negociación colectiva. Además, se encarecerá la compensación que se abona por finalización de los temporales. A partir de 2012 pasará gradualmente de los ocho días por año actuales a 12. Con esa tregua de año y medio, el Gobierno ha intentado que cualquier incremento de costes para las empresas se produzca cuando la recuperación económica ya sea visible. Los puntos clave de la reforma - Contrato de obra o servicio. Tendrá un límite máximo de dos años. El plazo se podrá ampliar un año más si se acuerda en convenio. - Encadenamiento de contratos. Se convertirán en fijos los trabajadores que en el plazo de dos años y medio hayan estado contratados durante 24 meses. - Aumento de la indemnización de los contratos temporales. Pasará de ocho días a 12 de forma progresiva entre 2012 y 2014. - Despido de 20 días. La nueva redacción del Estatuto de los Trabajadores hablará de "pérdidas económicas no meramente coyunturales" que la empresa tendrá que acreditar objetiva y documentalmente para facilitar la vía del despido objetivo (20 días). Esta expresión podría concretarse (seis meses de pérdidas) en las conversaciones con los grupos parlamentarios. - Contrato de fomento. Este contrato, hasta ahora solo para determinados colectivos, se aplicará a todos los temporales convertidos en fijos antes del 31 de diciembre de 2011, de forma que solo quedarán fuera los hombres que lleven menos de tres meses en el paro y los

72 actuales empleados fijos (45 días de despido). El Fondo de Garantía Salarial abonará 8 días del despido que corresponde a esta modalidad de contrato (33 días) para los que se firmen desde que se publique el decreto. Esta subvención al despido solo se aplicará a este tipo de contratos. El resto lo seguirá pagando la empresa. - Nuevo fondo para el despido. En un año se regulará un fondo de capitalización (modelo austriaco) para cada trabajador que servirá para financiar despidos de trabajadores indefinidos. En caso de que el trabajador no sea despedido nunca, lo podrá cobrar con la jubilación. Comenzará a funcionar en 2012, y solo para loscontratos firmados desde entonces. - Flexibilidad interna y cláusulas de descuelgue. Se facilita que las empresas puedan modificar las condiciones laborales (horario, jornada, movilidad funcional y geográfica). Se establece un sistema arbitral para los casos de desacuerdo, cuyo laudo será de obligado cumplimiento. En el caso de los salarios, la medida no podrá durar más tiempo que el periodo por el que se ha firmado el convenio. - Modelo alemán. A las empresas con dificultades se les permite ajustar plantilla reduciendo la jornada laboral entre el 10% y el 70%, pero solo durante un año. El resto dará derecho a prestación por desempleo. La bonificación a las empresas aumenta del 50% al 80% cuando estas se comprometan a formar a los trabajadores afectados. - Bonificaciones. Se concentran sobre dos colectivos: jóvenes (800 euros por ejercicio durante tres años) y mayores de 45 años (1.200 euros por año en un trienio). Las cuantías serán mayores para las mujeres. - Agencias de colocación y ETT. Se abre la puerta a la intermediación laboral con ánimo de lucro. Las empresas de trabajo temporal podrán operar en sectores como la construcción, donde tenían vedada su actividad. http://www.elpais.com/articulo/economia/meses/perdidas/despedir/barato/elpepieco/201 00612elpepieco_1/Tes?print=1

Los sindicatos exigen cambios o habrá huelga general CC OO y UGT aseguran que el texto presentado este viernes por el Gobierno sirve "para despedir más y más barato" MANUEL V. GÓMEZ - Madrid - 11/06/2010 Los sincatos amenazan con huelga general. Tras reunirse anoche con responsables de Trabajo tras conocer el boceto de reforma laboral que el Gobierno convertirá el próximo miércoles en proyecto legal, UGT y CC OO aseguraron que lanzarán la convocatoria si el Ejecutivo no rectifica. El texto "lesiona los derechos de los trabajadores", ha advertido el secretario de Acción Sindical de UGT, Toni Ferrer. En la misma línea se ha expresado su homólogo de CC OO, Ramón Górriz: "Sirve para despedir más y más barato, para convertir el tema de la intermediación en un negocio y abre la negociación colectiva en canal". Con estas premisas, la conclusión es clara: o cambia la redacción del decreto definitivo o habrá huelga general. Para Ferrer, "el texto no hay por donde cogerlo. Favorece claramente los intereses de la patronal". En su opinión, las medidas contra la temporalidad son puro maquillaje. Nada para impulsar el contrato fijo discontinuo y el aumento de la indemnización de los temporales no llega hasta 2014. "Las medidas de flexibilidad interna consagran la unilateralidad empresarial", explica. Para rematar, Ferrer apunta que varias de los aspectos que propone el Gobierno, como la subvención a despidos por el Fondo de Garantía Salarial, podrían ser inconstitucionales. Górriz, por su parte, cree que el texto del Ejecutivo "aumenta el poder discrecional de los empresarios" y deja fuera muchas de las propuestas que los sindicatos hicieron en la mesa de negociación. "Se ha desviado mucho", afirma. Uno de los puntos en los que Górriz fija su enojo es en la apertura de la intermediación en el mercado laboral a las agencias privadas de colocación. "Se pretende aprovechar la situación de crisis para aumentar el negocio. Y no dice nada de reforzar los servicios públicos de empleo", señala. Tanto Ferrer como Górriz opinan que con el aumento del poder empresaria que, en su opinión, se produce "no se tapona la hemorragia del desempleo". "Se despedirá más y más barato", defienden. En la reunión que los sindicatos tuvieron con Trabajo, el encargado del Gobierno para el diálogo social, Alfonso Morón, les advirtió de que ya no les entregarían más textos hasta que el 16 de junio el Consejo de Ministros aprobara el decreto. También les dijo que la cita no era para negociar nada, sino para informarles y aclarar dudas. Así que los cambios que ahora puedan hacerse en el borrador del decreto llegarán por la negociación con los grupos parlamentarios. Horas antes, el presidente de la patronal, antes de conocer el texto, había vaticinado que si se penaliza la contratación temporal aumentará más el paro. Díaz Ferrán, en una rueda de prensa para presentar la Declaración de Madrid suscrita por la asociación europea de patronales Business Europe, incidió en su apuesta por incentivar el contrato indefinido pero con despido más barato. El presidente de la patronal evitó valorar la propuesta de reforma del Gobierno pero explicó por qué fracasó el diálogo social en la madrugada del jueves. La reforma propuesta "no era suficientemente profunda" a juicio de la patronal. http://www.elpais.com/articulo/espana/sindicatos/exigen/cambios/habra/huelga/general/elpepuesp/20100611elpe punac_27/Tes?print=1

74 La reforma del mercado de trabajo El Gobierno sólo encuentra rechazo a la reforma en IU en el primer contacto Zapatero llamó el lunes a Rajoy para expresarle el interés de contar con el voto del PP y Montoro mantuvo el jueves un encuentro con Corbacho FERNANDO GAREA - Madrid - 12/06/2010 No ha hecho más que arrancar la negociación política del decreto de la reforma del mercado de trabajo, pero esta vez el Gobierno no ha encontrado más rechazo frontal de inicio que el de Izquierda Unida, que asume la posición de los sindicatos. Con el resto de partidos no hay todavía acuerdos, ni mucho menos compromiso para convalidar el decreto en el pleno del Congreso del día 22 de junio. No ha hecho más que arrancar la negociación política del decreto de la reforma del mercado de trabajo, pero esta vez el Gobierno no ha encontrado más rechazo frontal de inicio que el de Izquierda Unida, que asume la posición de los sindicatos. Con el resto de partidos no hay todavía acuerdos, ni mucho menos compromiso para convalidar el decreto en el pleno del Congreso del día 22 de junio, pero al menos no hay esta vez rechazo expreso como ocurrió con el del recorte del gasto social. Por eso, esta vez el Gobierno no les presenta un texto cerrado y ya aprobado, sino que está dispuesto a llegar a un acuerdo antes del miércoles. Y no quiere que una reforma que puede provocar una huelga general salga del Congreso solo con los votos del PSOE, entre otras cosas porque la reforma debe trascender esta legislatura. El Ejecutivo cree posible contar esta vez con los votos afirmativos de CiU, PNV y Coalición Canaria y, además, ha constatado la posibilidad de que se sume al acuerdo ERC. Si fuera así, el Ejecutivo contaría con un respaldo amplio frente a las protestas. De hecho, el portavoz de ERC en el Congreso, Joan Ridao, aseguró ayer que "la propuesta del Gobierno es un punto de partida estimable, aunque no es una reforma revolucionaria ni rupturista". Ridao, que ya ha mantenido reuniones con el ministro de Trabajo, Celestino Corbacho, calificó de "avance cualitativo importante" el documento del Gobierno. Citó expresamente como positivo que "amplía la edad del contrato de formación de 21 a 24 años, con un coste cero para las cotizaciones, e incluye el derecho al paro hasta ahora inexistente; se amplían también los títulos académicos habilitados para la contratación en prácticas, así como su duración de cuatro a cinco años, y se elabora un programa extraordinario de empleo para jóvenes, junto con las comunidades; se regula la fórmula conocida como contrato alemán, que prevé una redistribución del trabajo; se fomenta el contrato indefinido con 33 días de indemnización y se acota la contratación temporal a contratación por obra y servicio, con una duración de dos años e indemnizaciones de 12 días. Además, se mantienen todas las indemnizaciones por despido y no se toca la causalidad. Por lo que se refiere a la flexibilidad, introduce más capacidad para la negociación colectiva y refuerza los servicios públicos de empleo". Explicó que los tres diputados de ERC podrían votar a favor "si el PSOE no sucumbe a las presiones de la derecha para endurecerla".

75 CiU es probablemente el grupo parlamentario que más ha defendido la necesidad de llevar a cabo una reforma laboral, y llegó a pactar hace un año con el PSOE una resolución tras el debate del estado de la nación sobre la necesidad de cambiar la regulación del mercado laboral, pero los socialistas rompieron el pacto en pocas horas. Ahora el diputado de CiU Carles Campuzano ha mantenido encuentros con Corbacho y, aunque aún no hay acuerdos, en principio mantiene una posición favorable a la filosofía, a falta de conocer los detalles del decreto ley del Gobierno. El diputado del PNV Emilio Olabarría ha mantenido también contactos con Corbacho. Olabarría estudiaba ayer con los responsables de su partido la posición que mantendrá en la negociación. También la portavoz de Coalición Canaria, Ana Oramas, ha expresado al Gobierno su disposición a pactar la reforma. Con el PP, el Gobierno ha tenido ya varios contactos preliminares. El principal, la llamada del presidente del Gobierno, José Luis Rodríguez Zapatero, a Mariano Rajoy el lunes para expresarle su interés en contar con el apoyo del PP en la convalidación del decreto. Y el jueves por la tarde hubo una reunión más técnica del ministro de Trabajo con el responsable de economía del PP, Cristóbal Montoro. El PP siempre ha mantenido la necesidad de proceder a una reforma laboral y, por el momento, no ha mostrado un rechazo a las posiciones conocidas del Gobierno. Todo eso a falta de que Corbacho remitiera ayer por la tarde a Montoro un nuevo documento. Además de los contactos entre ambos, han acordado reunirse el próximo martes, la víspera de la reunión del Consejo de Ministros que debe aprobar el decreto. El único que ha mostrado un rechazo radical a la reforma es el diputado de Izquierda Unida, Gaspar Llamazares, que asumió ayer en rueda de prensa la tesis de los sindicatos. Así, se pronunció en términos duros contra el Gobierno y habló de "menú a la carta para la patronal y una dieta de adelgazamiento para los trabajadores" que será "inútil, injusto y contraproducente" y provocará una fuerte contestación social. Llamazares añadió que la reforma laboral forma parte de la "hoja de ruta del ajuste impuesto y tutelado" por los mercados y los organismos internacionales y se mostró convencido de que después vendrán otros "ajustes estructurales" como la implantación de un sistema mixto (público-privado) de pensiones. Por eso juzgó "inexorable" una huelga general. http://www.elpais.com/articulo/economia/Gobierno/solo/encuentra/rechazo/reforma/IU/prime r/contacto/elpepieco/20100612elpepieco_4/Tes?print=1

76 EDITORIAL Comienzo aceptable La propuesta de reforma laboral del Gobierno es un modo razonable de estimular el empleo fijo 12/06/2010 La reforma laboral que el Gobierno presentó ayer a los sindicatos y a la patronal responde en principio a los dos criterios básicos sobre los cuales existe un cierto consenso entre analistas económicos y expertos en el mercado de trabajo. El contrato fijo, con un despido máximo de 33 días, pretende reducir la dualidad del mercado laboral, compuesto hoy por trabajadores fijos con contratos con un coste elevado de indemnización y contratos temporales, para los cuales la indemnización media por despido es apenas de ocho días por año (plazo que muy pocos llegan a cumplir). Además, el Gobierno intenta acotar las causas de despido, de forma que los jueces puedan decidir con más precisión cuándo existen causas económicas para un despido procedente, y se dispone a flexibilizar las condiciones de la negociación laboral. Parecía irracional que las empresas en graves dificultades económicas no pudieran descolgarse de los convenios sectoriales y ahora tendrán la oportunidad de hacerlo si lo admite un comité de arbitraje. Pero el hallazgo de la propuesta del Gobierno es el fondo de capitalización para financiar el coste del despido de los trabajadores fijos que entrará en funcionamiento a partir de 2012. El propósito del fondo en primera instancia es pagar, con aportaciones empresariales, una parte (todavía sin determinar) de la indemnización en los nuevos contratos fijos. Su importancia no radica solamente en que abaratará el despido, sino en que el capital acumulado se desplazará con el trabajador. Se ha criticado con frecuencia la inflexibilidad de los derechos laborales, vinculados más a la empresa que al empleado. Esta inflexibilidad es uno de los motivos de la inmovilidad del empleo y de la persistencia de una tasa elevada de paro estructural; porque, como los trabajadores se niegan a perder los derechos asociados a la empresa en la que trabajan, no quieren aceptar el riesgo de desplazarse a otras empresas o ciudades. El fondo de capitalización, atribuido al trabajador y de libre utilización por él, es el modelo que debe seguirse con todos los derechos laborales. La propuesta del Gobierno es un principio aceptable de cambio laboral; empresarios y sindicatos pueden oponer objeciones de detalle, pero difícilmente pueden argumentar que no es un camino adecuado para favorecer la creación de empleo. En el texto se aprecia el deseo de mantener los equilibrios de poder sindical y empresarial en el mercado de trabajo. Por ejemplo, se abarata el coste del despido en el nuevo contrato de 33 días, pero al mismo tiempo se ponen limitaciones a los contratos de obra, de forma que el coste del despido pasa de 8 días por año a 12; se facilitan las cláusulas de descuelgue salarial, pero en caso de conflicto la resolución se encomienda a un órgano arbitral. Parece evidente que la resistencia sindical se enfocará contra las dos decisiones que reducen más sus poderes de negociación dentro de la empresa: la moderada liberalización de las causas del despido (los sindicatos tienen la oportunidad de negociar que el motivo económico sean más de los seis meses de pérdidas continuadas de la empresa que pretende el Gobierno) y la pérdida de referencia de los convenios territoriales y sectoriales. Pero no hay razones en esta reforma para que se empecinen en organizar una huelga general, salvo que entiendan que su función se limita a la defensa de los derechos del empleo fijo. Y menos motivos habrá si el Gobierno consigue que la reforma se apruebe por amplia mayoría en el Congreso.

77 La estabilidad en el empleo debe ser el primer objetivo del Gobierno; es fundamental para reactivar el consumo y apuntalar cualquier indicio, por frágil que parezca, de recuperación de la economía. Un empleo más estable solo puede conseguirse en estos momentos a cambio de una reducción razonable de los costes de despido. http://www.elpais.com/articulo/opinion/Comienzo/aceptable/elpepiopi/20100612elpepiop i_1/Tes?print=1

78 La reforma del mercado de trabajo El Gobierno crea un nuevo fondo para financiar despidos de trabajadores fijos a partir de 2012 El Fogasa sufragará parte del coste del despido hasta su puesta en marcha en 2012, pero solo para los nuevos contratos con 33 días de indemnización LUCÍA ABELLÁN 11/06/2010 El Ejecutivo ya ha encontrado la fórmula para financiar el coste del despido. La reforma laboral que se aprobará el próximo miércoles contempla la creación de un fondo de capitalización, solo aplicable a contratos indefinidos, que abone una parte del coste del despido a partir del año 2012. Aunque el texto, al que ha tenido acceso EL PAÍS y será remitido en las próximas horas a patronal y sindicatos, no lo especifica, el fondo se engrosará con aportaciones empresariales, por lo que el Ejecutivo ha preferido eximirlos de mayores cotizaciones hasta que asome la recuperación económica. Hasta ese momento, será el Fondo de Garantía Salarial (Fogasa), que ahora financia parte de los despidos de pequeñas empresas, el que se haga cargo de ocho días por año de la indemnización por despido. El acceso al Fogasa, no obstante, tendrá limitaciones. Solo podrán acogerse a esa subvención del despido los nuevos contratos indefinidos con despido más barato (33 días por año frente a los 45 ordinarios). De esa forma, el Ejecutivo trata de incentivar el uso de esa fórmula, ahora minoritaria en el empleo fijo. Además, aunque no está incluido en el texto, el Gobierno ve con buenos ojos dentro de las nuevas condiciones para la extinción del contrato de trabajo la posibilidad de que una empresa pueda acogerse al despido por causas económicas cuando acumule seis meses consecutivos en pérdidas. En el documento, sin embargo, no se ha recogido este extremo y solo se menciona que podrán recurrir a él cuando tengan "pérdidas económicas no meramente coyunturales". El motivo es dejar margen para negociar con el resto de partidos con vistas a su aprobación en el Congreso, previsiblemente el próximo día 22. http://www.elpais.com/articulo/economia/Gobierno/crea/nuevo/fondo/financiar/despidos /trabajadores/fijos/partir/2012/elpepueco/20100611elpepueco_8/Tes?print=1

79 La reforma del mercado de trabajo CC OO critica que el despido improcedente se pague con dinero público Toxo analiza el fracaso del diálogo social con los lectores de EL PAÍS y muestra su rechazo a "que aumente el poder del empresario frente al trabajador" EL PAÍS - Madrid - 11/06/2010 El secretario general de CC OO, Ignacio Fernández Toxo, ha afirmado hoy en una charla con los lectores de EL PAÍS que "no está en absoluto justificado que el despido improcedente se vea bonificado con recursos públicos". Con estas palabras, el líder de Comisiones respondía a la propuesta que puso el Ministerio de Trabajo sobre la mesa del fracasado diálogo social y que abogaba por que el Fondo de Garantía Salarial (Fogasa) aporte los recursos para abonar parte de la indemnización por despido de 33 días que figura en los contratos de fomento del empleo que el Gobierno quiere potenciar. Desde el Gobierno, el secretario de Estado de Economía, José Manual Campa, ha asegurado que la disminución en el "coste de la contratación" no repercutirá en un "coste adicional sustancial para el erario público". Aunque no ha querido confirmar que el proyecto final incluya la aportación del Fogasa -que según la última propuesta de Trabajo se haría cargo de 8 días de los 33 de las indemnización-, ha justificado su postura en que uno de sus "parámetros fundamentales" es que las medidas sean consecuentes con el objetivo de reducir el déficit público por debajo del límite del 3% en 2013. Sobre el fracaso de las negociaciones entre patronal y sindicatos para pactar una reforma laboral, Toxo ha reconocido las discrepancias frente a las propuestas del Ejecutivo para flexibilizar la negociación colectiva. "A salvo de conocer el texto definitivo", el hecho de que las empresas con dificultades puedan acogerse a la cláusula de descuelgue (es decir, desvincularse de lo pactado en el convenio, tanto en cuestiones salariales como en la organización del trabajo) sin necesidad de que haya acuerdo con los trabajadores, "incidirá en las garantías que establece la ley", ha denunciado. En cuanto al punto de la flexibilidad interna de las empresas "negociada" como alternativa al despido, ha insistido en que "puede resultar útil para evitar la destrucción de muchos puestos de trabajo". "Lo que no estaría de acuerdo es con que se instalase una forma de entender la flexibilidad como la que, en mi opinión, propone CEOE, que llevaría a incrementar el poder discrecional del empresario frente al trabajador", ha destacado. http://www.elpais.com/articulo/economia/CC/OO/critica/despido/improcedente/pague/di nero/publico/elpepueco/20100611elpepueco_7/Tes?print=1

80 La reforma del mercado de trabajo El Gobierno responsabiliza a CEOE del fracaso en la negociación laboral Zapatero reducirá por decreto el coste del despido - Díaz Ferrán acusa al Ejecutivo de falta de decisión y de no ofrecer alternativas válidas para el acuerdo L. ABELLÁN / M. GONZÁLEZ - Madrid / Roma - 11/06/2010 El diálogo social revivió en la madrugada de ayer la pesadilla de hace casi un año. Como en julio de 2009, la actitud de la patronal frustró un acuerdo que en algún momento tanto el Gobierno como los sindicatos tocaron con la punta de los dedos. El diálogo social revivió en la madrugada de ayer la pesadilla de hace casi un año. Como en julio de 2009, la actitud de la patronal frustró un acuerdo que en algún momento tanto el Gobierno como los sindicatos tocaron con la punta de los dedos. Aunque oficialmente se muestra salomónico, el Gobierno considera a la patronal CEOE responsable del fiasco de una reunión maratoniana que arrancó el pasado miércoles a las 19.30 y culminó casi 11 horas después con la ruptura definitiva de las conversaciones para pactar una reforma laboral. Varias fuentes gubernamentales -también los sindicatos- señalan las exigencias de la patronal como desencadenante del segundo fracaso del diálogo social en menos de un año. La primera vez obedeció a la negativa del Gobierno a rebajar las cotizaciones sociales. Ahora, los motivos son más complejos. En un momento en que a España le llueven las exigencias para que reforme su mercado laboral, la patronal consideró el viento a su favor y juzgó insuficientes las medidas de agilización del despido por causas económicas y la flexibilidad interna que proponía el Ejecutivo para que las empresas capeen la crisis. La propia patronal reconoce, de forma discreta, que sus demandas no se vieron satisfechas en la intensa negociación de la noche del miércoles y que eso precipitó el fin del proceso. De alguna forma, el Ejecutivo había creado la expectativa de que acotaría más los supuestos en que un juez podía rechazar un despido por motivos económicos, que lleva asociada una indemnización de 20 días por año trabajado para todo tipo de contratos, frente a los 45 ordinarios. No fue así; el texto final establecía como condición que la empresa tenga pérdidas y queden justificadas, sin más detalles. Pero lo que de verdad soliviantó a la patronal fueron las trabas impuestas a la contratación temporal. CEOE no esperaba -Trabajo aguardó hasta la última cita para poner esta carta sobre la mesa- una limitación de dos años al contrato de obra y servicio, ahora sin tope temporal, ni mucho menos un aumento de la indemnización por finalización de contrato eventual, que pasaría de ocho días por año trabajado a 12. Fuentes cercanas a la negociación atribuyen a las reticencias de la patronal la redacción de un segundo papel gubernamental durante la negociación. En plena madrugada, Trabajo ofreció una segunda versión de su propuesta en la que puntualizaba algunos aspectos controvertidos. Oficialmente, el presidente de CEOE, Gerardo Díaz Ferrán, se mostró duro con el Gobierno, al que acusó de "falta de decisión", y con los sindicatos por su "inmovilismo". Los órganos de gobierno de CEOE se reunieron ayer para respaldar a su presidente y la organización emitió un comunicado en el que reprocha a las partes no haber ofrecido "ninguna alternativa válida". Los sindicatos contratacaron. "Lo que perseguían era la discrecionalidad en el despido", concluyó Ignacio Fernández Toxo, líder de CC OO. Cándido Méndez, de UGT, resumió: "Es

81 muy decepcionante; no intento echar la responsabilidad a otro, pero ellos [los empresarios] no iban a negociar". Tras el fracaso del diálogo social, José Luis Rodríguez Zapatero apeló ayer a la "responsabilidad" de las fuerzas políticas para sacar adelante una reforma laboral que será "sustancial" y cambiará la estructura del mercado laboral español "para muchos años". El hecho de que Zapatero apelara a los grupos parlamentarios y no a los agentes sociales constata que ya ha arrojado la toalla sobre un posible acuerdo con empresarios y sindicatos. Hoy les presentará por separado y con pretensiones consultivas (la patronal pidió que la reunión no fuera conjunta, según fuentes sindicales) un documento con su propuesta. No obstante, el decreto que aprobará el Consejo de Ministros el próximo día 16 podría variar respecto a lo que se conozca hoy, pues el Gobierno previsiblemente introducirá algún cambio para garantizarse el apoyo parlamentario. Ayer el presidente se limitó a señalar que el objetivo de la reforma será sustituir el contrato temporal por el indefinido como fórmula habitual, "reducir el esfuerzo en el coste del despido, sin que los trabajadores pierdan derechos", e incrementar "la flexibilidad interna de la empresa"; lo que afectará a la jornada, las condiciones de trabajo y la regulación de salarios y convenios. De este último punto se deduce que el Gobierno incluirá la modificación de la negociación colectiva, para facilitar a las empresas con problemas desvincularse de los convenios sectoriales. Frente a quienes le critican por haber perdido dos años en la reforma laboral, Zapatero subrayó que esta lleva dos décadas pendiente, ya que el mercado de trabajo no ha cambiado en España desde la transición y en cada crisis se ha duplicado la media de desempleo de la UE. "Sabemos lo que hay en juego y lo saben el resto de formaciones políticas", agregó Zapatero, quien confía en obtener un amplio apoyo parlamentario. "El Gobierno tiene las ideas muy claras de lo que tiene que hacer". Y está dispuesto a hacerlo, concluyó. http://www.elpais.com/articulo/economia/Gobierno/responsabiliza/CEOE/fracaso/negoci acion/laboral/elpepieco/20100611elpepieco_2/Tes?print=1

82 La reforma del mercado de trabajo Casi 11 horas "intensas, duras e infructuosas" M. Á. NOCEDA - Madrid - 11/06/2010 Fueron casi 11 horas de reunión. Casi 11 horas entre las 19.30 del miércoles y las seis de la mañana pasadas del jueves. Como en los viejos tiempos. Con nocturnidad, pero sin humos. Y, esta vez, sin acuerdo. "Once horas intensas, duras e infructuosas", coincidieron en resumir los asistentes. De allí a la ducha y de la ducha a los quehaceres cotidianos, sin dormir. La reunión fue menos secreta que las anteriores. No obstante, los secretarios generales de los sindicatos, Ignacio Fernández Toxo (CC OO) y Cándido Méndez (UGT), y los representantes de la patronal (Gerardo Díaz Ferrán y Santiago Herrero), entraron por el garaje del Ministerio de Trabajo. Les esperaban el anfitrión, Celestino Corbacho, y el jefe del Gabinete de Presidencia, José Enrique Serrano, destinado expresamente por Zapatero. En principio se mareó un tanto la perdiz sobre los asuntos que se iban a tratar haciendo un repaso a los que ya estaban teóricamente superados. Así hasta que sobre las 21.00 el Gobierno sacó su primer papel. La patronal no tardó en rechazarlo, lo que constató la versión sindical -y posiblemente también del Gobierno- de que habían ido al encuentro solo para comprobar si se reflejaba lo que habían reclamado en reuniones anteriores. Las propuestas del Ejecutivo -extensión de contratos con indemnización de 33 días, endurecimiento de la temporalidad y flexibilidad interna en las empresas, principalmente- no eran precisamente lo que querían ver y que los sindicatos, más o menos, aceptaban. A pesar de ello siguieron negociando, mientras a unos y otros les entraban mensajes por los móviles, que permanecieron abiertos durante toda la reunión. Así, Díaz Ferrán pudo comprobar que la posibilidad de venta de su empresa Viajes Marsans a una intermediaria llamada Posibilitum se materializaba. Los responsables del Gobierno, mientras tanto, encargaron un segundo papel, que llegó a la mesa de negociación sobre las dos de la mañana. Al tiempo, se hizo un receso en el que se llamó a los secretarios de Acción Social de los sindicatos (Toni Ferrer y Ramón Górriz), al responsable de Relaciones Laborales de la CEOE (José de la Cavada), técnicos y asesores jurídicos de las tres partes para que se incorporaran. La llegada de estos, bien metida la madrugada, dio lugar al equívoco de que había fumata blanca. Nada más lejos de la realidad. De lo que se trataba era de que los técnicos analizaran con todos los pormenores del nuevo documento, centrado básicamente en la flexibilidad, la contratación y el despido. Se establecieron dos mesas de trabajo, la ya existente con los primeros espadas, y otra con los recién incorporados. No hubo progresos. Se volvió al origen de las discrepancias. Alguien comentó, a pie de obra: "Si no son capaces los jefes de ponerse de acuerdo, cómo lo van a ser los técnicos". El humo salió negro. Después, cada mochuelo a su olivo. Llegaron las conclusiones, algunas lamentaciones, muchas declaraciones y ataques cruzados. Y la constatación de que las diferencias de enfoque sí parecen abismales. Comienza ahora el tiempo de espera hasta que el Gobierno entregue hoy los documentos, que pueden no ser definitivos, ya que deberá negociarlo en el Parlamento. http://www.elpais.com/articulo/economia/horas/intensas/duras/infructuosas/elpepieco/20 100611elpepieco_1/Tes?print=1

La reforma del mercado de trabajo UN ASPECTO CLAVE PARA EL EJECUTIVO Generalización del contrato de 33 días M. V. G. - Madrid - 11/06/2010 Para combatir la alta temporalidad que aqueja al mercado laboral español, en 1997 Gobierno, empresarios y sindicatos acordaron crear el contrato de fomento de la contratación indefinida, una figura que recoge una indemnización por despido de 33 días por año trabajado, más baja que la ordinaria de 45. Pese a ello, pocos empresarios recurren a él a la hora de contratar. Tuvo un éxito relativo al principio, era el único contrato subvencionado pero la generalización de las bonificaciones hizo que decayera su uso. Los empresarios también lo explican por la complejidad de su mecanismo de despido objetivo. La indemnización de 33 días solo rige cuando el despido es improcedente y el patrono ha alegado causas económicas, lo que implica entrar en un proceloso trámite judicial. Si el empresario quiere que la rescisión sea rápida (dos días), tiene que alegar motivos disciplinarios, pero la indemnización sube hasta 45 días. Para eliminar esta excusa, el Gobierno propuso en principio equiparar los costes del despido improcedente de este contrato -sea por el motivo que sea- a 33 días por año trabajado. La oposición sindical le ha llevado a retirar este punto en su última propuesta. En el texto presentado el miércoles a sindicatos y empresarios, el Ejecutivo propuso aumentar su uso a nuevos colectivos durante los dos próximos años. Ahora hay pocos que queden fuera, solo hombres parados más de seis meses. Pero el Gobierno ha propuesto dejar solo fuera a los hombres con menos de un trimestre sin empleo. Además, el Ejecutivo quiere permitirá que las conversiones de temporales a fijos que se hagan hasta el 31 de diciembre de 2011 también puedan acogerse a esta figura. La medida estrella para impulsar este contrato contempla la subvención de una parte de la indemnización por despido procedente e improcedente (ocho días por año) con cargo al Fondo de Garantía Salarial en los nuevos contratos. http://www.elpais.com/articulo/economia/Generalizacion/contrato/33/dias/elpepieco/201 00611elpepieco_3/Tes?print=1

La reforma del mercado de trabajo LOS PUNTOS MÁS PRÓXIMOS Acuerdo en bonificaciones, jóvenes y modelo alemán M. V. G. - Madrid - 11/06/2010 Pasada la media noche, los negociadores dejaron fuera de la mesa el plan juvenil de empleo, las bonificaciones y el modelo alemán. Eran los puntos donde no había discrepancia, no tenía sentido hablar sobre ellos, mejor -aunque vano al final- centrarse sobre las discrepancias. • El Gobierno responsabiliza a CEOE del fracaso en la negociación laboral • El Gobierno entrega hoy a los agentes sociales su última propuesta de reforma laboral • El Gobierno entrega hoy a los agentes sociales su última propuesta de reforma laboral La noticia en otros webs • webs en español • en otros idiomas Para el plan juvenil, el primer texto que el Ejecutivo entregó a los agentes sociales recogía la ampliación del límite de edad para los contratos de formación (el de quienes no tienen ningún tipo de formación) hasta los 24 años y la supresión temporal de las cotizaciones sociales de empresas y trabajadores. También contemplaba un programa de formación que sería financiado al 60% por la Administración estatal y un 40% por las comunidades autónomas, y contendría medidas de orientación profesional. Por lo que respecta a las bonificaciones, el Ministerio de Trabajo proponía centrarlas especialmente sobre dos colectivos: jóvenes sin formación de menos de 30 años con más de un año en paro y mayores de 45 que también sean parados de larga duración. También se mantenían las subvenciones a la contratación para empresas de inserción laboral y víctimas de violencia de género. Asimismo, los planes del Gobierno para las bonificaciones contemplaban la evaluación del programa hasta finales de 2011. El tercer punto de acuerdo es el ya famoso modelo alemán que consiste en facilitar la reducción de jornada combinada con la prestación por desempleo, un mecanismo que ha permitido a Alemania contener y reducir el paro durante la crisis. Los límites de la reducción horaria se establecían en un mínimo del 10% de la jornada laboral y un máximo de 70%. Al mismo tiempo se abría la puerta a una mayor participación de los sindicatos en las empresas que no tienen representantes de los trabajadores. No hay cambios en uno de los puntos que reclamaban las centrales sindicales, las prestaciones por desempleo de las personas afectadas.

Tribuna - Juan José Dolado ¿Otra reforma laboral inútil? Juan José Dolado - 11/06/2010 Terminado el diálogo de sordos entre una patronal descabezada y unos sindicatos desprestigiados, el Gobierno presentará un decreto de reforma laboral el próximo día 16. Dados los precedentes, existe una vez más el riesgo de defraudar las expectativas de una buena parte de la sociedad y de nuestros acreedores (los mercados) de eliminar definitivamente la perniciosa bulimia que caracteriza el funcionamiento de nuestro mercado de trabajo, capaz de crear y destruir empleo a tasas inusitadas. Pese a que todavía no se conocen con certeza los contenidos del decreto, los indicios que se perciben a través de globos sonda resultan preocupantes por las siguientes razones. Primero, apenas se mencionan cambios en la negociación colectiva, aspecto indisoluble a la reforma de la protección al empleo. Si los salarios fueran suficientemente flexibles, el coste de despido sería neutral respecto al nivel de empleo. Piénsese en un contrato temporal anual con 8 días de salario de indemnización por fin de contrato. Si el salario mensual fuera de 1.000 euros, el trabajador y la empresa podrían fácilmente acordar un perfil salarial donde la primera paga fuera de 992 euros y la última de algo más de 1.008 euros (por la actualización debida al tipo de interés). Algo similar ocurriría con un contrato indefinido: acordando ambas partes la probabilidad de despido, el perfil salarial sería más creciente que sin costes de despido pero manteniendo su valor presente invariable. El problema surge cuando el salario fijado por convenio impide bajar de 1.000 euros la paga mensual o cuando una buena parte de esas indemnizaciones corresponden a pagos a terceras partes (judiciales, preavisos, autorizaciones administrativas, etc.) que empresa y trabajador no pueden interiorizar en el diseño del contrato. En dicho caso, aumenta el coste laboral con la consiguiente destrucción de empleo o freno a la creación del mismo. Entonces, ¿por qué el Gobierno ignora un cambio en la negociación colectiva hacia un modelo más descentralizado? Sencillamente porque patronal y sindicatos no lo desean. Con cerca de 80.000 asesores en despachos laboralistas bien asentados en la actual maraña de convenios provinciales/sectoriales, la perversa estructura vigente genera rentas anuales de más de 1.000 millones de euros para una clientela que perdería buena parte de su negocio si los convenios a nivel de empresa fuera la norma por defecto y no la excepción. Sin sustituir las complicadas cláusulas de "descuelgue" de la negociación actual por cláusulas de "enganche" a niveles superiores para aquellas pymes que así lo deseen, la reforma en el coste de despido resultará bastante estéril. Segundo, es problemática la estrategia de reducir la brecha entre indemnizaciones de indefinidos y temporales a través de la extensión de los contratos de fomento para la contratación indefinida con 33 días de indemnización (C-33). La imposibilidad legal de tener dos tipos de contratos indefinidos ordinarios que den derecho a indemnizaciones diferentes, se soslayó en 1997 con la creación de contratos de fomento del empleo para grupos desfavorecidos (jóvenes, parados de larga duración, temporales, etc.). El C-33 se ha utilizado poco porque su rescisión es legalmente más complicada que la del indefinido ordinario (C-45) y, dados los costes a terceros, le sale más caro al empresario en caso de despido. Ni la redefinición de paro de larga duración a más de 3 meses (después de haberla reducido de 1 año a 6 meses en 2006) ni abrir nuevamente otra ventana de oportunidad a la conversión de

86 temporales hasta finales de 2011 resolverá de una vez por todas la excesiva rotación que induce la elevada brecha de costes de despido. Tampoco lo hará elevar la indemnización de 8 a 12 días por fin del contrato de obra y servicio porque cualquier elevación del coste de despido es contraproducente mientras dure la recesión. La única solución es establecer reglas meridianamente claras mediante un contrato único con costes crecientes por antigüedad (Manifiesto de los 100) que reduzca la susodicha brecha de los 37 días actuales (45-8) a 4 o 5 días por año adicional con un techo al cabo de cinco años de entre 33 y 36 días. Este contrato aumenta la protección del trabajador, no la disminuye como argumentan sus detractores. Nuestras simulaciones indican que las indemnizaciones percibidas en caso de despido aumentarían en promedio desde un 5% un año después de la reforma hasta un 15% después de una década, simplemente porque aumenta la duración media de los contratos. A su vez, las empresas en promedio pagarían menos, simplemente porque destruyen menos puestos de trabajo. Por último, la idea de que el Fogasa pague 8 días de las indemnizaciones a los indefinidos parece diseñada por el peor enemigo del Gobierno. Los despidos de una empresa implican externalidades negativas para toda la sociedad. Como con la polución, corregir dichos efectos pasa porque las empresas propensas a despedir en exceso paguen más, no porque todas (y el contribuyente) les financien sus errores. Es como si a un conductor que acumula percances automovilísticos le rebajaran la prima del seguro, aumentando las de los demás. Pan para hoy y hambre para mañana. Juan José Dolado. Catedrático de Economía (UC3M) y uno de los promotores del 'Manifiesto de los 100' http://www.cincodias.com/articulo/opinion/reforma-laboral- inutil/20100611cdscdiopi_4/cdsopi/?view=print

La reforma del mercado de trabajo El Gobierno responsabiliza a CEOE del fracaso en la negociación laboral Zapatero reducirá por decreto el coste del despido - Díaz Ferrán acusa al Ejecutivo de falta de decisión y de no ofrecer alternativas válidas para el acuerdo L. ABELLÁN / M. GONZÁLEZ - Madrid / Roma - 11/06/2010 El diálogo social revivió en la madrugada de ayer la pesadilla de hace casi un año. Como en julio de 2009, la actitud de la patronal frustró un acuerdo que en algún momento tanto el Gobierno como los sindicatos tocaron con la punta de los dedos. El diálogo social revivió en la madrugada de ayer la pesadilla de hace casi un año. Como en julio de 2009, la actitud de la patronal frustró un acuerdo que en algún momento tanto el Gobierno como los sindicatos tocaron con la punta de los dedos. Aunque oficialmente se muestra salomónico, el Gobierno considera a la patronal CEOE responsable del fiasco de una reunión maratoniana que arrancó el pasado miércoles a las 19.30 y culminó casi 11 horas después con la ruptura definitiva de las conversaciones para pactar una reforma laboral. Varias fuentes gubernamentales -también los sindicatos- señalan las exigencias de la patronal como desencadenante del segundo fracaso del diálogo social en menos de un año. La primera vez obedeció a la negativa del Gobierno a rebajar las cotizaciones sociales. Ahora, los motivos son más complejos. En un momento en que a España le llueven las exigencias para que reforme su mercado laboral, la patronal consideró el viento a su favor y juzgó insuficientes las medidas de agilización del despido por causas económicas y la flexibilidad interna que proponía el Ejecutivo para que las empresas capeen la crisis. La propia patronal reconoce, de forma discreta, que sus demandas no se vieron satisfechas en la intensa negociación de la noche del miércoles y que eso precipitó el fin del proceso. De alguna forma, el Ejecutivo había creado la expectativa de que acotaría más los supuestos en que un juez podía rechazar un despido por motivos económicos, que lleva asociada una indemnización de 20 días por año trabajado para todo tipo de contratos, frente a los 45 ordinarios. No fue así; el texto final establecía como condición que la empresa tenga pérdidas y queden justificadas, sin más detalles. Pero lo que de verdad soliviantó a la patronal fueron las trabas impuestas a la contratación temporal. CEOE no esperaba -Trabajo aguardó hasta la última cita para poner esta carta sobre la mesa- una limitación de dos años al contrato de obra y servicio, ahora sin tope temporal, ni mucho menos un aumento de la indemnización por finalización de contrato eventual, que pasaría de ocho días por año trabajado a 12. Fuentes cercanas a la negociación atribuyen a las reticencias de la patronal la redacción de un segundo papel gubernamental durante la negociación. En plena madrugada, Trabajo ofreció una segunda versión de su propuesta en la que puntualizaba algunos aspectos controvertidos. Oficialmente, el presidente de CEOE, Gerardo Díaz Ferrán, se mostró duro con el Gobierno, al que acusó de "falta de decisión", y con los sindicatos por su "inmovilismo". Los órganos de gobierno de CEOE se reunieron ayer para respaldar a su presidente y la organización emitió un comunicado en el que reprocha a las partes no haber ofrecido "ninguna alternativa válida".

88 Los sindicatos contratacaron. "Lo que perseguían era la discrecionalidad en el despido", concluyó Ignacio Fernández Toxo, líder de CC OO. Cándido Méndez, de UGT, resumió: "Es muy decepcionante; no intento echar la responsabilidad a otro, pero ellos [los empresarios] no iban a negociar". Tras el fracaso del diálogo social, José Luis Rodríguez Zapatero apeló ayer a la "responsabilidad" de las fuerzas políticas para sacar adelante una reforma laboral que será "sustancial" y cambiará la estructura del mercado laboral español "para muchos años". El hecho de que Zapatero apelara a los grupos parlamentarios y no a los agentes sociales constata que ya ha arrojado la toalla sobre un posible acuerdo con empresarios y sindicatos. Hoy les presentará por separado y con pretensiones consultivas (la patronal pidió que la reunión no fuera conjunta, según fuentes sindicales) un documento con su propuesta. No obstante, el decreto que aprobará el Consejo de Ministros el próximo día 16 podría variar respecto a lo que se conozca hoy, pues el Gobierno previsiblemente introducirá algún cambio para garantizarse el apoyo parlamentario. Ayer el presidente se limitó a señalar que el objetivo de la reforma será sustituir el contrato temporal por el indefinido como fórmula habitual, "reducir el esfuerzo en el coste del despido, sin que los trabajadores pierdan derechos", e incrementar "la flexibilidad interna de la empresa"; lo que afectará a la jornada, las condiciones de trabajo y la regulación de salarios y convenios. De este último punto se deduce que el Gobierno incluirá la modificación de la negociación colectiva, para facilitar a las empresas con problemas desvincularse de los convenios sectoriales. Frente a quienes le critican por haber perdido dos años en la reforma laboral, Zapatero subrayó que esta lleva dos décadas pendiente, ya que el mercado de trabajo no ha cambiado en España desde la transición y en cada crisis se ha duplicado la media de desempleo de la UE. "Sabemos lo que hay en juego y lo saben el resto de formaciones políticas", agregó Zapatero, quien confía en obtener un amplio apoyo parlamentario. "El Gobierno tiene las ideas muy claras de lo que tiene que hacer". Y está dispuesto a hacerlo, concluyó. http://www.elpais.com/articulo/economia/Gobierno/responsabiliza/CEOE/fracaso/negociacio n/laboral/elpepieco/20100611elpepieco_2/Tes

TRIBUNA: HUGH POPE Turquía, Europa y la flotilla de ayuda a Gaza HUGH POPE 11/06/2010 La relación de Turquía con Israel, su principal socio musulmán en Oriente Próximo, se ha venido abajo estrepitosamente al acabar Israel con la vida de nueve activistas turcos propalestinos en alta mar el pasado 24 de mayo. Los muertos formaban parte de una flotilla que, transportando ayuda humanitaria, pretendía desafiar abiertamente el bloqueo israelí de Gaza. Turquía ha retirado a su embajador en Tel Aviv, ha cancelado maniobras militares conjuntas, ha anulado acontecimientos deportivos y ha acusado a Israel de piratería, de terrorismo de Estado y de tener "sangre en las manos". Miles de personas se han manifestado en las ciudades turcas para condenar las acciones israelíes, entonando lemas islamistas y llegando incluso a quemar alguna efigie de dirigentes israelíes o estadounidenses. Por su parte, Israel ha respondido tachando al convoy asaltado de "barcos del odio" y miles de turistas israelíes han abandonado sus planes de visitar los centros de recreo turcos que habían llenado en los últimos años. Después de un año en el que parece que la formación gobernante en Turquía, el Partido de la Justicia y la Democracia (AKP), se ha aproximado más a regímenes radicales como los de Irán, Sudán y Siria, el conflicto frente a las costas de Gaza ha alentado las dudas sobre si la orientación religiosa del AKP tiene una vertiente ideológica, y sobre si Turquía está apartándose de sus tradicionales aliados occidentales para centrarse en su condición de potencia emergente en Oriente Próximo. Sin embargo, si observamos de manera imparcial lo que Turquía ha intentado hacer en los últimos años, comprobaremos que no está dando la espalda a Occidente. Es cierto que trata de cambiar ciertas políticas occidentales, sobre todo las que hacen la vista gorda ante las consecuencias que para la población de Gaza tienen el bloqueo israelí y el aislamiento de Hamás, que esa misma población eligió para gobernarla. Pero Turquía impidió que sus propios parlamentarios se unieran a los barcos que se dirigían a Gaza. Por otra parte, Ankara defiende sus objetivos por medios legítimos, como el puesto que tanto le costó conseguir en el Consejo de Seguridad de la ONU y su integración en casi todos los organismos europeos a excepción de la UE, que todavía está negociando. Las tensiones que generan los vínculos con Israel no dependen de la ideología del Gobierno turco. Más bien, las crisis han seguido siempre una percepción de la opinión pública turca, en el sentido de que se está cometiendo una injusticia con los palestinos: ya sea durante la Guerra de los Seis Días de 1967, con la declaración de Jerusalén como capital de Israel en 1980 o con la ocupación de ciudades cisjordanas de 2002.Precisamente, la edad de oro de las relaciones turco-israelíes registrada durante la década de los noventa coincidió con los años del proceso de paz en Oslo. Del mismo modo, solo hace poco más de dos años que el primer ministro israelí Ehud Olmert fue invitado de honor en la residencia de su colega turco en Ankara. En otra sala, el presidente sirio se ponía al teléfono. Se trataba de la quinta ronda de conversaciones indirectas que

90 Turquía albergaba con el fin de negociar un acuerdo entre Israel y Siria, en virtud del cual Israel renunciara a la franja de territorio sirio que ocupa desde 1967 en el Golán. Puede que Turquía fuera ingenua, pero no hay duda de que era sincera al creer que estaba a punto de conseguir que ambas partes se sentaran frente a frente a negociar un acuerdo. Sin embargo, pocos días después, y sin haberlo advertido en modo alguno durante esa cena en Ankara, Israel inició la ofensiva del invierno de 2009 en Gaza. Esa clase de intentonas, destinadas a incrementar la estabilidad en la región, han caracterizado las iniciativas turcas durante la pasada década. Poco a poco, Turquía ha ido pactando con Siria, Líbano, Jordania y Libia la posibilidad de viajar sin visado; la apertura de nuevas carreteras, vías férreas y otros medios de comunicación; la integración de las infraestructuras energéticas; la firma de acuerdos de libre comercio y la celebración de reuniones intergubernamentales conjuntas. Acuerdos similares se están firmando con Irak, Irán y otros países del entorno. Está claro que Turquía está aplicando lecciones aprendidas de la Unión Europea, con la esperanza de que esa convergencia recree el éxito conseguido por esta a la hora de poner fin a ciclos de conflicto y de promover la estabilidad y la prosperidad. No es esta únicamente una política "islámica", ya que las ideas que favorecen una mayor apertura e integración también han generado vínculos más estrechos con Rusia, Serbia y Grecia. Por otra parte, tampoco supone una ruptura drástica con la posición turca fundamental en relación con Europa y Occidente. Más de la mitad de las exportaciones turcas se dirigen a Europa, los Estados de la UE representan el 90% de la inversión extranjera en Turquía y más de cuatro millones de turcos viven ya en la Unión. Por su parte, los Estados de Oriente Próximo reciben menos de un cuarto de las exportaciones de Turquía, únicamente representan el 10% de los turistas que recibe y solo dan trabajo a 200.000 emigrantes turcos. Es cierto que las negociaciones de Turquía con la UE se han estancado, y no por primera vez, en un proceso de convergencia que dura ya medio siglo. Sin embargo, en esta ocasión la principal responsabilidad del alejamiento turco recae en los ataques sufridos por el proceso a manos de políticos populistas de Francia, Alemania y Austria. Otro problema es el bloqueo de más de la mitad de los capítulos en vías de negociación por parte de los greco-chipriotas, que entraron en la Unión Europea en 2004 como únicos representantes de la dividida Chipre (a pesar de haber sido ellos quienes rechazaron el plan de reunificación de la ONU, patrocinado por la UE, mientras que Turquía y los turco-chipriotas aceptaban esa propuesta de retirada de las tropas turcas que ocupan el norte de la isla). Para terminar, hay que señalar que probablemente la Administración turca tenga razón al temerse que las acusaciones de que los activistas turcos en Gaza están vinculados a Al Qaeda -que surgen de su implicación en la ayuda a Bosnia y Chechenia durante los años noventa- formen parte de un plan que, destinado a desviar la atención de la condena a Israel por su utilización abusiva de la fuerza en alta mar, acabe mostrando a una Turquía que se sitúa en el bando equivocado en la llamada "guerra contra el terror". Es bastante improbable que algún Gobierno turco pudiera tolerar en su territorio a grupos vinculados con Al Qaeda, ya que esta ha cometido sangrientos atentados en el país, entre ellos las bombas colocadas en 2003 en el consulado general británico, en la sede central del banco HSBC en Estambul y en dos sinagogas. En realidad, el Gobierno turco está haciendo lo posible por ayudar a la OTAN en las iniciativas que lleva a cabo en Afganistán y Pakistán para poner fin a la amenaza de Al Qaeda. También ha organizado reuniones trilaterales con dirigentes afganos y paquistaníes, ha enviado a Afganistán a generales y tropas que han dirigido y respaldado a fuerzas de la OTAN que no entran en combate, y ha posibilitado que contratistas turcos construyan carreteras, hospitales y escuelas femeninas en ese país.

91 En consecuencia, las disputas entre Turquía e Israel por la política de este país respecto a los palestinos no demuestran ninguna animadversión de Turquía hacia Occidente. Puede que los turcos hayan sido los principales organizadores de la flotilla que se dirigía a Gaza, pero a ellos se unieron activistas, navíos y mercancías de 30 países más, entre ellos varios políticos de Estados de la UE. No tiene nada de antieuropeo protestar por el castigo colectivo que Israel inflige a los habitantes de Gaza. Lo único insólito es que Turquía, al contrario que los Estados europeos actuales, esté haciendo realmente algo para poner fin a esa situación. http://www.elpais.com/articulo/opinion/Turquia/Europa/flotilla/ayuda/Gaza/elpepiopi/201006 11elpepiopi_4/Tes?print=1

Geithner testifies; U.S. and China continue negotiations on currency policies By Howard Schneider Washington Post Staff Writer Friday, June 11, 2010; A14 Negotiation with China has failed to produce a clear sense of when the country might change its controversial currency policy, Treasury Secretary Timothy F. Geithner said Thursday, as new trade data produced disappointing results for the Obama administration's export efforts and congressional leaders renewed calls for a tougher stance with Beijing. President Obama has made increasing exports a centerpiece of his economic policy, aiming to double the United States' overseas sales in the next five years and create millions of new jobs in the process. Newly released information from the Commerce Department, however, showed that exports dropped slightly in April, indicating that the United States may not benefit from the quick and seamless rebound in exports that some analysts expected to flow from a global economic recovery. The department said that exports in April fell to $148.8 billion, from $149.8 billion the month before. Agricultural sales ebbed and purchases of U.S. goods in Europe declined, possibly pushed lower by the steep drop in the value of the euro. Though exports are still up significantly from the recession-lows of a year ago, the trade data formed the backdrop of renewed debate on Capitol Hill over China's currency management. The U.S. trade deficit with China widened 14 percent in April, to $19.3 billion, compared with $16.9 billion in March, driven by a surge in imports and a fall in sales to China by American companies. China keeps its currency, the yuan, pegged at an artificially low level to the dollar, a policy that many economists and lawmakers argue has cost the U.S. hundreds of thousands of manufacturing jobs by making Chinese goods cheap on world markets. In April, Geithner delayed a biannual report on world currency policies in which he was urged to label China a currency manipulator and take measures against the country. He said then that he wanted to use upcoming meetings with the Chinese to resolve the issue, but with that timeline almost expired, Geithner said Thursday that he had no idea when the Chinese might act. "To be honest, I don't know whether we are at the point where we are going to see meaningful progress in the short term," Geithner told the Senate Finance Committee. Top Chinese officials say they agree the yuan should appreciate -- a rise in the currency's value would help restrain inflation and wage increase demands in the country, and boost China's appetite for imports in line with recommendations from a broad array of analysts. But, Geithner said, "They have not decided when and how they are going to act." Top U.S. and Chinese officials met last month and will be together at the Group of 20 summit of large economies this month. Geithner said the United States will "take stock" of what to do next after the G-20 meeting. By then, lawmakers may take matters into their own hands. The threat of congressional action on currency policy has been used in past U.S.-China negotiations to jog loose concessions, and Sen. Charles E. Schumer (D-N.Y.) raised the possibility again. Schumer has offered legislation that would tax Chinese imports because of the country's undervalued currency, and he told Geithner the Senate was "going to do it soon. Be prepared." The issue is not just a U.S. concern. China's undervalued currency -- and the massive trade surplus and stockpile of currency reserves it has accumulated as a partial result -- is considered a potential risk for the global economy as the country undercuts development in other low-wage manufacturing countries such as India and Vietnam, and it prompts competitors such as Malaysia and Singapore to manage their currencies closely as well. The country's development policy remains oriented around exports, and recent events may have made the leadership in Beijing more cautious about any sharp appreciation in the yuan's value. While China's exports are surging overall, the drop in the value of the euro has made Chinese goods more expensive in that key market.

http://www.washingtonpost.com/wp-dyn/content/article/2010/06/10/AR2010061005385_pf.html

93 U.S. NEWS JUNE 10, 2010 U.S. Firms Build Up Record Cash Piles By JUSTIN LAHART U.S. companies are holding more cash in the bank than at any point on record, underscoring persistent worries about financial markets and about the sustainability of the economic recovery. The Federal Reserve reported Thursday that nonfinancial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest-ever increase in records going back to 1952. Cash made up about 7% of all company assets, including factories and financial investments, the highest level since 1963. While renewed confidence in corporate-bond markets has allowed big companies to raise a record amount of money, many are still hesitant to spend the cash on hiring or expansion amid doubts about the strength of the recovery. They are also anxious to keep cash on hand in case Europe's debt troubles lead to a new market freeze. "Cash is still king," said Jeff Hand, chief operating officer at Ross Controls, a Troy, Mich., maker of pneumatic valves and other products that is holding more cash as it struggles to recover from a sharp drop in business last year. "We're coming out of that, but the uncertainty is still there." Experience WSJ professional Editors' Deep Dive: Economy Takes Slow Road to Recovery DOW JONES BUSINESS NEWS Growth Trends Have Shifted Newsweek The Recovery Is Real Joins.com Mixed Forecast for Economy Access thousands of business sources not available on the free web. Learn More The rising corporate cash balances could represent a longer-term behavioral shift in the wake of the deepest financial crisis in decades. In the darkest days of late 2008, even large companies faced the threat that they wouldn't be able to do the everyday, short-term borrowing needed to make payrolls and purchase inventory. "We just went through this liquidity crunch that's made them realize the value of a dollar in hand," said John Graham, an economist at the Duke Fuqua School of Business. Even now, banks continue to pull back on lending. The Fed reported Thursday that net lending by the financial sector—including banks, credit unions and other lenders—was down 5.4% in March from a year earlier. The comfort of having cash on hand, though, comes at a high price companies may not be willing to pay for much longer. They are earning almost no interest on their holdings of cash, making it more difficult for them to achieve the returns shareholders typically expect from them. That will put pressure on companies to pare down the cash holdings eventually.

94 "Stockholders don't want them to keep sitting on cash at a zero return," said Paul Kasriel, an economist at Northern Trust. "They're going to use it," either to increase hiring and investment or to make payouts to shareholders in the form of dividends or share buybacks, he said. Earlier this week, retailer Target Corp. raised its quarterly dividend to 25 cents a share from 17 cents, saying that the company's cash holdings were "well above the amount needed for optimal reinvestment in our core business." When it reported results for its fiscal quarter ended May 1 on Monday, Philadelphia auto- parts and service retailer Pep Boys—Manny, Moe & Jack said it had $87.8 million in cash on its balance sheet, versus $21.3 million a year earlier. But in a call with analysts Tuesday, Chief Financial Officer Ray Arthur suggested the company would soon be putting the money into capital investments. "I just wouldn't plan on seeing $80 million or $90 million at the end of every quarter on our balance sheet," he said. In a recent survey of company chief financial officers that Duke's Mr. Graham conducted with CFO Magazine, he found that companies expect capital spending to increase by 9% over the next year, compared with 1.5% when he asked the question in December. They expect employment to grow by 0.7%, compared with the 1.4% drop they expected six months ago. Cash has piled up at Hooker Furniture Corp., based in Martinsville, Va. The company has seen increasing demand for the upholstered furniture it makes in the U.S., which it has found usually leads demand for the other furniture it imports from China. Hooker is being cautious nonetheless. When it reported results Monday, the company said it had $38.7 million in cash and other highly liquid assets on its balance sheet in its fiscal quarter ended May 2, up from $26.2 million a year earlier. "We're a fairly conservative company, and keeping our powder dry makes sense to use," said Hooker Chief Financial Officer E. Larry Ryder. Mr. Ryder says he sees the cash as a sort of insurance fund to make sure he can buy the raw materials and other inventory he will need to meet demand if business picks up. The company has cut its inventories to $38.5 million from $47.1 million over the past year. "We don't want to tie our cash up to the point that we don't have the liquidity we need to accumulate inventory when we need it," said Mr. Ryder. Companies' willingness to use their cash will play a major role in the strength of the recovery at a time when consumers need jobs to support their spending and many people are still trying to repair their finances. The Federal Reserve data showed households making some progress in paring down their debt, which fell at a 2.5% annual rate in the first quarter as credit remained tight and more homeowners defaulted on their mortgages. Household net worth—the value of houses, stocks and other investments, minus debts—rose for a fourth straight quarter as markets continued to rebound. At $54.6 trillion, though, it was still $11.3 trillion below its 2007 peak of $65.9 trillion. JUSTIN LAHART U.S. Firms Build Up Record Cash Piles JUNE 10, 2010http://online.wsj.com/article/SB10001424052748704312104575298652567988246.html# printMode

95 U.S. NEWS JUNE 10, 2010, 4:07 P.M. ET Federal Budget Deficit in May Totals $135.93 Billion By JEFF BATER WASHINGTON—The U.S. federal budget deficit rose again in May as the government neared the $1 trillion mark a second straight year. The government spent $135.93 billion more than it collected, the U.S. Treasury said in its monthly budget statement released Thursday. Government spending on defense came short of the expectations of research firm Macroeconomic Advisers, causing the research firm to lower its tracking forecast for second- quarter economic growth to 3.6% from 3.7%. The budget report came out a day after Federal Reserve Chairman Ben Bernanke issued a new warning on the U.S. fiscal condition. Mr. Bernanke, who testified to Congress Wednesday, said there is a risk to the overall economy if financial markets begin worrying about the government's commitment to reducing the deficit. The U.S. ran a record $1.42 trillion deficit in fiscal 2009. Fiscal years begin Oct. 1. Mr. Bernanke even said the U.S. could face problems that debt-stricken Greece has suffered if it doesn't come up with a plan soon to cut the deficit. So far, though, bond buyers are gobbling government securities, issued to finance government operations and service the big debt accumulated from years of deficit spending. In fact, on Thursday, the Treasury awarded $13 billion in 30-year bonds at a high rate of 4.182%. The bid-to-cover ratio for the sale, an indication of demand, was 2.87. "The Treasury was once again able to sell debt and attract significant interest at levels most on the street would classify as less than attractive yields," Miller Tabak analyst Dan Greenhaus said of the long-bond auction. The May federal budget deficit was a little smaller than projected. Economists surveyed by Dow Jones Newswires had estimated a $140 billion gap. The government usually runs a deficit in May. The shortfall last month was significantly smaller than a year earlier, as spending on government programs to bail out Wall Street wind down. Still, the deficit in May was the 20th straight. In the first eight months of fiscal 2010, the government has spent $935.61 billion more than it made. Thursday's statement said U.S. government revenues in May totaled $146.8 billion, compared with $117.22 billion in May 2009. Spending totaled $282.72 billion, versus $306.87 billion. Year-to-date revenues were $1.35 trillion, compared with $1.37 trillion in the first eight months of fiscal 2009. Spending so far in this fiscal year is $2.28 trillion, versus $2.37 trillion the prior period. The $2.28 trillion figure includes $145 billion in interest payments on the nation's debt. http://online.wsj.com/article/SB10001424052748704312104575298970678589804.html#print Mode

Enough with the economic recovery: It's time to pay up By Steven Pearlstein Friday, June 11, 2010; A12 Just about now, you may be a bit confused about the economy. Some economists and policymakers look at growth in output and see the beginnings of a sustainable recovery. Others note that most of that recent growth reflects a return to high spending and low savings, which is most definitely unsustainable. Some look at core inflation rates of less than 1 percent in major industrialized countries and worry about deflation. Others look at soaring government deficits and central banks' ballooning balance sheets and warn of inflation just over the horizon. Some insist there is an urgent need for another shot of Keynesian fiscal stimulus -- government borrowing and spending to create jobs -- which they assure will largely pay for itself with the extra tax revenue it will generate. Others warn that any more debt will cause markets to raise interest rates so high that it will eat up most of the proceeds from new borrowing. Some forecasters expect that fast-growing developing countries such as China and Brazil will power the global recovery and spur a rise in U.S. exports. Others warn that fiscal austerity and slow growth in Europe threaten the recovery. Even the people who are supposed to really understand this stuff can't come to consensus on where things are headed and what we should do next. And I have a hunch why that is: At this point, there are no good solutions -- only a choice among painful and distasteful ones. The controlling reality is that the global economic system is rebalancing itself after years in which the United States was not only allowed but encouraged to live beyond its means, consuming more than it produced and investing more than it saved. Now the bill for that is finally coming due -- all the clever and seemingly painless ways for postponing that day of reckoning have pretty much been played out. The only question now is what form that payment is going to take. Will it be an extended period of subpar growth and high unemployment, inflation that erodes the purchasing power of our income and the value of our assets, a deflationary spiral that grinds down wages and salaries and increases our debt burden -- or, as I suspect, some combination of all three? One reason for all the disagreement is that any decisions about the form of payment will have a big effect on how the burden is distributed -- between debtors and creditors, importers and exporters, those with lots of wealth and those with little, workers with market power and those without. What has been disappointing is that those in the position of economic leadership have not been more candid about the reality of this predicament and the limits of what government can or should do about it. Ben Bernanke and his colleagues at the Federal Reserve, for example, have refused to acknowledge that by keeping interest rates at zero "for the foreseeable future," they have

97 begun to generate new bubbles in financial assets and overheated the economies of developing countries, where much of the money is going. These are many of the same folks, after all, who once claimed they couldn't see the credit and real estate bubble developing right under their noses -- and, once those bubbles burst, rejected criticism that overly loose monetary policy might have been a cause. One economist whose warnings the Fed failed to heed back then was Raghuram Rajan, the former chief economist of the International Monetary Fund who in 2006 delivered a now- famous paper on the subject at the Fed's annual retreat at Jackson Hole, Wyo. Now Raghuram is sounding the alarm again, warning that while a weak U.S. economy still requires the Fed to hold interest rates relatively low, keeping them at zero is both dangerous and unnecessary, generating little extra output in the United States while creating hot money flows abroad. Equally disappointing in recent months has been the performance of the Obama White House, where it seems the political advisers have taken control of economic policy. Rather than allowing Republicans and Blue Dogs to frame the economic debate around the urgency of deficit reduction, this was the time for the president to focus the country on rebuilding the foundations for long-term economic growth. At this point, neither the politics nor the economics support the idea of spending large sums, directly or through tax breaks, just to shave a percentage point off this year's unemployment rate. But with plenty of slack in the economy and interest rates at historic lows, this is the ideal time to borrow and invest heavily in public infrastructure that has been badly neglected over the past 30 years. I'm referring not only to roads and bridges but also to airports and air traffic control systems, urban transit, high-speed rail, schools and university facilities, national laboratories, national parks, "smart" electric grids, broadband networks, green generating plants, and health information networks. Properly chosen, these projects can have huge long-run economic payoffs while tangibly improving the lives of all Americans. They're the kind of government spending today's voters can get excited about while also leaving a valuable legacy for future generations -- along with the debt that was used to finance them. And if they wind up creating some jobs at a time when millions of people are unemployed, so much the better. Having stabilized the economy and the financial markets, it is neither possible nor desirable for the government to try to delay any further the painful adjustments needed to put the global economy back into balance. It's time to settle up and get on with the more exciting challenge of shaping our long-term economic future. Steven Pearlstein Enough with the economic recovery: It's time to pay up June 11, 2010; A12 http://www.washingtonpost.com/wp- dyn/content/article/2010/06/10/AR2010061004971_pf.html

98 Eurointelligence Daily Morning Newsbriefing Van Rompuy caves in: he now accepts Berlin’s position of no institutional change

11.06.2010 At a meeting with Merkel, van Rompuy says no new institutions are necessary to deal with euro crisis; everything stays the same; Bank of Italy calculates that austerity will shave 0.5% of GDP; ECB revises its 2011 growth forecasts downward, and predicts irregular patterns; also continues to purchase bonds, but once again fails to provide details; debt spreads are now at pre-crisis levels in some crisis; German constitutional court rejects issuing an injunction against the SPV; NRC Handelsblad says a coalition of the right, including Geert Wilders PVV, is the most logical choice now; Polish parliament confirms Marek Belka as the new central bank chief; Gillian Tett, meanwhile, wonders why the Europeans are still resisting stress tests.

11.06.2010 Van Rompuy caves in: he now accepts Berlin’s position of no institutional change

The eurozone’s new governance regime will be the old one, more or less. FT Deutschland has a report according to which Herman van Rompuy has ruled out any institutional changes, including a secretariat to prepare eurozone summits. There is no majority for any changes. The Commission fears a loss of influence. The European Parliament fears a loss of influence. Germany fears French influence. Poland fears being left outside. So we are essentially back to old defunct regime, with penalties as the biggest idea that is now floating around. And Merkel is quoted as saying that the summit would not only discuss a new stability pact but also “aspects of growth”. We can’t wait. (It is our continued contention that this crisis has not been big enough to force material

99 change. After accepting the bailout, Merkel is now digging in on institutional reform. The same pattern emerges as with the banking bailout two years ago. The government create a protective umbrella in the hope that it might be sufficient for the crisis to solve itself. In the meantime they have not made progress in resolving the underlying problems. The same is going to happen again. The bond market umbrella now gives eurozone leaders a false sense of security.) Bank of Italy says austerity plan will cut 0.5% of GDP La Repubblica reports this morning that the Bank of Italy estimates the €24bn austerity package to have the effect of reducing economic growth by half a percentage point “all other things being equal”. Of course all other things are not equal, since other eurozone countries also pursue the same policies. The estimate was made by Salvatore Rossi, the Bank of Italy’s head of economic research in front of the Italian Senate’s budget committee. He said the consolidation was necessary, but it would slow down the already weak economic growth. Most of the effect will come through the direct spending cuts, and the promised crackdown on tax evasion. ECB to continue purchasing bonds The ECB will extend its offerings of unlimited liquidity and keep purchasing government bonds, Bloomberg reports from the ECB press conference yesterday. But Jean Claude Trichet refused to give more details on the bond purchases, they will remain secretive on this. Trichet said the ECB plans to offer further help to banks struggling to raise cash in money markets, interest rates are kept at 1%. Le Monde picked up on Trichet’s comments on growth. He said that quarterly growth rates are expected to be irregular for the eurozone. The ECB growth forecast was revised downwards for 2011 from 1.5% to 1.2% (between 0.2% and 2.2%), taking into account the negative effects of the austerity programmes by several eurozone member countries. For this year, the forecast was revised slightly upwards from 0.8% to 1% (between 0.7% and 1.3%). Debt spreads are widening Here is the financial market’s reaction to the European rescue package. Bond spreads are widening, and in some case are widening to above the levels that prevailed before the rescue package was announced. This is a terrible indictment. This graph from Calculated Risk tells all. German constitutional court rules against injunction The German constitutional court is rarely destructive, and it shies away from showdowns with the government. So we are not surprised to hear that the justices rejected a plea for an injunction against the eurozone rescue SPV on the grounds that such a decision itself could have contributed to instability. The decision, however, should not be seen as a pre-ruling on the real case, brought by a German MP, which the court is very likely to take seriously. We would expect that ruling to place further constraints on the German government’s ability to negotiate eurozone-wide policies, though it will probably not undo the SPV. About the Dutch coalition prospects post election. You should enjoy the English edition of NRC Handelblad. Its post election commentary provides a good analysis of the changes ahead. The most logical outcome would be a coalition of the right, it says, and Geert Wilders’ PVV has already made overtures and shown

100 ability to compromise. The problem is that the decimated Christian Democrats may not want to be in government. The comment is sceptical of a four-party centre left coalition, given the ideological opposition of the liberal and the labour parties. Tett on the lack of stress tests in Europe Gillian Tett wonders why the Europeans do not simply follow the American example and conduct stress tests and force banks to recapitalise. She notes that France and Germany in particular are resistant to the idea, fearing that those tests, if published, would unveiled big problems, for which they have no plan. Moreover, the public is unlikely to support another rescue package, having just grudgingly accepted a eurozone-wide bailout. So this leaves core Europe in a Japanese style scenario, in a world characterised by investor distrust and a steady slide in asset prices. Belka approved as central bank chief The Polish parliament yesterday confirmed Marek Belka as head of the central bank to replace Slawomir Skrzypek, who did on the Polish’s president’s plane crash in Russia on April 10. Belka, a former Politish prime minister, last served as head of the European section of the IMF. The FT writes the appointment was controversial as opposition leaders demanded that the decision should wait until the election of the new president. Mr Belka was nominated by Bronislaw Komorowski, the acting president, who is currently leading the opinion in the presidential race.

http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2820&tx_ttnews[ba ckPid]=901&cHash=e77d9a9855#

101

Trichet Says ECB to Keep Buying Bonds to Fight Crisis (Correct) By Simone Meier and Jana Randow

(Corrects value of bailout package in 11th paragraph.) June 10 (Bloomberg)

Jean-Claude Trichet said the European Central Bank will extend its offerings of unlimited cash and keep buying government bonds as it tries to ease tensions in money markets and fight the European debt crisis. “It’s appropriate to continue to do what we’ve decided” on purchases of sovereign and corporate bonds, Trichet, who heads the ECB, said at a press conference in Frankfurt today. Earlier, the central bank kept its benchmark interest rate at 1 percent. “We have a money market which is not functioning perfectly.” The ECB is buying state debt and pumping unlimited funds into the banking system as part of a strategy by European policy makers to stop the euro region from breaking apart. While Trichet refused to bow to some investors’ demands for more details on the bond purchases, he said the ECB plans to offer further help to banks struggling to raise cash in money markets. “The ECB is really in fire-fighting mode and is no longer thinking about exit,” said Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam. “Interest rates will be lower for longer because of this euro-region sovereign debt crisis.” The ECB will give banks access to unlimited funds over three months at a fixed rate in July, August and September, said Trichet. The Frankfurt-based central bank has used the measure as one of its key tools to bolster financial markets since the collapse of Lehman Brothers Holdings Inc. in September 2007. Track Record The euro rose during the press conference, strengthening as much as 1.1 percent to $1.2123 at 4:45 p.m. in Frankfurt. The single currency has shed 15.5 percent against the dollar this year.

102 The Bank of England today also kept its main rate unchanged at a record low of 0.5 percent and left the target for its bond holdings at 200 billion pounds ($292 billion). Trichet defended the ECB against critics who say the bond purchases amount to bailing out indebted governments and could fuel inflation, breaching two of the central bank’s founding principles and undermining its credibility. “We have the best track record on price stability over 11 1/2 years in Europe and among the legacy currencies,” Trichet said. “What we have done and what we do with the same purpose is to help restoring an appropriate functioning of the monetary- policy transmission mechanism.” Temporary Plan Trichet refused to be drawn on the duration of the bond plan, saying it would be “temporary.” While the central bank doesn’t immediately plan to issue debt certificates to mop up the excess liquidity pumped into markets through bond purchases, all options are being considered, he said. Investor concern that a Greek deficit crisis will spread across the 16-member euro region last month prompted European leaders to pledge a bailout package worth $910 billion and forced the ECB to reverse its withdrawal of emergency stimulus measures. Economists have also pushed back forecasts for higher interest rates until the second quarter of next year. New York University economist Nouriel Roubini, who predicted the financial crisis, said in an interview today that the ECB should cut its main lending rate to zero. Billionaire investor George Soros said today that the global economy just entered “act two” of the crisis. “We now expect the ECB to keep interest rates down at the current level of 1 percent not only through 2010 but deep into 2011,” said Howard Archer, chief European economist at IHS Global Insight in London. “The ECB may well have to continue to engage in non-standard measures for some considerable time to come.” Forecast The ECB today raised its euro-region growth forecast for this year and cut it for 2011. The central bank expects the economy to expand around 1 percent in 2010 compared with a previous forecast of around 0.8 percent. It will grow about 1.2 percent in 2011, lower than an earlier projection of around 1.5 percent because of weaker domestic demand, said Trichet. The central bank raised its inflation forecasts. Consumer prices will rise around 1.5 percent in 2010 and 1.6 percent in 2011, Trichet said. That compares with a previous projection that inflation would be around 1.2 percent in 2010 and 1.5 percent in 2011. To contact the reporter on this story: Simone Meier in Frankfurt at [email protected]; Jana Randow at [email protected]. Last Updated: June 10, 2010 15:42 EDT Simone Meier and Jana Randow Trichet Says ECB to Keep Buying Bonds to Fight Crisis (Correct) June 10, 2010 15:42 http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aNbI444Ocv08#

103

Europe’s antipathy to stress tests is well founded By Gillian Tett Published: June 10 2010 16:33 | Last updated: June 10 2010 16:33 Is it time for Europe to copy America, and conduct public, detailed bank “stress tests”? That question is haunting the transatlantic policy debate and global markets. In recent weeks, a palpable and growing sense of fear has erupted around Europe’s banking system. Share prices have fallen. Three-month dollar Libor rate has doubled to around 55 basis points. The ability of eurozone banks to roll over commercial paper has dwindled – last week alone their outstanding commercial paper fell $15bn. Such is the mood of unease that overnight deposits at the European Central Bank rose above €360bn this week – a record. UK and US call for bank transparency - Jun-03 More columns by Gillian Tett - Feb-23 Moreover, if you ask investors or bankers to explain this trend, the answer usually revolves around a lack of trust. Most notably, there is a perception that the balance sheets of eurozone banks are dangerously opaque, stuffed with rotten (or potentially rotten) assets such as risky sovereign bonds or legacy mortgage bonds. There is also a fear that eurozone banks have too few reserves, partly because they have raised far less capital than their US rivals in the last two years. US officials such as Timothy Geithner have been forcefully pointing out to their European counterparts in recent weeks that back in the spring of 2009 similar fears beset American banks. However, Washington conducted public stress tests, published the results and then forced banks to raise capital, helping to turn sentiment round. Something similar occurred in Japan almost a decade ago, when the Japanese government also performed stress tests on its troubled banks, albeit after numerous false starts. So, the Americans keep asking, why doesn’t Europe do the same? “It is pretty obvious what the problem is – but the Europeans just don’t seem to get it,” one, frustrated American official recently fumed. Could this be about to change? Some observers certainly hope so. Last weekend, Mario Draghi, governor of the Bank of Italy, issued public support for the idea, noting that “the decision of the US government to undertake these [stress] tests last year and publish them had a very beneficial impact both on the market and on the banks themselves.” Then, Jean-Claude Trichet, head of the European Central Bank, revealed that the ECB is overseeing stress tests, and gave an intriguing hint these might be released. “I expect appropriate communication will take place [about that],” Trichet observed. But the €360bn (plus) question right now is what Trichet – and other eurozone leaders – consider to be “appropriate communication”.

104 When the US did stress tests, these produced details about specific banks. However, this is not what eurozone leaders appear to have in mind. This week, for example, the Austrian government warned that it would only back stress tests if these were limited to sector-wide analysis. The German and French governments have privately voiced similar views. Indeed, the only eurozone country which appears to back US-style stress tests – and has even (laudably) done its own – is Ireland. Why? One problem is simple prejudice: the Germans and French loathe the idea of being lectured by Americans (particularly since they blame America for having started the whole banking crisis.) A second, more practical, problem is that some eurozone officials fear they would spark market turmoil if stress tests revealed that individual banks were short of capital – but they did not have a clear solution to plug that gap. After all, the European public is reluctant to use any more taxpayer money to support banks. Meanwhile, capital markets are so jittery that it could be hard to plug any gap just with private funds. The really big problem, however, is politics. In Germany, the government has just persuaded its population to support a very unpopular, and costly plan to “save” Greece (and other eurozone countries) from default. Given that, German officials understandably do not want to tell their voters that they are also conducting bank stress tests to cope with the possibility of, say, a Greek default. But if Germany does not include that scenario in any stress test, these would lack credibility. Hence the fact that one senior eurozone regulator laments that “it is just politically impossible for [Germany] to do stress tests”. That effectively leaves the core eurozone trapped. If it follows America – and does public stress tests – there could be political and market convulsions. But if the eurozone does not do stress tests, it will end up looking like Japan in the 1990s: namely a world wracked by corrosive investor unease, market distrust and stealthy slides in asset prices. Maybe the ever-wily Jean-Claude Trichet will find a way to escape that trap when the ECB finally decides to make “appropriate communication”. But don’t count on it. No wonder Americans are so frustrated, and investors so uneasy. [email protected] Gillian Tett Europe’s antipathy to stress tests is well founded June 10 2010 16:33 http://www.ft.com/cms/s/0/dcf9b35a-749d-11df-b3f1-00144feabdc0.html

BA threatens to favour Madrid By Pilita Clark and Richard Milne in London Published: June 10 2010 23:01 | Last updated: June 10 2010 23:01 British Airways will expand in Madrid rather than at Heathrow after it merges with Iberia if the government fails to address rising travel demand now that it has scrapped plans for a third runway at Britain’s biggest airport, Willie Walsh said.

105 “You’ve got a fantastic airport in Madrid that has excess capacity that the Spanish government has invested in [and] Madrid’s local government has invested in, and we’ll grow there,” the BA chief executive told the Financial Times in a video interview. View from the Top: Willie Walsh - Jun-11 Europe misses out on airline recovery - Jun-07 BA losses fail to put off investors - Jun-03 BA meets Unite but aims to increase flights - Jun-01 BA cabin crew split over future walkouts - Jun-08 “Growth is not going to go away. Growth will just leave the UK and go to other parts of Europe. “BA will be able to access that growth because our assets are mobile and we can focus on developing Madrid rather than London.” The UK’s coalition government confirmed last month it would not allow any new runways at the country’s three largest airports, Heathrow, Gatwick or Stansted, prompting applause from environmental campaigners and frustration in the aviation industry. Ministers say any increase in demand for air travel in the south-east of the UK – predicted to grow from 117m passengers in 2000 to 300m in 2030 – can be soaked up by regional airports and new high-speed rail links. But the aviation industry questions how this would work, especially since Heathrow is the only true international hub airport in Britain. Mr Walsh said the runway issue reinforced the merger plan with Iberia due to be completed by the end of the year. His comments on Thursday came as BA issued its annual report revealing Mr Walsh had foregone a £334,000 bonus last year, but could get a larger one this year if he meets a range of criteria including an improvement in industrial relations. The report was issued hours after the Unite union, which represents most of BA’s 13,400 cabin crew, told the airline it planned a fresh strike ballot, which could see another wave of stoppages in the summer. The ballot is over travel concessions stripped from striking staff; disputed disciplinary measures against some strike supporters, and the use of replacement crew working on reduced terms during the stoppages. Mr Walsh said that he had shown that the union could no longer close down the airline. http://www.ft.com/cms/s/0/b34ae28e-74d6-11df-aed7-00144feabdc0.html

106 06/10/20104 06:16 PM Letter from Berlin Has Muddling Merkel Lost Her Touch? By Charles Hawley Fighting, bickering and name-calling. Eight months after voters returned Angela Merkel to the Chancellery at the head of a center-right coalition, her government is not cutting a good figure. Some are asking if the chancellor herself has forgotten how to lead. She has been called Germany's Margaret Thatcher. She has been compared favorably to the "Iron Chancellor," the country's well-respected pre-World War I leader Otto von Bismarck. At the beginning of this year, Time magazine even dubbed German Chancellor Angela Merkel as "Frau Europe." These days, though, Merkel is striking a dramatically different figure. Just eight months into her second term in office, her center-right coalition appears frayed and it has shown a clear preference for infighting to governing in recent weeks. Even more concerning, repeated efforts by the chancellor to turn down the volume on the bickering have failed. Increasingly, Germany's erstwhile strongwoman is looking weak, like she has lost her leadership touch. "She seems to be just muddling through," Gero Neugebauer, a political science professor at Berlin's Free University, told SPIEGEL ONLINE. "Her government is behaving like mere bookkeepers. And bookkeepers are just that -- they are not the head of the enterprise." It is an impression that has been building throughout the year. Merkel was heavily criticized both domestically and internationally for her molasses-like response to the Greek debt crisis, which earned her the nickname "Madame Non," and voters in North Rhine-Westphalia delivered her party a thrashing in a state vote there in May. But as disagreements within her governing coalition have exploded into the headlines this week, there are some who speculate that Merkel's second term could very well end prematurely. Fierce Criticism Ironically, much of this week's bickering was triggered by Merkel's effort to finally try to provide her government with a clear mission. With Europe mired in a national debt crisis, the chancellor and her cabinet agreed on Monday to an austerity package designed to save €80 billion by 2014. Merkel, it seemed for a brief moment, would go down in history as the chancellor who not only guided Germany through the global financial crisis, but also balanced the budget afterwards. Just days later, however, it looks as though that encyclopedia entry might have to wait. Criticism of her austerity program has been fierce, with many of the barbs coming from within her own governing coalition. Indeed, leading members of Merkel's Christian Democrats (CDU) have blasted the package for placing too great of a burden on Germany's poor while leaving the better off untouched. Some have proposed raising taxes on those in the upper brackets -- a suggestion which, in turn, has made her already-pouting coalition partners from the pro-business Free Democratic Party (FDP) positively apoplectic. Of greater concern, however, is the fact that many voices from both within and outside of politics have begun doubting whether Merkel's austerity package will have the effect she claims it will. The package includes cuts to some welfare benefits, a new tax on radioactive waste for operators of nuclear plants and a levy on air travel. Many, though, have pointed out

107 that large portions of the austerity package are ill-defined. A streamlining of the military, for example, is supposed to save €2 billion a year. Improved efficiency in unemployment offices is to cut spending by €5 billion a years and a reduction in bureaucracy, it is hoped, will slash outlays by €4 billion annually. The plan also includes €5.6 billion in savings in 2014 through "comprehensive expenditure reductions." Merkel sought to calm nerves on Wednesday, acknowledging the critique but defending the austerity program. The key now, she said, "is to make the package reality." In a clear effort to nip the bickering in the bud, she said: "After examining the situation, I have decided that this package, as we have presented it, is a balanced and correct program." Wild Sow and Cucumbers Still, the austerity package debate is just one front in the intra-coalition war currently being waged. And, if anything, it is the more civilized one. Of particular note is the exchange of insults this week between the FDP and the Christian Social Union (CSU), the Bavarian sister party of Merkel's CDU. For months, the two parties have tussled over competing ideas on health care reform, with Health Minister Philipp Rösler, a member of the FDP, repeatedly being singled out for critique from Bavaria. Earlier this week, the FDP ran out of patience. Daniel Bahr (FDP), a high-ranking official in Rösler's Health Ministry, said that the CSU was behaving like a "wild sow, they are only being destructive." In response, CSU General Secretary Alexander Dobrindt blasted the FDP as a "troop of cucumbers" -- an affront in the insult-poor German language which is roughly akin to calling the party a gaggle of bumbling idiots. The CSU also called on Merkel to clear the waters. Merkel, though, has been having difficulties doing so lately. No matter what she says these days, the bickering seems to continue -- and public support for her government continues to fall. A recent public opinion poll found that just 5 percent of the German public approve of the FDP, down from 14.6 percent on election day last September. Approval of Merkel's conservatives is at a four-year low. "The chemistry has to work; the inter-personal atmosphere within the coalition is very important," says political scientist Neugebauer. "Because they don't trust each other, you end up with this barroom language. And if they don't trust each other, how can they expect the voters to trust them?" Putting Its Foot Down The FDP in particular seems to have thrown caution -- and political discipline -- to the wind. Party head Guido Westerwelle, who is also foreign minister and Merkel's vice chancellor, has cut an especially poor figure in Berlin as his party spent months promising tax cuts even as economic realities made such cuts an impossibility. Now, with some in the CDU calling for a tax increase for Germany's top earners, the FDP is trying to put its foot down. Several FDP leaders on Wednesday said that the FDP would not tolerate any tax increases whatsoever. And, with Merkel facing a crucial test of her power later this month as lawmakers and state delegates gather to name a successor to President Horst Köhler -- whose surprise resignation last week shocked even Merkel -- the FDP is threatening to rebel. Merkel's candidate Christian Wulff has excited few, and on Wednesday, Jörg-Uwe Hahn, head of the Hesse chapter of the FDP, said "the majority for Wulff in the Federal Assembly (eds. note: the Federal Assembly, made up of federal lawmakers and state delegates, elects the German president) is unsafe as long as the FDP delegates continue to be frustrated with

108 (Merkel's conservatives.)" Many German commentators assume that, should Wulff lose the upcoming vote, Merkel's coalition would dissolve. Merkel, though, has given no indication that she will seek to improve relations with her partners at the FDP. On Wednesday, just hours after Economy Minister Rainer Brüderle (FDP) said that there would be no state aid forthcoming for ailing carmaker Opel, Merkel contradicted him. "The last word has not been spoken" on the issue, she said. The back-and- forth continued on Thursday. The months of bickering has taken Germany largely by surprise. When the FDP joined Merkel's conservatives following last September's vote, many assumed that the center-right coalition would function just as harmoniously as it did under Chancellor Helmut Kohl in the 1980s and 90s. For that, though, says Neugebauer, Merkel needs a vision. "The fundamental mistake was that they didn't come up with a common aim for the government," he says. "If leadership means that she is able to give direction -- that she is able to give people a vision for how they will live after the crisis -- then you have to say that she is not leading well." Should her coalition not be able to post some significant successes by a string of state elections next year, he continues, "then I don't think the coalition will survive."

URL: • http://www.spiegel.de/international/germany/0,1518,699970,00.html RELATED SPIEGEL ONLINE LINKS: • Merkel's Malaise: Gambling Away the Voters' Trust (06/08/2010) http://www.spiegel.de/international/germany/0,1518,699385,00.html • Radical Cutbacks: German Government Agrees on Historic Austerity Program (06/07/2010) http://www.spiegel.de/international/germany/0,1518,699229,00.html • Merkel's Candidate for German President: A Sheep in Wulff's Clothing (06/04/2010) http://www.spiegel.de/international/germany/0,1518,698734,00.html • Letter from Berlin: Merkel's Incredible Shrinking Coalition Partner (06/03/2010) http://www.spiegel.de/international/germany/0,1518,698596,00.html • German Head of State Quits: Why Horst Köhler Was an Unhappy President (05/31/2010) http://www.spiegel.de/international/germany/0,1518,697864,00.html • Elections in North Rhine-Westphalia: Key State Vote Handicaps Merkel (05/10/2010) http://www.spiegel.de/international/germany/0,1518,693917,00.html

109 06/08/20104 03:05 PM The World from Berlin Merkel's Austerity Program Is 'Faint- Hearted and Unbalanced' The German government's newly announced budget cuts may be a signal for the struggling euro, but the decision not to hike taxes on the rich will fuel public protest against the measures, say media commentators. If Chancellor Angela Merkel was hoping for a fresh start for her embattled government, this wasn't it. After eight months of in-fighting, stalling and setbacks, Chancellor Angela Merkel's government finally took a landmark decision on Monday, announcing the country's largest package of budget cutbacks since World War II. It plans to cut the budget by a total of around €80 billion ($95 billion) by 2014 to meet the requirements of the EU's stability pact and of the so-called "debt brake" enshrined in the German constitution. The savings involve cuts in social spending, including reductions in allowances for the long- term unemployed. There will also be several new business levies including an air travel tax, a tax on nuclear power station operators and a financial transactions tax, although the latter would only be introduced if it were agreed at a European level. The government also plans to axe 15,000 jobs from federal payrolls by 2014, and to scale back several tax subsidies, including reducing the number of exemptions to Germany's environmental tax. The opposition Social Democrats, Greens and the Left Party have attacked the measures as socially unfair and complained that the coalition has spared its core base of wealthy and middle-income voters much pain. The top rate of income tax has been left unchanged, as has the tax on inheritances. And the deeply controversial tax break for hotel owners pushed through at the start of the year by the pro-business Free Democrats, the junior partners to Merkel's conservatives, has also been left untouched. The general secretary of the opposition Social Democrats, Andrea Nahles, said the measures were "extremely cowardly because the people who are to blame for the crisis are spared, while those in need are made to pay." The president of the German Confederation of Trade Unions (DGB), Michael Sommer, said trade unions would organize mass protests against the cuts. "The burden on the long-term unemployed is being increased to an incredible extent," Sommer said. "This flawed savings package will meet with an appropriate response from the unions," he said. "The burden is being put on the weak shoulders, not the strong ones." Not a Fresh Start for Merkel German media commentators say the cuts are a necessary first step to getting the budget deficit back below the limit of 3 percent of GDP stipulated by the euro zone's stability pact. The commitment to budget restraint is an important signal to highly-indebted euro-zone members such as Greece, Portugal, Spain and Ireland, commentators say. On closer inspection, however, the cuts aren't particularly ambitious and don't amount to the fresh start that Merkel's beleaguered government desperately needs, they argue. The business daily Financial Times Deutschland writes:

110 "This package has the enormous advantage that it probably won't choke off the recovery which is only just beginning. At a time when the southern European countries are drastically cutting their budgets, it is all the more important that Germany, as the largest European economy, keeps growth going. That will also help the euro. Financial markets at the moment are paying close attention to whether the euro-zone states are restructuring their budgets. But they get just as nervous if there are signs that savings measures may threaten the economic recovery." "The government still faces a truly gigantic task, namely implementing all these measures. And the eternally nervous financial markets will keep a very close eye on whether the coalition's plans are watered down as they are implemented. Initial reactions give a taste of how difficult the coming months will be for Merkel's government. Business federations, airlines and power companies are up in arms, as are welfare groups, the civil service trade union and opposition parties." The center-left Süddeutsche Zeitung writes: "In terms of volume, the savings package meets the requirements. It will reduce the government's gigantic budget deficit step by step in the coming years to an acceptable level, and the requirements of the constitution and the EU's stability pact will be fulfilled -- at least on paper." "Chancellor Merkel and her deputy Guido Westerwelle, like so many of their predecessors, shunned a systematic review of all subsidies, however, even though such a review is urgently needed." "The second major problem of the savings package is the lack of social balance. It mainly hits the less well-off … Savings packages of this size are only accepted by the public if they are broadly fair. Against this background, the planned bank tax of just €2 billion a year can only be seen as a joke or even an insult. And there is no growth strategy. Vice Chancellor Westerwelle, for example, could have worked his cherished tax cuts for middle-income groups into the package -- if he had had the courage to raise taxes for other groups in return, for example for top earners or for people with large inheritances." The left-leaning Berliner Zeitung writes: "If you demand tough sacrifices from parents, the long-term unemployed or civil servants, you can't just throw a billion-euro tax gift to hotel managers. The government should have begun by reversing this ridiculous policy, which it introduced at the start of the year. But it didn't have the strength to do so, or to significantly raise inheritance tax to international levels, or to raise top-level income tax rates. Merkel evidently didn't want to provoke the embattled FDP any further. But if you make generous gifts to lobby groups and decide to refrain from tapping fresh sources of tax revenue, you can't expect support from the public. ... Overall, the savings package seems fainthearted and unbalanced." The business daily Handelsblatt writes: "This savings package is disappointing. The reduction in subsidies, originally a much-vaunted issue, played virtually no role. A few tax exemptions for energy taxation will be removed, to the tune of just €1 billion. Given financial subsidies and tax breaks totalling around €140 billion per year that Germany still allows itself, that's a laughable sum. The coalition has fallen far short of what it could have done." The conservative Die Welt writes:

111 "The savings packet isn't really big. The consolidation will amount to €11.2 billion in the coming year. That is less than 1 percent of the total government spending predicted for 2011 by the leading economic research institutes. Secondly, and much more importantly, the measures will not achieve the all-important goal of putting state finances on a more solid foundation over the long term. The 'ecological air traffic levy' would have been imposed in a few years' time no matter what, in line with an EU guideline. So in the long term it won't result in additional unplanned revenue for state coffers. And the package contains the financial transactions tax, even though it has already been shelved in international negotiations." The conservative Frankfurter Allgemeine Zeitung writes: "The savings package marks the real beginning of the coalition's work in two senses. After spending more than half a year stumbling around on key issues and waiting for the North Rhine-Westphalia state election, the government finally has a program. But the work is also just beginning, in the sense that the decisions in principle have to be fleshed out into concrete action. That will lead to major rows once the budget plans have been drawn up. The rapid decision on key points was only possible because the coalition had its back to the wall. The agreement is also likely to have been accelerated by the euro crisis, which showed the government and the public how precarious the situation -- meaning the stability of the currency -- really is." The mass circulation Bild writes: "For the first time in eight months, the center-right coalition has made a determined decision. The savings program is sound. It scraps labor-market programs in areas where cutbacks don't really hurt anyone. It cuts additional benefits for groups that have often been among the beneficiaries of government measures over the last five years. It taps civil servants because they have safe jobs despite the crisis." "The direction is the right one. The government is saving money on items it no longer wants to afford and that can only be financed through debt. Every private individual would do the same with his own finances. The program isn't heartless, contrary to what the opposition parties are saying. " -- David Crossland URL: http://www.spiegel.de/international/germany/0,1518,699416,00.html RELATED SPIEGEL ONLINE LINKS: • Merkel's Malaise: Gambling Away the Voters' Trust (06/08/2010) http://www.spiegel.de/international/germany/0,1518,699385,00.html • Radical Cutbacks: German Government Agrees on Historic Austerity Program (06/07/2010) http://www.spiegel.de/international/germany/0,1518,699229,00.html • The Millionaire Party: Germany's Free Democrats Accused of Serving the Rich (01/20/2010) http://www.spiegel.de/international/germany/0,1518,672660,00.html • Letter from Berlin: Merkel's Search for New German President Full of Potential Pitfalls (06/01/2010) http://www.spiegel.de/international/germany/0,1518,698030,00.html

112

Opinion

June 10, 2010 Prune and Grow

By DAVID BROOKS Sixteen months ago, Congress passed a stimulus package that will end up costing each average taxpayer $7,798. Economists were divided then about whether this spending was worth it, and they are just as divided now. The president’s economists ran the numbers through their model and predicted that the stimulus package would create or save at least three million jobs. John F. Cogan and John B. Taylor of Stanford and Tobias Cwik and Volker Wieland of the Goethe-University of Frankfurt argue that the White House methodology is archaic. Their model suggests the stimulus will create about a half-million jobs. Edward L. Glaeser of Harvard compared the change in employment in each state to the amount of stimulus money it has received. He found a slight relationship between stimulus dollars and job creation, but none at all if you set aside three states: Alaska and the Dakotas. Over all, most economists seem to think the stimulus was a good idea, but there’s a general acknowledgment that we know relatively little about the relationship between fiscal policy and job creation. We are left, as Glaeser put it on The Times’s Economix blog, “wading in ignorance.” If the economists are divided about what just happened, the rest of the world is not divided about what should come next. Voters, business leaders and political leaders do not seem to think that the stimulus was such a smashing success that we should do it again, even with today’s high unemployment. They seem to see the fiscal floodgates wide open and that the private sector still only created a measly 41,000 jobs last month. That doesn’t inspire confidence. Furthermore, they understand something that is hard to quantify: Deficit spending in the middle of a debt crisis has different psychological effects than deficit spending at other times. In times like these, deficit spending to pump up the economy doesn’t make consumers feel more confident; it makes them feel more insecure because they see a political system out of control. Deficit spending doesn’t induce small businesspeople to hire and expand. It scares them because they conclude the growth isn’t real and they know big tax increases are on the horizon. It doesn’t make political leaders feel better either. Lacking faith that they can wisely cut the debt in some magically virtuous future, they see their nations careening to fiscal ruin. So we are exiting a period of fiscal stimulus and entering a period of fiscal consolidation. Last year, the finance ministers of the G-20 were all for pumping up economic activity. This year, they called on their members to reduce debt. In this country, deficits are now the top concern.

113 Some theorists will tell you that if governments shift their emphasis to deficit cutting, they risk sending the world back into recession. There are some reasons to think this is so, but events tell a more complicated story. Alberto Alesina of Harvard has surveyed the history of debt reduction. He’s found that, in many cases, large and decisive deficit reduction policies were followed by increases in growth, not recessions. Countries that reduced debt viewed the future with more confidence. The political leaders who ordered the painful cuts were often returned to office. As Alesina put it in a recent paper, “in several episodes, spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions.” This was true in Europe and the U.S. in the 1990s, and in many other cases before. In a separate study, Italian economists Francesco Giavazzi and Marco Pagano looked at the way Ireland and Denmark sharply cut debt in the 1980s. Once again, lower deficits led to higher growth. So the challenge for the U.S. in the years ahead is to consolidate intelligently. That means reducing deficits while at the same time making the welfare state more efficient, boosting innovation in areas like energy, and spending more money on growth-enhancing sectors like infrastructure. That’s a tough balancing act. The biggest task will be to reduce middle-class entitlement spending. Alesina found that spending cuts are a more effective way to stabilize debt than tax increases, though we’ll need both. The second biggest task is to consolidate while addressing another problem: labor market polarization. According to a Hamilton Project/Center for American Progress study by David Autor, high-skill sectors saw no net loss of jobs during the recession. Middle-skill sectors like sales saw an 8 percent employment decline. Blue-collar jobs fell by 16 percent. In other words, the recession exacerbated the inequalities we’ve been seeing for decades. Somehow government has to cut total spending while directing more money to address the trends that threaten to hollow out the middle class. During the period of consolidation, in other words, the government will have to spend less, but target better. That will require enormous dexterity and intelligence from a political system that has recently shown neither. DAVID BROOKS Prune and Grow June 10, 2010 http://www.nytimes.com/2010/06/11/opinion/11brooks.html?th&emc=th

114

SEC approves curbs to avoid repeat of 'flash crash' By Zachary A. Goldfarb Washington Post Staff Writer Friday, June 11, 2010; A15 The nation's financial markets on Friday will start pausing trading in any stock in the Standard and Poor's 500-stock index if it declines more than 10 percent in any five- minute period. The measure is the first significant regulatory response designed to avoid a repeat of the "flash crash" that sent markets gyrating by hundreds of points in a matter of minutes last month.

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SEC Chairman Mary Schapiro announced new rules Thursday. As regulators continue to dissect what happened May 6, the Securities and Exchange Commission approved curbs Thursday that would attempt to keep trading across all markets orderly if enormous selling pressure occurs. Several existing circuit breakers that would normally pause trading didn't go off May 6. Moreover, trading hubs had differing rules for how to control volatility, leading to additional irregularities throughout the market. In the flash crash, the Dow Jones industrial average fell nearly 1,000 points in less than an hour, and other major market indicators experienced similar swings. The burst of erratic trading dealt a setback to confidence in the financial system and generated concerns about whether regulations have kept up with the rapidly increasing size and complexity of markets.

115 The new circuit breakers address these concerns only in part. For now, they affect only the stocks in the S&P 500, and not the more sophisticated financial instruments, such as stock-market futures, that regulators suspect played an important role in fueling last month's volatility. "The May 6 market disruption illustrated a sudden, but temporary, breakdown in the market's price-setting function when a number of stocks and [exchange-traded funds] were executed at clearly irrational prices," SEC Chairman Mary Schapiro said in a statement Thursday. "By establishing a set of circuit breakers that uniformly pauses trading in a given security across all venues, these new rules will ensure that all markets pause simultaneously and provide time for buyers and sellers to trade at rational prices." The New York Stock Exchange is expected to introduce the curbs Friday, and Nasdaq will follow Monday, as other exchanges are expected to do. The trading pauses would last five minutes under a pilot program that ends Dec. 10. The SEC may extend the program then and expand it to other stocks and markets later. The SEC has not concluded what specifically -- firms or transactions -- was behind the flash crash. But regulators have said that a significant contributing factor was probably speculators making bets in far-flung trading hubs that nevertheless had a major influence on the prices of blue-chip stocks. The SEC is working on a number of other measures to avoid a repeat of the flash crash and is considering curbs on automated, high-speed, computer-driven trading that might have fed the chaos. It's also looking at banning "stub" quotes that allow market-makers -- firms that agree to buy and sell shares to ensure that investors can make trades -- to technically stay active in the market as is required by some exchanges. These quotes usually are far below or above what the market is asking and are almost never executed. On May 6, trades were executed at extremely low stub prices. Exchanges have since canceled most of those trades. Zachary A. Goldfarb SEC approves curbs to avoid repeat of 'flash crash', June 11, 2010; A15 http://www.washingtonpost.com/wp- dyn/content/article/2010/06/10/AR2010061002636.html?wpisrc=nl_headline

116

Chinese Exports Surge: How Sustainable?

In May 2010, Chinese exports climbed 48.5% y/y, well above consensus expectations, to US$131.76 billion, the highest dollar value since mid 2008. Exports also rose on a sequential basis to all major trading partners, including the U.S. and EU. Although imports also rose on a y/y basis by 48.3% to US$112 billion, the price and volume of commodity imports fell. The jump in exports contributed to a US$19.53 billion trade surplus in May, higher than that of Q1 as a whole and likely to contribute to appreciation pressure. Danske's Flemming Nielsen notes that, like other early Asian trade data, China's exports show that there has yet to be any noticeable impact from the eurozone debt crisis. However, with imports growing more slowly, the trade data is "still consistent with growth in China gradually slowing on the back of some moderation in domestic demand."

U.S. Trade Deficit Widens as Exports Contract More Than Imports

The U.S. trade deficit widened by 0.6% to reach US$40.2 billion in April 2010—the largest deficit since December 2008—after a downward-revised 0.3% widening in March 2010. Both imports and exports of goods contracted in April, but the stronger decline in exports caused the goods deficit to widen by 0.2%. Services also contributed to the widening of the trade deficit as the services surplus fell 1.1%. The widening of the deficit resulted from the non-petroleum deficit widening by 4.2% in April while the petroleum deficit contracted 2.2%. The real trade deficit narrowed by 2.5% after widening by 3.8% in March, the U.S. Bureau of Economic Analysis (BEA) reported on June 10. The trade gap with China widened in April 2010, as did gaps with Canada and the OPEC countries and Latin America. The trade gap with Europe and Mexico narrowed in April, the BEA reported on June 10. While exports have continued to post gains in early 2010, imports have been getting a boost from the inventory restocking cycle, fuel imports and a pickup in consumer spending, causing the deficit to widen.

RGE Analysis by Elisa Parisi-Capone Adjustment Dynamics in Spain: Will Belt-Tightening Cinch Off Growth?

RGE Analysis by Elisa Parisi-Capone: In an earlier Analysis, RGE pointed to Spain as the most structurally challenged eurozone economy on a set of measures such as unemployment, total factor productivity, corporate sector leverage, exposure to a construction overhang and structural slumps in tax revenues. In comparison to other periphery countries, Spain’s adjustment needs stem less from a history of fiscal profligacy than from high private sector indebtedness, a steady loss of competitiveness over the past decade and 10 years of missed structural reforms in both the product market and—especially—in the labor market. On the positive side, Spain features a higher gross and net national savings rate than other periphery countries (and very much in line with the eurozone average), and it has started to tackle the overcapacities in the financial sector. An important set of structural reforms will be announced within the next 10 days. In view of the tight shock transmission channel between the sovereign and the financial sector, the Spanish government has front-loaded fiscal adjustment toward the 3% deficit target by 2013 in order to restore confidence and establish credibility with investors. To cushion the negative impact on domestic (and foreign) demand and not derail the still fragile recovery, it is important that the simultaneous fiscal retrenchment in the periphery is counterbalanced by expansionary policies in current account surplus countries in addition to expansionary monetary policy by the ECB. As mentioned before, further interventions by the ECB might be

117 necessary while the contagion risk across the region remains acute and the EMU stability framework is still work in progress.

Asia Week Ahead: Regional Divergences in Growth and Inflation Risks

RGE Analysis by Arpitha Bykere and Mikka Pineda: Next week, New Zealand’s retail sales data will show that March was but a blip in an otherwise bleak retail sales outlook. India's data will support our prediction that inflation, despite easing from its peak, will remain elevated in Q2 and Q3 amid rising wages and demand and continued supply-side inflation. Malaysia’s inflation data will show moderate price pressures due to a gradual increase in domestic demand and closing of the output gap, past currency appreciation and delayed subsidy and tax reforms. With risks skewed to growth rather than inflation, the central bank will stay on hold in Q3. In the Philippines, remittance data will show growth on an annual basis due to rising deployment of workers, especially to higher-paying jobs in fast-growing economies in the Middle East and Asia. Singapore’s export data will show strong growth from base effects and improved electronics and semiconductor demand in the U.S. and Asia before slowing in H2. Also in the coming week, Japan’s Q1 flows of funds data is unlikely to show any significant changes in the household saving pattern: conservative portfolios, with the majority of assets in cash and Japanese government bonds.

LatAm Focus: Inflation Behaving but Still Under Watch

RGE Analysis by Bertrand Delgado and Juan Lorenzo Maldonado: In Brazil, headline inflation cooled off in May as food prices decelerated; however, core inflation continued moving higher on the back of demand-pull pressures. At the June 9 meeting, the central bank monetary policy committee tightened the SELIC rate by 75 bps to 10.25%, as was widely expected. We anticipate COPOM tightening by another 75 bps at the July meeting. In Mexico, headline inflation surprised to the downside, driven by seasonal factors, especially lower food prices, while core inflation stayed relatively stable on a year-over-year basis. Mexico’s inflation results cemented expectations that the central bank will stay on hold for the rest of the year. In Chile, the central bank survey reinforces our view that the tightening cycle will begin on June 15 with a 25-bp hike to a still-accommodating 0.75% rate, while in Colombia, the central bank survey continues to suggest that inflation is not a concern. In Venezuela, the authorities provided details on the trading price band for the third FX market, which we are skeptical will work.

From: Roubini Global Economics Sender: Roubini Global Economics Date: Fri, 11 Jun 2010 06:00:58 +0000 To: ReplyTo: Roubini Global Economics Subject: RGE's Daily Top 5

118

Bernanke warns U.S. of 'unsustainable' debt level By Jia Lynn Yang Washington Post Staff Writer Thursday, June 10, 2010; A12 The U.S. economy continues a slow, painful recovery, but Congress must prepare to address an "unsustainable" level of debt in the federal budget, Federal Reserve Chairman Ben S. Bernanke cautioned Wednesday. "Our nation's fiscal position has deteriorated appreciably since the onset of the financial crisis and the recession," Bernanke told the House Budget Committee. The budget deficit was necessary to help get the nation out of recession, Bernanke said, but will have to be addressed in the long term, particularly in light of the European debt crisis. As the U.S. economy improves and stimulus measures are phased out, Bernanke said, the budget deficit gap should narrow. But the country's aging population will make it hard to balance the budget, as the ratio of taxpayers to elderly people benefiting from social programs decreases. Several factors continue to drag on the economy. The jobless rate remains stubbornly high, and the housing market hasn't shaken its supply of foreclosures and short sales. Still, the recovery inches forward, according to Bernanke and the Fed's "beige book" report on conditions around the country, which was released Wednesday. Consumers are opening their wallets slightly more, according to the Fed's latest survey, which is based on anecdotal reports collected through May 28 from the Fed's 12 districts. Business spending is up, as well, with some growth in the manufacturing, nonfinancial services and transportation sectors. There are early signs, however, that the Gulf of Mexico oil spill is hurting tourism spending. The Fed's Atlanta district reported some cancellations of vacation lodgings. Inflation has remained low, the report said, making it likely that the Fed will stick to its policy of keeping the benchmark U.S. interest rate close to zero when policymakers meet later this month. But the U.S. economy's major trouble spots -- the housing market and the 9.7 percent unemployment rate -- are showing their staying power. The residential real estate market could head into another slump -- or at least remain flat -- now that government-subsidized incentives have ended. The number of customers applying for a home mortgage fell to the lowest level in 13 years last week, the Mortgage Bankers Association said Wednesday, suggesting that the modest housing recovery had been propped up by subsidies. A home-buyer tax credit expired at the end of April. On the jobs front, Bernanke said it would still be a "significant amount of time" before the economy recovered the 8.5 million jobs lost during 2008 and 2009. Unemployment is known as a lagging indicator, meaning it is among the last pieces of economic data to improve coming out of a recession.

119 Companies are still hesitant to hire, according to a survey of chief financial officers in the United States released Wednesday. Nearly 60 percent of the 1,102 executives surveyed this month said they will not return their staffs to pre-recession levels until 2012 or later. And plans to hire over the next year are limited, according to the Duke University/CFO Magazine Global Business Outlook Survey. After delivering this mixed news Wednesday morning on Capitol Hill, Bernanke traveled to Richmond to praise programs at community colleges that help people find work. "We will have no easy resolution to the challenges we face in restoring jobs and strengthening the economy," he said. http://www.washingtonpost.com/wp- dyn/content/article/2010/06/09/AR2010060903991_pf.html

Testimony Chairman Ben S. Bernanke Economic and financial conditions and the federal budget Before the Committee on the Budget, U.S. House of Representatives, Washington, D.C. June 9, 2010 Chairman Spratt, Ranking Member Ryan, and other members of the Committee, I am pleased to have this opportunity to offer my views on current economic and financial conditions and on issues pertaining to the federal budget. The Economic Outlook The recovery in economic activity that began in the second half of last year has continued at a moderate pace so far this year. Moreover, the economy--supported by stimulative monetary policy and the concerted efforts of policymakers to stabilize the financial system--appears to be on track to continue to expand through this year and next. The latest economic projections of Federal Reserve Governors and Reserve Bank presidents, which were made near the end of April, anticipate that real gross domestic product (GDP) will grow in the neighborhood of 3- 1/2 percent over the course of 2010 as a whole and at a somewhat faster pace next year.1 This pace of growth, were it to be realized, would probably be associated with only a slow reduction in the unemployment rate over time. In this environment, inflation is likely to remain subdued. Although the support to economic growth from fiscal policy is likely to diminish in the coming year, the incoming data suggest that gains in private final demand will sustain the recovery in economic activity. Real consumer spending has risen at an annual rate of nearly 3- 1/2 percent so far this year, with particular strength in the highly cyclical category of durable goods. Consumer spending is likely to increase at a moderate pace going forward, supported

120 by a gradual pickup in employment and income, greater consumer confidence, and some improvement in credit conditions. In the business sector, real outlays for equipment and software posted another solid gain in the first quarter, and the increases were more broadly based than in late 2009; the available indicators point to continued strength in the second quarter. Looking forward, investment in new equipment and software is expected to be supported by healthy corporate balance sheets, relatively low costs of financing of new projects, increased confidence in the durability of the recovery, and the need of many businesses to replace aging equipment and expand capacity as sales prospects brighten. More generally, U.S. manufacturing output, which has benefited from strong export demand, rose at an annual rate of 9 percent over the first four months of the year. At the same time, significant restraints on the pace of the recovery remain. In the housing market, sales and construction have been temporarily boosted lately by the homebuyer tax credit. But looking through these temporary movements, underlying housing activity appears to have firmed only a little since mid-2009, with activity being weighed down, in part, by a large inventory of distressed or vacant existing houses and by the difficulties of many builders in obtaining credit. Spending on nonresidential buildings also is being held back by high vacancy rates, low property prices, and strained credit conditions. Meanwhile, pressures on state and local budgets, though tempered somewhat by ongoing federal support, have led these governments to make further cuts in employment and construction spending. As you know, the labor market was hit particularly hard by the recession, but we have begun to see some modest improvement recently in employment, hours of work, and labor income. Payroll employment rose by 431,000 in May, but that figure importantly reflected an increase of 411,000 in hiring for the decennial census. Private payroll employment has risen an average of 140,000 per month for the past three months, and expectations of both businesses and households about hiring prospects have improved since the beginning of the year. In all likelihood, however, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009. On the inflation front, recent data continue to show a subdued rate of increase in consumer prices. For the three months ended in April, the price index for personal consumption expenditures rose at an annual rate of just 1/2 percent, as energy prices declined and the index excluding food and energy rose at an annual rate of about 1 percent. Over the past two years, overall consumer prices have fluctuated in response to large swings in energy and food prices. But aside from these volatile components, a moderation in inflation has been clear and broadly based over this period. To date, long-run inflation expectations have been stable, with most survey-based measures remaining within the narrow ranges that have prevailed for the past few years. Measures based on nominal and indexed Treasury yields have decreased somewhat of late, but at least part of these declines reflect market responses to changes in the financial situation in Europe, to which I now turn. Developments in Europe Since late last year, market concerns have mounted over the ability of Greece and a number of other euro-area countries to manage their sizable budget deficits and high levels of public debt. By early May, financial strains had increased significantly as investors focused on several interrelated issues, including whether the fiscally stronger euro-area governments would provide financial support to the weakest members, the extent to which euro-area growth would be slowed by efforts at fiscal consolidation, and the extent of exposure of major European financial institutions to vulnerable countries.

121 U.S. financial markets have been roiled in recent weeks by these developments, which have triggered a reduction in demand for risky assets: Broad equity market indexes have declined, and implied volatility has risen considerably. Treasury yields have fallen as much as 50 basis points since late April, primarily as a result of safe-haven flows that boosted the demand for Treasury securities. Corporate spreads have widened over the same period, and some issuance of corporate bonds has been postponed, especially by speculative-grade issuers. In response to these concerns, European leaders have put in place a number of strong measures. Countries under stress have committed to address their fiscal problems. A major assistance package has been established jointly by the European Union (EU) and the International Monetary Fund (IMF) for Greece. To backstop near-term financing needs of its members more generally, the EU has established a European Financial Stabilization Mechanism with up to 500 billion euros in funding, which could be used in tandem with significant bilateral support from the IMF. EU leaders are also discussing proposals to tighten surveillance of members' fiscal performance and improve the design of the EU's fiscal support mechanisms. In addition, to address strains in European financial markets, the European Central Bank (ECB) has begun purchasing debt securities in markets that it sees as malfunctioning, and has resumed auctions of three- and six-month loans of euros in unlimited quantities to borrowers with appropriate collateral. To help ease strains in U.S. dollar funding markets, the Federal Reserve has reestablished temporary U.S. dollar liquidity swap lines with the ECB and other major central banks. To date, drawings under these swap lines remain quite limited and far below their peaks reached at the height of the financial crisis in late 2008, but they are nevertheless providing an important backstop for the functioning of dollar funding markets. More generally, our ongoing international cooperation sends an important signal to global financial markets that we will take the actions necessary to ensure stability and continued economic recovery. The actions taken by European leaders represent a firm commitment to resolve the prevailing stresses and restore market confidence and stability. If markets continue to stabilize, then the effects of the crisis on economic growth in the United States seem likely to be modest. Although the recent fall in equity prices and weaker economic prospects in Europe will leave some imprint on the U.S. economy, offsetting factors include declines in interest rates on Treasury bonds and home mortgages as well as lower prices for oil and some other globally traded commodities. The Federal Reserve will remain highly attentive to developments abroad and to their potential effects on the U.S. economy. Fiscal Sustainability Ongoing developments in Europe point to the importance of maintaining sound government finances. In many ways, the United States enjoys a uniquely favored position. Our economy is large, diversified, and flexible; our financial markets are deep and liquid; and, as I have mentioned, in the midst of financial turmoil, global investors have viewed Treasury securities as a safe haven. Nevertheless, history makes clear that failure to achieve fiscal sustainability will, over time, sap the nation's economic vitality, reduce our living standards, and greatly increase the risk of economic and financial instability. Our nation's fiscal position has deteriorated appreciably since the onset of the financial crisis and the recession. The exceptional increase in the deficit has in large part reflected the effects of the weak economy on tax revenues and spending, along with the necessary policy actions taken to ease the recession and steady financial markets. As the economy and financial markets continue to recover, and as the actions taken to provide economic stimulus and

122 promote financial stability are phased out, the budget deficit should narrow over the next few years. Even after economic and financial conditions have returned to normal, however, in the absence of further policy actions, the federal budget appears to be on an unsustainable path. A variety of projections that extrapolate current policies and make plausible assumptions about the future evolution of the economy show a structural budget gap that is both large relative to the size of the economy and increasing over time. Among the primary forces putting upward pressure on the deficit is the aging of the U.S. population, as the number of persons expected to be working and paying taxes into various programs is rising more slowly than the number of persons projected to receive benefits. Notably, this year about 5 individuals are between the ages of 20 and 64 for each person aged 65 or older. By the time most of the baby boomers have retired in 2030, this ratio is projected to have declined to around 3. In addition, government expenditures on health care for both retirees and non-retirees have continued to rise rapidly as increases in the costs of care have exceeded increases in incomes. To avoid sharp, disruptive shifts in spending programs and tax policies in the future, and to retain the confidence of the public and the markets, we should be planning now how we will meet these looming budgetary challenges. Achieving long-term fiscal sustainability will be difficult. But unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth.

1. See "Summary of Economic Projections," an addendum to the April Federal Open Market Committee minutes, available at Board of Governors of the Federal Reserve System (2010), "Minutes of the Federal Open Market Committee, April 27-28, 2010," press release, May 19. Return to text Chairman Ben S. Bernanke Economic and financial conditions and the federal budget Before the Committee on the Budget, U.S. House of Representatives, June 9, 2010 http://www.federalreserve.gov/newsevents/testimony/bernanke20100609a.htm

123 Global Business

June 10, 2010 Workers at Chinese Honda Plant March in Protest By KEITH BRADSHER ZHONGSHAN, China — Striking workers at a Honda auto parts plant here are demanding the right to form their own labor union, something officially forbidden in China, and held a protest march Friday morning. Meanwhile, other scattered strikes have begun to ripple into Chinese provinces previously untouched by the labor unrest. A near doubling of wages is the primary goal of the approximately 1,700 Honda workers on strike here in this southeastern China city, at the third Honda auto parts factory to face a work stoppage in the last two weeks. A chanting but nonviolent crowd of workers gathered outside the factory gates on Friday morning and held a short protest march before dissolving into a large group of milling young workers who filled the two-lane road for more than a block outside the factory. They were met by black-clad police with helmets, face masks and small round riot shields. But the workers showed no signs of being intimidated. The police marched off at midmorning, leaving the workers to block the road into the small industrial park next to a eucalyptus-lined muddy canal that runs past the factory. The workers dispersed about an hour after the police left and remained on strike. Management helped defuse the march by distributing a flier that essentially offered 50 renminbi, or about $7.30, for each of the eight days that the factory was closed beginning in late May as part of a nationwide shutdown of Honda manufacturing set off by a transmission factory strike. Management previously wanted to treat the shutdown as unpaid leave, workers said. Only 50 or so striking workers showed up outside the factory after lunch on Friday. Managers distributed a new flier urging them to return to work in the afternoon and saying that all would be forgiven if they did. But the flier contained no new offer on wages, and there was no sign that any workers were going back into the factory. One worker said that the newly chosen factory council was not holding any negotiations because it could be physically dangerous for all of the representatives to gather in one place with management and the authorities. The worker, an activist in the labor unrest here, said that the strikers were waiting for a genuinely new offer from management before holding any more talks. This latest strike, which started Wednesday morning, has taken on political dimensions. The strikers here have developed a sophisticated, democratic organization, in effect electing shop stewards to represent them in collective bargaining with management. They are also demanding the right to form a trade union separate from the government-controlled national federation of trade unions, which has long focused on maintaining labor peace for foreign investors.

124 “The trade union is not representing our views; we want our own union that will represent us,” said a striking worker, who insisted on anonymity for fear of retaliation by government authorities or the company. Geoffrey Crothall, the spokesman for China Labour Bulletin, a labor advocacy group based in Hong Kong that seeks independent labor unions and collective bargaining in mainland China, expressed surprise when told how the Honda workers here in Zhongshan had organized themselves. “It does reflect a new level of organization and sophistication” in Chinese labor relations, he said. A Honda spokesman declined to comment on the details of the strike. The Chinese government has been relatively lenient in allowing coverage of the labor unrest because Honda is a Japanese company, and some anti-Japanese sentiment lingers in China as a legacy of World War II. Despite unusual forbearance in allowing the various strikes so far, the Chinese government has shown no interest in tolerating unions with full legal independence from the national union. Dozens of workers gathered in clumps shortly before sunset on Thursday in front of the sprawling parts factory and outspokenly criticized local authorities for seeming to side with the company.

Ariana Lindquist for The New York Times Workers demonstrated outside the Honda factory in Zhongshan, China, on Friday. The workers said that large numbers of police officers had been positioned in the factory on Wednesday and Thursday in an attempt to intimidate them. The two other Honda parts factories shut down by walkouts in recent weeks have reopened after workers were promised large pay increases. The Chinese government has not allowed unions with full legal independence from the national, state-controlled union. But the government has occasionally finessed the issue by letting workers choose their factories’ representatives of the national union, or by allowing the creation of “employee welfare committees” in parallel with the official local units, said Mary E. Gallagher, a China labor specialist at the University of Michigan. But these exceptions have tended to be in less prominent industries like shoe and garment manufacturing, and not in bastions of heavy industry like automaking.

125 Workers here were not specific Thursday about what would qualify as having their own union. They are mostly in their early 20s, more than half are women. Their education levels are low. Although several said they had high school degrees, Honda requires only junior high school educations.

Ariana Lindquist for The New York Times Striking workers outside a Honda factory in Zhongshan, China on Thursday. The workers say they want to be paid as much as workers at the first Honda factory recently to go on strike, a high-tech transmission factory in Foshan where the workers are almost entirely young men with a couple of years of vocational school training in addition to high school degrees. Besides the Honda strike here, there were new reports Thursday of strikes at Japanese- and Taiwanese-owned factories in at least five other cities. Four of the cities are outside the heavily industrial Guangdong Province, where all three Honda auto parts strikes have taken place. But the strikes involving the other employers appeared to have ended quickly as managers, faced with an acute labor shortage, sought to address workers’ demands. Honda has settled the strikes at its other two factories as well. Chinese-owned companies tend not to disclose when strikes have occurred, and it is not clear how many strikes over all have taken place in recent days. The strike here has stopped work at a two-story factory that makes rear and side mirrors, door locks and a range of other auto parts for Honda assembly plants over the world. The workers here say that employees in each department of the factory held a meeting, discussed who would be their most persuasive representative and then selected that person to represent them on a factorywide council of about 20 workers that has held negotiations with management. Municipal officials and representatives of the government-authorized labor union have also attended meetings of the workers’ council with management, workers said.

126 In a flier that workers said had been distributed to them by managers on Thursday morning, the factory’s management said it was beyond their authority to recognize a union. The management said that a government labor board would decide on the workers’ request by June 19, and asked that the workers return to their jobs in the meantime. Dozens of workers from the factory gathered around a foreign reporter Thursday, even though clean-cut men in crisp shirts, perhaps plainclothes police officers or private security guards, were hovering nearby and sometimes filming. The workers, who insisted on anonymity because of lingering concerns about retaliation, said that a company manager had announced over loudspeakers late Thursday afternoon that all workers would be asked on Friday morning to sign a new contract and would be dismissed if they failed to do so. Asked if they would sign, the workers replied with a chorus of “no!” Since going on strike on Wednesday morning, the workers have marched around inside the factory each day shouting slogans like “Increase our wages” before going home each evening to cramped apartments in nearby buildings. The workers voiced skepticism that the company would meet their demands, mainly an 89 percent increase in their pay. It is currently 900 renminbi a month, or $132, for a 42-hour week. An 89 percent increase would be about 800 more renminbi a month, or a raise of about $117. Many workers in Guangdong province already earn considerably more than the minimum wage because of an acute labor shortage even before the strike started. The minimum wage varies from city to city and changes frequently. It is currently 900 renminbi in Zhongshan, according to workers. Workers said that they had read news reports on the Internet that Honda had already granted raises of 500 renminbi a month, or $73, in settling other strikes. Honda has not confirmed the raises, indicating only that they were large in percentage terms. Workers at the factory here said that their jobs required them to stand for eight hours a day at their posts, and that pregnant women were allowed to sit only in their last trimester. Workers also complained that they were not allowed to speak while working — a common requirement in Chinese factories — and that they had to obtain passes before going to the bathroom. They said they were criticized if managers thought they took too long getting a drink of water. A municipal official standing with a group of private security guards outside the factory said that there was no evidence that Honda had broken any employment laws. The workers “just want more money, they’re inspired by the other Honda strikes,” said the official, who insisted on anonymity. The strike began Wednesday morning after a woman employee showed up with her identity card improperly attached to her shirt and was denied entry by a security guard. The woman criticized the guard, who responded by shoving her to the ground, the workers said. Workers said that the factory’s management had offered an increase of 100 renminbi a month in workers’ allowance for food and housing. The allowance is currently 300 renminbi a month, or $44. Chen Xiaoduan in Shanghai contributed research. KEITH BRADSHER Workers at Chinese Honda Plant March in Protest June 10, 2010 http://www.nytimes.com/2010/06/11/business/global/11strike.html?th&emc=th

127 Daily Morning Newsbriefing Victory for the austerity party

10.06.2010 Austerity wins, as the winner of the Dutch elections is the liberal VVW, followed closed by the Labour party. Jan Peter Balkenende’s Christian Democrats come fourth, behind the Geert Wilder’s anti-immigrationists; Balkenende quit party chairmanship and national politics; three or four party coalition now considered the most likely options; Belgian separatist Bard de Wever says he favours strong regions within a strong Europe; Poul Nyrup Rasmussen says he favours a European debt agency and a single European bond; EU Commission politely ignores Merkel-Sarkozy letter calling for an EU wide short sale ban; France and Germany now quarrel about who cancelled the dinner on Monday; the Spanish government has made a final attempt to seek a consensus on labour market reforms; Portugal managed to raise some money at a bond auction, but a penal rate; Paul Krugman, meanwhile, says Europe’s fiscal contractions affects the rest of the world.

10.06.2010 Victory for the austerity party

The liberal VVW, run by former Unilever executive Mark Rutte, has won the Dutch election, and became the largest party with 31 seats, followed by the Dutch Labour party (PvdA) with 30 seats in the 150 seat parliament. Jan Peter Balkenende’s Christian Democrats crashed from 41 to 21, and became the forth largest party – behind the anti-immigrant Freedom Party (PVV), run by Geert Wilders. The two small-party winners were the Greens and the D66, a radical democratic party. As NRC Handelsblad writes this is the most fragmented political results ever. Never had the largest party as few as 31 seats in the 150 strong parliament. The left-wing SP lost 10 seats to 15 seats. Caretaking prime minister Jan Peter Balkende immediately quit the leadership of the Christian Democrats, and announced he would not be entering parliament even. NRC says a plausible coalition would be the Liberals, Wilder’s anti-immigrants, and the Christian Democrats, with a narrow majority of 76 seats. Another possibility would be a four party centrist coalition with the Labour Party, the Greens and D66. There are two wider implications of this election beyond the Dutch border. The first is a trend in the wider Benelux area towards the anti-immigrant right. On Sunday, when Belgium

128 goes to the polls, Bart de Waver’s separatist N-VA is likely to become the single largest party. The second significance is that Rutte’s VVW has campaigned aggressively for spending cuts. Reuters says the Liberals had campaigned for a total of €39bn in spending cuts over the next decade. Over the next four year the plan forsees a fiscal adjustment of €20bn (over 3% of GDP), to reach a budget surplus, but it is not clear whether the VVW can reach that goal if it were to enter a four-party coalition of the centre. Flemish Nationalists up to strengthen regions within Europe The Flemish-Nationalist party N-VA under its leader De Wever gave an international press conference in a charm offensive to calm down financial markets concerns ahead of Belgian elections June 13. According to the polls, this 'separatist' party could receive as much as 25 %, far ahead of Christian Democrats, socialists and liberals. De Wever said that if they were to win, Belgium could see a power shift towards regions under a European umbrella. See Flanders Today for more. Rasmussen favours a single European bond Some movement has come into the debate about the EU governance. At a party meeting yesterday (which we attended – no press coverage this morning), Poul Nyrup Rasmussen , the leader of the European Socialists, came with a range of governance proposals for the eurozone, the most important being the establishment of a European debt agency, and the creation of a single European bond, covering part of the eurozone’s total debt. He did not present a fully worked out proposals – there are several currently competing for attention. He also said the Socialists would give qualified support to the idea of a fiscal union. EU Commission ignores Merkel-Sarkozy letter Angela Merkel and Nikolas Sarkozy suddenly decided they have to be seen doing something together, and wrote a letter calling on the EU to accelerate efforts to tighten financial regulation. A spokesman for the Commission said she welcomed the urgency France and Germany attached to the issue, while simultaneous turning a cold shoulder. The Commission will not table any legislation at the forthcoming, and will delay until September. Furthermore, there is no chance at all of an EU-wide short sale ban. The maximum likely outcome is a new set of transparency rules. The purpose of the latter was to demonstrate that France and Germany are still on speaking terms, after the sudden and unexplained cancellation of the dinner between Merkel and Sarkozy in Berlin. The FT’s article says that the French parliament will on Friday vote on a legislation according to which settlement days will be reduced to a single day – which means that short selling would become completely impractical. France and German cannot even agree on who cancelled the dinner It is getting more and more absurd: The German government now denied that they had cancelled the dinner with Sarkozy, saying that this was a French initiative, according to Frankfurter Allgemeine. On Tuesday the French government had indicated that it happened on German request. For this obvious contradiction, Berlin has a simple explanation: The French press delegation already had landed in Berlin when they learned about the cancelation. To evade the anger of the French press, the French government preferred to blame Berlin rather than assuming responsibility themselves.

129 Spanish government makes one final effort to seek consensus on labour market reform El Pais has the details of the labour market reform discussion, as the Spanish government has made another effort to overcome the difference in the negotiations among the social partners. The issues at stake are the reduction in the number of compensation days from 45 to 33 days for each year worked, and most important a change in the rules when to trigger the 20 day rule, currently used only when companies are in financial difficulties, but this is usually denied by the courts). Other issues are an increase in compensation days for fixed term contracts to reduce the gap between fixed and permanent contracts, and to introduce Austrian-style short-time working hours during crises. (As we said before these are real and wide-ranging reforms that should bring the Spanish labour market a lot closer to the eurozone average. We still do not understand how Spain intends to improve competitiveness.) Portugal issues debt at the above the rate it would get from the SPV Portugal yesterday managed to raise €816m in 10-year bonds at an interest rate of 5.225%, compared to the rate on the previous 10-year auction of 4.523%. There was relief that Portugal was able to raise the money, but concern about the relatively high interest rate. And the rate would be more than the rate Portugal would have had to pay if it decide to tap the European rescue fund. The FT quotes Portuguese officials as saying they have no intention to tap the SPV (“not an option which is part of our plans”). Yeah right. The transmission mechanism of fiscal austerity Paul Krugman has written an important short note on the economics of Europe’s austerity programmes. Using the Mundell-Fleming model in combination with zero-bound monetary policy, the effect of Europe’s austerity on the rest of the world could be quite severe, as austerity leads to lower interest rates, a fall in the exchange rate, the latter being the main transmission mechanism to the rest of the world. He concludes: “Folks, this is getting ugly. And the US needs to be thinking about how to insulate itself from European masochism.” (We agree with Krugman. The Europeans habitually underestimate the impact on their own policies on the rest of the world, partly because the political culture is still that of small countries. If Belgium changes its policies, it has no measurable effect on the rest of the world. Herman van Rompuy, who was a Belgian prime minister before he became president of the European Council, should be more careful when justifying austerity of the EU as a whole in terms of next year’s projected GDP data. They are only so positive because the forecasts did not include the austerity programmes in their calculations.) http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2819&tx_ttnews[backPid]=901&cHash=cab90938ee#

130

10.06.2010 Don’t blame the euro By: Heleen Mees

With all the turbulence rocking the financial markets and the sharp drop in the euro’s exchange rate, you could almost forget that the single European currency has been quite a success. One of the main reasons for its introduction was to enable the eurozone countries to benefit from the low interest rates associated with the status of reserve currency. For decades the US dollar was the world’s sole reserve currency, which meant that interest rates in the United States were permanently lower than those elsewhere. Those lower interest rates boosted US investment, employment and economic growth. This “exorbitant privilege”, as former French President Valéry Giscard d’ Estaing once described it, enabled Americans to live beyond their means for many years. They spent more than they earned and used their homes as their own personal ATMs. Since the eurozone was established, the countries that adopted the single currency have enjoyed a similar privilege. By increasing the size and liquidity of the financial markets, the single currency resulted in lower real interest rates, not just on government bonds, but also on corporate bonds, mortgage loans and consumer credit. The fall in interest rates was most pronounced at the periphery of the eurozone. Until the crisis, Spain, Ireland and Greece had been achieving above-average economic growth of about 5 per cent annually. Cohesion became a reality, as the per capita incomes of the various eurozone countries began to grow closer. This development also benefited countries such as Germany and the Netherlands – their export markets expanded, since a major portion of their exports go to other EU countries. It’s ridiculous to brand Spain, Portugal and Ireland as “overspending, unreliable partners”, as some commentators do. Until the economic crisis erupted, their national budgets were almost as well managed as those of Germany and the Netherlands. The same cannot be said of Greece, but it would be wrong and short-sighted to lump all the peripheral countries together. It was the banks and other financial institutions (e.g. pension funds, insurance companies) that facilitated the boom at the periphery of the eurozone by lending huge sums to Spain, Greece, Ireland and Portugal under virtually the same conditions as those applicable to Germany and the Netherlands. In doing so they failed to charge a realistic risk margin. One of the consequences was that European leaders were lulled into a false sense of security. After all, if the financial markets didn’t envisage any problems, why would Europe’s leaders – themselves mere mortals – be troubled? Surely the markets are always right?

131 The extensive package of measures presented by the eurozone countries, the International Monetary Fund (IMF) and the European Central Bank (ECB) may not be enough to solve the crisis afflicting the euro. After all, it’s not simply a liquidity crisis but a solvency crisis as well, at least as far as Greece is concerned. Without the rescue package it is unlikely that the country could both service its debt and reduce the budget deficit. The banks and other financial institutions that lent money to Greece therefore should accept “haircut”: a restructuring of the excessive debt burden in the form of a partial write-down of claims against. The greatest risk of moral hazard does not apply, as is often argued, to politicians, but instead to financiers. In the US, the banks have seen their profits rocket back up to record levels. These are the same institutions that needed many billions of dollars in government aid to prop them up back in 2008. Now, for the first time in history, the trading desks of the four largest Wall Street banks have experienced a quarter in which they turned in a profit every single day. In the first 65 trading days of 2010, Goldman Sachs, JP Morgan, Bank of America and Citi Group each allegedly made about a hundred million dollars. So while their 2008 losses were shouldered by tax payers, their profits are now once again falling into the hands of a select group of financiers, traders and bank directors. It’s like a lottery in which they can never lose. Globalisation has brought instability to the global economy. Banks and other financial institutions have played a key role in this respect by taking massive risks without pricing them properly. They must not be allowed to emerge from the carnage unscathed.

Heleen Mees is researcher at the Erasmus University in Rotterdam. In May 2009 her book “Between Greed and Desire – The World between Main Street and Wall Street” was published in the Netherlands. http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2818&tx_ttnews[ba ckPid]=901&cHash=c55e5e4f62#

132 FT's rolling global market overview Asian data boost hopes of demand recovery ByJamie Chisholm, Global Markets Commentator. Published: June 10 2010 07:43 | Last updated: June 10 2010 11:20 Thursday 11:00 BST. Thank goodness for Asia. Risk bulls have been saved from another mauling after the East delivered a batch of positive economic news. The FTSE All-World index is up 0.4 per cent, commodity prices are higher and the dollar is falling as traders hope that vibrant activity in China and elsewhere in the region will overpower the negative fallout from the eurozone fiscal crisis. Asian stocks buoyed by strong China data - Jun-10 Short view: Swiss currency intervention - Jun-09 Q&A - Central and eastern European economies - Jun-09 Banks fly to security of covered bonds - Jun-09 Prospects for today’s session had looked decidedly grim after Wall Street suffered yet another late slide – this in spite of further emollient comments on the US economy from Ben Bernanke, chairman of the Federal Reserve, and a generally positive reading of national commerce from the Fed’s “Beige Book” survey. However, cautious optimism has returned, pushing US equity futures higher by 1.2 per cent, following the well-received data out of Asia. A bounce in the euro has also helped. The most important snippet of news, perhaps, was confirmation from China that its exports had risen by almost 50 per cent over the year to May. Imports were also stronger, boosting hopes that domestic and global demand is getting stronger. Thursday’s Market Menu What’s affecting risk appetite Risk on ● Asia: regional macroeconomic data supportive ● Euro: China’s pension fund lends support ● Footie: World Cup to boost global hopes... Risk off ● ...until inevitable penalty-based disappointment arrives. Sell gilts, buy bunds ● Stress: euro banks deposit another record amount at ECB News that annualised first-quarter GDP growth in Japan had risen by a greater-than-expected 5 per cent also improved the mood, as did positive employment data out of Australia. An interest rate increase in New Zealand emphasised that economic recovery is well-established. All very promising, and a welcome return to positive macroeconomic fundamentals after the shock of last week’s disappointing US non-farm payrolls numbers. But whether it will prove sufficient to snap western markets out of their fiscal and regulatory moping is moot. Such concerns have been partly responsible for regular selling into risk

133 rallies of late, and comments from Mr Bernanke yesterday in which he reiterated the long- term damage caused by a burgeoning US budget deficit may resonate loud and long. ☼ Factors to Watch. Monetary policy meetings of the European Central Bank and the Bank of England are not expected to deliver changes in main interest rates. However, traders will be keen to see whether Jean-Claude Trichet, ECB president, has anything to say about conditions in the eurozone’s financial system. US weekly initial jobless claims will need to see some decent improvement less “double dip” fears make a return onto traders’ radar. ☼

● Asia. The FTSE Asia-Pacific index is up 1 per cent, helped by a 1.1 per cent bounce in Tokyo as exporters note the yen’s fall against the euro. Sydney rose 1.2 per cent on hopes for still-sturdy China resource demand and the good employment figures. The Hang Seng in Hong Kong added 0.1 per cent. However, the ever-contrarian Shanghai market fell 0.8 per cent as real estate companies moved lower on fears that a 12.4 per cent rise in property prices in May could result in more restrictions on the sector as Beijing looks to cool speculation.

● Europe. Bourses have reversed early declines as sentiment has steadily improved. The FTSE 100 in London is up 0.4 per cent, helped by BP shares sharply cutting heavy initial losses. The FTSE Eurofirst 300 index is up 0.6 per cent.

● Forex. The euro is holding on to the $1.20 level as some traders say that the recent downward trend may have stalled, and after the head of China’s national pension fund said the beleaguered unit would stabilise. The single currency is up 0.5 per cent versus the dollar at $1.2019. The dollar index is down 0.5 per cent to 87.45 as haven flows wane. The flipside of that move is a bounce in those units with a high positive correlation to growth, such as the Aussie and Kiwi dollars, which are up against their US namesake by 1.9 per cent and 1.6 per cent respectively.

● Debt. US Treasury yields are higher as risk appetite improves. The 10-year yield is up 4 basis points at 3.21 per cent. The US will auction $13bn of 30-year bonds today. Other auctions this week have generally been well-received in spite of yields sitting close to multi- month lows. There is a better tone to the eurozone “peripheral” sovereign sector following a successful €3.9bn auction of Spanish 3-year notes. Yields on the 10-year notes of Greece, Portugal and Spain are down 9bp to 8.22 per cent, 18bp to 5.20 per cent, and 11bp to 4.53 per cent, respectively.

● Commodities. The complex is firmer on stronger risk appetite. Oil is up 0.6 per cent at $74.85, adding to Wednesday’s big jump, following a drawdown in US inventories. Metals prices are slightly higher. Gold is down 0.7 per cent at $1,222 an ounce. Follow Jamie Chisholm’s market comments on Twitter: @JamieAChisholm http://www.ft.com/cms/s/0/59ca6622-744e-11df-b3f1-00144feabdc0.html

134 Switzerland’s new reputation for currency manipulation

By James Mackintosh Published: June 9 2010 20:38 | Last updated: June 9 2010 20:38

Switzerland may be best known for cuckoo clocks and tax avoidance, but its central bank is doing its best to give it a reputation for currency manipulation. The reserves of the Swiss National Bank rose last month by $73bn (£50bn) – more than 50 per cent – as it bought euros to stem the rise in the Swiss franc. The scale of intervention is scary. May’s alone was equal to two months of Switzerland’s gross domestic product. Brown Brothers Harriman estimates that the SNB bought €55bn (£45bn) of eurozone sovereign debt as it invested in euros over the past month – more than the European Central Bank, which is trying to prop up sovereign bond markets.

Swiss franc shifts to centre of European banking stage - Jun-09

Euribor soars as banks curb lending - Jun-03

Euro rebounds on talk of further intervention - May-19

Traders bet on rise in Swiss franc - Mar-10

Lex: Swiss franc - Apr-09

Market Insight: Hungarian borrowers favour Swiss franc - Mar-21

The intervention has not been totally successful. The franc has risen 3.91 per cent against the euro since the start of May and set record highs every day this month. But the effectiveness of the policy can be seen from the franc’s fall against the dollar, where it has tracked the euro’s descent. This in spite of a haven status similar – or stronger – than the US. With low debt, a negligible budget deficit and a positive current account, the country looks as safe as it is boring. The SNB is trying to tackle twin threats. Exporters could be crushed by a suddenly stronger franc while banks could be flattened by the runaway currency, as franc borrowers in eastern Europe find it harder to service debts (although most of the franc lending is from non-Swiss European banks). But intervention brings a threat of its own: inflation. The flood of money into Switzerland is feeding through to the money supply, pushing three-month Libor down to 0.08 per cent, well below the 0.25 per cent target. Japan was the last nation to have such a low rate, in the midst of its deflation. Switzerland wanted quantitative easing, but not on this scale. It will have to accept soon that while intervention can work against speculators, there is a limit to how far it can fight fear. Turquía slams últimas sanciones a Irán By Daniel Dombey in Washington, Alex Barker in London and Najmeh Bozorgmehr in Tehran Por Daniel Dombey en Washington, Alex Barker en Londres y Bozorgmehr Najmeh en Teherán Published: June 9 2010 14:21 | Last updated: June 10 2010 09:46 Publicado: 09 de junio 2010 14:21 | Última actualización: 10 de junio 2010 09:46 The US blamed Europe for alienating Turkey from the west as the Nato ally on Wednesday became one of two members of the United Nations Security Council to vote against stepping up . Los EE.UU. acusaba a Europa de alienar a Turquía por el oeste como el aliado de la OTAN el miércoles se convirtió en uno de los dos miembros de las Naciones Unidas Consejo de Seguridad a votar en contra de la intensificación de las sanciones contra Irán . Susan Rice, US ambassador to the UN, attacked the “very unfortunate choices” by , the other country to oppose the measures. Susan Rice, embajadora de EE.UU. ante la ONU, atacó a los muy desafortunado "opciones" de Turquía y Brasil , el otro país para oponerse a las medidas. EDITOR'S CHOICE Editorial Comentario: No hay ninguna alternativa a Irán - Jun-09 Roula Khalaf: La disuasión se levanta programa - Jun-09 el cuerpo se aprieta el tornillo Mundial sobre Teherán - Jun-09 Minado la fuerza de los reformistas - Jun-09

135 frente a "romper las relaciones entre EEUU y Turquía punto 'en una votación sobre - Jun-08 La violencia plantea dilema para la política de EE.UU. - May-31 “They are now the outliers,” she said of the two traditional US allies. "Ellos son ahora los valores extremos", dijo refiriéndose a los dos tradicionales aliados de los EE.UU.. “They are standing outside of the rest of the Security Council, outside of the body of the international community.” Russia and China, long doubtful about sanctions, voted in favour after a dogged US campaign for support. "Ellos están fuera del resto del Consejo de Seguridad, en las afueras de la masa de la comunidad internacional." Rusia y China, a largo dudas acerca de las sanciones, votó a favor después de una tenaz campaña de EE.UU. para la ayuda. Recep Tayyip Erdogan, Turkey's prime minister, on Thursday followed up his country's 'No' vote by calling the vote “a mistake”. Recep Tayyip Erdogan, primer ministro de Turquía, el jueves un seguimiento de su país «no» llamando a la votación "un error". He said Brazil and Turkey would continue to seek a diplomatic solution to the standoff. También dijo que Brasil y Turquía seguiría buscando una solución diplomática a la disputa. On Wednesday, Robert Gates, defence secretary, suggested European Union reluctance to admit Turkey as a member could be pushing it away from the west and expressed concern about the deterioration of Turkish-Israeli ties. El miércoles, Robert Gates, secretario de Defensa, sugirió Europea Unión renuencia a admitir a Turquía como miembro podría ser lo empuja lejos del oeste y expresó su preocupación por el deterioro de las relaciones turco-israelíes. “If there's anything to the notion that Turkey is moving eastwards, it is in no small part because it was pushed, and it was pushed by some in Europe refusing to give Turkey the kind of organic link to the west that Turkey sought,” he said while visiting London. "Si hay algo que la idea de que Turquía se está moviendo hacia el este, es en gran parte debido a que fue empujada, y fue por iniciativa de algunos en Europa se niega a dar a Turquía el tipo de vínculo orgánico con el oeste de Turquía solicitó," él , dijo durante su visita a Londres. The resolution, passed by 12 votes to two with Lebanon abstaining, establishes a partial arms embargo, an inspection regime for Iranian ships and takes steps against companies linked to the Revolutionary Guard Corps. La resolución, aprobada por 12 votos a favor y dos abstenciones con el Líbano, establece un embargo de armas parcial, un régimen de inspecciones a los buques iraníes y toma medidas contra empresas relacionadas con el Cuerpo de la Guardia Revolucionaria. The sanctions also hit groups linked to Iran's nuclear and missile projects. Las sanciones también se estrelló contra los grupos vinculados a los proyectos nucleares y de misiles de Irán. After months of negotiations with the final measures fall short of Washington's original intentions, but President Barack Obama hailed them as “the toughest sanctions ever faced by the Iranian government”. Después de meses de negociaciones con Moscú y Beijing las medidas finales están privados de las intenciones originales de Washington, pero el presidente Barack Obama les aclamó como "las más duras sanciones enfrentado por el gobierno iraní". As the US and its allies offered to negotiate with Iran “at the earliest possible opportunity”, he added: “These sanctions do not close the door on diplomacy.” En los EE.UU. y sus aliados se ofreció a negociar con Irán "a la mayor brevedad posible", agregó: "Estas sanciones no cierran la puerta a la diplomacia." But Brazil denounced what it called a “rush to sanctions” and Turkey insisted that a recent fuel swap deal that Ankara and Brasilia struck with Iran had to “remain on the table”. Pero Brasil denunció lo que llamó una "fiebre de las sanciones" y de Turquía insistió en que un acuerdo de combustible de intercambio reciente de que Ankara y Brasilia golpeó con Irán tuvo que "están sobre la mesa". The US says that deal is inadequate but yesterday said it was prepared to discuss how it could be improved. Los EE.UU. dice que acuerdo es insuficiente, pero ayer dijo que estaba dispuesto a discutir cómo se podría mejorar. Iran said the resolution “was not the right and logical approach”. Irán dijo que la resolución "no era el enfoque correcto y lógico".

136 COMMENT Derivatives: A tricky pick By Jonathan Ford and Sam Jones Published: June 9 2010 20:58 | Last updated: June 9 2010 23:12

It has become a familiar refrain up and down Wall Street. Whenever questions are raised about the complex subprime mortgage derivatives the investment banks sold during the credit boom, back comes the response: caveat emptor. Democrats open to talks on derivatives - May-16 Banks go on trial over Milan derivatives deal - May-07 EU set to rule on derivatives clearing - May-04 Clearing Corp funds derivatives research - May-03 Islamic finance embraces derivatives - May-04 Buffett warns on derivatives legislation - May-02 Goldman Sachs rebutted the fraud charges brought against it recently by the Securities and Exchange Commission – the first case the US regulator has bought against issuers of these derivatives – by making just such an argument. The bank said that when it sold collateralised debt obligations (CDOs) that allowed investors to place bets on pools of subprime mortgages, it was dealing only with sophisticated investors who required no protection. They knew, or should have known, what they were doing. If they didn’t – well, buyer beware. Goldman has even referred to the investors who bought its CDOs as “among the most sophisticated mortgage investors in the world”. Wall Street’s finest have been bracing for the legal and regulatory backlash ever since regulators started poking around the CDO deals they sold. They have good reason to be nervous about the liabilities they may face. Between 2005 and 2007, investment banks issued about $1,100bn of CDOs. Huge losses from these products almost brought down the financial system the following year. If investment banks had to compensate buyers for even a fraction of these losses, the result would be financial carnage.

137 But beyond the issue of legal liabilities, there are broader questions about the way investment banks behaved. Because they could deem buyers of CDOs to be “sophisticated” – a legal term dating back to the US Securities Act of 1933 and extended to over-the-counter derivatives in 2000 – they were free to treat them as counterparties, rather than customers to whom they owed a duty of care. As lawmakers and regulators look more closely at the CDO business, evidence is emerging of the way the investment banks used this freedom to take advantage of customers – many of whom they knew to be ignorant of the risks. This may come back to haunt the banks. The SEC case concerns a CDO – Abacus 2007-AC1 – created and sold in early 2007, just as the housing market was on the verge of melting down. Its allegation is that Goldman assisted John Paulson’s Paulson & Co hedge fund, which wanted to “short” (or bet against) the CDO, to influence its contents, some of which he picked for their toxicity. The investment bank then sold Abacus to its clients without telling them about Paulson’s true role. Indeed, it is claimed, the bank allowed those buyers to believe that it would be investing alongside them on the long side, an allegation that Goldman denies. Had they known the truth, the SEC claims, they might never have bought the CDO. Paulson was able to exert the influence it did because of the informal way in which Goldman and other investment banks put CDOs together. In spite of structuring and selling these products, they did not “sponsor” issues in the same way they would for an ordinary share offering (and consequently be obliged to endorse the quality of the investment). Their role was simply to co-ordinate a number of counterparties and agents that actually ran the CDO – and in the process, to take a fee. By 2007, CDO structuring was raking in billions of dollars for banks. It was the fastest growing and most lucrative area of most banks’ entire bond trading operations. Being at the centre of deals gave an investment bank great power. As it appointed the ratings agencies and managers, it could shop round for those that were likely to be the most compliant. It could promote the interests of favoured investors, use CDOs to hedge its own loan book or even take a trading position. This was a considerable edge. It was an edge the investment banks deployed against “long” investors on the other side of CDO trades. These were commercial banks, many from outside the US, that bought CDOs because new international capital rules let them hold highly-rated assets (even those backed by mortgages) off their balance sheets in special vehicles while setting aside only tiny slivers of capital against them. As this boosted returns, they piled in. By 2007, according to Merrill Lynch analysts, banks had vehicles containing close to $1,700bn worth of assets. One of these, Rhinebridge, a $15bn offshoot of the German bank IKB, was one of the main buyers of Abacus. Commercial banks such as IKB – which traditionally specialised in lending to small and medium-sized German businesses – did not adequately understand CDOs, it has since become clear. They relied too often on box-ticking due diligence procedures – ratings and the rubber stamp of CDO managers – to have purchases approved by their organisations’ credit committees. James Fairrie, a credit officer who formerly worked at IKB, says while due diligence was “extremely thorough on the face of it”, it did not ask the right questions. The order had “come down from on high that it was a good thing to buy CDOs”. Managers at the bank were often swept along by the pace of deals. “If I delayed things more than 24 hours, someone else would have bought the deal.”

138 He attributes the pressure to “the extraordinary abilities of the American sales manager”, adding: “They are very insistent and persuasive. They made sure you were well looked after – entertained as well.” “IKB had an army of PhD types to look at CDO deals and analyse them,” says one CDO investor. “But Wall Street knew that they didn’t get it. When you saw them turn up at conferences there was always a pack of bankers following them.” . . . Nothing excuses the lack of savvy shown by the commercial banks. They took losses because of their own greed and ignorance. IKB, one of the first lenders to collapse in the credit crunch, was largely the author of its own misfortune. But that does not excuse investment banks if they took advantage of their clients’ credulity. A number of cases have come to light suggesting that this was going on. The Goldman case is all about “adverse selection” – putting risky assets into CDOs. This was not unique. As the mortgage market weakened, hedge funds eagerly sponsored CDOs to place negative bets – often seeking to push the most toxic debt they could into the structures. To win the hedge funds’ business, while also gaining the due diligence rubber stamp needed to mark the resultant CDOs fit for sale, investment banks recruited pliant CDO managers who signed off the hedge funds’ choices. “This adverse asset selection was going on a lot,” says one hedge fund investor. “Various CDO managers would be asked by banks if they would go along with this sort of thing. Those with integrity said no. You got paid a fee to tarnish your reputation.” Adverse selection was not the only dubious practice. Banks also structured CDOs that were seemingly designed to incur losses for long investors. In mid-2006, Morgan Stanley launched some CDOs – known as the Baldwin deals – that have puzzled observers. Rather than the risk in the deal reducing over time as the underlying loans in the structure were repaid – as is typical with CDOs – the Baldwin deals continued to take on new risks as old ones ran off – a fact that was disclosed to investors in the deal’s marketing documentation. This feature led to massive losses and would have done so, according to one CDO investor, even if the housing market had not collapsed. Significantly, Morgan Stanley chose to bet against its own product, and by extension against the customers to whom it was selling it. One investor describes Baldwin as “the most sinister trade of all”. But if one CDO exemplifies the conflicts inherent in the investment banks’ role, it was Vertical 2007-1. By the time UBS of Switzerland structured this $1.5bn product, the US property market was clearly turning. Vertical – which UBS staff referred to in internal e-mails as “vomit” and “crap” – was eventually sold. Barely two months later, Vertical collapsed. One of the buyers, Pursuit Partners, a hedge fund, has since sued the bank, alleging it knew before it sold the deal that it would fall apart. To get Vertical off the ground, UBS certainly bust a gut. Its relationship with Standard & Poor’s – a rating agency that had already awarded its top rating to hundreds of CDOs – was exceptionally fraught. E-mails from S&P released by the US Senate show how aggressively UBS bankers acted to get the rating they needed for Vertical. In one, a banker told an S&P executive he would spell her name correctly only when she did what he asked her to do. S&P was perhaps reluctant to sign off because of an unusual feature to the Vertical deal. “Vertical is politically closely tied to [Bank of America] – and is mostly a marketing shop – helping to take risk off books of BofA,” wrote James Halprin, an S&P analyst, to colleagues

139 that year. He seemed to suggest that the purpose of Vertical was to help Bank of America hedge its mortgage risks. UBS did not return calls for comment on the connections alleged between it and Bank of America in the Vertical deal. In a statement earlier this year the bank said Pursuit was a “sophisticated investor” that was “fully aware that it was purchasing troubled securities at deep discounts in the summer of 2007” and that the hedge fund itself described the investments in unflattering terms. According to the bank, Pursuit has reduced its claim from $100m to $35m. The court hearing the case “found no probable cause for Pursuit’s core allegations”, it said, adding: “UBS is confident that it will prevail on the merits of the remaining claims.” Vertical was not the only example of a CDO constructed by one bank to the apparent benefit of another. In a CDO named Jackson Segregated Portfolio, built in 2006 by Citigroup, parts of its portfolio were selected by Morgan Stanley, according to a person familiar with the deal. Just as with Abacus, Morgan Stanley’s role was not disclosed to investors in the CDO. Morgan Stanley profited from the collapse of the deal. “We expressly disclosed in marketing the Jackson CDOs that the collateral selection may have included factors adverse to investors,” a Citigroup spokesperson said on Wednesday. “Having said that, we remain committed to enhancing the transparency of all financial transactions in which we are involved.” Though investors were unaware of Morgan Stanley’s short position in the Jackson deal, the transaction differed from Abacus markedly because it did not involve a third-party selection agent. In the Jackson CDO marketing materials, Citigroup explicitly stated that it did not act “in a fiduciary capacity in the selection of the reference portfolio”. . . . Certainly, investment banks were interested in the possibility of using CDOs to offload the toxic risks in rivals’ balance sheets on to clients. As Goldman’s Fabrice Tourre put it in an e- mail to his superiors at the end of 2006, one of the big opportunities lay in “Abacus-rental strategies ... [where] we ‘rent’ our Abacus platform to counterparties focused on putting on macro short [sic] in the sector”. Decoded: Goldman would sell CDOs stuffed with other investment banks’ toxic waste, allowing them to short it. “The banks didn’t want to look as if they were short themselves,” says one subprime investor. “So bank A helped bank B get short and then bank B helped bank C and so on. Unless you were very close to the market you wouldn’t get it.” Banks were not blind to the risks their reputations were running. “Real bad feeling across European sales about some of the trades we did with clients,” one Goldman salesman wrote to Daniel Sparks, who headed the bank’s mortgage department, in October 2007. “The damage this has done to our franchise is very significant,” he added, before listing five trades and the hundreds of millions Goldman had collected from them at the expense of clients within months of their closing. Whether or not the banks broke securities laws, their pious mission statements stress their commitment to the client. Goldman’s, for instance, says simply: “Our clients’ interests always come first.” The contrast with the banks’ behaviour in the CDO market could hardly be more striking.

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The long and the short of a strange synthetic product The product at the heart of the US Securities and Exchange Commission’s civil charges against Goldman Sachs is a synthetic collateralised debt obligation. This complex structure comprises a bet from a set of “long” investors that a given pool of mortgage-backed bonds will pay off; and another from a set of “short” investors who believe it will default. The CDO simply reconciles these opposing bets, much as a bookmaker would. The structure issues both bonds and insurance. The bonds, secured against financial insurance contracts (credit default swaps) taken out against the pool of mortgage bonds on which investors wish to bet, are sold to long investors. The short investors, who believe the bonds in the pool will fail, buy the insurance. Their premiums pay the long investors’ coupons. In return, the long investors’ principal payments for the bonds are set aside to cover insurance claims in the event of a default. To assemble and sell a synthetic CDO such as Goldman’s Abacus, an investment bank must co-ordinate counterparties and agents carefully – not least because it must reconcile two opposing views of the market without spooking either side. During the market’s heyday, counterparties willing to go short were two a penny. The trick came in persuading investors to go long. Banks were therefore at pains to stress the safety of CDO bonds, and the robustness of the processes that gave birth to them. For the sake of propriety, they employed a third-party CDO manager or selection agent to select and watch over the pool of mortgage bonds. In the case of Abacus, Goldman chose a company called ACA. In addition, to make the bonds saleable, rating agencies were appointed to adjudge their creditworthiness. These had a habit – largely because of their poorly calibrated property market models – of awarding synthetic CDOs their highest badges of security: triple-A status. For Abacus, Goldman used Moody’s and Standard & Poor’s. The involvement of third parties allowed Goldman and its peers to stress that their own roles were akin to that of marketmakers, bringing together willing buyers and sellers. When he testified to Congress in April, Lloyd Blankfein, Goldman chief executive, was clear about this distinction. “The thing customers are buying [with CDOs] is exposure,” he observed. “They’re not coming to us because of what our views are.” http://www.ft.com/cms/s/0/b62bed3a-73fb-11df-87f5-00144feabdc0.html

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June 9, 2010, 4:35 am

The Global Transmission of European Austerity June 9, 2010, 4:35 am

Some thoughts on the fiscal austerity mania now sweeping Europe: is anyone thinking seriously about how this affects the rest of the world, the US included? We do have a framework for thinking about this issue: the Mundell-Fleming model. And according to that model (does anyone still learn this stuff?), fiscal contraction in one country under floating exchange rates is in fact contractionary for the world as a whole. The reason is that fiscal contraction leads to lower interest rates, which leads to currency depreciation, which improves the trade balance of the contracting country — partly offsetting the fiscal contraction, but also imposing a contraction on the rest of the world. (Rudi Dornbusch’s 1976 Brookings Paper went through all this.) Now, the situation is complicated by the fact that monetary policy is up against the zero lower bound. Nonetheless, something much like this transmission mechanism seems to be happening right now, with the weakness of the euro turning eurozone fiscal contraction into a global problem. Folks, this is getting ugly. And the US needs to be thinking about how to insulate itself from European masochism. The Global Transmission of European Austerity June 9, 2010, 4:35 am http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index. html

June 9, 2010, 4:22 am The Seductiveness Of Demands For Pain

Mark Thoma is astonished at Raghuram Rajan’s obviously intense desire to find some argument, any argument, for raising interest rates even though unemployment is near 10 percent. As he points out, Rajan is reduced to arguing that the Fed should raise rates because unemployment is low in Brazil. But I realized, as I read this, that I’d seen something like this before. Back in the summer of 2008, as the world was sliding into recession, Ken Rogoff demanded that the Fed and the

142 ECB raise rates because of rising commodity prices and inflationary pressure in developing countries. Again, it was very hard to understand what model lay behind the demand. And let me throw Jeff Sachs into the mix. Brad DeLong is astonished by the recent Sachs oped calling for fiscal austerity now now now, in which he claims that fiscal expansion has had all sorts of negative effects that are, in fact, completely absent from the data. What’s going on here? I don’t think you can resort to class-warfare arguments. What I think is happening is that we’re seeing the deep seductiveness, for many economists (and others), of taking what sounds like a tough-minded position in favor of inflicting pain on the economy — and the people who make up that economy. Keynes knew all about this. Writing about the peculiar appeal of classical economics even in a world in which it had manifestly failed, he argued That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. Something like that, I believe, is going on here. Calling for austerity and tight money feels courageous, tough-minded, and virtuous; it allows the economist making such calls to take the pose of a Serious Person standing firm against the easy-money guys. Yes, I know that’s insulting. But what’s so striking is that in all three cases I’ve cited you had highly trained economists — that is, people who have spent their whole lives arguing in terms of carefully laid out models — making arguments that aren’t backed by any model I can see. And may I say, I think that by giving in to the seductiveness of calls for pain, some of my colleagues are doing a lot of damage; at a time when we really need clarity of thought, they’re adding to the intellectual murk instead. http://krugman.blogs.nytimes.com/2010/06/09/the-seductiveness-of-demands-for-pain/

May 21, 2010, 11:22 am Crying Fire! Fire! In Noah’s Flood Early reaction to today’s column has been curious, though not unexpected: I’m getting a lot of rage from people who want their deficit-and-inflation crisis, and won’t take no for an answer. Let’s back up here. By spring 2009 a sharp division had emerged among economic commentators. On one side, many people looked at big budget deficits and the rapid expansion of the monetary base, and saw terrible things happening to interest rates — who will finance all that government borrowing? — and inflation — look at all that money the Fed is printing! On the other, some of us — especially those of us who had studied Japan in the 1990s — argued that this wasn’t that kind of situation. With the economy depressed and short-term interest rates up against the zero lower bound, government deficits would not crowd out private spending, but rather promote it. And when you’re in that situation, expanding the monetary base isn’t inflationary. On the contrary, the danger was deflation from excess capacity. In effect, we’ve had a test of those two views. And guess what? Interest rates have fluctuated, but as of 20 minutes ago the 10-year bond rate was 3.17, yes, 3.17 percent. Bond vigilantes, where have you gone. Meanwhile, core inflation — and yes, that is the right measure — just

143 keeps falling. (As Mark Thoma points out, this is a total refutation of those who kept claiming that there is no Phillips curve.) But as I said, the people who want their deficit-and-inflation crisis just won’t take no for an answer. I was trying to come up with an explanation of the curious insistence that we’re facing an imminent interest rate and/or inflation crunch; then I realized that John Maynard Keynes had already done that, in explaining the hold classical economics retained on thought despite its obvious inability to account for the Great Depression: The completeness of the Ricardian victory is something of a curiosity and a mystery. It must have been due to a complex of suitabilities in the doctrine to the environment into which it was projected. That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority. That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority. And all of this has a real, damaging effect on policy. The econ team at Goldman Sachs (not online) makes the interesting point that FOMC inflation forecasts are pulled up by a small group that keeps forecasting much higher inflation than anyone else; this in turn helps limit the Fed’s willingness to support the economy. And the deficit hawks have, of course, killed any hope of more stimulus. Anyway, I’m sure that the usual suspects won’t change their tune. Even if we do have a Japan-style lost decade, they’ll keep predicting hyperinflation just around the corner. http://krugman.blogs.nytimes.com/2010/05/21/crying-fire-fire-in-noahs-flood-3/

144 John Maynard Keynes The General Theory of Employment, Interest, and Money

Chapter 3

The Principle of Effective Demand

We need, to start with, a few terms which will be defined precisely later. In a given state of technique, resources and costs, the employment of a given volume of labour by an entrepreneur involves him in two kinds of expense: first of all, the amounts which he pays out to the factors of production (exclusive of other entrepreneurs) for their current services, which we shall call the factor cost of the employment in question; and secondly, the amounts which he pays out to other entrepreneurs for what he has to purchase from them together with the sacrifice which he incurs by employing the equipment instead of leaving it idle, which we shall call the user cost of the employment in question. The excess of the value of the resulting output over the sum of its factor cost and its user cost is the profit or, as we shall call it, the income of the entrepreneur. The factor cost is, of course, the same thing, looked at from the point of view of the entrepreneur, as what the factors of production regard as their income. Thus the factor cost and the entrepreneur's profit make up, between them, what we shall define as the total income resulting from the employment given by the entrepreneur. The entrepreneur's profit thus defined is, as it should be, the quantity which he endeavours to maximise when he is deciding what amount of employment to offer. It is sometimes convenient, when we are looking at it from the entrepreneur's standpoint, to call the aggregate income (i.e. factor cost plus profit) resulting from a given amount of employment the proceeds of that employment. On the other hand, the aggregate supply price of the output of a given amount of employment is the expectation of proceeds which will just make it worth the while of the entrepreneurs to give that employment.

It follows that in a given situation of technique, resources and factor cost per unit of employment, the amount of employment, both in each individual firm and industry and in the aggregate, depends on the amount of the proceeds which the entrepreneurs expect to receive from the corresponding output. For entrepreneurs will endeavour to fix the amount of employment at the level which they expect to maximise the excess of the proceeds over the factor cost.

Let Z be the aggregate supply price of the output from employing N men, the relationship between Z and N being written Z = φ(N ), which

145 can be called the aggregate supply function . Similarly, let D be the proceeds which entrepreneurs expect to receive from the employment of N men, the relationship between D and N being written D = f (N ), which can be called the aggregate demand function .

Now if for a given value of N the expected proceeds are greater than the aggregate supply price, i.e. if D is greater than Z , there will be an incentive to entrepreneurs to increase employment beyond N and, if necessary, to raise costs by competing with one another for the factors of production, up to the value of N for which Z has become equal to D . Thus the volume of employment is given by the point of intersection between the aggregate demand function and the aggregate supply function; for it is at this point that the entrepreneurs' expectation of profits will be maximised. The value of D at the point of the aggregate demand function, where it is intersected by the aggregate supply function, will be called the effective demand . Since this is the substance of the General Theory of Employment, which it will be our object to expound, the succeeding chapters will be largely occupied with examining the various factors upon which these two functions depend.

The classical doctrine, on the other hand, which used to be expressed categorically in the statement that 'Supply creates its own Demand' and continues to underlie all orthodox economic theory, involves a special assumption as to the relationship between these two functions. For 'Supply creates its own Demand' must mean that f (N) and φ(N) are equal for all values of N , i.e. for all levels of output and employment; and that when there is an increase in Z ( = φ(N )) corresponding to an increase in N , D ( = f (N )) necessarily increases by the same amount as Z . The classical theory assumes, in other words, that the aggregate demand price (or proceeds) always accommodates itself to the aggregate supply price; so that, whatever the value of N may be, the proceeds D assume a value equal to the aggregate supply price Z which corresponds to N . That is to say, effective demand, instead of having a unique equilibrium value, is an infinite range of values all equally admissible; and the amount of employment is indeterminate except in so far as the marginal disutility of labour sets an upper limit.

If this were true, competition between entrepreneurs would always lead to an expansion of employment up to the point at which the supply of output as a whole ceases to be elastic, i.e. where a further increase in the value of the effective demand will no longer be accompanied by any increase in output. Evidently this amounts to the same thing as full employment. In the previous chapter we have given a definition of full employment in terms of the behaviour of labour. An alternative, though equivalent, criterion is that at which we have now arrived, namely a situation in which aggregate employment is inelastic in response to an increase in the effective demand for its output. Thus Say's law, that the aggregate demand price of output as a whole is equal to its aggregate supply price for all volumes of output, is equivalent to the proposition that there is no obstacle to full employment. If, however, this is not the true law relating the aggregate demand and supply functions, there is a

146 vitally important chapter of economic theory which remains to be written and without which all discussions concerning the volume of aggregate employment are futile.

A brief summary of the theory of employment to be worked out in the course of the following chapters may, perhaps, help the reader at this stage, even though it may not be fully intelligible. The terms involved will be more carefully defined in due course. In this summary we shall assume that the money-wage and other factor costs are constant per unit of labour employed. But this simplification, with which we shall dispense later, is introduced solely to facilitate the exposition. The essential character of the argument is precisely the same whether or not money-wages, etc., are liable to change.

The outline of our theory can be expressed as follows. When employment increases, aggregate real income is increased. The psychology of the community is such that when aggregate real income is increased aggregate consumption is increased, but not by so much as income. Hence employers would make a loss if the whole of the increased employment were to be devoted to satisfying the increased demand for immediate consumption. Thus, to justify any given amount of employment there must be an amount of current investment sufficient to absorb the excess of total output over what the community chooses to consume when employment is at the given level. For unless there is this amount of investment, the receipts of the entrepreneurs will be less than is required to induce them to offer the given amount of employment. It follows, therefore, that, given what we shall call the community's propensity to consume, the equilibrium level of employment, i.e. the level at which there is no inducement to employers as a whole either to expand or to contract employment, will depend on the amount of current investment. The amount of current investment will depend, in turn, on what we shall call the inducement to invest; and the inducement to invest will be found to depend on the relation between the schedule of the marginal efficiency of capital and the complex of rates of interest on loans of various maturities and risks.

Thus, given the propensity to consume and the rate of new investment, there will be only one level of employment consistent with equilibrium; since any other level will lead to inequality between the aggregate supply price of output as a whole and its aggregate demand price. This level cannot be greater than full employment, i.e. the real wage cannot be less than the marginal disutility of labour. But there is no reason in general for expecting it to be equal to full employment. The effective demand associated with full employment is a special case, only realised when the propensity to consume and the inducement to invest stand in a particular relationship to one another. This particular relationship, which corresponds to the assumptions of the classical theory, is in a sense an optimum relationship. But it can only exist when, by accident or design, current investment provides an amount of demand just equal

147 to the excess of the aggregate supply price of the output resulting from full employment over what the community will choose to spend on consurnption when it is fully employed.

This theory can be summed up in the following propositions:

(1) In a given situation of technique, resources and costs, income (both money-income and real income) depends on the volume of employment N .

(2) The relationship between the community's income and what it can be expected to spend on consumption, designated by D 1 , will depend on the psychological characteristic of the community, which we shall call its propensity to consume . That is to say, consumption will depend on the level of aggregate income and, therefore, on the level of employment N , except when there is some change in the propensity to consume.

(3) The amount of labour N which the entrepreneurs decide to employ depends on the sum (D ) of two quantities, namely D 1 , the amount which the community is expected to spend on consumption, and D 2 , the amount which it is expected to devote to new investment. D is what we have called above the effective demand.

(4) Since D 1 + D 2 = D = φ(N ), where is the aggregate supply function, and since, as we have seen in (2) above, D 1 is a function of N , which we may write χ(N ), depending on the propensity to consume, it follows that φ(N ) − χ(N ) = D 2 .

(5) Hence the volume of employment in equilibrium depends on (i) the aggregate supply function, (ii) the propensity to consume, and (iii) the volume of investment, D 2 . This is the essence of the General Theory of Employment.

(6) For every value of N there is a corresponding marginal productivity of labour in the wage-goods industries; and it is this which determines the real wage. (5) is, therefore, subject to the condition that N cannot exceed the value which reduces the real wage to equality with the marginal disutility of labour. This means that not all changes in D are compatible with our temporary assumption that money-wages are constant. Thus it will be essential to a full statement of our theory to dispense with this assumption.

(7) On the classical theory, according to which D = φ(N ) for all values of N , the volume of employment is in neutral equilibrium for all values of N less than its maximum value; so that the forces of competition between entrepreneurs may be expected to push it to this maximum value. Only at this point, on the classical theory, can there be stable equilibrium.

148 (8) When employment increases, D1 will increase, but not by so much as D ; since when our income increases our consumption increases also, but not by so much. The key to our practical problem is to be found in this psychological law. For it follows from this that the greater the volume of employment the greater will be the gap between the aggregate supply price (Z ) of the corresponding output and the sum (D 1 ) which the entrepreneurs can expect to get back out of the expenditure of consumers. Hence, if there is no change in the propensity to consume, employment cannot increase, unless at the same time D 2 is increasing so as to fill the increasing gap between Z and D 1 . Thus—except on the special assumptions of the classical theory according to which there is some force in operation which, when employment increases, always causes D 2 to increase sufficiently to fill the widening gap between Z and D 1 —the economic system may find itself in stable equilibrium with N at a level below full employment, namely at the level given by the intersection of the aggregate demand function with the aggregate supply function.

Thus the volume of employment is not determined by the marginal disutility of labour measured in terms of real wages, except in so far as the supply of labour available at a given real wage sets a maximum level to employment. The propensity to consume and the rate of new investment determine between them the volume of employment, and the volume of employment is uniquely related to a given level of real wages—not the other way round. If the propensity to consume and the rate of new investment result in a deficient effective demand, the actual level of employment will fall short of the supply of labour potentially available at the existing real wage, and the equilibrium real wage will be greater than the marginal disutility of the equilibrium level of employment.

This analysis supplies us with an explanation of the paradox of poverty in the midst of plenty. For the mere existence of an insufficiency of effective demand may, and often will, bring the increase of employment to a standstill before a level of full employment has been reached. The insufficiency of effective demand will inhibit the process of production in spite of the fact that the marginal product of labour still exceeds in value the marginal disutility of employment.

Moreover the richer the community, the wider will tend to be the gap between its actual and its potential production; and therefore the more obvious and outrageous the defects of the economic system. For a poor community will be prone to consume by far the greater part of its output, so that a very modest measure of investment will be sufficient to provide full employment; whereas a wealthy community will have to discover much ampler opportunities for investment if the saving propensities of its wealthier members are to be compatible with the employment of its poorer members. If in a potentially wealthy community the inducement to invest is weak, then, in spite of its potential wealth, the working of the principle of effective demand will compel it to reduce its actual output, until, in spite of its potential

149 wealth, it has become so poor that its surplus over its consumption is sufficiently diminished to correspond to the weakness of the inducement to invest.

But worse still. Not only is the marginal propensity to consume weaker in a wealthy community, but, owing to its accumulation of capital being already larger, the opportunities for further investment are less attractive unless the rate of interest falls at a sufficiently rapid rate; which 'brings us to the theory of the rate of interest and to the reasons why it does not automatically fall to the appropriate level, which will occupy Book IV.

Thus the analysis of the propensity to consume, the definition of the marginal efficiency of capital and the theory of the rate of interest are the three main gaps in our existing knowledge which it will be necessary to fill. When this has been accomplished, we shall find that the theory of prices falls into its proper place as a matter which is subsidiary to our general theory. We shall discover, however, that money plays an essential part in our theory of the rate of interest; and we shall attempt to disentangle the peculiar characteristics of money which distinguish it from other things.

III

The idea that we can safely neglect the aggregate demand function is fundamental to the Ricardian economics, which underlie what we have been taught for more than a century. Malthus, indeed, had vehemently opposed Ricardo's doctrine that it was impossible for effective demand to be deficient; but vainly. For, since Malthus was unable to explain clearly (apart from an appeal to the facts of common observation) how and why effective demand could be deficient or excessive, he failed to furnish an alternative construction; and Ricardo conquered England as completely as the Holy Inquisition conquered Spain. Not only was his theory accepted by the city, by statesmen and by the academic world. But controversy ceased; the other point of view completely disappeared; it ceased to be discussed. The great puzzle of effective demand with which Malthus had wrestled vanished from economic literature. You will not find it mentioned even once in the whole works of Marshall, Edgeworth and Professor Pigou, from whose hands the classical theory has received its most mature embodiment. It could only live on furtively, below the surface, in the underworlds of Karl Marx, Silvio Gesell or Major Douglas.

The completeness of the Ricardian victory is something of a curiosity and a mystery. It must have been due to a complex of suitabilities in the doctrine to the environment into which it was projected. That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social

150 injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority. That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority.

But although the doctrine itself has remained unquestioned by orthodox economists up to a late date, its signal failure for purposes of scientific prediction has greatly impaired, in the course of time, the prestige of its practitioners. For professional economists, after Malthus, were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation;—a discrepancy which the ordinary man has not failed to observe, with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other groups of scientists whose theoretical results are confirmed by observation when they are applied to the facts.

The celebrated optimism of traditional economic theory, which has led to economists being looked upon as Candides, who, having left this world for the cultivation of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand. For there would obviously be a natural tendency towards the optimum employment of resources in a society which was functioning after the manner of the classical postulates. It may well be that the classical theory represents the way in which we should like our economy to behave. But to assume that it actually does so is to assume our difficulties away. http://ebooks.adelaide.edu.au/k/keynes/john_maynard/k44g/chapter3.html

151 3 COMMENT The new lesson for resilient Asia By Stephen Roach Published: June 8 2010 22:12 | Last updated: June 8 2010 22:12 Asia has come through the global crisis of 2008-09 with flying colours. As chairman of Morgan Stanley’s Asia businesses over the past three years, I have been privileged to witness this extraordinary resilience first-hand. As I now head back to the US, three lessons stand out. First, Asia learnt the painful lessons of the 1997-98 regional crisis very well. That crisis stemmed largely from Asia’s vulnerability to the vicissitudes of international capital flows. Lacking in foreign exchange reserves, overly exposed to short-term external debt and with rigid currency pegs, the region stood little chance when the hot money started to flee. When Thailand went, Indonesia, South Korea, Taiwan and most of the others in developing Asia were quick to follow. By contrast, for Asia, the latest crisis was primarily an external demand shock. The unprecedented 11.8 per cent drop in the volume of global trade in goods in 2009 hit this export-led region extremely hard. No country was spared either sharp recession (Japan, Taiwan, Malaysia and Thailand) or major slowdown (China, India and South Korea). But Asia’s build-up of foreign exchange reserves in the period between the two crises – from less than US$1,000bn in 1998 to nearly $5,000bn in 2009 – insulated it from the financial upheaval that followed Lehman’s collapse. Second, there is the China factor. As I have criss-crossed the region, there has been no mistaking Asia’s new China-centric character. I remember penning a piece in the Financial Times after the Asian crisis arguing that China was bound to supplant Japan as the leader of regional growth. Most were sceptical and even I concede that the transition occurred with greater speed than I anticipated. But China has clearly arrived as the region’s dominant economic force. In the past 10 years, export-led economies such as Japan, South Korea and Taiwan have all redirected their overseas shipments. Their largest export market was once the US; now it is China. The “Asian dream”, as a result, is now much more a Chinese dream. That is certainly evident in Hong Kong nearly 13 years after the handover to China, but I also have seen it repeatedly in my business dealings across the region. That puts Asia in a tight spot – relying more and more on China for sustained growth and prosperity. Yet China’s challenges can hardly be minimised – as underscored by the latest property and credit bubbles, as well as the labour-related pressures seen in the recent problems at Foxconn’s Shenzhen plant. But just as surgical administrative measures seem likely to contain the damage from the bubbles, rapid productivity growth should offset deferred minimum wage rises and keep unit labour costs in check. That does not diminish China’s most daunting structural imperative – an increasingly urgent need to stimulate private consumption. I am hopeful that China will pull this off with a pro-consumption shift in the 12th Five Year Plan (2011-16). That, in turn, would provide a boost for its East Asian suppliers – namely, South Korea, Japan and Taiwan. If, however, China fails to engineer this transition, its growth

152 dynamic will be impaired by lingering post-crisis headwinds blowing from the west. The rest of a China-centric Asia could then be in trouble. Third, Asia cannot presume that just because it weathered the global crisis it has discovered the holy grail of economic prosperity. In an increasingly complex and integrated world, trouble has an unpredictable way of mutating. The cross-product contagion of 2008-09 was very different from the cross-border contagion of 1997-98. Asia must prepare for the inevitable next crisis rather than bask in warm glow of its new-found resilience. On that score, Asia has a full plate. In the late 1990s, exports made up about 35 per cent of developing Asia’s gross domestic product. Ten years later, that ratio had risen to 45 per cent. The region has become more dependent on external demand just as the aftershocks of the 2008-09 crisis are likely to take a lasting toll on this demand in both the US and Europe. In this context, it is critical for Asia to adapt yet again – to move towards greater reliance on its own internal markets. Asia’s post-crisis imperative is now to stimulate private consumption – very different from the imperative of repairing financial vulnerability after the crisis of the late 1990s. My bet is on Asia – that the next three years are going to be even better than they were during my recent stint in the region. I think China definitely gets it – that the post-crisis era leaves it with little choice other than turn to its own 1.3bn consumers as a major source of internal growth. But I leave Asia with one big worry – that the rest of the world doesn’t get it. I worry, in particular, about the steady drumbeat of China-bashing in Washington – especially as we approach mid-term elections this year. I fear that America, with a massive multilateral trade deficit that stems from an unprecedented shortfall of domestic saving, will make a major mistake in seeking a bilateral “remedy” to a jobless recovery by imposing trade sanctions on China. More than ever, the US needs to stop taking out its frustrations on others. It should look in the mirror and deepen its understanding of the self-inflicted nature of its problems. This is America’s re-education imperative. That is a key reason why I am heading off to Yale. The writer is the chairman of Morgan Stanley Asia and author of ‘The Next Asia’. He will be joining the faculty of Yale University on July 1 Stephen Roach The new lesson for resilient Asia June 8 2010 22:12 | http://www.ft.com/cms/s/0/6db3b66a-733c-11df-ae73-00144feabdc0.html

153 Global Business

June 8, 2010 Power Grows for Striking Chinese Workers June 8, 2010 By DAVID BARBOZA and HIROKO TABUCHI SHANGHAI — China’s wage contagion continues to spread. Honda Motors said Tuesday that workers at a parts plant had walked off the job just days after the company settled a separate strike by agreeing to substantial pay raises for 1,900 workers at its transmission factory.

The new walkout, at an exhaust-system factory in the city of Foshan, will force Honda to halt work Wednesday at one of its four auto assembly plants in China, the company said. The assembly plants had just reopened after closing for almost two weeks because of the earlier strike at the transmission factory, which is also in Foshan. The second Honda strike comes amid growing signs that, in a recent and remarkable shift of labor dynamics, China’s huge migrant work force is gaining bargaining power. New pressure to raise pay and improve labor conditions, coming in part from the Chinese government, is likely to raise the cost of doing business in China and could induce some companies to consider shifting production elsewhere. Another big employer wrestling with labor issues, Foxconn Technology — a giant contract electronics manufacturer that has also announced wage increases in China this month — said Tuesday that it was reconsidering the way it ran its operations Strikes at parts factories in Foshan in response to criticism of its workplace practices. have hurt Honda. Foxconn, which has experienced a string of suicides among workers at its sprawling, citylike campuses in the southern metropolis of Shenzhen, said it was considering turning the management of some of its worker dormitories over to local governments in China. “Because Foxconn is a commercial enterprise operating like a society, we’re responsible for almost everything for our workers, including their job, food, dorm and even personal relationships,” Arthur Huang, a Foxconn spokesman, said Tuesday. “That is too much for a single company. A company like Foxconn shouldn’t have so many functions.” Foxconn, a subsidiary of Hon Hai Precision Industry of Taiwan, makes devices for companies like Apple, Dell and Hewlett-Packard. Hon Hai’s shares fell more than 5 percent Tuesday in Taiwan, to their lowest level since August, after the company said it would seek to pass on its higher labor costs to clients.

154 As the company held annual shareholder meetings in Taipei and Hong Kong, small groups of people demonstrated outside, urging the company to improve conditions for workers. Turning over management of employee dormitories to the government authorities would be a drastic change for Foxconn, which, like thousands of other manufacturers in southern China, has lured peasants from rural areas to work at giant, gated factory compounds. One of the company’s Shenzhen campuses employs 300,000 workers and covers about one square mile. The campus has high-rise dormitories, a hospital, a fire department, an Internet cafe and even restaurants and bank branches. Some workers have complained, though, that the long workdays they are expected to put in, with few days off, give them little free time to take advantage of any amenities. Foxconn said Sunday that it planned to double by October the salaries of many of its 800,000 workers in China to 2,000 renminbi, or nearly $300, a month. The announcement of a big raise by one of the country’s biggest exporters seems likely to put pressure on other companies to follow suit, analysts say. The chairman of Foxconn, Terry Gou, told the Taipei shareholders’ meeting that the company was looking to shift some unspecified production from China to automated plants in Taiwan, Reuters reported. After years of focusing on luring foreign investment, Chinese government officials are now endorsing efforts to improve conditions for workers and raise salaries. The government hopes the changes will ease a widening income gap between the rich and the poor and prevent social unrest over soaring food and housing prices. On Friday, Beijing’s municipal government said it would raise its minimum wage by 20 percent. Ma Jun, a Hong Kong economist at Deutsche Bank, said last week that more cities and provinces would soon raise their minimum wages 10 to 20 percent. “We therefore believe that a faster-than-expected labor cost increase has now become a political imperative,” Mr. Ma said in a report, citing comments from Beijing’s leadership about improving social justice. But analysts say wage pressure is also coming from labor shortages in coastal cities as the country’s declining birth rate reduces the number of young people entering the work force. Factories in southern China that used to advertise in search of employees 18 to 24 years old are now recruiting much older workers. The labor shortages are being worsened by an economic boom and improving job prospects in inland provinces that have long supplied a steady stream of migrant workers to industrial areas. TPV Technology, a contract manufacturer that produces computer monitors with about 16,000 workers in five cities in China, said it raised salaries by 15 percent in January and planned to raise them again, perhaps as early as July. “We’ll adjust our salary to the market and to our competitors’ level,” said Shane Tyau, a vice president at TPV, which is based in Hong Kong. “If Foxconn announces another round of pay raises, we’ll reconsider our wage level, too.” Economists say that China’s labor force is growing increasingly bold and that over the last year, periodic strikes in southern China — some supposedly involving global companies — have been resolved quietly or not reported in the media.

155 But the Honda strikes, like the spate of Foxconn suicides, are noteworthy for having generated considerable public attention. To resolve the strike at its transmission plant, Honda last week offered workers raises of 24 to 32 percent. That strike had forced Honda to shut down its four assembly plants in China. Now Honda has been a target again. The exhaust-system factory is controlled by a joint venture between a Honda subsidiary and a Chinese company. Honda said the strike would force it to stop work at its Guangqi Honda Automobile assembly plant in the city of Guangzhou. Honda owns a network of production facilities in China, including the car assembly factories and three auto parts manufacturers, as well as two motorbike plants, two plants that make generators, pumps and other power equipment and three research centers. Those numbers do not include factories opened in China by Honda subsidiaries like Yutaka Giken, which separately runs four auto parts manufacturers in the country. Honda declined to speculate Tuesday on whether it was vulnerable to additional strikes for having already shown a willingness to raise wages at the transmission factory. “It’s not at all clear at this point whether the two strikes are related,” said Natsuno Asanuma, a Honda spokeswoman. “It’s too early at this point to say whether we are looking at some kind of chain reaction.” Tomoo Marukawa, a professor of the Chinese economy at Tokyo University, said that Japanese firms could be especially vulnerable to labor strife because they tended not to give Chinese workers a chance to rise within the company. “Honda’s labor conflicts are not just happening because of disputes over wages,” Professor Marukawa said. “Many Chinese probably see little future in a company where locally hired staff are shut out from promotions,” he said. “It’s a problem that is common to many Japanese companies operating overseas." Honda has declined to talk about specifics of its settlement with workers at the transmission plant, including whether it involved any changes in its promotion policies. David Barboza reported from Shanghai and Hiroko Tabuchi from Tokyo. Bao Beibei contributed research. DAVID BARBOZA and HIROKO TABUCHI Power Grows for Striking Chinese Workers June 8, 2010 http://www.nytimes.com/2010/06/09/business/global/09labor.html?src=me&ref=business

Global Business

June 7, 2010 As China’s Wages Rise, Export Prices Could Follow By DAVID BARBOZA SHANGHAI — The cost of doing business in China is going up.

156 Coastal factories are increasing hourly payments to workers. Local governments are raising minimum wage standards. And if China allows its currency, the renminbi, to appreciate against the United States dollar later this year, as many economists are predicting, the relative cost of manufacturing in China will almost certainly rise. The salaries of factory workers in China are still low compared to those in the United States and Europe: the hourly wage in southern China is only about 75 cents an hour. But economists say wage increases here will eventually ripple through the global economy, driving up the prices of goods as diverse as T-shirts, sneakers, computer servers and smartphones. “For a long time, China has been the anchor of global disinflation,” said Dong Tao, an economist at Credit Suisse, referring to how the two-decade-long shift to manufacturing in China helped many global companies lower costs and prices. “But this may be the beginning of the end of an era.” The shift was illustrated Sunday, when Foxconn Technology, one of the world’s largest contract electronics manufacturers and the maker of well-known products that include Apple iPhones and Dell computer parts, said that it was planning to double the salaries of many of its 800,000 workers in China, beginning in October. The new monthly average would be 2,000 renminbi — about $300, at current exchange rates. The announcement follows a spate of suicides at two Foxconn campuses in southern China and criticism of the company’s labor practices. Foxconn, based in Taiwan and employing more than 800,000 workers in China, said the salary increases were meant to improve the lives of its workers. Last week the Japanese automaker Honda said it had agreed to give about 1,900 workers at one of its plants in southern China raises of 24 to 32 percent, in hopes of ending a two-week strike, according to people briefed on the agreement. The new monthly average would be about $300, not counting overtime. And last Thursday, Beijing announced that it would raise the city’s minimum monthly wage by 20 percent, to 960 renminbi, or about $140. Many other cities are expected to follow suit. Analysts say the changes result from the growing clout of workers in China’s economy, and are also a response to the soaring food and housing prices that have eroded the spending power of workers from rural provinces. These workers, without factoring in the recent wage increases by some employers, typically earn $200 a month, working six or seven days a week. But there are other reasons. Analysts say Beijing is supporting wage increases as a way to stimulate domestic consumption and make the country less dependent on low-priced exports. The government hopes the move will force some export-oriented companies to invest in more innovative or higher-value goods. But Chinese policy makers also favor higher wages because they could help ease a widening income gap between the rich and the poor. Big manufacturers are moving to raise salaries because they are desperate to attract new workers at a time when many coastal factory cities are struggling with labor shortages. A Foxconn executive said last week that the turnover rate at its two Shenzhen campuses — which employ over 400,000 people — was about 5 percent a month, meaning that as many as 20,000 workers were leaving every month and needed to be replaced. Marshall W. Meyer, a China specialist at the Wharton School at the University of Pennsylvania, says that demographic changes in China are reducing the supply of young workers entering the labor force and that this is behind some of the wage pressure.

157 “Demography will do what the Strategic and Economic Dialogue hasn’t: raise the cost of Chinese goods,” he said, referring to United States-China talks on Chinese currency reform and other economic issues. “There is no way out.” Economists say many of the same forces that were at work in 2007 and 2008, when China’s economy was overheating, have returned and even intensified this year. Local governments have stepped up enforcement of labor and environmental regulations, driving up production costs. And perhaps most troubling for companies here is the prospect of an appreciating Chinese currency, which would make their exports more expensive overseas. Beijing has long promised to allow its currency to fluctuate more freely. But when the global financial crisis shuttered many Chinese factories, the government effectively repegged the renminbi to the dollar to protect exporters. Pietra Rivoli, a professor of international business at Georgetown University and the author of “The Travels of a T-Shirt in the Global Economy,” says the effects of rising labor costs will vary by industry, perhaps with lower-valued goods like garments being forced to move to western China or even to Vietnam and Bangladesh. But she says high-end electronics like smartphones are likely to remain, because they command high profit margins and because China has built a sophisticated infrastructure and quality-control system. “Labor is such a small piece of the pie for them,” Professor Rivoli says of the electronics brands. “The money’s all in the design, the marketing and the complicated distribution system, including retail outlets. Like with Apple, they have those rents in the shopping malls, fancy stores and all those hip people working there. That costs a lot.” Still, salary increases are expected to affect many stages of the supply chain and force some companies to raise prices. For many exporters who simply produce on contract for global brands, profit margins are already razor-thin, and raising prices could hurt business. “They’re going to have to find a way to pass this on to the end user,” says Mr. Tao at Credit Suisse. Economists say a necessary restructuring is under way, one that should allow the nation’s huge “floating population” of migrant workers to better share in the benefits of growth and stimulate domestic consumption. United States and European Union officials have been pressing China to help improve the global economy by consuming more and reducing the country’s huge trade surpluses. Rising labor costs here are not the end of cheap production in China, analysts say, but they are likely to help change the country’s manufacturing mix. “China isn’t going to lose its manufacturing base because it’s got a huge domestic market,” said Mary Gallagher, director of the Center for Chinese Studies at the University of Michigan. “But it will move them toward higher-end goods. And that matches the Chinese government’s ambition. They don’t just want to be the workshop of the world. They want to produce high- tech goods.” Chen Xiaoduan contributed research. http://www.nytimes.com/2010/06/08/business/global/08wages.html?src=me&ref=busines s

158 Business Day

June 9, 2010 Labor Reform Talks in Spain Appear at a Stalemate By THE ASSOCIATED PRESS Filed at 7:19 a.m. ET MADRID (AP) -- Talks between unions and management on reforming Spain's labor market appear to be at a stalemate, Spain's labor minister said Wednesday, making it more likely the Socialist government will impose its own labor reforms. The talks, which have been going on for months, aim to encourage hiring, resurrect a moribund economy and reassure jittery markets that Spain can trim its deficit and debt loads. But Labor Minister Celestino Corbacho said it will be difficult for the two sides to reach a consensus in the last round of talks Wednesday. Unions have threatened a general strike if they feel those changes harm workers, but a strike Tuesday by civil servants protesting wage cuts drew a weak response. That raised questions whether the unions had enough support to pull off a nationwide walkout. Corbacho said the government was ready to explain its reform proposals to opposition parties. ''It is clear that, starting tomorrow, we have to begin talking to the parties in Parliament,'' he told reporters at Parliament. Barring an agreement between labor and management, the government says it will approve reforms by decree on June 16, one day before a EU summit in Brussels. These reforms would then have to be ratified by Spain's Parliament. Spain's labor laws have been widely criticized as rigid and discouraging companies from hiring. Spanish workers who are laid off get severance pay of as much 45 days per year worked, among the highest levels in Europe. The government is expected to try to lower that number to 33 days. Spanish media report the government is also considering making it easier for companies to argue economic distress as grounds to lay off workers with just a 20-day per year severance package. http://www.nytimes.com/aponline/2010/06/09/business/AP-EU-Spain-Financial- Crisis.html?_r=1&src=busln

159

Greek Default Seen by Almost 75% in Poll Doubtful About Trichet By Rich Miller

June 9 (Bloomberg) -- Global investors have little confidence in Europe’s efforts to contain its debt crisis or in European Central Bank President Jean-Claude Trichet, with 73 percent calling a default by Greece likely. Only 23 percent say they expect the region’s almost $1 trillion rescue package to both keep the European monetary union together and prevent a debt default by a government, according to a quarterly poll of investors and analysts who are Bloomberg subscribers. More than 40 percent say Greece is likely to abandon the euro. “There is clearly a risk of a breakup of the euro,” says Geoff Marson, managing director at a Guernsey subsidiary of London-based Odey Asset Management, which oversees about $6 billion. Trichet, whose ECB supported the rescue package by buying bonds of Greece and other European governments, saw his approval rating tumble from a January Bloomberg poll. A plurality -- 48 percent -- give the 67-year-old central banker an unfavorable rating in the latest poll, while 41 percent view him favorably. In January, Trichet received a 60 percent approval rating, with 27 percent regarding him negatively. “Trichet has sacrificed the ECB’s independence by helping to rescue Greece,” says Cyril Boudin, a participant in the poll and a derivatives trader at Unicredit Group in London. Market Slump Stock markets worldwide have slumped and the euro has plunged as Europe has struggled to defuse its debt crisis. The Stoxx Europe 600 Index has fallen 12 percent from its 2010 high on April 15, while the euro has lost about 17 percent against the dollar since the start of the year. More than 60 percent of those surveyed say they expect the euro to fall further against the dollar over the next three months. While the European currency may be due for a “corrective bounce” in the short run, “longer term, the market has parity in its sights,” says Marson, who took part in the poll. The euro traded at $1.1973 at 5 p.m. yesterday in New York. European investors are more optimistic about the ability of their region to resolve its problems than were their counterparts elsewhere. Thirty percent of those polled in Europe say they expect the rescue

160 package to succeed. U.S. investors are the most pessimistic, with only 14 percent expecting Europe’s efforts to work. A quarter of investors in Asia are also in that camp. Overall, 40 percent of investors worldwide say European defaults were possible even with the package, while another 35 percent see some countries dropping out of the euro zone. Lacking Fortitude Investors in all three regions agree that Greece is the most likely country to default on its debt. “The Greek government will not have the long-term fortitude to control spending,” says Robert Knox, a poll participant and chief executive officer of Park City, Utah- based broker-dealer RG Knox Co. Thirty-five percent of those surveyed say a default by Portugal was likely, while more than a quarter say the same about Spain. Outside of Europe, the country seen as most likely to miss a debt payment was Argentina, with 31 percent. “I see a lot of similarities between Spain’s situation now and emerging markets in the past 20 years,” says Alvaro Teixeira, the head of Latin American equities at Prebon Canada Ltd. in Toronto. They include “high debt, high unemployment, growing social distress,” and a currency that’s too strong for the Spanish economy. Dumping the Euro Fifteen percent of those polled say it’s likely Spain would be forced to dump the euro as its currency to help ease the pain on its economy. One in five see Portugal making that move. “This crisis could be a significant step that leads to an eventual breakup of the euro zone,” says William Aston-Reese, vice president of money-market sales at New York-based broker Tradition Asiel Securities Inc. and a poll participant. Investors in Europe are about evenly split on Trichet’s performance at the central bank. Forty-eight percent give him an unfavorable rating, while 46 percent see him in a positive light. The rest have no opinion. American investors are the most down on Trichet, with 56 percent seeing him in an unfavorable light. In Asia, 34 percent of poll participants agree with that view. In contrast, more than two-thirds of investors worldwide approve of the job being done by U.S. Federal Reserve Chairman Ben S. Bernanke. U.S. Vulnerable Still, the sovereign debt problems in Europe will hurt the U.S. economy, according to more than 85 percent of global investors surveyed. About two-thirds say the turmoil won’t be enough to send the U.S. back into recession. The quarterly Bloomberg Global Poll of investors, traders and analysts in six continents was conducted June 2-3 by Selzer & Co., a Des Moines, Iowa-based firm. It is based on interviews with a random sample of 1,001 Bloomberg subscribers, representing decision-makers in markets, finance and economics. The poll has a margin of error of plus or minus 3.1 percentage points. To see the methodology and exact wording of the poll questions, click on the attachment tab at the top of the story. Last Updated: June 8, 2010 18:00 EDT

http://www.bloomberg.com/apps/news?pid=20601087&sid=aq_vuFaKzuVI&pos=4#

161 Eurointelligence Daily Morning Newsbriefing A lurch to the right – and to more austerity – forecast in today’s Dutch election

09.06.2010 Dutch opinion polls forecast a victory of the right wing VVD, which might lead to a coalition of the right; Balkenende is likely to be ousted; Klaus Regling is tipped to the CEO of the SPV to bail out the eurozone; the German federal finance agency will raise the money for the SPV; ECB bond purchases are levelling off; finance ministers accept Estonia’s entry into the eurozone, but France and Italy are sceptical; Spain wants to accelerate pension reform, and expects decision by late summer; EU is to press ahead with a bank levy; tensions are growing between France and Germany about the governance of the eurozone; Harold James says a convertible renminbi might well become a leading global reserve currency; Wolfgang Münchau says Germany’s austerity plan won’t work, because there is no evidence that Germany’s anaemic economic growth is likely to improve; Martin Wolf, meanwhile, says the current policy mix suggests that deflation are very real threat.b

09.06.2010 A lurch to the right – and to more austerity – forecast in today’s Dutch election

It looks like the end of Jan Peter Balkenende, the Dutch premier, at least according to the polls, which sees a surge of the right wing VVS under Mark Rutte, which is projected to raise its number of seats from 22 to 33 or 34 seats in the 150 strong Dutch parliament. That would make the VVD the largest party, and put it in prime position to form a new coalition. His main opponent is the labour party, which is projected to achieve 30 seats. The gain of the VVD came in part at the expense of the anti-Islamic PVV, led by Geert Wilders. To call Rutte a fiscal conservative would be an understatement. He is calling for spending cuts and austerity – which is as popular in the Netherlands as it is in Germany. The FT writes the polls suggest two possible coalition coalition outcomes, a right- wing coalition with VVD, PVV, and Christian Democrats, or VVD, Labour Party, and another small liberal party. Also interesting if you at the headline of the outgoing version of the international edition of

162 NRC Handelsblad, you detect an increasingly nationalistic bend. “In Dutch elections, Europe is not an issue”, “Dutch electorate seemingly apathetic to foreign affairs”. Regling to run SPV FT Deutschland writes that the recently agreed SPV may sound like a European organisation, but it will be run by Germans. Klaus Regling, the former director general of DG Ecfin, is tipped to be the CEO of the SPV. The paper also writes that the federal finance agency will raise the money for the SPV. The EIB has also been considered, but did not want to get involved as it can

ECB bond purchases levelling off Karl Whelan at the Irish economy blog tracked the ECB accumulated bond purchased and finds that they are already levelling off. “It is notable that the program has purchased smaller amounts with each passing week: €16.3 billion during the week ended May 14, €10.4 billion during the week ended May 21, €8.8 billion during the week ended May 28 and €4.9 billion during the week ended June 4. We know that some members of the Governing Council would like the program to end quickly. At this rate of decline, it will be over in a couple of weeks.” Finance ministers accept Estonia’s entry into the EU, but France is sceptical FT Deutschland writes that the Ecofin accepted the Estonian application to join the euro in January 2011, to demonstrate that the euro remains attractive despite the current difficulties. French finance minister Christine Lagarde was sceptical, and wondered whether it would be wise to accept new candidates at a time when the stability and growth pact was subject to re- negotiations. Italy also raised objections. The ECB was critical about Estonia’s ability to maintain low inflation. Spain wants to accelerate pension reform – expects decision this summer Labour market reforms alone are not going to the trick in Spain. They need to be embedded in other reforms, most important financial and pension reforms. According to El Pais, Elena Salgado yesterday announced that the government expects a reform of the pension system

163 from the talks among social partners by the summer, or immediately after that. The Commission said it will examine the Spanish austerity pact next week. Initial reactions from the Commissions to the Spanish policy responses were positive. EU presses ahead with bank levy Undeterred by a failure to co-opt the G20, EU finance ministers yesterday pledged to pursue plans to issue an up-front levy on banks, but the FT writes there continues to be disagreement about what to do with the funds. The EU’s position was best summed by Germany’s deputy finance minister who said that the EU will try to reach a global consensus, but when that is not possible, the EU would press ahead on its own.

About France and Germany The tensions between France and Germany are getting worse, and are costing the eurozone a lot of money. Jean Quatremer writes in his blog that France is unhappy about the Germanic terms of the SPV, which is now created under Luxembourg (and be run by a German). The fund is limited to 4% to the eurozone’s GDP, and there is no joint solidiarity. Everybody is only responsible for their own share of the fund. But at least Paris managed to negotiate away the German insistence that national parliaments should sanction each payment. Harold James on the renminbi Harold James writes in a Project Syndicate column that the dualty of the euro and the dollar is likely by the renminbi, but only after a move towards full convertability. He said the history of the D-Mark suggests that such a transition can occur very quickly. The attractiveness of the renminbi lies not only with the excess reserves, but also with that fact China produces goods in strong demand. Wolfgang Münchau on German austerity In his FT Deutschland column, Wolfgang Münchau writes that it is astonishing that the coalition partners, who have essentially done nothing since coming to power last year, could only ever agree on an austerity package. Austerity is the creative power in German politics. He said the history of debt reduction through austerity is not very encouraging. Almost all successful efforts of debt reduction included strong economic growth. There is nothing in the plan of the coalition, not even a statement of intentions, that Germany will implement policies to raise economic growth. Martin Wolf on deflation In his FT column, Martin Wolf quotes Adam Posen’s assertion that a combination of premature austerity, persistent banking problems, and insufficiently lose monetary policies caused the deflation of Japan, which is persistent still today. Wolf wonders whether the G20, except the US, is now pursuing the same policies as Japan, or as the US in 1937. Wolf says it is very likely that the private sector will response to the austerity not through an expansion in demand, that would offset the impact, but through a depression. He concludes that the world economy remains disturbingly fragile. “Only those who believe the economy is a morality play, in which those they deem wicked should suffer punishment, would enjoy that painful result.” No prizes for guessing whom he had in mind. http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2817&tx_ttnews[ba ckPid]=901&cHash=eb4051abd8#

164 COLUMNISTS Fear must not blind us to deflation’s dangers

By Martin Wolf Published: June 8 2010 22:07 | Last updated: June 8 2010 22:07

A consensus is forming that policymakers should tighten fiscal policy, sharply, in countries with large fiscal deficits. Yet what makes these policymakers sure that business and consumers will spend in response to austerity? What if they find that it tips economies into recession, or even deflation? In last weekend’s communiqué of the Group of 20 leading economies, finance ministers and central bank governors stated that “countries with serious fiscal challenges need to accelerate the pace of consolidation”.Yet the world economy confronts two risks, not one: the first is, indeed, that much of the developed world is going to be Greece; the second is that it will be Japan. As Adam Posen, outside member of the Bank of England’s monetary policy committee, pointed out in a recent speech, fiscal contraction, along with persistent banking problems and insufficiently loose monetary policy, generated the negative shock in 1997 that entrenched deflation in Japan.* Many economic historians argue that the US made a similar mistake in 1937. How, I wonder, will the world look back on what is now being planned? Germany’s commitment to greater fiscal austerity across the eurozone is powerful, if hardly surprising. Judged by the UK prime minister’s speech on Monday, the UK is on the same path. Happily, the US has not joined the consensus – as yet. Japan is stuck firmly in deflation. Germany’s most recent rate of annual core inflation was just 0.3 per cent. In the US, core inflation is 0.9 per cent. Another economic shock could shift these economies into deflation, with all the attendant difficulties of trying to make monetary policy bite in a world of post-bubble deleveraging. Moreover, despite the heroic efforts of central banks, growth of broad monetary aggregates is subdued, mainly because the transmission mechanism is impaired: over the latest 12-month period, US and eurozone M2 grew just 1.6 per cent. Monetarists should be quite relaxed about

165 the risks of inflation. They should be concerned, instead, that central banks are failing to give the private sector the liquidity it wants. Against this background, what would a big tightening of fiscal policy deliver? In the absence of effective monetary policy offsets, one would expect aggregate demand to weaken, possibly sharply. Some economists do believe in “Ricardian equivalence” – the notion that private spending would automatically offset fiscal tightening. But, as Mr Posen argues of Japan, “there is no good evidence ... of strong Ricardian offsets to fiscal policy.” In developed countries today, fiscal deficits are surely a consequence of post-crisis private retrenchment, not the other way round. This is all very well, many will respond, but what about the risks of a Greek-style meltdown? A year ago, I argued – in response to a vigorous public debate between the Harvard historian, Niall Ferguson, and the Nobel-laureate economist, Paul Krugman – that the rapid rise in US long-term interest rates was no more than a return to normal, after the panic. Subsequent developments strongly support this argument. US government 10-year bond rates are a mere 3.2 per cent, down from 3.9 per cent on June 10 2009, Germany’s are 2.6 per cent, France’s 3 per cent and even the UK’s only 3.4 per cent. German rates are now where Japan’s were in early 1997, during the long slide from 7.9 per cent in 1990 to just above 1 per cent today. What about default risk? Markets seem to view that as close to zero: interest rates on index-linked bonds in the France, Germany, the UK and US are about 1 per cent. What, for that matter, does the spread between conventional and index-linked bonds tell us about inflation expectations? We can say that these are, happily, still well anchored, at about 2 per cent in the US, Germany and France. In the UK, they are somewhat higher. The question is whether such confidence will last. My guess – there is no certainty here – is that the US is more likely to be able to borrow for a long time, like Japan, than to be shut out of markets, like Greece, with the UK in-between. As borrowers, the US and UK have advantages: first, their private sector surpluses cover some three-quarters and 90 per cent, respectively, of their fiscal deficits; second, many private-sector investors need assets that match liabilities in their domestic currency; third, because these countries have active central banks, bondholders suffer no significant liquidity risk; fourth, they have floating exchange rates, which take some of the strain of changes in confidence; fifth, they have policy autonomy, which gives a reasonable prospect of near-term economic growth; and, finally, the US offers the world’s most credible reserve asset. That gives the US government the position vis-a-vis the world that the Japanese government possesses vis-a-vis Japanese savers. Critics could argue that these arguments downplay the risks of a “sudden stop” in financial markets. But risks arise on both sides. When Japan – or Canada or Sweden – tightened in the 1990s, a buoyant world economy could absorb excess domestic supply. There is no world economy big enough to offset renewed contraction in Europe and the US. Concerted fiscal tightening could, in current circumstances, fail: larger cyclical deficits, as economies weaken, could offset attempts at structural fiscal tightening. For countries in southern Europe, this is already a danger. Much of the world could end up in a beggar-my- neighbour position towards an increasingly fiscally stretched US. The G20 did stress “the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances.” That seems fair. In so doing, policymakers must recognise that deflation is a

166 risk, too, and that tighter fiscal policy requires effective monetary policy offsets, which may be hard to deliver today, above all in the eurozone. Premature fiscal tightening is, warns experience, as big a danger as delayed tightening would be. There are no certainties here. The world economy – or at least that of the advanced countries – remains disturbingly fragile. Only those who believe the economy is a morality play, in which those they deem wicked should suffer punishment, would enjoy that painful result.

* The Realities and Relevance of Japan’s Great Recession, www.bankofengland.co.uk Martin Wolf Fear must not blind us to deflation’s dangers une 8 2010 22:07 http://www.ft.com/cms/s/0/6bc012d6-733c-11df-ae73-00144feabdc0.html

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El deterioro de las finanzas públicas El Gobierno acelerará la reforma de las pensiones "en torno al verano" Economía espera una respuesta rápida del Pacto de Toledo - La UE refuerza sus poderes para auditar las cuentas públicas e intensifica el recorte de los déficit ANDREU MISSÉ - Luxemburgo - 09/06/2010 Bruselas quiere reformas rápidas en el mercado de trabajo y en las pensiones, y ambos cambios se acercan a toda velocidad. El presidente Zapatero ya ha puesto fecha límite para la reforma laboral: el 16 de junio. Y el Gobierno avanzó ayer que se ha propuesto acelerar la otra reforma medular, la relativa a las pensiones. Bruselas quiere reformas rápidas en el mercado de trabajo y en las pensiones, y ambos cambios se acercan a toda velocidad. El presidente Zapatero ya ha puesto fecha límite para la reforma laboral: el 16 de junio. Y el Gobierno avanzó ayer que se ha propuesto acelerar la otra reforma medular, la relativa a las pensiones. La vicepresidenta Elena Salgado aseguró en Luxemburgo que el Ejecutivo espera una respuesta del Pacto de Toledo sobre las pensiones "en torno al verano o inmediatamente después". Hasta ahora se trabajaba sin fecha -y a un ritmo más bien lento, con un horizonte que no preveía novedades hasta finales de año-, pero la presión de Bruselas obliga a cambiar el paso. El examen sobre el plan de austeridad español llegará el próximo martes, indicó el comisario de asuntos económicos y monetarios, Olli Rehn. El comisario manifestó que España ha tomado decisiones "muy importantes" sobre consolidación fiscal y "está preparando nuevas reformas estructurales sustanciales", entre las que citó la laboral y la relativa a las pensiones. Salgado puntualizó sobre pensiones que "no se trata de una reforma nueva", y añadió que el Gobierno "ya ha presentado una propuesta y la ha enviado al Pacto de Toledo". La novedad es que la respuesta del pacto se espera ahora a corto plazo. La propuesta del Ejecutivo consiste, básicamente, en elevar gradualmente la edad de jubilación y revisar el periodo de cálculo de las pensiones. Y contiene otros aspectos como la posibilidad de cubrir a colectivos que hasta ahora no lo están (como los empleados del hogar) y restringir las prejubilaciones. Las reformas laboral y de pensiones vienen a complementar el drástico plan de recortes presentado por el Gobierno . Salgado volvió a reiterar la disposición de España a hacer "todo lo necesario" para que el déficit público sea del 6% en 2011. La polémica sobre si las medidas anunciadas hasta ahora por el Gobierno son suficientes se despejará el próximo martes por la Comisión Europea. Salgado manifestó que "no hay ninguna medida específica más" prevista para 2011. "Lo que hay", precisó, "es el compromiso por parte del Gobierno español por si hay desviaciones con respecto a la ejecución presupuestaria, para solucionar esas desviaciones de manera que en todo caso el déficit en el año 2011 sea de un 6%". La reunión de ministros de Economía dejó otras novedades. La UE está intensificando su cruzada por la austeridad del gasto público con una panoplia de medidas que van desde dotar de más poderes a Eurostat para auditar las cuentas de los Estados, a fortalecer la cooperación en la lucha contra el fraude fiscal transfronterizo en materia del IVA y reforzar las sanciones a los países que incumplan el Pacto de Estabilidad. La necesidad de progresar en la

168 consolidación presupuestaria vale para España y Portugal, los países más presionados, "pero también para los otros Estados miembros de la zona euro sin ninguna excepción", dijo el presidente del Eurogrupo, Jean-Claude Juncker. Con el objetivo de poner fin a los engaños estadísticos, los ministros de Economía acordaron reforzar los poderes de investigación de Eurostat, la oficina estadística de la Unión. El objetivo es autorizar a Eurostat para que pueda efectuar auditorías de las cuentas de los Estados sometidos a procedimientos de déficit excesivo. La Comisión ya pidió sin éxito reforzar sus poderes en 2004, cuando descubrió por primera vez anomalías en las estadísticas de Grecia. El descubrimiento de nuevas falsificaciones de cifras el pasado otoño en Grecia y el temor de que las malas prácticas pudieran darse en otros casos está tras el nuevo papel de Eurostat. Rehn, desveló ayer su preocupación por las cuentas presentadas por Bulgaria y aseguró que Bruselas "está considerando enviar una misión próximamente" a ese país. Los ministros aprobaron también robustecer la cooperación entre las administraciones de los distintos países para combatir el fraude fiscal en el IVA en operaciones transfronterizas. http://www.elpais.com/articulo/economia/Gobierno/acelerara/reforma/pensiones/torno/verano /elpepieco/20100609elpepieco_3/Tes/

169 Coulisses de Bruxelles, UE Jean Quatremer mardi 08 juin 2010 Les désaccords franco-allemands auront coûté cher à la zone euro

Berlin et Paris ont étalé comme à plaisir leurs divergences depuis le début de la crise de la dette souveraine, en décembre 2009, ce qui a contribué à paniquer chaque jour davantage les marchés financiers. Les États membres de l’eurozone espèrent que l’adoption, hier soir, à Luxembourg, des derniers détails techniques du plan de sauvetage européen doté de 440 milliards d’euros refermera cette longue parenthèse et que les investisseurs seront enfin convaincus de la solidité de la zone euro. C’est la chancelière allemande qui est largement responsable de cette cacophonie. Angela Merkel a trainé des pieds, pour des raisons de politique intérieure (lire par ailleurs), pour affirmer sa solidarité avec les pays du sud de l’Europe confrontés à la défiance des investisseurs, alors que l’Élysée la pressait d’agir rapidement afin d’enrayer une crise de confiance qui menaçait de dégénérer. Même si Nicolas Sarkozy s’est abstenu de toute critique publique, il n’a pas dissimulé, en privé, son exaspération devant la lenteur et les réticences allemandes. Rien n’a été facile. Le plan d’aide à la Grèce de 80 milliards d’euros a donné lieu à de véritables psychodrames. Et même lorsque la crise a menacé d’emporter l’euro, Berlin s’et fait tirer l’oreille. Ainsi, le méga-plan de stabilisation financière destiné à venir en aide aux États qui n’arriveraient plus à se financer à des conditions normales sur les marchés n’a été adopté, le 10 mai, aux petites heures du matin, qu’après d’interminables négociations. Pour Berlin, il n’était pas question de permettre à la Commission d’emprunter sur les marchés pour prêter de l’argent aux pays en difficulté : cela ressemblerait trop à un sauvetage direct que les traités européens interdisent. Ses partenaires ont donc accepté de créer une société ad hoc de

170 droit luxembourgeois (la « facilité européenne de stabilité financière ») qui pourrait, elle, emprunter sur les marchés, la Commission se voyant simplement octroyer le droit d’emprunter de son côté 60 milliards d’euros. Pas question non plus d’un engagement sans limites comme le voulait Paris : ce sera 440 milliards d’euros au maximum, soit 4 % du PIB de l’Union. Pas question non plus d’un engagement solidaire souhaité par l’Élysée : chaque pays de la zone euro (plus la Pologne et la Suède qui y participent volontairement) ne sera garant que d’une partie des sommes empruntées, en fonction de sa participation au capital de la BCE (18,9 % pour Berlin, 14,2 % pour Paris), avec une marge de sécurité (120 % de l’engagement initial). Mais, Berlin a, dès le 11 mai, posé de nouvelles exigences qu’elle a finalement abandonnées à la demande de Paris : pas question de demander l’autorisation préalable des parlements nationaux à chaque fois qu’il faudra venir en aide à un pays. De même, la société ad hoc empruntera au meilleur taux possible sur les marchés (la France espère obtenir le AAA++, la meilleure note) et non en fonction des taux qu’obtiendrait chaque pays qui garantit telle ou telle tranche du prêt, ce qui serait revenu à mettre en place une série de prêts bilatéraux… Il aura donc fallu six mois de psychodrame pour que la zone euro se dote enfin d’un mécanisme quasi-fédéral de crise.

« L’Allemagne a fait de nombreux pas vers nous », se réjouit-on à l’Élysée. Mais, pour Nicolas Sarkozy, ces tergiversations allemandes n’ont seulement servi à rien, mais ont couté très cher à la zone euro : une intervention rapide et massive des partenaires d’Athènes aurait stoppé les attaques des spéculateurs contre la dette grecque et empêché la contagion au reste de la zone euro. Photos: Thierry Monasse (non reproductible sauf autorisation) Rédigé le mardi 08 juin 2010 à 17:28 Jean Quatremer Les désaccords franco-allemands auront coûté cher à la zone euro mardi 08 juin 2010 http://bruxelles.blogs.liberation.fr/coulisses/2010/06/les-d%C3%A9saccords- francoallemands-auront-co%C3%BBt%C3%A9-cher-%C3%A0-la-zone-euro.html

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Patos cojos que se quieren Harold James 2010-06-03

FLORENCIA – Los temores sobre la deuda soberana y las dudas sobre el plan de rescate del euro han situado la cuestión de las divisas internacionales de reserva en primer plano. Hasta esta primavera, la mayoría de los observadores había dado por sentado que la participación del dólar en las reservas internacionales iría disminuyendo gradualmente, mientras que la del euro aumentaría, y que el mundo haría una suave transición gradual a un régimen de multirreservas. Hasta ahora, la crisis financiera mundial ha sido históricamente notable al no haber tenido repercusiones importantes en los mercados de divisas. Las acciones de las divisas de reserva más importantes han estado estables, pues en 2009 el dólar representaba el 62 por ciento de las reservas de divisas y el euro el 27 por ciento. Los cambios importantes no se han debido a decisiones deliberadas de los bancos centrales de reasignar reservas, sino de la simple aritmética de los cambiantes tipos de cambio: con un dólar más fuerte, aumentó la proporción del dólar en las reservas mundiales, mientras que con un dólar más débil se redujo. De hecho, un equilibrio del terror –por decirlo así– ha obstaculizado reasignaciones importantes por parte de los grandes poseedores de reservas. El intento de diversificar vendiendo un activo determinado tendría tan grandes repercusiones en los mercados, que produciría grandes pérdidas a cualquier banco central que lo hiciera. La crisis del euro ha puesto en tela de juicio la opinión de que la transición a un régimen de multirreservas resultará suave. Los bancos centrales de Asia y Oriente Medio que cuentan con grandes reservas de euros se han puesto nerviosos ante los respaldos políticos al euro, pero con el gran déficit fiscal de los Estados Unidos, junto con la continua incertidumbre sobre sus mercados financieros, el dólar también es potencialmente vulnerable. Hay algunos precedentes históricos de esta situación. En el decenio de 1960, la libra británica era la segunda divisa de reserva del mundo. Las autoridades americanas hicieron esfuerzos considerables para apoyar la libra, porque sabían que los mismos factores que hacían vulnerable la libra amenazaban también al dólar. Así, pues, se veía la libra como parte del perímetro de defensa del dólar. Los críticos lo vieron como el caso de dos patos cojos que se apoyaban mutuamente. El reciente frenesí de diplomacia telefónica de alto nivel, en la que el Presidente Barack Obama apremió a los dirigentes europeos para que actuaran a fin de rescatar el euro, reveló que esa dinámica seguía en pie. Fue una extraordinaria demostración no sólo de lo difícil que resultó a los dirigentes europeos reaccionar coordinadamente, sino también de la importancia estratégica que reviste una segunda divisa de reserva para la mayor de

172 ellas. En caso de que el euro se desplomara, la economía de los Estados Unidos sería sumamente vulnerable, por lo que los patos cojos de hoy necesitan abrazarse. La analogía con el decenio de 1960 plantea la cuestión de si podría surgir –y cuándo– una nueva divisa internacional importante. Al cabo de pocos años, el reino de la libra como divisa internacional de confianza pasó a ser cosa del pasado. El yen y el marco alemán surgieron como nuevas divisas de reserva en potencia, aunque los gobiernos y los bancos centrales japoneses y alemanes sintieron profunda preocupación por ese nuevo papel de sus divisas y la inestabilidad que podía entrañar. Retrospectivamente, muchos han considerado inevitable el cambio, pero en aquel momento pareció enormemente improbable. El ascenso del yen y del marco alemán ocurrió sólo veinte años después de la catastrófica devastación de la segunda guerra mundial, que había ido acompañada inevitablemente de inflación. Durante la ocupación de la inmediata posguerra, los planificadores militares de los EE.UU. tuvieron que imponer nuevos regímenes de divisas e instituciones de banca central. Aún más extraordinario es que, cuando esas nuevas divisas surgieron como nuevas aspirantes a la condición de reserva, hacía poco que habían pasado a ser convertibles para las transacciones de la cuenta corriente y aún estaban limitadas las corrientes de capital. Alemana había pasado a la convertibilidad de la cuenta corriente en 1958, pero el Japón no lo hizo hasta 1964. Además, el Japón en particular no era especialmente acaudalado en una comparación internacional y ninguno de los dos países tenía mercados de capitales profundos ni bien desarrollados. Sólo importaba un dato: unos impresionantes resultados de las exportaciones, pues los dos países mantuvieron grandes superávits comerciales durante varios años y a lo largo de diferentes fases del ciclo económico, gracias a lo cual parecieron una fuente de mayor estabilidad de las divisas que los Estados Unidos y Gran Bretaña. La acumulación de activos asociada con los superávits exteriores, junto con una continua fuerza exportadora, parecían una garantía de sus divisas. A diferencia del dólar y de la libra, el yen y el marco alemán no dependían de la atracción de corrientes extranjeras de capital. Naturalmente, la conversión en divisa de reserva en potencia creaba una profunda vulnerabilidad. Tanto el Japón como Alemania liberalizaron muy lentamente sus sistemas financieros nacionales, pues intentaron limitar las entradas de capitales durante un período de tiempo considerable para evitar una rápida apreciación de sus divisas y la consiguiente erosión de su competitividad exportadora. China pasó a la convertibilidad de la cuenta corriente en 1996, pero mantuvo un gran número de controles de los movimientos de capital, que han hecho de escudo contra el contagio financiero. ¿Siguen siendo necesarios? La enseñanza que se desprende del decenio de 1960 indica que un renminbi totalmente convertible podría pasar a ser rápidamente una importante divisa de reserva internacional. Sería atractiva no sólo porque el Banco Popular de China y otras importantes entidades chinas tienen enormes activos extranjeros, sino también porque China produce bienes que los consumidores del mundo siguen queriendo comprar. La experiencia histórica de Alemania y del Japón y la reciente agitación financiera de los grandes países industrializados parece aconsejar no hacer ese cambio de política. Pero, como país grande que es, China no tendría las vulnerabilidades de las divisas fuertes más pequeñas (la corona noruega o el franco suizo, por ejemplo) y, como suministrador de una divisa de reserva, China no necesitaría seguir acumulando reservas, lo que ha sido un importante factor que ha contribuido a la inestabilidad financiera mundial. Al sumárseles

173 el renminbi como posible opción de reserva, los actuales patos cojos quedarían liberados de su matrimonio forzoso. Copyright: Project Syndicate, 2010. www.project-syndicate.org Traducido del inglés por Carlos Manzano. Harold James Patos cojos que se quieren 2010-06-03 http://www.project- syndicate.org/commentary/james41/Spanish

The Nixon Shock Doctrine Revisited Harold James 2010-04-01

FLORENCE – Richard Nixon has been dead for 15 years, but he is making another comeback in America. The 37th President of the United States believed that international monetary relations are unlikely to be transformed by talking. Instead, he thought that radical unilateral action was required. Today, pressure is increasing for the US Treasury to follow Nixon’s misguided example and issue a finding (due by April 15th) that China is manipulating its exchange rate. Some 130 members of Congress have signed a letter demanding action on China’s currency. The campaign is enthusiastically endorsed by a leading US economist and trade specialist, the Nobel laureate Paul Krugman. From today’s perspective, the problems of the Nixon era look relatively manageable, even trivial. The world’s currency reserves were held in a slightly lop-sided way: at the end of 1971, Germany had reserves worth $17.2 billion, and Japan’s were worth $14.1 billion – 14% and 11.5% of the world’s total, respectively. In 2008, the last year for which figures are available, Japan held 23.4 % of the world’s reserves and China held 44.8%. These figures are even higher today. In 1971, Americans were feeling the effects of a German and Japanese export surge. Germany had a current-account surplus of 2.1% of GDP at the time, while Japan’s was 4.4%. In 2008, the Japanese surplus was 3.2% of GDP, Germany’s was 6.7%, and China’s was 9.8%. Then, as now, there were differing perspectives on the cause of the global imbalances. Europeans and Asians saw excessively loose US fiscal and monetary policy as the major culprit. Americans, by contrast, thought that Japan and Germany were artificially holding down their currencies’ value in order to get an unfair advantage for their politically powerful export industries. Germany was more obliging in the face of US pressure, mainly because its security relied on America’s military presence. It undertook a small revaluation in 1969 and then let its currency float in May 1971. But Japan’s government was intransigent. Talking about the charms of market opening or about fairness did not help. Treasury Secretary John Connolly attacked Japan’s “controlled economy.” There were two American strategies to prize open Japan’s supposedly closed economy. One strategy, termed “benign neglect,” was to let the surplus countries pile up reserves until they realized that they had a very big problem. But there seemed to be no end to the piling up of reserves, so the only remaining choice was confrontation.

174 Nixon intrinsically distrusted multilateralism. The conventional view, then as now, was that unilateral action risked unleashing a wave of protectionism. When Federal Reserve Chairman Arthur Burns objected on the grounds that other countries might retaliate, Connolly replied, “Let ‘em. What can they do?” The point was clear: “So the other countries don’t like it. So what?” On August 15, 1971, Nixon imposed a temporary surcharge of 10% on imports “to ensure that American products will not be at a disadvantage because of unfair exchange rates.” At the same time, there was a wage and price freeze, an end to the Federal Reserve’s swap network of support for other central banks, and a limitation of gold transactions, implying a reduction in the value of the American currency. None of these measures served to restore US economic growth rates or correct the surpluses of America’s competitors. To be sure, the Japanese and German external balances were subject to heavy swings in the course of the turbulent 1970’s. Large surpluses turned into deficits for Japan in 1973 and 1979, and for Germany in 1974, 1975, 1979, and 1980. But this was due not to bilateral corrections in these countries’ trade relationships with the US, but mostly to their energy dependence and the decade’s energy price shocks. Between these deficits, large surpluses for Germany and Japan reappeared – as they have in the 2000’s. Some of the late 1970’s correction did follow from renewed intense US pressure for fiscal and monetary expansion, but that expansion caused inflationary pressure, which the Japanese and Germans then predictably blamed on the US. After an initial inflationary surge, American economic growth fell off sharply in the 1970’s. The world became much more inflationary, and quite a bit more protectionist. This did not, however, imply a return to the 1930’s, in large part because energy dependence forced industrial countries to maintain an open trade regime so that they could earn the money to pay for oil and gasoline. America’s currency unilateralism pushed everyone else to organize against the chaos emanating from Washington. The Europeans advanced their plans for regional monetary and economic integration. The dollar confusion encouraged the oil producers to form their (briefly) highly effective cartel, OPEC. Only the most obvious of the targets of August 1971, Japan, was badly hit by what the Japanese called the second “Nixon shokku” (the first being Nixon’s announcement the previous month that he would visit mainland China in 1972). That was because, unlike Germany, Japan was standing on its own. China today is not isolated in the way that Japan was in 1971. On the contrary, it will find an easy way to turn its resentment of American pressure into an issue of regional solidarity – exactly as the Germans did in the 1970’s. Instead of leading to an American renaissance, the “Nixon shock” produced theories about American imperial overstretch and decline. Today, the fastest way to really make this “the Asian century” is to give Asian exporters a similarly unpleasant shock, thereby spurring the creation of an Asian community of surplus countries. Can Barack Obama, fresh from his major domestic victory on health care, really afford to turn himself into Richard Nixon? Harold James The Nixon Shock Doctrine Revisited 2010-04-01 http://www.project- syndicate.org/commentary/james39/English

175 JUNE 8, 2010 Euro Zone Finalizes Terms of Rescue Package By CHARLES FORELLE LUXEMBOURG—Euro-zone finance ministers gave their final approval to a €440 billion ($520 billion) rescue package Monday and said the special entity set up for emergency lending would aim for the highest possible credit rating. At the same time, the International Monetary Fund, now deeply involved in bailing out the euro zone, called on the Continent to clean up its banking sector and to go beyond current proposals for joint management of national budgets. The conclusions from high-level meetings here nudged the 16-nation euro zone closer toward fiscal union: In pushing for a triple-A-rated rescue vehicle, Germany, France and other strong nations will effectively be leveraging their own high credit ratings to support their less- creditworthy euro-zone fellows. View Full Image

Reuters Strauss-Kahn, left, and Juncker at a euro zone finance meeting Monday. The currency bloc's rescue vehicle is the largest piece of a €750 billion package that includes participation from the IMF and a facility run by the European Union's executive arm, the European Commission. Formalizing the deal could provide some relief to markets jittery about the zone's ability to put cash on the table. But the deal sets the stage for negotiations with rating agencies over further details. The euro zone agreed last month that its members would back the bailout with loan guarantees in proportion to their shares in the European Central Bank—roughly in order of economic heft. The rescue vehicle will borrow on capital markets for its funding. EU officials wrestled for weeks with how losses should be borne if an aid recipient defaults, and on what guarantees need to be put into action. The answer would help determine how much protection the rescue vehicle's lenders would enjoy and in turn what sort of interest rate they could demand.

176 Olli Rehn, the European commissioner for economic affairs, said Monday that the countries had agreed to guarantee an extra 20% beyond their ECB shares, which could help cover any shortfalls. That, he said, is "one of the elements" to ensure the "highest possible rating." Another element is a "cash reserve to provide an additional cushion" for the guarantees, according to a euro-zone statement. As the euro-zone countries agreed last month, the rescue vehicle will be an off-balance-sheet entity that raises money backed by members' guarantees. The entity would then lend the money it raises to fiscally troubled member countries. Finance ministers remained intensely concerned with budget gaps in the currency bloc's weaker countries. Spain and Portugal have made "courageous" moves to trim their deficits, but "further consolidation" will be needed in coming years, said Jean-Claude Juncker, the Luxembourg prime minister and the president of the council of euro-zone countries. Earlier Monday, the IMF sounded stern notes about Europe's need to resolve questions over its longer-term fiscal governance—how, in other words, euro-zone members can ensure that others exercise prudence in taxation and spending. The fund said it welcomed proposals by the European Commission to beef up budget surveillance but called for "more-ambitious changes" to foster compliance with the rules. It also proposed using an EU bond issuance to give countries an incentive to keep deficits down. Under such a plan, an official said, the countries that kept their fiscal numbers in line with rules would be allowed to borrow at low EU rates. That idea has met with political resistance from countries that would be effectively subsidizing others' borrowing. Behind the Bailout

The fund also warned that "delayed or half-hearted fiscal consolidation" in troubled countries could cause more financial-market upheaval. At the same time, it fretted that too much consolidation—that is, too much budget cutting—could crimp the growth countries need to generate in order to pay back their towering debts. How to balance the two extremes is one of the Continent's central conundrums.

177 A group led by EU President Herman Van Rompuy, charged with encouraging fiscal prudence, also met here Monday. Mr. Van Rompuy said the members discussed measures to toughen up the EU's existing budget rules, such as slapping sanctions earlier on wayward spenders. He didn't provide further details. Separately, the EU continued to deal with fallout from Hungary. Senior politicians from the newly elected ruling party there said late last week that the country wouldn't likely meet its IMF-prescribed budget-deficit targets. That caused a sharp plunge in the Hungarian forint and the euro, and sent policy makers backpedaling to insist the IMF's target still holds. In a rebuke, Mr. Juncker said Monday that he wasn't worried about Hungary's fiscal situation, but that politicians should submit themselves to a "higher degree of verbal discipline." EU ministers also formally approved, as expected, Estonia's bid to join the euro. It will adopt the currency at the beginning of next year. http://online.wsj.com/article/SB10001424052748703303904575292582026400388.html?m od=WSJEUROPE_hpp_MIDDLESecondStories

THE OUTLOOK JUNE 7, 2010 Across Europe, Austerity Moves at Different Speeds By MARCUS WALKER

BERLIN—Reports that Europe is strangling its recovery with austerity may turn out to be exaggerated. Promises to cut budgets are de rigueur in Europe as governments scramble to reassure investors unnerved by Greece's debt crisis. The belt-tightening has raised worries in Washington that Europe's conversion to fiscal rectitude could derail the global recovery. But the timing and depth of Europe's cutbacks vary greatly, and countries which aren't yet under severe pressure from bond markets are trying to steer a middle way between growth and fiscal rebalancing. European Union countries fall into three basic categories:

178 One embattled group—Greece, Spain, Portugal and Ireland—has no choice but to cut budget deficits hard. These four account for only 18% of euro-zone gross domestic product, according to economists at Goldman Sachs. View Full Image

Reuters A man walks up the stairs of a closed metro station during a 24-hour strike of public transport workers in Athens. Journalists and public transport workers walked off the job on June 3, adding to a series of strikes against tough austerity measures. The second includes the U.K. and Italy, where policy makers fear they could face similarly severe pressure from markets eventually. They are cutting their deficits immediately—but slowly—to begin with. A third group, the core of euro-zone members around big economies Germany and France, is following St. Augustine's prayer for "chastity and continence, but not yet." Warnings of fiscal schmerz (pain) and rigueur (austerity) from Chancellor Angela Merkel and President Nicolas Sarkozy belie the fact that both countries, as well as a few smaller neighbors, are letting budget deficits rise this year. Even the euro core will start to cut spending and raise taxes from 2011 onwards. That's too restrictive for Keynesian economists, the U.S. Treasury and the International Monetary Fund, all of whom have called on Europe's financially sounder countries to put off cuts to prop up growth. The U.S. and IMF found themselves in a minority when finance ministers from the Group of 20 leading economies met in South Korea on Friday and Saturday. Most other participants pressed Europe to sort out its finances soon. But austerity plans in core Europe are probably cautious enough to allow a fragile recovery to continue, many economists say. "Germany is still easing, Spain is tightening, Italy is neutral—it looks about right," says Greg Fuzesi, economist at J.P. Morgan in London. "You can't rule out the risk that the recovery will fade because of fiscal tightening, but at the moment it looks like the cyclical dynamics will continue to give Europe a lift," he says. Even if Europe's fiscal repairs don't choke off the recovery, they could make it more reliant on business while weakening household spending. Consumers are expected to bear the brunt of measures such as indirect-tax increases and public-sector pay freezes. Meanwhile the fast- falling euro is set to boost exports. A sustained 10% drop in the euro—as seen in the last six months—adds about half a percent to GDP in the single-currency zone, say economists. As a whole, the euro zone is still in stimulus mode this year—just. But in 2011, budget cutbacks across the zone will subtract around 1.5% from GDP, according to Goldman estimates, meaning that the private sector will have to carry the recovery.

179 Goldman expects the euro-zone economy to grow by around 2% next year despite the fiscal drag. Keynesians still argue Europe has the balance wrong, and that Germany and some others are doing less than they could to support growth. Whatever the economic merits of that case, the political argument was lost decisively in Europe in early May, when Germany backed away from tax cuts, the euro zone agreed on a huge bailout fund, and the U.K. elected a Conservative-led government. The euro zone's €750 billion bailout fund for countries that, like Greece, might lose access to capital markets presents Germany and other countries with potentially high costs. That turned Ms. Merkel's government decisively against cutting taxes—an election pledge that voters increasingly saw as irresponsible anyway. Surveys show ordinary Germans are increasingly worried about rising public debt, which they fear could undermine the country's cherished welfare state. Across the euro zone, saving the single currency—and with it, European integration—by beefing up budget discipline now takes political priority over a faster economic recovery. "It would have been preferable if core countries, particularly Germany, had delayed fiscal consolidation a year longer," says Jennifer McKeown, senior European economist at London consultancy Capital Economics. "But there might have been growing market concerns about the core countries' public finances, too, which would not have been good for the euro experiment," she says. When to roll back public spending was a key issue in the U.K. general election, with the then- Labour government arguing for cutting later, and Conservatives arguing for action now. The new Conservative-Liberal Democrat coalition has opted for immediate savings—but only £6 billion this year. Write to Marcus Walker at [email protected] http://online.wsj.com/article/SB10001424052748704726104575290301974295536.html

180 BUSINESS JUNE 7, 2010 Finance Panel Accuses Goldman of Stalling By JOHN D. MCKINNON And SUSANNE CRAIG WASHINGTON—A commission probing the financial crisis denounced Goldman Sachs Group Inc., saying the firm first dragged its feet over requests for information then dumped hundreds of millions of pages of documents on the panel. View Full Image Associated Press Commission chairman Philip Angelides last week.

TK The Financial Crisis Inquiry Commission issued a subpoena to Goldman, demanding that the firm provide a key for identifying customer names and a way of matching up specific documents to the commission's requests for information. The subpoena also demanded documents concerning Goldman's mortgage-backed derivative securities, which are central in current federal probes of the firm. The commission is particularly interested in Goldman's dealings with American International Group Inc., which had to be bailed out by the government during the financial crisis in 2008. The subpoena demanded interviews with a number of executives, including Chief Executive Lloyd Blankfein, as well as the executive who's most knowledgeable about "transactions between AIG and Goldman," the FCIC said. A Goldman spokesman said, "We have been and continue to be committed to providing the FCIC with the information they have requested."

Any revelations unearthed by the commission could pose public-relations and legal risks for Goldman as it fends off federal investigations and private litigation. The commission is asking for audio tapes of internal discussions at Goldman, a type of disclosure that hasn't previously figured in the firm's public battles, according to people familiar with the situation. The battle with the commission represents another Washington stumble for Goldman. The firm was sued by the Securities and Exchange Commission in April over one of its subprime- mortgage securities, and endured a public thrashing by the Senate Permanent Subcommittee

181 on Investigations over other deals where lawmakers said the firm unfairly profited at the expense of its customers. Goldman said it did nothing wrong. Commission chairman Phil Angelides, the former California state treasurer, termed Goldman's response to document requests "a very deliberate effort to run out the clock." The 10-member panel, formed by Congress last year, has a December deadline to submit its final report. "We should not be forced to play 'Where's Waldo' on behalf of the American people," said Mr. Angelides, referring to the children's books. Vice chairman Bill Thomas, a former Republican House member, termed the firm's conduct "deliberate obfuscation," adding, "They may have more to cover up than maybe we thought." A timeline released by the commission late Monday showed that the FCIC began asking for documents and other information in late January. But it received only incomplete or inadequate responses, along with repeated requests for delays, the timeline said. Among other items, the FCIC is seeking more information about the ABACUS transactions that figured in the SEC's fraud lawsuit against Goldman. Many of the commission inquiries appear to be in preparation for a coming FCIC hearing on derivatives, at which Goldman executives could testify. AIG effectively wrote insurance on many Wall Street mortgage deals that later soured. Goldman has disclosed receiving roughly $14 billion from AIG in such deals, representing virtually full payment on AIG's obligations. Goldman said it didn't retain much of the money, using it instead to meet similar obligations to other clients of the firm. The commission also has asked Goldman about its sale of subprime derivative securities that later plunged in value. Goldman traders made side bets against some of these same securities. Goldman executives have emphasized the firm's status as a market maker that has minimal obligations to look after its customers' interests. In response to the commission's inquiries, Goldman insiders say the firm has provided more than 20 million documents to the committee. Commission officials said Goldman delayed responding to their requests for months. Within the past three weeks, the firm provided the commission a mass of material totaling about five terabytes, officials said, or hundreds of millions of pages. "We did not ask them to pull up a dump truck to our offices and dump a bunch of rubbish," Mr. Angelides said. —Serena Ng contributed to this article. Write to John D. McKinnon at [email protected] and Susanne Craig at [email protected] http://online.wsj.com/article/SB10001424052748703303904575292530057313818.html?mod =WSJEUROPE_newsreel_business

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JUNE 6, 2010 Tax Hikes and the 2011 Economic Collapse Today's corporate profits reflect an income shift into 2010. These profits will tumble next year, preceded most likely by the stock market. By ARTHUR LAFFER People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies. It shouldn't surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives. Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it's also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter. People can also change the timing of when they earn and receive their income in response to government policies. According to a 2004 U.S. Treasury report, "high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992—over $15 billion—in order to avoid the effects of the anticipated increase in the top rate from 31% to 39.6%. At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994." Just remember what happened to auto sales when the cash for clunkers program ended. Or how about new housing sales when the $8,000 tax credit ended? It isn't rocket surgery, as the Ivy League professor said.

On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to

183 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts. Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there's always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere. Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be. Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession. In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn't take effect until Jan. 1, 1983. Reagan's delayed tax cuts were the mirror image of President Barack Obama's delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%. But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011. Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market. In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what's going to happen to tax rates, this conversion seems like a no-brainer. The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain't seen nothing yet. Mr. Laffer is the chairman of Laffer Associates and co-author of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010). http://online.wsj.com/article/SB10001424052748704113504575264513748386610.html#

184 ECONOMY JUNE 8, 2010, 9:14 A.M. ET Fitch: U.K. Fiscal Challenge 'Formidable' By LAURENCE NORMAN And ART PATNAUDE LONDON—Fitch Ratings on Tuesday urged the U.K. to cut its borrowing by an additional 1% of gross domestic product per year if the country is to maintain its triple-A rating. The warning is timely for the new U.K. government, which later in the day will lay out fresh details of how they will address a budget deficit that reached £156 billion ($225.71 billion) in the last financial year. On Monday, Prime Minister David Cameron warned the U.K. could end up making interest payments of £70 billion by 2015 if it doesn't move rapidly to tackle its debts. View Full Image

Chris Ratcliffe/Bloomberg News U.K. Opposes Early Budget Scrutiny by EU Germany, U.K. Ready for Spending Cuts The Source: Warning Good News for U.K. Chancellor Austerity Moves at Different Speeds Vote: Will belt-tightening derail global recovery? In its statement, Fitch said the fiscal challenge facing the U.K. is formidable and warrants a strong medium-term consolidation strategy, including a faster pace of deficit reduction than set out in the budget released in April 2010. A more ambitious deficit reduction path, "with borrowing 1% lower than the April 2010 budget throughout the medium term, would result in an earlier peak in debt to GDP and a clearly declining debt path," Fitch said in a statement. The ratings agency has a stable outlook on the country's rating. Fitch's warning hit U.K. assets. The blue-chip FTSE 100 index initially dropped below the psychologically important 5000 level before retracing some of the losses. Midafternoon, it was down 0.7%. U.K. government bonds, known as gilts, fell from their earlier highs, and sterling weakened in the currency markets. The annual cost of insuring $10 million of U.K. government debt against default rose to $98,000, from $94,000, according to Markit data.

185 The warning came about an hour before the daily setting of the London interbank lending rate. The three-month sterling rate edged up to a fresh 10-month high of 0.72719%, from 0.72563%. A U.K. treasury spokesman said the rating agency "makes the case clearly" for accelerated deficit reduction, especially in the aftermath of the euro-zone debt problems. "The government agrees and that is why it is committed to significantly accelerating the reduction of the structural deficit. The G20 meeting last weekend endorsed this approach," the spokesman said. If anything, the Fitch report could to make it easier for Mr. Cameron and Chancellor of the Exchequer George Osborne to broaden political support for the tough fiscal decisions needed in the months ahead. Mr. Osborne will set out some of his plans in the June 22 emergency budget. Over the summer, the government will carry out a comprehensive spending review, which will pencil in the size of spending cuts needed at government departments. However, in its note Fitch seemed to hint that tax hikes as well as spending cuts may be needed for the U.K. to deliver a credible deficit-reduction path. "Achieving such a path purely on the basis of further spending cuts would imply unprecedented real declines in primary spending," Fitch said. Write to Laurence Norman at [email protected] http://online.wsj.com/article/SB10001424052748703302604575294072398905304.html?mod =WSJEUROPE_hpp_LEFTTopStories

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JUNE 8, 2010 Bernanke Says Economy Seems to Be on Track By JON HILSENRATH and LUCA DI LEO Federal Reserve Chairman Ben Bernanke offered cautious reassurance that the U.S. recovery is on track, despite recent turmoil in financial markets and worries about the health of Europe's economy. "There seems to be a good bit of momentum in consumer spending and investment," Mr. Bernanke said at a dinner hosted by the Woodrow Wilson International Center for Scholars. "My best guess is we'll have continued recovery, but it won't feel terrific." In addition to longstanding worries about anemic U.S. job growth and a fragile banking system, Fed officials have been watching warily in recent weeks as U.S. stock prices decline amidst Europe's worsening economic outlook. Mr. Bernanke noted that the U.S. recovery seemed to have become more entrenched in the first half of 2010. Last year, growth was driven by government stimulus and inventory rebuilding by firms. Now, he noted, consumers and businesses were kicking in. "There are some signs that the private sector is picking up the baton," he said. However he added Europe to the long list of caveats that give Fed officials pause. "We're watching that whole situation very carefully, he said referring to European efforts to rein in large government budget deficits. He also noted that with the economy growing at a moderate pace of between 3.0 and 3.5%, it will take time for the unemployment rate to come down. Mr. Bernanke added that financial market movements were among the variables he would consider in assessing the need for interest rates hikes. The Fed has pushed short-term interest rates to near zero in late 2008, and looks increasingly unclined to move them higher any time soon. Mr. Bernanke has said many times before that movements in employment, inflation and inflation expectations were his main criteria for assessing the need for a rate hike, but he noted Monday, "we're looking at financial markets and other things as well." It was an unusual appearance for the Fed chairman. Fed officials usually stick to well-scripted events. But Mr. Bernanke has been trying to speak out more openly in different environments. In this case, he was grilled by the former television newsman Sam Donaldson, known for his combative years as a voluble White Correspondent. Mr. Donaldson was mostly polite in this case, but also interrupted the Fed chairman a few times to get new questions in. Write to Jon Hilsenrath at [email protected] and Luca Di Leo at [email protected] http://online.wsj.com/article/SB10001424052748703303904575293500401370006.html?m od=WSJ_article_MoreIn#

187 Daily Morning Newsbriefing While Strauss-Kahn understands the problems of the eurozone, von Rompuy does not

08.06.2010 At the eurogroup meeting Herman von Rompuy presents his priorities for reforming the eurozone governance: a new stability pact and an agenda to reduce current account imbalances; The assumption here is that imbalances are entirely structural and only the problem of deficit countries; The IMF advocates a more comprehensive response in its Article 4 conclusions, calling for policy actions also from surplus countries; Bond yields are rising in the eurozone despite ECB bond purchases; Germany presents its austerity package for 2011-2014 with a cumulated spending affect of €26.6bn; Biggest saving items are reduction in welfare payments, further job cuts in the public sector, reductions in subsidies, a new tax on nuclear energy and a budget cut for the Bundeswehr by €2bn; Gunter Nonnenmacher argues that this austerity programme marks the true beginning of the coalition; Jean Quatremer worries about the impact of the German austerity package on Europe; Thomas Klau argues that Merkel has chosen at the national context rather than the European to reclaim leadership; A diner between Merkel and Sarkozy has been postponed; Jeffrey Sachs, meanwhile, says that Keynesianism has experienced its last hurrah during this crisis. 08.06.2010 While Strauss-Kahn understands the problems of the eurozone, von Rompuy does not

After a meeting of his task force to reform the eurozone governance, Herman van Rompuy last night listed the priorities – a new stability pact and an agenda to reduce current account imbalances within the eurozone. In his analysis, the problem of countries with large current account deficit is 100% structural, and to 100% located in the countries with current account deficits. [Both assumptions are dead wrong. Spain surely has competitiveness problems with structural components, but how then do you explain the US deficit relative to China? Is the US not supposed to be more competitive than we are? Was the Lisbon Agenda not premised on this assumption? The problem we observed during the last decade was excessive saving in

188 Germany (and China), and excessive dissaving in Spain (and the US). There are structural pathologies in all those economies that contribute to this outcome, as well as a lack of coordination and integration (in the labour market, for example). If you to fix the problem, you have to propose a much more symmetric agenda. The German tax and regulatory systems have built-in incentives for manufacturing investments, and disincentives for consumption. ] Contrast this facile analysis of the situation, with that of Dominque Strauss-Kahn, who was also present at yesterday’s eurogroup meeting, where he presented the IMF article 4 conclusions. As ever, it is best to read the IMF’s own summary and full statement. While the eurozone itself is focusing entirely on fiscal adjustment – plus some structural reforms in countries with current account deficits – the IMF advocates a more comprehensive policy response. It says five issues must be tackled right now: 1. Fiscal sustainability 2. Country specific structural reforms to spur growth (in all countries) 3. Accelerated restructuring of the financial sector 4. Better EMU governance 5. Go much further on building an EU financial stability architecture than before The article IV deliberations also make the point, in contrast to van Rompuy that not only Spain has to adjust, but Germany as well. “Policy action is not only necessary in member countries suffering from market tensions or competitiveness problems, but throughout the euro area to generate confidence, display cohesion, and improve overall investment and growth prospects.” Bond yields are rising despite ECB purchases Bond yields of Italy and Spain reached new peaks on Monday and are now higher than they were before the €750bn package, reports the FT. Last week, yields rose sharply within the eurozone - except for Germany. Investors criticised the ECB bond purchasing programme, saying that the central bank has bought too little to stop yield spreads from widening. ECB has bought €5.5bn last week, compared to €16.5bn, €10bn and €8.5bn the first three weeks. They also argue for a widening of the programme, while the ECB bought mainly Greek, Portuguese and Irish bonds. This bias is responsible for the relatively strong yield rise of Spanish and Italian bonds. Axel Weber, meanwhile, called for tighter ceilings on ECB bond purchases, saying the programme was only to bridge until government actions kick in. Do don’t fooled by the headline: Germany is not saving 3% of GDP, only 1% - and thank God for that The German press hails this programme as the first big achievement of the new coalition. An austerity package of €80bn over four years, 2011-2014. But there is the usual double-counting. It means that in a four-year period, there will be a total of €80bn less spending than there would have been otherwise. The cumulated spending affect is €26.6bn, which is a tad over 1%. It this number which compares with Italy’s €24bn in savings in two years, which is a tud under 2%. It means that there is somewhat less need to panic over the immediate cyclical impact. In 2011, Germany’s budget will return from expansionary to neutral with savings of €11bn – essentially reversing the stimulus measures. The biggest single items for cuts are: reduction in welfare payments (concrete government payment of pension provision to welfare recipients), further job cuts in the public sector, reductions in subsidies, a new tax on nuclear energy. From 2013, the budget of the Bundeswehr will be cut by €2bn. This is a relatively moderate

189 programme, targeting at structural measures. (It is in our view better, and more realistic, than the Italian programme, even though relatively speaking a lot smaller, because it targets structural cost changes, where as the Italian programme depends on dubious revenue assumptions through another crackdown on tax evasion. Even if it were to succeed, plugging budget holes through tax increases is not going to work). Nonnenmacher on the politics of German austerity Gunter Nonnenmacher, one of the senior political commentators in Frankfurter Allgemeine Zeitung, made the point that this austerity programme marks the true beginning of the coalition, which has wasted six months essentially doing nothing but wait for the state elections in North-Rhine Westphalia. He said the coalition stood with its back to the wall, when it made the decision relatively quickly over a long weekend. But success of the strategy will depend on the coalition’s ability to pull together – which has been large absent so far. Postponing meeting with Sarkozy Whith Angela Merkel now busy promoting the austerity programme at home, the tête-à-tête meeting between Angela Merkel and Nicolas Sarkozy scheduled for yesterday evening had to be postponed to June 14, reports Liberation. Such a last minute change is extremely rare and only is another example for the state of Franco-German coordination. Thomas Klau on Merkel In an interview with Les Echos Thomas KLau says that Germany is defining its economic policy purely in national terms without consideration of the impact on the sustainability of the common currency. Angela Merkel wants to restore her leadership at the national level, at the detriment of a leadership in Europe. A dangerous and short sighted strategy. Quatremer on the economics of German austerity Writing in his blog Jean Quatremer worries about the wider effects of the German package, especially the fact that all eurozone countries are engaging in a generalised and simultaneous tightening of the budgets. He writes it would have been better for the eurozone to state a more co-ordinated response (one in which Germany is the laggard of consolidation, not the avantguarde). Germany is sending a bad signal to the financial markets – that it does not care about economic growth. Jeffrey Sachs on the irrelevance of Keynesianism Jeffrey Sachs makes an unfashionable comment in the FT, in which he says that Keynesianism has experienced its last hurrah during this crisis. The problems we have had is excessive debt accumulation, which is not going to be corrected by stimulus packages, but structural reforms and savings. His view is summed up by the following statement: “The relevant fact was that the US, UK, Ireland, Spain, Greece and others had over-borrowed for a decade, so a decline in consumption after 2007 was not an anomaly to be fought but an adjustment to be accepted.” He said the stimulus packages were intended to help us get back to a pattern of consumption and housing-led growth. He makes five concrete proposals – a medium-term budget framework with front-loaded deficit cuts (i.e. Germany), accept absence of short-term link between policy and high quality jobs, ensure sufficient social safety nets, enact structural reforms to rebalance, accept higher income and wealth taxes for the rich. Do don’t fooled by the headline: Germany is not saving 3% of GDP, only 1% - and thank God for that http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2816&tx_ttnews[ba ckPid]=901&cHash=d8922c53c8

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ECONOMIC HEALTH CHECK IMF Urges Swift Action to Restore Confidence and Growth in Euro Area June 7, 2010 IMF Survey online June 7, 2010 • Pace of fiscal consolidation should be tailored to each country's needs • Spurring euro area growth is essential • Restructuring of Europe's financial system should be accelerated The current euro area crisis results from fiscally unsustainable policies in some countries, delayed repair of the financial system, insufficient progress in establishing the discipline and flexibility needed for a smooth functioning of monetary union, and deficient governance of the euro area, according to the IMF’s annual review of euro area policies, released on June 7. European policymakers need to take decisive action to complete their project of monetary union, said the IMF. While recognizing that the immediate crisis response has been bold, demonstrating the eurozone’s capability to act together when pushed, the IMF analysis said it will be imperative to quickly secure the operation of the European Financial Stability Facility. The IMF added that crisis management is not an alternative to the corrective policy actions and fundamental reforms needed to reinforce the foundation of the European Monetary Union. Following the conclusion of the IMF’s annual analysis of the euro area economy, Managing Director Dominique Strauss-Kahn emphasized the importance of fiscal responses being adapted to the individual circumstances of each country. “Fiscal sustainability is certainly an important aim that countries all around the world, not only in Europe, but including in Europe, have to take into account. But you have to differentiate those policies depending on the fiscal room that the different countries may have, and taking into account the balance between the fact that you have to go back on a sustainable track on the fiscal side and the fact that you need to maintain the highest possible level of growth. So it leads to different actions in different countries,” he told reporters following a June 7 meeting of the Eurogroup finance ministers in Luxembourg. Restoring confidence The IMF’s annual review noted that a one-size-fits-all fiscal adjustment strategy should be avoided, with the response being adapted to the individual characteristics of each of the euro area’s 16 member countries. At the same time, the IMF said that countries facing market pressures have no choice but to go ahead with forceful fiscal adjustment. “Delayed or half-hearted fiscal consolidation in countries facing high spreads could trigger a further loss of financial market confidence in the fiscal sustainability of some member states, a spike in risk premiums and a sharp depreciation of the euro.”

191 Overall, the area-wide fiscal stance is correctly set to remain broadly neutral in 2010 as countries with manageable debt dynamics continue to provide adequate support to nurture the recovery. But all euro area countries must make additional efforts to turn around unfavorable debt dynamics over the medium term, the statement said. This will inevitably entail comprehensive reforms to pension and health systems, and other entitlement programs, a process that is already well under way in many countries in emerging Europe that were hit hard by the crisis, and of course in Greece. The IMF statement also emphasized the importance of protecting vulnerable groups during the reform and adjustment process. Restoring growth After years of slow reforms, the longstanding problem of anemic growth in the euro area must now be forcefully addressed, the IMF statement said. “Higher growth is not only important for its own sake, but essential to help secure fiscal sustainability and strengthen the cohesion of the euro area.” Reforms have been clearly identified in the context of the European Union’s Lisbon strategy, but the tools to bring about the needed coordinated implementation have been lacking until now, the statement said. Key reforms include making the labor market more effective, removing disincentives to work embedded in various public policies, enhancing wage bargaining flexibility, and further liberalizing services sectors. More generally, financial sector reform remains a key priority and must be coordinated, both within Europe and globally, the statement said. Coordination is required to avoid regulatory arbitrage by financial institutions when it comes to new capital and liquidity requirements, surcharges on systemic institutions, and measures to address rapid credit growth and liquidity mismatches. “For the euro area, a robust calibration in all areas is required to increase the banking system’s resilience to any future shocks,” the IMF statement said. Reforming economic and financial governance The IMF annual review also focused on broader reforms required in the economic and financial governance of the euro zone. “The euro area fiscal framework needs to be substantially strengthened to deliver the collective fiscal responsibility required for a well- functioning monetary union,” said the IMF statement. It highlighted two areas in particular: • Focus on enforcing budgetary discipline, helped by fundamental legislative reform, and on addressing macroeconomic imbalances. • Extend the progress made in establishing more harmonized regulation and supervision of the EU financial system to the area of crisis management and resolution. The IMF’s Executive Board will meet at a date to be announced to formally discuss the euro area Article IV report. ECONOMIC HEALTH CHECK IMF Urges Swift Action to Restore Confidence and Growth in Euro Area June 7, 2010 http://www.imf.org/external/pubs/ft/survey/so/2010/CAR060710A.htm

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Describes the preliminary findings of IMF staff at the conclusion of certain missions (official staff visits, in most cases to member countries). Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, and as part of other staff reviews of economic developments.

June 7, 2010 Concluding Statement of the IMF Mission on Euro-Area Policies

(In the Context of the 2010 Article IV Consultation Discussions with Euro-Area Countries) 1. Policymakers need to take decisive action to complete the project of monetary union. The current euro area crisis results from fiscally unsustainable policies in some countries, delayed repair of the financial system, insufficient progress in establishing the discipline and flexibility needed for a smooth functioning of the monetary union, and deficient governance of the euro area. Consequently, divergences in economic performance have been allowed to fester, building up imbalances and leading to the recent dramatic wake-up call from markets. The immediate crisis response has been bold, demonstrating the euro-area’s capability to act together when pushed. In this context, it will be imperative to quickly secure the operation of the European Financial Stability Facility. But crisis management is not an alternative to the corrective policy actions and fundamental reforms needed to reinforce the foundation of the European Monetary Union (EMU). 2. What should be done? Immediate action is needed to: • Establish fiscal sustainability, with the pace of consolidation differentiated to take into account financial market pressures and the state of the recovery. • Spur growth, including crucially by implementing a set of priority, country-specific structural reforms throughout the euro area. • Accelerate the restructuring of the financial system. • Strengthen economic governance of EMU. As recognized by the Commission and the President’s task force, the focus should be on enforcing budgetary discipline, helped by fundamental legislative reform, and on addressing macroeconomic imbalances. • Complete the EU’s financial stability architecture by extending welcome progress in establishing more harmonized regulation and supervision of the EU financial system to the area of crisis management and resolution. Near-Term Growth Outlook 3. Already prior to the recent sovereign jitters, growth in the euro area was expected to be moderate and uneven, marked by high and persistent unemployment and subdued investment. Despite very supportive fiscal, financial and monetary policies, which stabilized demand, growth remains weak in the euro area and diverging across member states. While policies and institutions limited the rise in unemployment on average, its counterpart was a

193 significant decline in productivity across all sectors in the euro area. Hence, new job creation will be limited during the upswing. Lending constraints are weighing on demand of a significant number of households and small and medium-sized enterprises. Robust global demand and the weaker euro, now close to fundamentals, are helping the export sector, but rigidities, especially in labor and financial markets in some countries, are limiting the necessary restructuring in the aftermath of the global crisis and hampering the efficient reallocation of labor and capital. 4. Key downside risks emanate from concerns about fiscal sustainability and possible adverse feedback between the financial sector and public finances. Delayed or half- hearted fiscal consolidation in countries facing high spreads could trigger a further loss of financial market confidence in the fiscal sustainability of some member states, a spike in risk premiums and a sharp depreciation of the euro. While the recently established crisis management framework should limit abrupt movements, lack of sustained fiscal and structural policy adjustment would further sap business and consumer confidence, possibly undoing the impetus stemming from the global recovery and even adversely affecting the global economy. While overall bank performance and capital measures have improved substantially, weaknesses in parts of the banking system remain, amid concerns about the sustainability of the profit rebound and still highly leveraged private sector balance sheets in some countries. Overcoming the crisis 5. Policies need to move urgently from crisis management to fundamental reforms. National authorities must now quickly implement a distinct set of policies for each member state to underpin fiscal sustainability, as several are doing, and boost sustainable growth. Governments should explicitly commit to specific policy actions, coordinated in a euro area context. Policy action is not only necessary in member countries suffering from market tensions or competitiveness problems, but throughout the euro area to generate confidence, display cohesion, and improve overall investment and growth prospects. 6. Credible fiscal adjustment must be at the core of the response, emphasizing the need for early implementation of measures backing the fiscal targets. Countries facing market pressures have no choice but to adjust forcefully and to prepare contingency plans to avoid any slippage jeopardizing the achievement of deficit targets. For all countries, additional efforts must be made to turn around unfavorable debt dynamics over the medium term. Comprehensive entitlement reforms should be a key ingredient of many consolidation programs, with an emphasis on large medium and long-term gains, such as from increases in the effective retirement age and healthcare reform. Attention should also be paid to the quality and the composition of adjustment to maximize support for growth and to measures to protect vulnerable groups during the reform and adjustment process. 7. Fiscal actions will need to balance these considerations with the feeble state of the recovery. Overall, the area-wide fiscal stance is correctly set to remain broadly neutral in 2010 as countries with manageable debt dynamics continue to provide adequate stimulus to nurture the recovery. Nonetheless, fiscal consolidation is inevitable, and will need to start in all countries in 2011 at the latest. Its pace should be differentiated across member states. Countries should stand ready to adjust their fiscal plans depending on the state of the financial system and the degree to which fiscal actions help bolster confidence. 8. The longstanding problem of anemic growth in the euro area must now be addressed—higher growth is not only important for its own sake, but essential to help secure fiscal sustainability and strengthen the cohesion of the euro area. Priority reforms have been clearly identified in the context of the Lisbon strategy, but the tools to bring about

194 the needed coordinated implementation have been lacking. The case for these changes could hardly be more pressing. Key reforms include: making the labor market more effective, removing disincentives to work embedded in various public policies, enhancing wage bargaining flexibility, and further liberalizing services sectors. Other measures should target tax compliance, licensing restrictions, non-tariff trade barriers, and foreign ownership and investment restrictions. Distortions to competition in the banking sector should be removed, including by phasing out public ownership stakes. A renewed commitment to liberalize trade and avoid disguised forms of protectionism would be welcome. 9. The stability of the euro area banking system needs to be secured. Banks overly reliant on enhanced credit or government support should be forced to raise additional capital, clean up their balance sheets and establish a viable business model, or face restructuring or resolution. Supervisors should ensure that their actions do not unduly curb the availability of credit, especially to sound small business borrowers and households. Blanket financial support measures may need to be reinstated or remain in place for longer than envisaged, though care must be taken that they do not put off the urgency to restructure. 10. More generally, financial sector reform remains a key priority and must be coordinated, both within Europe and globally. This pertains to new capital and liquidity requirements, surcharges on systemic institutions, as well as targeted macro-prudential measures that address rapid credit growth and liquidity mismatches. For the euro area, a robust calibration in all areas is required to increase the banking system’s resilience to any future shocks. Monetary policy 11. The ECB rightly took strong action to prevent the sharp tightening of credit conditions in some member states from undermining its monetary stance. The Securities Markets Program (SMP) has reduced the extreme volatility in sovereign debt markets that was infecting other credit and financial markets and hampering the transmission of the supportive monetary policy stance. The establishment of this program should however not detract from the need for unwavering implementation of measures that underpin fiscal sustainability, especially where markets are most concerned. Once systemic liquidity conditions return to normal, the ECB can resume its gradual exit from its non-standard policy support to avoid distorting market mechanisms and reducing incentives for weak banks to restructure. 12. With risks to price stability remote, the monetary policy rate can remain low. Underlying inflation is expected to stay low for the next two years: wage growth is set to remain subdued in response to high unemployment and squeezed profit margins. Volatile commodity prices and indirect tax changes will be reflected in short-term inflation developments but do not pose risks in such an environment. Reflecting the ECB’s excellent track record, long-term inflation expectations remain well anchored, keeping risks to price stability at bay. Protracted low rates do raise the risk of distortions that need to be monitored and addressed with macro-prudential tools. Reforming economic and financial governance 13. The euro area fiscal framework needs to be substantially strengthened to deliver the collective fiscal responsibility required for a well-functioning monetary union. The Stability and Growth Pact did not encourage member states to take advantage of good times to build sufficient buffers and to bring down debt to prudent levels. This reflects fundamental weaknesses in prevention and enforcement that urgently need to be addressed. Ideally, one should aim at delegating to the center the capacity to enact binding deficit targets on member

195 states based on sound economic judgment about individual countries’ debt sustainability and cyclical positions, as well as area-wide needs. However, such a reform will require building consensus around Treaty changes, which will take time. 14. The Commission’s proposals to improve fiscal governance are welcome, but more ambitious changes are needed to foster compliance with the rules. The Commission’s calls for a stronger focus on medium-term debt sustainability in the excessive deficit procedure, and the early peer review of budgets and reform plans are particularly apposite. However, member states should also face stronger incentives to comply with common rules. One avenue is through greater national ownership, by adopting rules-based fiscal frameworks with a strong legal basis and effective enforcement at the national level. It would be essential to anchor national rules in the key objective of the SGP, namely a balanced budget in structural terms, and possibly more ambitious debt reduction. Meanwhile, other avenues could be explored to strengthen the cohesion of the euro area while reinforcing budgetary discipline, including through more use of central budgetary resources or access to common bond issuance linked to compliance with the SGP. 15. Surveillance over external imbalances and structural weaknesses should also be improved. In this respect, the Commission’s May 12 Communication foresees a welcome upgrading of the peer review of competitiveness developments and underlying structural challenges by the Eurogroup. To assist this process, Europe 2020 should focus on policies that enhance market flexibility and facilitate competitiveness adjustments within EMU. The Eurogroup should systematically assess and communicate the benefits of reforms, especially in the areas of wage policies, tax measures impacting on labor costs, and actions aimed at removing major market rigidities. When non-compliance leads to significant cross-country spillovers in EMU, the Commission should address a policy warning to the Member States concerned, followed by a public statement by the Council. Cohesion policy should play a larger role in providing incentives for the correction of the underlying causes of intra-euro area imbalances. 16. The European Systemic Risk Board (ESRB) and European Supervisory Authorities (ESAs) need to be established without delay. Reaching an expeditious compromise between the Council and Parliament will be essential. The ESRB should be given a mandate to declare emergencies and recommend coordinated crisis management actions across all sectors, as well as to guide the calibration of preventive macro-prudential measures across the EU. The European Banking Authority should have a strong role both in supervisory colleges and in crisis management groups for individual cross-border institutions. 17. Stronger and harmonized early intervention and resolution capabilities remain essential. European legislation should urgently establish a core set of resolution tools and remove legal constraints on their effective use, thereby raising the scope for coordination in the resolution of cross-border institutions. A risk-based levy on the banking system, as currently proposed by the Commission, would help establish financial stability funds, which will also require a fiscal backstop. Such funds can be used to reduce systemic risks, by aiding the resolution of systemic institutions and enabling early action to force the sale of bad assets, including those arising from cross-border exposures. A European Resolution Fund and Resolution Authority can further strengthen financial stability, in particular where individual countries are fiscally constrained, but need to be linked to a strong role for the European Banking Authority in the supervision of individual institutions. http://www.imf.org/external/np/ms/2010/060710a.htm

196 07/06/2010 à 16h29 (mise à jour à 17h09) La rencontre Merkel-Sarkozy reportée La rencontre entre la chancelière allemande Angela Merkel et le président français Nicolas Sarkozy prévue lundi soir à Berlin a été repoussée in extremis au 14 juin. «Les consultations prévues ce soir entre la chancelière Angela Merkel et le président français Nicolas Sarkozy sont repoussées d’une semaine pour des raisons de calendrier», selon un communiqué de la chancellerie. «Sur proposition de la Chancellerie, la rencontre (…) se tiendra à Berlin le lundi 14 juin à 17h00» locales, précise un communiqué de l’Elysée. L’annulation in-extremis d’une rencontre bilatérale de ce type est extrêmement rare. Elle a été annoncée alors que Mme Merkel présentait les grandes lignes du budget allemand 2011, qui prévoit des coupes drastiques afin de réduire le déficit public de la première économie européenne. Angela Merkel, en berne dans les sondages tout comme Nicolas Sarkozy, se trouve en position inconfortable sur son front politique intérieur depuis la démission surprise du président Horst Köhler la semaine dernière et un désaveu aux régionales de mai en Rhénanie (ouest). L’élaboration du projet de budget fut difficile et Mme Merkel devait en fin de journée défendre le texte devant les chefs de groupe parlementaire. M. Sarkozy et Mme Merkel avaient prévu un dîner de travail notamment pour préparer le sommet européen de Bruxelles du 17 juin ainsi que les prochaines réunions des G8 et G20 au Canada. Depuis trois mois, les accrochages se sont multipliés de part et d’autre du Rhin autour de la gouvernance économique de l’Europe et des réticences de Berlin à voler au secours de la Grèce. La ministre française de l’Economie Christine Lagarde a lancé publiquement des coups de griffe contre l’Allemagne, dénonçant pêle-mêle son excédent commercial insupportable pour ses voisins de la zone euro ou sa décision d’interdire certaines ventes à découvert d’obligations d’Etat. A demi-mots, la France reproche aussi à sa voisine d’avoir retardé le plan de sauvetage de la zone euro. «En janvier, ça nous aurait coûté 15 milliards, aujourd’hui, 750 milliards», s’est- on agacé à Paris. C’est dans ce climat houleux qu’Angela Merkel et Nicolas Sarkozy devaient aussi tenter d’accorder leurs violons sur la coordination des politiques économiques européennes, alors que le président de l’Union européenne (UE) Herman Van Rompuy devait présenter lundi ses premières propositions sur ce thème. Ce dossier a longtemps empoisonné les relations entre les deux pays, Berlin refusant de sacrifier son orthodoxie budgétaire sur l’autel de l’Europe.

197 Le mois dernier, la chancelière appelait encore l’Europe à adopter «une nouvelle culture de la stabilité» sur le modèle allemand qui a, selon elle, «plus que fait ses preuves». Partisan ardent et de longue date d’un «gouvernement économique de l’Europe», le président français est déterminé à avancer. Mais, contrairement au passé, sans heurter de front sa partenaire. Ces dernières semaines, Nicolas Sarkozy s’est abstenu d’étaler au grand jour ses divergences avec Angela Merkel, pour ne pas la gêner dans les affaires de politique interne ou alimenter la spéculation contre l’euro. «Il ne peut pas y avoir de désaccords entre l’Allemagne et la France sur des sujets de cette importance», a-t-il argumenté en mai. Sur un mode très optimiste, Paris assure que Berlin, qui insistait jusque-là plutôt sur une coordination au niveau de l’UE, n’est plus hostile à un gouvernement économique de la zone euro. «Tout le monde est d’accord sur la nécessité de la coordination et personne ne conteste plus que ce pilotage doive se faire au niveau des chefs d’Etat et de gouvernement», estime-t-on à la présidence française. La France défend l’idée de réunions régulières des chefs d’Etat et de gouvernement de l’Eurogroupe et même de créer un «secrétariat» des seize. «Mais le débat reste ouvert à ce stade», assure l’Elysée. (Source AFP) http://www.liberation.fr/monde/0101640040-la-rencontre-merkel-sarkozy-reportee

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THOMAS KLAU DIRECTEUR DE L'EUROPEAN COUNCIL ON FOREIGN RELATIONS À PARIS [ 08/06/10 ]

« Merkel restaure son leadership national au détriment du leadership européen » Sur le même sujet Berlin coupe dans le social pour prendre la voie de la consolidation budgétaire Emploi : pourquoi l'Allemagne s'en sort mieux que la France Comment interpréter le programme d'économies présenté par la chancelière Merkel, dans le débat sur l'émergence d'une gouvernance économique au sein de l'UE ? Angela Merkel, affaiblie récemment par sa gestion de la crise, la défaite de son camp aux régionales de Rhénanie-du-Nord - Westphalie et les démissions spectaculaires du ministre- président de Hesse et du président de la République veut montrer qu'elle est encore capable d'exercer un leadership. Le problème, c'est que l'Allemagne, première puissance de l'UE, continue à définir sa politique économique en termes purement nationaux, sans concevoir, semble-t-il, que les mesures prises ont un impact sur la stabilité et les perspectives de pérennité de la monnaie unique. Elle veut restaurer un leadership national, certes, mais au détriment d'un leadership européen. J'y vois un calcul dangereux et court-termiste. Est-il trop tôt pour prendre des mesures d'économies aussi importantes ? En l'état actuel des économies de la zone euro, une politique qui met autant l'accent sur l'austérité est prématurée. Pensez à la fragilité persistante du système bancaire. On court le danger de provoquer une nouvelle récession. Ce qui est particulièrement périlleux, puisque l'ampleur des dettes nationales ne pourra être maîtrisée que grâce à une croissance suffisamment forte. Faut-il s'attendre à des critiques des partenaires européens de Berlin ? Le problème, c'est que la plupart des autres pays de la zone euro n'ont pas encore, eux non plus, appris à raisonner économiquement dans le cadre européen. Certains petits pays, comme la Belgique ou le Luxembourg, ont fait ce travail d'adaptation, il y a longtemps, contraints par leur petite taille et l'évidence que leur réalité économique et financière est fortement déterminée par les décision prises à Berlin ou à Paris. Mais bien peu, au final, ont pris conscience qu'une apparente bonne gestion nationale ne suffit plus à contribuer à la saine gestion d'une zone monétaire commune. Quelles réactions attendez-vous en Allemagne ? L'opposition sociale-démocrate devrait être dans son rôle et critiquer des éléments du paquet d'économies. Mais je crains que le SPD n'ait pas non plus opéré ce recadrage intellectuel vers le niveau européen. Le seul parti, en Allemagne, qui a engagé ce travail, ce sont les Verts. Quant à l'opinion, elle est très inquiète d'un possible retour de l'inflation, de l'ampleur des déficits, de la hauteur des dettes publiques, vous le voyez dans les sondages. Une partie de l'électorat d'Angela Merkel devrait accueillir favorablement ces mesures. PROPOS RECUEILLIS PAR K. M., Les Echos http://www.lesechos.fr/info/inter/020588603976--merkel-restaure-son-leadership-national-au- detriment-du-leadership-europeen-.htm

199 Coulisses de Bruxelles, UE Jean Quatremer, lundi 07 juin 2010 L’austérité généralisée menace-t-elle la reprise européenne ?

Les marchés ont réussi à imposer la rigueur à la plupart des pays de l’Union européenne. Paniqués par l’explosion de l’endettement public (entre 20 et 30 points de PIB supplémentaires en deux ans et cela va empirer), ils ont commencé à fuir la dette souveraine des pays budgétairement et économiquement les plus fragiles de la zone euro et même l’euro comme en témoigne sa chute continue depuis novembre dernier (moins de 1,20 dollar désormais). Les États ont compris le message : tour à tour, ils annoncent des plans d’austérité drastiques afin de ramener leur déficit et leur dette à un niveau soutenable, celui prévu par le tant décrié Pacte de stabilité. Mais cela risque de tuer la faible reprise européenne. Aujourd’hui, c’est l’Allemagne qui a annoncé la douloureuse. Après deux jours de dures négociations au sein du gouvernement – ce qui explique l’annulation in extremis du sommet franco-allemand qui était prévu ce soir —, Angela Merkel a obtenu des coupes de 11 milliards d’euros dans le budget 2011 qui seront suivis par des économies de 17,1 milliards en 2012, 25,7 milliards en 2013 et 32,4 milliards en 2014. Soit 86 milliards d’euros en quatre ans. Tous les secteurs, sauf l’éducation et la recherche, seront touchés. Ce plan, le plus rigoureux de l’après-guerre, fait suite à l’annulation déjà annoncée des baisses d’impôts promises par ses alliés libéraux du FDP. Ce plan d’austérité est, à mon sens, particulièrement mal venu. Tous les États de la zone euro ne peuvent en même temps adopter une telle politique qui risque d’amener une nouvelle récession. Un bon « Policy mix » européen au sein d’une même zone monétaire, aurait été que l’Allemagne, dont les finances publiques sont moins dégradées que celles de ses voisins — relance sa demande intérieure – déprimés depuis plusieurs années — pendant que ses partenaires purgent leurs comptes. Il est vrai que la France n’a toujours pas annoncé de plan d’austérité, mais cela ne saurait tarder : sa situation budgétaire se dégrade à vu d’œil et elle risque de perdre son « triple A » ce qui lui couterait plusieurs milliards d’euros chaque année en intérêts supplémentaires… En empruntant la voie de la rigueur, l’Allemagne envoie donc aux marchés un mauvais signal. Car ceux-ci, qui ne sont pas à une contradiction prés, s’inquiètent désormais de la croissance molle qui s’annonce… Mais, selon Barclay’s capital, tout n’est pas noir. Dans une récente note de conjoncture, la banque d’affaires britannique note qu’il n’y a pas de quoi paniquer parce que : « 1/ l’austérité est surtout cantonnée aux pays périphériques cette année et demeure légère l’an prochain ; 2/ la baisse de l’euro compense largement les effets de l’austérité ; 3/ les pays « cœur » et le reste du monde alimentent la demande ; 4/ la politique monétaire est et pourrait rester longtemps très accommodante ». Jean Quatremer, lundi 07 juin 2010 L’austérité généralisée menace-t-elle la reprise européenne? http://bruxelles.blogs.liberation.fr/coulisses/2010/06/laust%C3%A9rit%C3%A9- g%C3%A9n%C3%A9ralis%C3%A9e-menacetelle-la-reprise-europ%C3%A9enne-.html

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Doubts raised about ECB bond buying By David Oakley and Ralph Atkins Published: June 7 2010 19:52 | Last updated: June 7 2010 19:52 It is one month since the announcement of the €750bn “shock and awe” international rescue package to save Europe’s government bond markets from imploding – and the results so far are not encouraging. A key part of the plan was the European Central Bank’s decision to buy eurozone government bonds to stop the relentless rise in government bond yields of the weaker economies on the monetary union periphery. Yet the bond yields of Italy and Spain, which hit fresh peaks on Monday, are higher than they were before the emergency rescue plan was announced.

In the past week – with the exception of Germany – yields of eurozone countries have risen sharply, with some analysts warning that the euro itself may not survive the Continent’s public debt crisis. The jump in yields has sparked growing criticism of the ECB for its apparent lack of conviction over purchasing government bonds. Last week, it bought only €5.5bn in bonds, which many investors say explains why yields are moving higher again. This compares with the €16.5bn, €10bn and €8.5bn bought in the first three weeks of the programme. The ECB has bought a total of €40.5bn. Insight: Clearing houses are no panacea for market ills - Jun-07 Interactive: Europe’s economic weather map - May-26 Eurozone woes dent Belgium bond sale - Jun-07 Editorial: Europe’s illusions - Jun-06 Harvinder Sian, senior European rates strategist at Royal Bank of Scotland, says: “The ECB is not buying enough bonds, its governing council appears to be split over the programme while the debt problems of Greece, Spain and Portugal are far from resolved.

201 “Beyond that, European policymakers in Germany appear reluctant to show their complete support for the peripheral markets. “This has led to more instability in the eurozone and more questions about whether the euro as a project can survive.” Ralf Preusser, head of European rates research at BofA Merrill Lynch Global Research, adds: “We are at a critical stage for the eurozone. There are very few buyers of eurozone bonds, except for the most liquid markets. “While the details and extent of the support measures for the periphery are unclear, investors lack the confidence to buy eurozone bonds and that is likely to last for a while yet.” Traders are also critical of the ECB for failing to widen the buying programme. It has almost entirely bought Greek, Portuguese and Irish bonds, they say, which is why Spanish and Italian yields have jumped to highs not seen since November 2008 and July 2009, respectively. Spanish and Italian yield spreads over Germany are also at their widest since the mid-1990s. The effectiveness of the bond purchasing programme has certainly been undermined by comments from Axel Weber, Germany’s Bundesbank president, who has called for a tight limit on the amount of bonds to be bought. He says the programme should act merely as a “bridge” until government actions to support the eurozone kick into action – that is, once the special purpose vehicle with €440bn to assist countries in severe difficulties is in place. The ECB is also unlikely to rush to conclusions in judging the success of the programme at such an early stage – and will not jump to conclusions based on interest rate spreads – because its aim was to restore the normal functioning of markets, on which progress has been achieved. The lesson learnt from the ECB’s decision last year to launch a €60bn programme to buy covered bonds is that it can take some months for the effects to work through and confidence to return to targeted financial markets. However, Mr Sian says: “The ECB may have to buy a larger amount of bonds than it had hoped as the stability of the eurozone rests on investor confidence. “That confidence has not been restored. It will need more intervention from the ECB before it is.” http://www.ft.com/cms/s/0/c105711e-7260-11df-9f82-00144feabdc0.html

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Push to underpin clearing house foundations By Jeremy Grant Published: June 7 2010 18:55 | Last updated: June 7 2010 18:55 Could clearing houses be the next “too big to fail” financial institutions?

For the past 12 months, regulators have touted the value of clearing houses as a way to safeguard the financial system from the catastrophic effects of another Lehman-style default. Insight: Clearing houses are no panacea for market ills - Jun-07 FT Trading Room - Mar-18 Quick View: Clearing houses need a backstop - Apr-29 Derivatives dealers voice support for clearing - Apr-23 Standing between two parties to a trade, a clearer acts as buyer to every seller and seller to every buyer, guaranteeing the transaction is completed even if one party defaults. Dull as it may seem in a world where markets are more fixated on the high-octane attractions of algorithmic trading, the importance of clearing to financial systems has become obvious to policymakers globally in the wake of the 2008 financial crisis.

203 Legislation to overhaul the over-the-counter (OTC) derivatives markets is working its way through the US Congress, while new regulations are expected from the European Commission within weeks. Both emphasise greater use of clearing so parties no longer simply have to trust the other’s creditworthiness. Yet Patrick Pearson, head of the Commission’s unit spearheading OTC derivatives and clearing reforms, says there has been a “notable absence of discussion about whether a CCP [central counterparty] should be strong enough to withstand financial Armageddon”. Partly this is because clearers performed well during the Lehman crisis, closing outstanding positions with no disruption to the financial system. That has engendered a certain level of confidence in clearers. But industry observers say confidence should not be placed blindly in clearing houses and that strengthened regulatory oversight of such institutions – and possibly even central bank support – is needed. Anthony Belchambers, chief executive of the Futures and Options Association, a London- based association representing banks and brokers that are big users of clearers, says: “Their track record is pretty good so I think they should be trusted, but they are critically important to the [financial] system now so there has to be some more external oversight.” The first concern is whether clearers can handle a wave of “standardised” OTC derivatives that are likely to enter into clearing as reforms are implemented. Many OTC contracts are “standardised”, but they may not always be very liquid, creating problems when assessing default scenarios. Even so, clearers are jostling for as much of the available business as they can get, prompting concern that some clearers may be tempted to loosen their financial standards to attract business. Roger Liddell, chief executive of LCH.Clearnet, the London-based clearer, claims certain unnamed clearers are already “competing on margin”, referring to the funds market participants must post upfront to cover possible losses. Second, the growth of so-called “high-frequency” trading means that clearers may face new types of intraday risks as this makes up an increasing proportion of trading at a time of rapid product innovation. Nils-Robert Persson, chairman of Swedish technology company Cinnober, says some clearers “built their systems based on old technology and old views of what a financial instrument will look like in the future”. In Europe, Brussels is worried that key financial standards are not uniform across clearers. Mr Pearson says his department researched 13 clearers across the region and found that their minimum share capital requirements “vary widely”, from €29,000 in one case to hundreds of millions of euros in another. In addition, he highlights differences between clearers on auction practices and “default waterfalls” – the sequence by which a clearer uses default funds and defaulting member collateral to make good on trades that have gone wrong. “Can we really have CCPs operating across Europe with wide differences in these practices?” Mr Pearson asks. His department is expected to come up with new regulations in coming weeks that would address such issues.

204 Given these perceived risks, policymakers are now confronted with whether clearers should have access to central bank lending facilities if one of them were to get into difficulty or even collapse – a scenario not ruled out given historical precedent. Critics argue that this would create “moral hazard” – that is, a situation where clearers would have less incentive to ensure they are as robustly capitalised, managed and governed as possible if they know central banks will ride to their rescue. Daniela Russo, director of general payments and market infrastructure at the European Central Bank, said in London last month: “If the CCP knows it will be supported by [a] central bank, this will be a very dangerous incentive not to manage risk.” Others complain that allowing clearers access to a central bank “discount window” would amount to nothing more than another taxpayer bail-out. Yet some clearers say any suggestion that they might need to be bailed out misses the point. Wayne Luthringshausen, chief executive of the Options Clearing Corporation, which clears for all eight US options exchanges, says all the OCC would need in a time of crisis would be to rely on a central bank to act as a banker in the very short term – say, a few hours – so that it could convert its holdings of US Treasury bills into cash to tackle a default. “All I’d need is cash for government securities. I don’t need taxpayers picking up debit balances for clearing members who didn’t behave,” he says. “We are willing to run our business on our own but this is a bigger issue than the OCC, it’s about the economy and the financial system.” http://www.ft.com/cms/s/0/0d6dce68-725a-11df-9f82-00144feabdc0.html

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Europe’s illusions Published: June 6 2010 19:53 | Last updated: June 6 2010 19:53 Eurozone leaders’ tendency to think that everything will work out for the best if people just trust them is not limited to politics. It is evident in their attitude towards financial markets too. It is best for investors not to know too much, the thinking seems to go, as policymakers across continental Europe bristle at US prods to run public stress tests of their banks. The result is to make the credibility of the eurozone’s banking sectors as threadbare as the reputation of much of its political leadership. In Europe’s debt crises, as with the US subprime fiasco, for every profligate borrower there must be a reckless creditor. Sometimes they were one and the same: Germany’s Landesbank sector was as eager to place its faith, and German savings, in too-good-to-be true investments across the Atlantic as across the Alps. The eurozone is in external balance, so its losses, whatever they are (the European Central Bank predicts another €195bn [$233bn, £161bn] before next year is over) will be self-inflicted. Frankfurt’s secrecy should be shed - Jun-06 Opinion: Europe must focus on what works - Jun-02 ECB warns of ‘hazardous contagion’ - May-31 Gloomy consumers hit eurozone sentiment - May-31 Wolfgang Münchau: Austerity and weak euro - May-30 French minister says bail-out alters EU treaty - May-27 Eurozone finance is channelled through banks, not securitised like in the US. So it is banks that will suffer as loans, sovereign or private, go sour. Spanish cajas de ahorro – regional fiefdoms of mortgage lending that served as conveyor belts from wholesale funding to a frothy construction sector – and Greek banks that faithfully bought their government’s debt, stand first in line. Right behind are banks and insurance companies from the eurozone core. The equity cushions of the German and French banking systems barely cover total exposures to Greek, Portuguese and Spanish assets, says the OECD. So investors know some eurozone banks are dead men walking, but they are having to guess which ones. No ban on naked short- selling can change that. It is no surprise that banks feel a funding squeeze – or would in the absence of the ECB’s liberal liquidity provisions. Sorting Europe’s sheep from its goats is overdue. A public stress test of all eurozone banks must be undertaken. Those insufficiently capitalised for a worst case scenario – including sovereign default – must be recapitalised or taken over. The ECB is equipped for the technical task. But national leaders must find the will to take it on. They have not found it yet. Creditors are made whole in as small a bank as CajaSur. Germany, rather than admitting the state of its banks, rescues Greece to bail them out on the sly, at the cost of stoking popular outrage. The longer leaders suppress how bad things are, the worse the outcome. http://www.ft.com/cms/s/0/263b8b1c-7195-11df-8eec-00144feabdc0.html

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06/07/2010 03:25 PM The World from Berlin Presidential Vote 'Could Turn into a Disaster for Merkel' Chancellor Angela Merkel has chosen her candidate to fill Germany's vacant presidency. But the rest of the country prefers the opposition's favorite. The June 30 vote could turn into a disaster for Merkel, commentators write on Monday. Chancellor Angela Merkel, a master tactician when it comes to the politics of power, has been outmaneuvered for once, and could get into serious trouble as a result. The sudden resignation of the country's largely ceremonial president and head of state, Horst Köhler, last Monday was the latest in a series of blows that have dented her reputation with voters and her authority in government this year. To avoid further damage and to demonstrate that she still has a firm grip on the reins in Berlin, Merkel needs to find a suitable replacement for Köhler and to ensure that he gets the necessary backing from her center-right majority in the Federal Assembly, the special parliamentary body which will convene on June 30 to elect the president. This has turned into an important test of her leadership, and so far, it isn't going well. Her chosen candidate for president, Christian Wulff, the governor of the northern state of Lower Saxony, initially seemed like a safe and easy choice. Wulff, a deputy leader of Merkel's conservative Christian Democrats (CDU), is a bland, inoffensive career politician who has honed his Mr. Clean image with soapy soundbites such as this one: "What gives me strength is the hearty warmth of ordinary people." Merkel, confident of her parliamentary majority, rejected an offer from the opposition parties to agree on a compromise candidate for the presidency. Strongly in Favor of Gauck Wulff would have been a shoo-in for the job if the Social Democrats and Greens hadn't landed a coup by nominating a rival who most observers and even many of Merkel's followers believe would make a far better president -- Joachim Gauck, 70, a Protestant pastor from eastern Germany who opposed the communist regime, someone whom Merkel herself has showered with praise in the past. After unification, Gauck spent 10 years heading the authority that manages the archives of East Germany's secret police, the Stasi, thereby making a major contribution to shedding light on the crimes of East Germany. Unfortunately for Merkel, large parts of the German media, including SPIEGEL magazine and mass-circulation Bild am Sonntag, have come out strongly in favor of Gauck, and some eastern German members of the pro-business Free Democratic Party (FDP), the junior partner in Merkel's center-right coalition, have raised the prospect that they might vote for Gauck rather than Wulff on June 30. Newspapers have been comparing the biographies of the two contenders and many have concluded that Gauck has much more to offer the nation. SPIEGEL writes that Wulff hasn't come up with a memorable initiative or piece of legislation in over 30 years in politics, while Gauck struck a blow for freedom and democracy by helping to bring down the East German regime.

207 Media are calculating that it would only take 22 rebels in Merkel's coalition to deprive Wulff of the required absolute majority in the first two rounds of voting in the Federal Assembly, the body made up of the 622 members of the Bundestag, Germany's lower house of parliament, and the same number of delegates appointed by the country's 16 states. That alone would hugely damage Merkel's authority as CDU leader and chancellor. After the first two rounds, candidates need merely a simple majority. Were Gauck to ultimately win, it could spell the end of Merkel's government, German media commentators write on Monday. SPIEGEL writes: "Chancellor Merkel has once again been unmasked as a power politician who has been guided by internal party considerations in her choice of the man meant to represent all German citizens." Center-left Süddeutsche Zeitung writes: "The reaction in parts of the media as well as among the conservatives and the FDP to the nomination of Lower Saxony Governor Wulff make clear: on June 30, Merkel's chancellorship will be in real danger for the first time. If Wulff isn't elected in the first or second round of voting in which the absolute majority is necessary, there would be a massive resurgence of the leadership debate. Not to mention what would happen if Wulff loses against his challenger Joachim Gauck in the third round." Conservative Die Welt writes: "Wulff -- centrist politics impersonated, the personification of German normality -- wouldn't have had such poor chances of cutting a good figure. There's something paternal about him, as well as something youthful and -- this is a particularly valued asset -- he knows his way around the political system thanks to decades of party political and government work. Things could have gone smoothly if Joachim Gauck hadn't suddenly emerged. But Wulff looks bad compared with Gauck. That's not his fault, it's to Gauck's credit. The ruling parties seem to be reacting by digging in their heels. The ranks are being closed, dissent is being portrayed as betrayal of the government. But what, apart from vain pride, should prevent a rethink given the new circumstances?" Left-wing Die Tageszeitung devotes its entire front page to reprinting verbatim a speech Merkel gave on Jan. 22 in Berlin on the occasion of Gauck's 70th birthday in which she showers him with praise, calling him an "outstanding speaker," an "exciting personality," a "true teacher of democracy," a tireless advocate of "freedom, democracy and justice." The newspaper's headline is "Merkel's Ideal President." Business daily Financial Times Deutschland writes: "Gauck could turn into a disaster for Merkel. Her style of politics is backfiring now -- taking decisions on her own, alienating allies and weakening strong political figures.... Merkel stands to lose more than the sympathy of a wing of her party or the backing of infuriated regional governors. She can withstand 21 rebels in her own ranks. One more and Wulff will have failed, at least in the first round of voting." The paper quotes an unnamed Merkel ally as saying that a defeat of Wulff would be a "disastrous scenario" for Merkel and would herald ther end of her center-right coalition. Mass circulation Bild writes: "If Gauck wins, it will be the knock-out blow for the center-right coalition. It will be the end of the government, then the dream duo Merkel-Westerwelle would have no option but to bid their sad farewells. One might find it regrettable that the presidential election is once again

208 getting sucked into the maelstrom of party politics. But it's a simple fact: this isn't just about Gauck or Wulff -- this is also about Gauck or Merkel." -- David Crossland URL: http://www.spiegel.de/international/germany/0,1518,699175,00.html RELATED SPIEGEL ONLINE LINKS: • Letter from Berlin: Merkel's Search for New German President Full of Potential Pitfalls (06/01/2010) http://www.spiegel.de/international/germany/0,1518,698030,00.html • Controversy Over Afghanistan Remarks: German President Horst Köhler Resigns (05/31/2010) http://www.spiegel.de/international/germany/0,1518,697785,00.html • Letter from Berlin: Germany's Lonely Chancellor (05/24/2010) http://www.spiegel.de/international/europe/0,1518,696435,00.html • Merkel's Candidate for German President: A Sheep in Wulff's Clothing (06/04/2010) http://www.spiegel.de/international/germany/0,1518,698734,00.html

209

06/07/2010 05:46 PM Radical Cutbacks German Government Agrees on Historic Austerity Program The German government put together the largest austerity package since World War II on Monday, with spending cuts and new business levies aimed at saving 80 billion euros by 2014. Chancellor Angela Merkel says Germany, as Europe's largest economy, must set an example.

DER SPIEGEL The effect of Germany's new "debt brake" constitutional amendment. The German government on Monday announced plans to reduce spending by €80 billion ($95.7 billion) by 2014 in the largest package of cuts since World War II. The austerity program aims at reducing the budget deficit and helping to protect the euro as it continues its slide. "We have to save €80 billion by 2014 to put our financial future back on a solid footing," Merkel told a press conference on Monday afternoon. She said the budget cuts for Germany, Europe's largest economy, were a "unique show of strength" that signalled her government's commitment to tackling the European debt problems that have plunged the euro single currency into crisis. "Germany as the largest economy has a duty to set a good example," she said. A number of European nations have fashioned similar austerity programs, with Spain passing sharp cuts

210 last week and Greece having pushed through far-reaching emergency savings measures earlier this year in a last ditch attempt to avoid bankruptcy. The government plans to cut social spending in such areas as jobless benefits and will also shed many civil service jobs. There will be no reductions in government spending on education and research and no increases in income or value-added-tax, Merkel said. Business subsidies, however, will be reduced and a new levy will be imposed on air traffic. Power companies will be charged a new nuclear fuel rod tax and there will also be a financial markets tax. The government also plans to save money through a comprehensive reform of the German army, the Bundeswehr, though conscription is to continue, despite musings to the contrary by German Defense Minister Karl Theodor zu Guttenberg. 'We Can't Afford Everything' Merkel's cabinet also agreed to delay the planned reconstruction of Berlin's city palace by three years from 2011 to 2014 -- a move that will save the government €440 million. The savings plan is a far cry from the mission Merkel's governing coalition -- which pairs her conservatives with the pro-business Free Democratic Party (FDP) -- set for itself when it took office last October. Together with FDP head Guido Westerwelle, she had hoped to pass significant tax cuts. But the ongoing financial crisis and rapidly developing euro crisis, which has led to the fashioning of a €110 billion bailout of Greece and a €750 billion war chest to prop up the euro, has strapped Germany's already fragile budget. The savings plan comes as yet another blow to Westerwelle's political fortunes. Tax cuts had become a signature issue for him and his party and he seemed loathe to abandon the plan even as Merkel began talking about austerity measures. Leaders of Merkel's coalition met for 11 hours on Sunday to agree on the plans and then spent longer than expected finalizing them on Monday. Merkel said there was no alternative to drastic savings. "These are serious and difficult times," she said. "We can't afford everything we would like if we want to be able to shape our future." The government has to make radical budget savings to meet its commitments to reduce the budget deficit. The Stability Pact governing Europe's monetary union calls for Berlin to reduce the deficit from its current level of 5 percent of GDP to below the 3 percent ceiling by 2013. Furthermore, Berlin recently passed a constitutional amendment requiring that the federal budget be balanced by 2016. After a brief period of relative stability, the euro fell again against the dollar over the weekend and was trading on Monday below $1.20. cro -- with wire reports URL: http://www.spiegel.de/international/germany/0,1518,699229,00.html RELATED SPIEGEL ONLINE LINKS: • The World from Berlin: Presidential Vote 'Could Turn into a Disaster for Merkel' (06/07/2010) http://www.spiegel.de/international/germany/0,1518,699175,00.html • Berlin's Budget Plans: German Austerity Program Offers Chance for New Beginning (06/02/2010) http://www.spiegel.de/international/germany/0,1518,698378,00.html • The Failure Club: Our Leaders Are Responsible for Europe's Crisis (06/02/2010) http://www.spiegel.de/international/europe/0,1518,698343,00.html • From the Archive: Neo-Baroque in Berlin (12/04/2008) http://www.spiegel.de/international/germany/0,1518,594515,00.html

211 Daily Morning Newsbriefing Oh no, another stability pact beckons

07.06.2010 First drafts of the new governance procedures are circulating, and undershoot even the lowest expectations. No real agenda on economic governance, except stronger sanctions; Ecofin likely to agree on European stability fund, after France and Germany finally agreed; Funds will be lend at market conditions, no authorisation required from national parliaments; Also today, Angela Merkel and Nicolas Sarkozy are to stitch up their differences over diner in Berlin tonight; Germany close to agreement on austerity programme with severe cuts in public spending; G20 supports drive for austerity; Euro fell under $1.20 amid fears that debt crisis spread throughout Europe; Paul Krugman predicts lost decade for the world economy; Angela Merkel might not get her presidential candidate through; Wolfgang Münchau argues that central bank transparency has become crucial again; The procedure for enhanced cooperation, meanwhile, has been evoked for the first time, not by finance ministers but by justice ministers for common rules on divorce.

07.06.2010 Oh no, another stability pact beckons

If you have low expectations in the European Union and its institutions, this news reports undershoots all of them. The big governance idea coming out from this crisis is another stability pact – with sanctions! Die Welt has obtained a working draft of a paper to be discussed at tonight eurogroup meeting in Luxembourg, and tomorrow’s Ecofin, according to which the big idea is a semi-automated sanctions mechanism that kicks in earlier than previously – and that includes concrete demands about targets for debt-to-GDP ratios. The proposals also include a strengthening of the role of the economics commission within the Commission – to prevent others ganging up on him to push through their national interests. The article also said that Germany’s own balance budget law stands no chance to be implemented at eurozone level. The article also showed how difficult it will be to extend policy co-ordination beyond the stability pact. Silvana Koch Merin, a liberal MEP, said the proposal would effectively mean that other countries have influence on Germany’s economic policies – and was thus unacceptable. (If you want to get really depressed, read the vox populi comments below the article. Politically, it is going to be extremely difficult for Germany to accept anything other than a

212 souped-up stability pact, as Koch-Mehrin’s outburst indicated. To solve the problem of the eurozone, there is clearly a need for an end to absolute sovereignty over economic policies. The question must surely be how sovereignty can be effectively shared. Otherwise, international investors will invariable conclude that the EU has no effective agenda to deal with private sector imbalances, which have the biggest explosive potential. So this agenda is still consistent with a break-up of the euro.) On the ECOFIN agenda is also the agreement over the financial stability fund, after France and Germany had finally agreed on a proposal. According to Les Echos the last points were the involvement of national parliaments and lending conditions. The current agreement is that it does not require the national parliaments to authorise the funds (as wished by Germany, Austria, Finland and the Netherlands), but that it will be lend at market conditions. It is interesting to note that the agreement was well celebrated as historical achievement in the French Press (Les Echos), but received quasi no coverage in Germany. Also today, Angela Merkel invited Nicolas Sarkozy for a diner in Berlin, for a group therapy (La Croix) after divisions over how to handle the crisis. Germany austerity plan is mostly agreed This is quick. The eurozone country that should be lagging the process towards austerity is pressing ahead the fastest. Coalition leaders met for a weekend retreat and agreed on the essential cornerpoints of an austerity programme. German newspapers have been reporting various details of the talks, which are still continuing today. Frankfurter Allgemeine reports that there will be severe cuts in the public sector, welfare spending, and subsidies, as well as a tax on nuclear power stations. The total size of the package is €51bn until 2016 – which is necessary for Germany to meet its own self-imposed debt rules, which will kick in that year. Merkel lent her support to the decision to focus the austerity on welfare spending cuts, rather than tax increased, as had been demand by some sections of her own party. The trade unions have already indicated their opposition to those plans. G20 falls in line with drive to austerity everywhere The G20 communiqué said expansionary fiscal policy were no longer sustainable because investors were no longer confident about some countries’ public finances, the FT reports. “Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” it said. “We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions.” The drive for austerity is now the official policy where, as the world is exiting from the crisis simultaneously – just as we had always feared. Euro depreciates amid fear of debt crisis spread The euro reaches 1.1967$ for the first time in four years amid concerns that the sovereign debt crisis will spread throughout Europe and low growth prospects for the eurozone, Bloomberg reports. Credit-default swaps on France, Austria, Belgium and Germany rose last week. The cost of insuring against losses on Hungarian sovereign debt surged after comments from government officials sparked concern Europe’s sovereign debt crisis may be spreading to eastern Europe.

213 Krugman predicts a lost decade Paul Krugman now predicts a lost decade for the world economy. “It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US... The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound... Utter folly posing as wisdom. Incredible.” Merkel’s presidential candidate in difficulties The forthcoming German presidential elections could turn into a make-or-break issue for the Merkel government as several senior FDP politicians indicated that they would support Joachim Gauck, the candidate of the Social Democrats and the Greens. There is increasing criticism of Merkel’s handling of the situation, in particular her failure to talk to the Social Democrats, as in the view of many conservatives, Gauck would have been their ideal candidate. Gauck is from East Germany, and headed the agency that investigated activities by the Stasi. German liberal warns that they might vote for Gauck in revenge against a serious of recent humiliations at the hand of the coalition partner, which has rejected tax cuts, and the liberal health care reforms – two of the most important liberal agendas for this coalition. The Christian Democrats and the Liberal have together a small absolute majority in the presidential electoral chamber. The best hope for Merkel is now the Left Party, which does not support Gauck. It is hard to see how Merkel’s coalition could survive if a defeat of their candidate Christian Wulff. Wolfgang Münchau about transparency In his FT column, Wolfgang Münchau makes the point that central bank transparency, always an issue, is becoming vital during a crisis when the central banks takes on a quasi fiscal role. He said last week’s market jitters were to a large extent caused by bad or absent communication as dubious media reports fed market speculation. He says it is time for the ECB to publish minutes, voting records, and in particular detailed lists of which bonds it buys. It will otherwise create rumours that will be hard to control. He concludes with the observation that the present debates in Brussels and Frankfurt are primarily about Brussels and Frankfurt, not about the future of the eurozone. That would require a bigger crisis – which the eurozone is unfortunately very likely to get. EU finally invokes enhanced co-operation: on divorce The symbolism of the decision is quite extraordinary. The enhanced co-operation procedure has been lingering in the European Treaties since Amsterdam in the 1990s, but never used. It was really only intended for the eurozone – to take decisions among each other. Now it has invoked, not by finance ministers, but justice minister, on agreeing common rules for divorce. http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2813&tx_ttnews[ba ckPid]=901&cHash=a2140e54b2#

214 Opinion June 7, 2010, 3:33 am Madmen In Authority Rereading my post on the folly of the G20, it seems to me that I didn’t fully convey just how crazy the demand for fiscal austerity now now now really is. The key thing you need to realize is that eliminating stimulus spending, while it would inflict severe economic harm, would do almost nothing to reduce future debt problems. Here’s the IMF’s estimate of sources of the growth in debt over the next few years: Decomposition of Government debt increase 1907-1914 (total debt increase: 35,5% of GDP) IMF Fiscal stimulus (3,5) Financial support (3,0) Higher interest payments (4,0) Revenue loss for lower asset prices and finnancial profits (9,0) Automatic stabilizers (10,0) Other (6,0) And even this figure conveys a misleading impression of the importance of stimulus spending. First, since cutting stimulus would weaken the economy, it would reduce revenues — that is, a substantial part of the debt growth the IMF attributes to stimulus would have happened even without stimulus, through lower revenue. Second, for the US at least the core reason for long-run budget concern is rising health care costs — in fact, health cost control is the sine qua non of long-run solvency — which has nothing whatever to do with how much we spend on job creation now. So how much we spend on supporting the economy in 2010 and 2011 is almost irrelevant to the fundamental budget picture. Why, then, are Very Serious People demanding immediate fiscal austerity? The answer is, to reassure the markets — because the markets supposedly won’t believe in the willingness of governments to engage in long-run fiscal reform unless they inflict pointless pain right now. To repeat: the whole argument rests on the presumption that markets will turn on us unless we demonstrate a willingness to suffer, even though that suffering serves no purpose. And the basis for this belief that this is what markets demand is … well, actually there’s no sign that markets are demanding any such thing. There’s Greece — but the Greek situation is very different from that of the US or the UK. And at the moment everyone except the overvalued euro-periphery nations is able to borrow at very low interest rates. So wise policy, as defined by the G20 and like-minded others, consists of destroying economic recovery in order to satisfy hypothetical irrational demands from the markets — demands that economies suffer pointless pain to show their determination, demands that markets aren’t actually making, but which serious people, in their wisdom, believe that the markets will make one of these days. Awesome. Madmen In Authority June 7, 2010, 3:33 am http://krugman.blogs.nytimes.com/2010/06/07/madmen-in-authority/

215 June 6, 2010, 3:00 am

Lost Decade, Here We Come The deficit hawks have taken over the G20: “Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” it added. “We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions”. These words were in marked contrast to the G20’s previous communiqué from late April, which called for fiscal support to “be maintained until the recovery is firmly driven by the private sector and becomes more entrenched”. It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US. But don’t we need to worry about government debt? Yes — but slashing spending while the economy is still deeply depressed is both an extremely costly and quite ineffective way to reduce future debt. Costly, because it depresses the economy further; ineffective, because by depressing the economy, fiscal contraction now reduces tax receipts. A rough estimate right now is that cutting spending by 1 percent of GDP raises the unemployment rate by .75 percent compared with what it would otherwise be, yet reduces future debt by less than 0.5 percent of GDP. The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound. But what about Greece and all that? Look, right now sovereign debt problems are taking place in countries with a very specific problem: they’re part of the euro zone, AND they’re badly overvalued thanks to huge capital inflows in the good years; as a result they’re facing years of grinding deflation. Counties not in that situation are not facing any pressure from the markets for immediate cuts; as of this morning, 10-year bonds were yielding 3.51 in Britain, 3.21 in the US, 1.27 in Japan. Yet the conventional wisdom now is that these countries must nonetheless cut — not because the markets are currently demanding it, not because it will make any noticeable difference to their long-run fiscal prospects, but because we think that the markets might demand it (even though they shouldn’t) sometime in the future. Utter folly posing as wisdom. Incredible. Lost Decade, Here We Come June 6, 2010, 3:00 am http://krugman.blogs.nytimes.com/2010/06/06/lost-decade-here-we-come/ June 4, 2010, 3:33 am Policy And The Tinkerbell Principle OK, I have to weigh in briefly on this debate between Mark Thoma and Scott Sumner. Mark is being too gentle here: on this issue, Scott is just wrong — actually wrong on two levels. First, he writes that

216 But here’s the bigger flaw with the whole expectations trap argument. People think it applies to monetary policy, but they forget it applies equally to fiscal policy. (Indeed I never realized this until today.) Here’s why. Krugman’s model relies on rational expectations, indeed you can’t get the expectations trap without ratex. But if you have ratex in your model, then no policy can work unless it is expected to work. What Scott is suggesting is that all macro policy, both monetary and fiscal, is subject to what we might call the Tinkerbell Principle: you can fly, but only if you believe you can fly. But this isn’t even true about monetary policy, unless you’re at the zero lower bound. Under normal circumstances, an open-market operation will reduce short-term interest rates, regardless of what the market believes. It’s only when you’re up against the lower bound that increasing the current monetary base does nothing, so an open-market operation matters only if people believe it signals higher inflation later. And the Tinkerbell principle NEVER applies to fiscal policy. If the government goes out and hires a million people to dig ditches, the direct effect is that a million people have been put to work digging ditches. It doesn’t matter whether people believe it will work. Some of the effect might be partially offset if people believe the government will have to raise taxes later (though not completely offset– we’ve had that discussion). The point, however, is that expectations effects if anything diminish the effectiveness of fiscal policy, which actually works best if expectations don’t change at all. Beyond the theoretical confusion, Scott argues that Almost everyone agrees that Japan does not face an expectations trap. They can devalue the yen whenever they wish, as much as they wish. Someone should tell my current hosts. The Swiss National Bank has been trying hard to prevent an appreciation of the franc: since the start of the crisis Switzerland has added around $100 billion, or 20% of GDP, to its foreign exchange reserves. An equivalent intervention for the US would be $3.5 trillion. Yet the franc has still strengthened from .6 to .7 euro. The point here is that currency intervention is actually just a form of quantitative easing — conceptually no different from buying commercial paper or long-term bonds. And the same problem arises — namely, that you have to engage in a huge expansion of the central bank’s balance sheet to gain traction. You can say that’s OK, and in fact I would; I’d like to see the Fed add several trillion to its assets. But central banks are leery of doing this, for various reasons, including the fact that they’re taking on risk. So it’s just wrong to suggest that currency intervention offers an easy way out of the expectations trap; there’s nothing special or magical about that particular form of QE — or rather, nothing special except that it’s a beggar-thy-neighbor policy. Bottom line: you really have to think these things through. Blithe generalizations about rational expectations aren’t enough. And the Tinkerbell Principle actually applies only in some cases. http://krugman.blogs.nytimes.com/2010/06/04/policy-and-the-tinkerbell-principle/ June 3, 2010, 4:59 am Rashomon In The OECD It seems to me that much of the sensible debate over macroeconomic policy (as opposed to the nonsense debate — I cannot for the life of me see the case for monetary tightening) comes

217 down to how you see this picture, which in some version has been making an appearance at various meetings I’ve been in lately: Eurostat, IMF The horizontal axis shows gross debt as a percentage of GDP at the end of 2009; the vertical axis shows the budget deficit as a percentage of GDP in 2009. Each point represents one advanced economy; I’ve labeled a few countries of interest. Japan is, literally, off the chart, with enormous debt and a large deficit. As you can see, I’ve identified the GIPSIs — the Club Med plus Ireland countries that are facing serious questions about solvency. As you can also see, by the debt-and-deficit criteria the US, UK, and (as you can’t see) Japan look similar enough to the crisis countries that if you didn’t know better, you might expect them to be in the same boat. But they aren’t. As of right now, the interest rates on 10-year bonds are 3.59% in the UK, 3.36% in the US, 1.29% in Japan. CDS spreads for Japan and the UK are only about a third of the level for Italy. So what does one make of this? One possible answer is, just you wait — any day now there will be a Wile E. Coyote moment, the markets will realize that America is Greece, and all hell will break loose. The other answer is to note that all the crisis countries are in the eurozone, while the US, UK, and Japan aren’t — and to argue that having your own currency makes all the difference. I’ll choose door number 2. http://krugman.blogs.nytimes.com/2010/06/03/rashomon-in-the-oecd/ June 3, 2010, 4:19 am I Do Not Think That Word Means What You Think It Means, OECD Edition The OECD’s chief economist responds to my column about the pain caucus: To be clear, we are not arguing for contractionary policy, but for progressively less stimulus. In fact, stimulus should not be withdrawn completely until the economy returns to full employment. But the process should be started fairly soon, to take into account the well known long and variable monetary policy lags. I suppose there is some interpretation of the word “contractionary” in which raising the Fed funds rate from zero to 3.75 percent by the end of 2011, even though the OECD’s own forecast says that the unemployment rate will be above 8 percent and the inflation rate only 1 percent, isn’t contractionary. But it sure would tend to derail the economic recovery. http://krugman.blogs.nytimes.com/2010/06/03/i-do-not-think-that-word-means-what-you- think-it-means-oecd-edition/ June 1, 2010, 4:03 pm Pre-refuting William Galston So William Galston has an article in the New Republic questioning Keynes — and me. He lays great stress on the Reinhart-Rogoff claim that growth slows substantially when debt exceeds 90 percent of GDP.

218 First of all, that’s not in the Reinhart-Rogoff magnum opus. It’s in a later working paper, which is not nearly of the same standard. And when Galston writes, Until someone refutes Reinhardt and Rogoff, our operating presumption must be that excessive debt accumulation will eventually reduce economic growth I sort of wonder at the absence of a link to my blog post in which I, well, refuted Reinhart and Rogoff. OK, that post was very recent — but it’s not the first time I wrote about this issue; see here. I don’t want to be too cranky here, but if you’re going to cite me in the title of an article, and accuse me of not having an answer to what someone else wrote, shouldn’t you do a search to see whether I have, in fact, said anything about it? Anyway, the punchline: I’m a great admirer of the Reinhart-Rogoff work on crises — but NOT of their work claiming that 90 percent debt/GDP ratios constitute a red line, which isn’t at all up to the standard of the other material. It’s based on a crude correlation — and as soon as you look at specific examples, it starts to look all wrong. The details are at the links. So as the title of this post implies, I believe I pre-refuted Galston. Oh, and before commenting on Japan, one has to read Adam Posen (pdf). That’s all for now; I’m hiking in an undisclosed location (the biking comes later). http://krugman.blogs.nytimes.com/2010/06/01/pre-refuting-william-galston/ May 28, 2010, 6:56 am Martin Wolf Is Not A Serious Person And neither am I. Wolf writes: I have now lost faith in the view that giving the markets what we think they may want in future – even though they show little sign of insisting on it now – should be the ruling idea in policy. Amen. Yet most of the men in the room where I’m now sitting believe the contrary. With a few exceptions, everyone is calling for fiscal austerity everywhere, right now. Awesome. http://krugman.blogs.nytimes.com/2010/05/28/martin-wolf-is-not-a-serious-person/

219 07.06.2010 GFC to GSC – Part 2: Nowhere to Run To, Nowhere to Hide By: Satyajit Das

It Always Ends in the Same Way … Like many economically weaker EU members, Greece fudged the numbers to meet the qualifications for Euro-zone entry. Membership of the Euro-zone reduced the ability of Greece to manage its economy. It lost the ability to use its currency, via devaluations, to improve competitiveness and stimulate exports. It also lost the ability to set interest rates, now set by the ECB. It also cannot print its own currency to fund sovereign borrowing. Greece also has low levels of domestic saving and is reliant on international capital flows. The current episode exposed an underlying weak and unbalanced economy with few sustainable competitive advantages. It has also exposed poor political leadership and inadequate financial controls. The same could be said of a number of other countries. No one, including the IMF, seriously believes that the austerity program announced by Greece will work. Argentina had debt to GDP of around 60% and a budget deficit of 6%. Adjustments necessary to halve both failed. After a long drawn out struggle between 1999 and 2001, Argentina was forced to reschedule its debt and have still not quite made their way back to normality. Many of the vulnerable countries in Europe are in a much worse position than Argentina in 1999. Rapid economic growth or high inflation would improve Greece’s prospects for survival. Neither is a realistic option. The Euro-zone could continue to finance Greece, which would require extension of the current package, which is initially for 3 years. Greece may not be able to avoid a debt restructuring. For the countries like, Ireland, Spain, Portugal as well the others, the savage austerity measures required are unlikely to be palatable and probably won’t work in any case. In any debt rescheduling, lenders would take significant write downs, reducing Greece’s debt burden, giving it a chance to emerge as a sustainable economy. Previous sovereign defaults suggest that the losses to investors may be as high as 70-80% of the face value. The rating agencies have suggested a loss around 50%. This would equate to a loss of around $130 billion to $200 billion, making this the single largest sovereign default in history. The real agenda of the bailout is to avoid foreign lenders taking large losses. The investors were imprudent in their willingness to lend excessively to countries like Greece assuming EU "implicit" support and are now seeking others to bail out them out of their folly. As Herbert Spencer, the English philosopher, observed: "the ultimate result of shielding men from the effects of folly is to fill the world with fools." The real purpose of the bailout is to prepare for a possible series of sovereign debt restructurings in Europe. In an ideal world, banks and investors raise capital and write down their exposure to the troubled debtors over time allowing the restructuring to be relatively smooth, avoiding disruption to financial markets. It is not certain that this is achievable. Dysfunctional functionalism …

220 Contagion is already a reality. Highly indebted sovereign borrowers with immediate financing needs are facing higher costs and lower availability of funds. Scrutiny of their public finances is forcing them to undertake austerity programs to remain credible borrowers with access to markets The risk of losses from a Greek or other sovereign defaults has affected financial institutions. Mirroring events at the start of the GFC, the close linkages between Euro-zone banks through cross border loans and investment to each other remain a serious potential problem. The connections and trading in instruments on the credit risk of banks and sovereigns (such as CDS contracts) may prove a major channel for financial contagion. A single sovereign default may affects banks, which in turn will affect other banks, resulting in renewed problems for the global financial system. The stress is most evident in inter-bank funding rates that have risen sharply to their highest levels in a year. While they are below the extraordinary levels following the problems of Lehman Brothers and AIG, forward funding rates and instruments used to transfer liquidity between currencies (such as basis swaps) anticipate further increases. Some of the change is technical and driven by a shortage of dollars, due to investors repatriating funds. Central banks have reinstated currency swap deals to make it easier for banks to borrow dollars. A greater concern is that banks fearful of the quality of borrowing banks limit lending. Markets are stockpiling liquidity, as evident by surplus balances at the ECB and other central banks, fearing a sequel to the deep freeze in financial markets in 2008. Activity in bond markets and new equity raisings has slowed sharply, albeit from very high recent levels. If these markets do not resume activity shortly, then further problems can be anticipated. In the real economy, forced or voluntary retrenchment of government spending is restricting demand restraining economic growth. This has global implications as a lack of demand in Europe affects the exporting economies of Japan, China and East and South Asia. Currency volatility, dominated by the appreciation of the dollar, is creating problem. It is driven by a flight to quality, away from Euros and Yen to dollars. It is also driven by a forced de-risking as traders unwind the carry trade (long risk/ short dollars). The Australian dollar, which has been masquerading as a respectable currency, reverted to the Peso of the South Pacific, falling an astonishing 12+% in a few days. Concerns about commodity prices and Chinese growth accelerated the fall. Increased dollar strength belies the fundamentals and is merely victory in the battle of the "ugly" currencies. Dollar strength will slow the ability of the U.S. to use exports as a growth engine. Many U.S. corporate earnings have been adversely affected by the current shift. Continued dollar strength will ultimately affect U.S. growth and the adjustment of the current account deficit. The weakness of the Euro and resultant appreciation of the Renminbi by 14+% also reduces Chinese exporter’s earnings and competitiveness. China is now even more reluctant to take steps to allow the Renimini to appreciate. The European sovereign debt crisis has once again exposed the problem of unaddressed global imbalances. The weakness of Europe and currency volatility means that it is hard to deal with now than before. The sovereign debt problems are creating serious dislocations and perverse outcomes. Paralleling the events after the Asian monetary crisis in 1997/1998, the flight to dollars has pushed down interest rates on U.S. government debt. Paradoxically, lower interest rates reduce pressure for deficit reduction by lowering the cost of servicing public debt. Low interest rates perversely encourage greater borrowing by an already deeply indebted borrower. Combined with the stronger dollar, it encourages spending. It also defers hard decisions addressing the U.S. budget deficit and structural problems. The weak Euro will further increase Germany’s current account surplus which was forecast by the OECD to increase to increase to 7.2% of GDP in 2011 (from 5% in 2009) before the fall in the currency. This will exacerbate the imbalances within the Euro-zone.

221 Fading Hopes …. A combination of self-reinforcing events is driving a pernicious reversal of the dynamics of 2008- 09. Then, co-ordinated government action on a grand scale stopped the global financial crisis from turning into a depression. Government and central bank strategy was a bet on growth and inflation, as the most painless means of adjusting the overly leveraged and deeply indebted global economy. Now, governments have become the problem. Markets have engaged in wishful thinking. In the words of François Duc de La Rochefoucauld: "Hope, deceitful as it is, serves at least to lead us to the end of our lives by an agreeable route." The most important consequence of Greece and European sovereign debt problems will be to force governments everywhere to stabilise and reverse the deterioration in public finances, by a combination of new taxes and cutting expenditures. Many indebted economies, including Britain and Italy, have implement austerity measures. The sharp reduction of government spending coincides with the end of the effects of stimulus packages and is likely to slow economic growth. Country specific factors – attempts by China to rein in excessive lending growth and property price rises; higher interest rates in Australian and India, driven by perceived inflation in local economies – may also undermine growth. Government demand for funds and deteriorating conditions in the financial system will reduce the availability of funds and increase cost, further restricting growth. The ability to use inflation to reflate asset prices is increasingly difficult. Inflation needs convergence of several conditions – loose money supply, active lending by banks to increase the velocity of the money and an imbalance between supply and demand. Growth in money supply by itself may not be sufficient to create inflation. In Japan, years of loose monetary policy and quantitative easing have not prevented significant deflation over the last two decades. Problems within the financial system have slowed the velocity of money. Capacity utilisation is generally low and over capacity exists in many industries. In the short term, high levels of inflation appear unlikely. Higher energy and food prices have prevented outright deflation in recent times. But with price rises, other than food or energy, low, the risk of deflation is present. The GSC has profoundly shifted economic dynamics. Refusing to acknowledge the real problems, major economies have over a period of two decades transferred debt from companies to consumers and finally onto public balance sheets. A huge amount of assets and risk now is held by central banks and governments, which are not designed for such long-term ownership. There are now no more balance sheets that can be leveraged to support the current levels of debt. Borrowing can only be repaid by the sale of assets, including those funded by the debt, or by redirecting income, perhaps generated by the asset purchased to repayments. Unfortunately, in many cases, the current value of the asset will not cover the outstanding debt. The level of income and cash flow generated is insufficient to cover interest costs or amortise the amount borrowed. The GSC focused attention on the excessive level of debt and how it was used. Based on per capital income of $30,000 (roughly 75% of Germany), Greece gives the appearance of a developed economy. In fact, Greece’s economy and its institutional infrastructure are weak. In the World Bank’s Index for Doing Business that measures the commercial environment, Greece ranks 109th behind Lebanon, Egypt and Ethiopia and, amongst developed countries, in the same index, second last. Around 30% of the Greek economy is unreported and informal. Tax revenue losses may be around $30 billion per annum. Productivity and quality are low. Despite the size of the public sector, public services are inadequate. Corruption is endemic. While entry into the Euro may have assisted Greece’s ascension into major league status, the Euro decreased international competitiveness as the country effectively priced itself out of the market for goods and services. Entry into the Euro compounded existing weaknesses by providing access to low cost funds. Greek bonds became eligible as collateral for ECB funding. Assumptions of "implicit" ECB and EU support (since proven correct) facilitated easy access to bank funding. A period of credit driven expansion financed a construction boom and social

222 policies, such as early retirement with large pension entitlement, often in excess of those available in more affluent countries. The harsh reality is that much of the debt in Greece was not used to finance productive enterprises but fuelled consumption or was channelled into unproductive uses. There are no substantial assets or income from those investments that will help repay the debts. Many countries and businesses face identical problems and now must face and adjust to that painful reality. As Tyler Cowen, Professor of Economics at George Mason University, observed in a 21 May 2010 opinion piece entitled "How Will Greece Get Off the Dole?" in the New York Times: "…it’s a moot point whether Greece is a poor country masquerading as a wealthy country or vice versa. … If the old illusion was that Greece was a wealthy country, the new illusion is that Greece will, in short order, become wealthy enough to pay back ever-growing sums of debt. " The lack of viable policy options is increasingly evident in the panicked reactions of governments. One manifestation has been re-regulation of financial markets and institutions. While increased financial oversight is inevitable, the specific regulations and timing need to be considered carefully. Actions that could curtail credit availability abruptly and excessively risk making serious problems worse. Increased capital, reduced leverage and more strict controls over liquidity and derivatives are necessary but need to be implemented in a way so as to not exacerbate existing problems. Germany’s decision to ban naked short selling was poorly conceived and a politically driven initiative. As other nations are unlikely to follow, the proposal will be practically ineffective. Blaming "wolf packs" (wolves are actually seriously endangered in Europe and are protected) misses the point that the short sellers are merely pointing out the blindingly obvious – some sovereign states are effectively bankrupt and not in a position to pay back the debt. In literature, they all quote Shakespeare in the end. When things go wrong in financial markets, it seems that everybody looking for a scapegoat blames speculators and short sellers. Nowhere to run to, Nowhere to Hide…. The onset of the GSC marks a new dangerous phase of the credit crisis. At best a withdrawal of government support (through lower spending and higher taxes) will reduce global demand and usher in a potentially prolonged period of stagnation. At worst, increasing difficulty in sovereigns raising money and a clutch of sovereign debt rescheduling may result in a sharp deterioration in financial and economic conditions. Recent difficulties by Germany to issue debt highlight the risks. Financial institutions will continue to build up capital and reduce balances sheets, anticipating further losses and write-offs over time, including potential losses on exposures to sovereign loans. Lending growth will continue to be low reducing growth. Consumption and investment will be below potential. There is no political will to tackle deep-seated problems. The electorate is unwilling to accept the adjustments and lower living standards that will be necessary. As the credit crisis enters it third year, the scale of sovereign debts means that governments now have limited room to counter any new economic downturn any new problems or crisis. The liquidity and government spending driven rally also caused "bubbles" in emerging market. There is a risk that the GFC and GSC morphs into the EMC (Emerging Market Crisis). The world increasingly rocks to an old Holland-Dozier-Holland standard that Martha and the Vandellas made famous: "Nowhere to run to, baby/ Nowhere to hide." Satyajit Das is the author of the just released Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2010) http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2814&tx_ttnews[backPid]=901& cHash=d782a6f7d9

223 Confidencial de Michael Cembalest: Chief Investment Officer J.P. Morgan Private Banking

On May 13, we reviewed why we believe Italy is more insulated from the European credit crisis, a result of a smaller budget deficit, greater public and private sector reliance on domestic financing, and lower banking sector risks. Unfortunately, the same cannot be said of Spain. I won’t repeat the 4-dimensional chart again, but Spain’s fiscal adjustment in a low growth limited devaluation environment is almost as difficult as Greece’s. We’re concerned about austerity in a country that already has 20% unemployment; where home prices are down only 11% with half the newly constructed ones sitting unoccupied; and with $3.4 trillion of household and corporate debt (220% of GDP, one of the highest ratios in the world). Progress is being made on the lending mechanism that offers countries like Spain a chance to fund bilaterally rather than in debt markets, as well as on Spanish fiscal reform. But systemic risks remain, and we retain large underweights to European equities and the Euro. Among the comments I see regarding how Spain will be OK, these 2 are prevalent: “the current account is healing rapidly (reducing reliance on foreign capital)”, and “Spain’s public debt is not as high as in other countries”. On the first, the current account has improved, from 10% to 4% of GDP. But how? In prior cases of current account improvement, imports and exports both rose, with exports rising faster. Over the last two years, Spain’s current account improved as imports and exports both declined. This is not a positive sign for growth, employment, or private sector solvency. Secondly, after adding possible costs from Cajas (regional savings banks) and Autonomias (municipalities), Spain’s public debt is higher than Portugal and Ireland. Some analysts believe the Cajas have enough capital and operating income to make it through the next couple of years. A comparison of Survival Ratios1 does show that Spanish banks are comparable to US banks circa May 2009, when the Treasury SCAP Stress Test was conducted. But this is due to the strength of Santander and BBVA. The Cajas, which represent 40% of banking sector assets, are in much weaker condition and may face more than EUR 100 bn of losses. The Bank of Spain seized CajaSur, a savings bank in Cordoba (note that Moody’s last rating on CajaSur was A1, one of the highest of all the Cajas). The 7 arranged mergers of undercapitalized Cajas seem to be based more on regional proximity than on relative financial strength, and may not reduce the government’s need to recapitalize them. 1 The Survival Ratio looks at whether a banking system can earn its way out of its problems. If the path looks viable, and there are gov’t guarantees in place for depositors and bondholders, a country may avoid a deeper crisis. Ratio = existing equity + 2 years of estimated pre-provision income, divided by stress case loan losses, net of existing provisions and purchase adjustments (losses already recognized). Wonderland. We have expressed unease about consequences of European austerity. The other day, I read the following from a Chief European Economist: “I have found that with respect to this assessment of the socio-political situation in each country, the further you get away from the Euro-zone, the more skeptical (and often the more convinced) observers get. Makes you wonder, doesn’t it?” No, it doesn’t. The closer that economists and strategists are to a region, the harder it has been for them to see a negative paradigm shift. Examples include Citicorp in Mexico 1994 (the only U.S. firm that had a Mexican branch banking license); Asian economists in 1997; Renaissance Capital, Deutsche Bank and CSFB in Russia in 1998; U.S. technology analysts in 2001; Argentina’s “Chicago Boys” economists defending its currency board; etc. These are my own experiences, and others’ may differ. But there is a Stockholm syndrome at work sometimes; investors are wise to be wary of it.

224

Frankfurt’s shroud of secrecy should be shed

By Wolfgang Münchau Published: June 6 2010 19:05 | Last updated: June 6 2010 19:05 There is a more than even chance that the European Union will get something right this week. I expect finance ministers to reach a sensible agreement on the outstanding details of the special purpose vehicle that is to provide a protective shield for the weaker eurozone members. Uncertainty over the scope of the SPV contributed to last week’s turmoil in European capital markets. Another source of instability were German media reports suggesting French banks were dumping large holdings of Greek bonds on to the European Central Bank. There was no hard evidence to support it, but there were no hard denials either, as a result of which this suspicion rattled markets for several days. The underlying cause of last week’s rise in sovereign bond spreads was thus lousy communication. The market panic would never have arisen if the ECB had provided details of its bond purchases, or if European finance ministers had clearly communicated which elements of the SPV had been agreed and which had not. In the absence of details, people assume the worst. Last week they did. Transparency is not something in which the EU, and the ECB in particular, excel. It is about time the ECB told us very clearly what it buys and how its members vote. According to my information, only Axel Weber, president of the Bundesbank, formally raised his hand and voted against the ECB’s bond purchase programme. He was, however, not the only one to raise concerns during the discussions. I have also heard other accounts, less credible, claiming a different voting pattern. So who is right? The main point is that we should not have to make such guesses. There are many good reasons for greater transparency. It is a prerequisite to the resolution of a wide-ranging crisis such as this. The ECB has had a good crisis so far, but withholding important information is irresponsible and potentially dangerous. The discussion about transparency is not new. I recall writing about it in 1998. For many years, observers have been saying that the stability and growth pact that governs eurozone membership would not withstand an even medium-strength storm; that sanctions do not work; that we need proper systems of crisis management; that we need different eurozone accession criteria; and that we need central bank transparency. They got nowhere on any of these points. The ECB tried to nip any debate on transparency in the bud – claiming it would expose its council members to undue pressure at home. ECB observers thus became Kremlinologists, constantly speculating on what the ECB was thinking, as opposed to what it was saying. Conspiracy theories came and went. And when the crisis took hold, secrecy gave rise to toxic speculation, which in turn has reinforced the problems.

225 The EU missed a big chance to address all these problems in 2003, during the constitutional convention that ultimately gave rise to the Lisbon treaty. It has another chance now, but I am not holding my breath. I would place transparency and central bank accountability right at the top of the governance to-do list. I am not questioning the ECB’s independence. But the ECB should at the very least be forced to publish the votes of its meetings without having to identify the members. Ideally, they should go further and fully identify the votes. I used to accept the argument at the beginning of monetary union that national central bank governors might come under pressure to vote in their countries’ interest. But the argument is difficult to uphold a decade later. If that were still the case, we might as well shut the whole thing down. Anne Sibert, a professor of economics at Birkbeck College, London, and an external member of the monetary policy committee of the Central Bank of Iceland, makes the point in a new paper* that there are two types of accountability, formal and substantial. The latter includes the possibility of a penalty in case of failure to achieve the objective. The ECB is not even formally accountable. She writes: “For there to be formal accountability, the ECB must be transparent: that is, it must inform the citizenry of its actions and decisions and justify them. Unfortunately, the ECB – notoriously opaque in its conduct of monetary policy – is demonstrating perhaps even less transparency in its financial stability role.” In the concrete case of bond purchases, when the ECB becomes a quasi-fiscal actor, the public has a democratic right to information not only about aggregate volumes but exactly which bonds the ECB has bought. The problem of lack of transparency is not confined to the ECB. It is present in Brussels as well. The wider governance debate, under the leadership of Herman van Rompuy, president of the European Council, is just as secret as an ECB council meeting. That secrecy, too, is giving rise to speculation, which has the effect of triggering denials and rejections, thus shutting off a genuine debate. My impression is that the current discussions in Brussels and Frankfurt are primarily about Brussels and Frankfurt, not about providing sustainable solutions. For that to happen, we need – and probably will get – a much, much bigger crisis. *“Accountability and the ECB”, www.annesibert.co.uk http://www.ft.com/cms/s/0/31809bac-7195-11df-8eec-00144feabdc0.html

226 Internacional ANÁLISIS: El conflicto de Oriente Próximo

A un minuto de la guerra JUAN CARLOS SANZ 06/06/2010 "One minute. One minute", nos gritaban los soldados israelíes mientras abrían fuego la cubierta del Mavi Mármara, relataba a la prensa uno de los activistas de la flotilla humanitaria de ayuda a Gaza al poco de ser repatriado a Estambul desde Tel Aviv. "One minute", el tiempo que pidió con vehemencia Recep Tayyip Erdogan en el Foro de Davos de 2009 para expresar su condena a la incursión israelí en la franja de Gaza, es ya todo un lema reivindicativo en el viejo conflicto de Oriente Próximo. El primer ministro turco no ha dejado desde entonces de proclamar que Israel se ha convertido en un obstáculo para la paz en la región. Investido con la toga de doctor honoris causa por la Universidad Europea de Madrid, lo recordaba una vez más hace apenas tres semanas en la capital española, donde oficializó con el presidente brasileño, Luiz Inácio Lula da Silva, el nacimiento de una política autónoma hacia Irán por parte de dos potencias emergentes que ha desairado a Estados Unidos. El Gobierno de Ankara se ha esforzado en los últimos años en mejorar sus relaciones con Siria, Irak y otros países vecinos de Oriente Próximo, donde al pasado imperial otomano ha sucedido una pujante estrategia de lazos energéticos y comerciales. "Nadie debe poner a prueba la paciencia de Turquía". Esta advertencia de Erdogan a Israel para que liberara a los más de 600 activistas -dos terceras partes de nacionalidad turca- detenidos en el asalto a la llamada Flotilla de la Libertad fue interpretada en Turquía como un ultimátum en toda regla. El Consejo de Seguridad Nacional se reunió de inmediato en Ankara para evaluar la crisis. Los analistas turcos apuntaron en ese momento la posibilidad de que Turquía cortara las relaciones diplomáticas con el Estado hebreo e invocara a continuación el Tratado de la Alianza Atlántica, de la que forma parte desde su fundación. No llegó la sangre al Mediterráneo oriental, pero el alejamiento de Turquía e Israel, que precisamente comenzaron a ser aliados estratégicos al hilo de los acuerdos de paz de Oslo entre palestinos e israelíes, se ha consumado en esta crisis. Ankara ha retirado a su embajador en Tel Aviv, ha suspendido la cooperación militar y ha congelado las relaciones económicas bilaterales, que rondaron los 2.500 millones de euros en 2009. Turquía, que ve frenada su aspiración a convertirse en miembro de pleno derecho de la Unión Europea por el veto de Francia, Alemania y Chipre, se ha convertido ya en una nueva potencia en el Mediterráneo oriental. Sus Fuerzas Armadas, las segundas más numerosas de la OTAN y que participan en la misión internacional en Afganistán, avalan su capacidad de respuesta. "El proceso de acercamiento a la UE ha sido el motor de las grandes reformas que ha experimentado Turquía", reconocía en mayo el presidente de la República, Abdulá Gül, ante un grupo de periodistas europeos. Pero el Gobierno turco ejerce ahora su liderazgo regional con un estilo más occidental: el denominado soft power de los negocios y las relaciones diplomáticas. El gesto de Turquía ante Israel durante la crisis de la flotilla ha situado a la nueva potencia emergente en puesto de gran visibilidad al frente de un mundo islámico de 1.500 millones de personas, que ven en el modelo turco un referente de progreso y modernidad sin pérdida de su identidad cultural. "No tenemos la ambición de construir un nuevo imperio", advertía el subsecretario de Exteriores turco Selim Yenel, "pero queremos paz y estabilidad en nuestra región". JUAN CARLOS SANZ A un minuto de la guerra 06/06/2010 http://www.elpais.com/articulo/internacional/minuto/guerra/elpepuint/20100606elpepiint_3/Tes

227 Barómetro de clima social de junio SONDEO DE METROSCOPIA Crisis de Gobierno, sí; elecciones, aún no El 86% de los ciudadanos expresa poca o ninguna confianza en Zapatero - Seis de cada 10 piden al presidente cambios inmediatos en el Ejecutivo

FERNANDO GAREA - Madrid - 06/06/2010 Los planetas se han alineado hasta dejar en penumbra el panorama de España: crisis económica, crisis política, pesimismo ciudadano creciente, falta de liderazgo, desconfianza en el Gobierno, rechazo a la oposición, falta de acuerdos básicos entre los partidos y deterioro de la paz social. Ni un rayo de sol que ilumine el panorama. Este es el negro escenario que dibuja la encuesta de Metroscopia para EL PAÍS, en la que ninguna variable mejora para el Gobierno. Pero eso tampoco significa una petición de adelanto electoral. Para eso Mariano Rajoy tendrá que esperar, porque en este panorama pesimista, la opinión mayoritaria es que hay que agotar la legislatura, aunque haya que proceder de inmediato a un cambio profundo en el Gobierno. Un 53% considera que disolver las cámaras supondría paralizar la toma de decisiones urgentes, porque lo prioritario es afrontar la crisis. Es decir, lo contrario de lo que sostiene Mariano Rajoy, empeñado en anteponer el final de José Luis Rodríguez Zapatero a cualquier otra circunstancia, aunque eso suponga encrespar aún más el clima político y dificultar el camino hacia la recuperación. El líder del PP ha llegado a decir que un adelanto electoral daría confianza a los mercados. Él no lo ha pedido expresamente, pero casi todos los dirigentes relevantes del PP sí lo han hecho. Incluso el ex presidente José María Aznar, en un mitin en Murcia, se sumó ayer a esa tesis. Dijo que el Gobierno está "agotado" y que "está agotado" y que cada día que pasa supone

228 "prolongar inútilmente la agonía de un país que va a pagar un precio muy alto por culpa de esta crisis". Los ciudadanos encuestados no coinciden con esa idea, pero eso no significa que avalen la gestión de Zapatero. Por el contrario, la valoración del presidente sigue cayendo a cifras récord, acelerada por el anuncio de las medidas de recorte, que sepultan su proyecto y sus promesas de salir de la recesión sin tocar el gasto social. Por primera vez hay más ciudadanos que desaprueban la gestión de Zapatero que los que rechazan la de Rajoy. Un 86% dice tener poca o ninguna confianza en Zapatero, el 84% dice que improvisa y el 76% desaprueba su gestión. Ni siquiera conserva Zapatero el apoyo casi ilimitado que tuvo de los votantes del PSOE, porque el 70% ya no se fía de él y el 57% rechaza su gestión. Su desaprobación sigue sin tocar fondo y va cayendo progresivamente en cada encuesta, a falta de que se constate el final de la paz social y que caiga sobre Zapatero la maldición que ya cayó sobre sus antecesores: la huelga general. Los ciudadanos vienen a decirle a Zapatero que está obligado a asumir la responsabilidad de afrontar la crisis, pero para eso necesita un equipo distinto y tiene que empezar por hacer el cambio de Gobierno al que se resiste. Por eso, seis de cada 10 encuestados, un 58%, asegura que debe procederse de inmediato a un cambio en el Gobierno para afrontar la situación. Pese a todos los datos, los ciudadanos consideran un mal mayor la convocatoria inmediata de elecciones generales, porque sería un obstáculo para la recuperación, tal y como dijo Josep Antoni Duran Lleida (CiU) en el Congreso. También porque la resignación ciudadana hace que el 73% asegure que un Gobierno del PP no lo haría mejor y que un 55% diga que la situación económica internacional es casi más determinante que la actuación del Ejecutivo. Poco más de un año después de que Zapatero hiciera un cambio en profundidad de su equipo, incluyendo pesos pesados de su partido como Manuel Chaves, José Blanco y Trinidad Jiménez, entre otros, un 69% asegura que ha perdido su capacidad de dar solución a los problemas del país. Esta opinión la sostiene el 53% de los votantes socialistas. Hace poco más de un año, Zapatero puso sobre las espaldas de Elena Salgado la gestión de la crisis que antes soportaba Pedro Solbes. Un año después, la vicepresidenta segunda obtiene su peor nota desde que está en el Gobierno. Sigue muy por encima de todos en valoración Alfredo Pérez Rubalcaba, el único ministro portador de buenas noticias, cuando anuncia las detenciones y a la espera de las novedades sobre el final de ETA. Los ciudadanos parecen penalizar la falta de acuerdo entre los dos grandes partidos y, quizás por eso, la valoración del PP y de su líder siga bajo mínimos, tras haberse opuesto a las medidas de recorte del gasto propuestas por Zapatero. También se refleja en que el 88% pide acuerdos entre los dos grandes partidos y hasta un 75% asegura que sería deseable una gran coalición. El pesimismo ciudadano se manifiesta en las cifras más altas de la calificación negativa de la situación económica del país y la personal. El 89% dice que aún queda mucho para mejorar y, al contrario de lo que ocurría hace dos años, los encuestados aseguran que han recortado sus gastos de ocio, de compras, de hogar y de vacaciones. Es decir, que han sacrificado su forma de vida habitual, y eso se traslada también al malestar ciudadano contra todo. http://www.elpais.com/articulo/espana/Crisis/Gobierno/elecciones/elpepuesp/20100606elpepi nac_1/Tes

229 Barómetro de clima social de junio El 77% quiere nuevos candidatos

El PP aumenta la brecha hasta 10,5 puntos por el hundimiento del PSOE F. G. - Madrid - 06/06/2010 La brecha entre el PP y el PSOE se ha consolidado y hasta se ha ampliado ligeramente. Ya son 10,5 los puntos de diferencia, no tanto a consecuencia de la subida de los populares como del desplome de la estimación de voto del PSOE. La última encuesta de Metroscopia mostraba ya una ventaja de nueve puntos, en plena efervescencia por el anuncio del plan de recorte del sueldo de los funcionarios. La brecha entre el PP y el PSOE se ha consolidado y hasta se ha ampliado ligeramente. Ya son 10,5 los puntos de diferencia, no tanto a consecuencia de la subida de los populares como del desplome de la estimación de voto del PSOE. La última encuesta de Metroscopia mostraba ya una ventaja de nueve puntos, en plena efervescencia por el anuncio del plan de recorte del sueldo de los funcionarios y de congelación de las pensiones. Ahora esa brecha parece consolidada, porque el PP está casi tres puntos por encima de su resultado de 2008 y al nivel de su mayoría absoluta de 2000, y el PSOE está 11,2 puntos por debajo de las últimas generales, en su nivel más bajo de la historia. Se ha instalado la idea de triunfo del PP y el 61% de votantes del PSOE ya lo da por hecho. La duda es si la ventaja del PP ha dejado de ser coyuntural y es irreversible o es posible la remontada en casi dos años hasta las elecciones. Lo primero que no está claro es quién puede liderar esa remontada, porque Zapatero no ha despejado aún la incógnita de si repetirá por tercera vez como candidato. Y es indicativo que la encuesta muestra que si finalmente

230 volviera a presentarse lo haría en contra de los ciudadanos y de los propios votantes socialistas. Los ciudadanos no parecen querer que por primera vez en la historia los candidatos de los dos grandes partidos se presenten por tercera vez como cabezas de lista. Si una de las dos formaciones decidiera cambiar de cabeza de lista, los electores se lo agradecerían, según el sondeo. Un 77% asegura que España necesita que otros políticos se sitúen al frente de los principales partidos; un 72% dice que Zapatero no debería repetir y un 60% que Rajoy debe abandonar. El líder del PP tiene ahora más apoyo entre los suyos, porque el 56% le quiere como candidato, frente a solo el 35% del PSOE que quiere a Zapatero. Para sustituir a Rajoy, la lista la encabeza Alberto Ruiz-Gallardón, y para relevar a Zapatero, el preferido es Alfredo Pérez Rubalcaba. http://www.elpais.com/articulo/espana/77/quiere/nuevos/candidatos/elpepuesp/20100606elpe pinac_3/Tes

5 Despido más barato, pero menos fácil El Gobierno busca contentar a patronal y sindicatos en el final de la negociación LUCÍA ABELLÁN - Madrid - 06/06/2010 Han sido meses de desencuentros, de pasos en falso y, sobre todo, de dilaciones. Pero en la recta final de la reforma laboral, el Gobierno se ha vuelto estratega, justo cuando el margen de maniobra es más estrecho. Empeñado en seguir negociando con patronal y sindicatos hasta el momento de presentar su proyecto, el Ejecutivo ha perfilado unos cambios en la regulación del despido. Han sido meses de desencuentros, de pasos en falso y, sobre todo, de dilaciones. Pero en la recta final de la reforma laboral, el Gobierno se ha vuelto estratega, justo cuando el margen de maniobra es más estrecho. Empeñado en seguir negociando con patronal y sindicatos hasta el momento de presentar su proyecto, el Ejecutivo ha perfilado unos cambios en la regulación del despido que pretenden contentar por igual -y quizá también disgustar por igual-, a trabajadores y empresarios. Aunque resulte ya demasiado tarde para granjearse las simpatías de los agentes sociales, el Gobierno podrá argumentar al menos que intentó buscar un camino intermedio entre las peticiones de CEOE y las de UGT y Comisiones Obreras. Las partes se han dado una última oportunidad para llegar a un acuerdo el próximo miércoles. En el despido empieza y acaba una reforma laboral que se ha demorado más de cuatro meses en negociaciones formales y casi dos años en contactos. Los negociadores del Gobierno buscan equilibrar la propuesta final. Se facilitarán los despidos por causas económicas, con indemnización de 20 días por año trabajado frente a los 45 del despido improcedente, pero también se dificultará el acceso al llamado despido exprés, según explican fuentes cercanas a la negociación. Esa fórmula, vigente desde 2002, permite a las empresas olvidarse del trámite judicial si en las 48 horas siguientes a la salida del trabajador depositan la indemnización aplicable al despido improcedente. Aunque resulte más costoso, el 80% de los despidos se tramitan por esa vía, presentándose como despidos disciplinarios, incluso si responden a causas económicas. El freno consistiría en cortar para esos supuestos la financiación del despido que la reforma laboral pretende poner en marcha a través de un fondo específico. Si se engrosa un fondo con

231 aportaciones empresariales para financiar los eventuales despidos, se podría vetar esa financiación para los improcedentes por motivos disciplinarios, la vía rápida por la que ahora se resuelve la mayoría. Eso disuadiría al empresario de emplearla y haría más atractiva la opción del despido objetivo, sobre todo si se acotan los supuestos en que el juzgado puede rechazarlo. Además de en el contenido, el Gobierno está empleando buenas dosis de estrategia en las formas. En primer lugar, se resiste a dar por finiquitada la negociación hasta el minuto antes de presentar su decreto. Con esa actitud pretende una imagen dialogante y, de paso, retrasa la preparación de una eventual huelga general. Los sindicatos han anunciado que la convocarán si hay un decreto lesivo para los trabajadores. Pero cuanto más tarde en conocerse ese texto, menos tiempo tendrán para organizarla antes de julio, como pretenden CC OO y UGT. Entretanto, el Gobierno podrá medir el descontento popular con la huelga de funcionarios convocada para el próximo martes, justo un día antes de la que se supone será la última reunión del diálogo social. El desenlace de esta tragicomedia laboral estará entonces más claro. http://www.elpais.com/articulo/economia/Despido/barato/facil/elpepueco/20100606elpepieco _5/Tes

232 La primera crisis del euro Alemania siempre gana La huida de los inversores de la deuda de países periféricos reduce a mínimos históricos el coste de financiación germano C. P. - Madrid - 06/06/2010 El capitalismo es la asombrosa idea de que los peores hombres harán las peores cosas para alcanzar el bienestar de todos. Siempre Keynes. En el corto plazo, todas las crisis dejan montones de perdedores (casi siempre los mismos) y un puñado de ganadores (de nuevo los mismos, o parecidos). El capitalismo es la asombrosa idea de que los peores hombres harán las peores cosas para alcanzar el bienestar de todos. Siempre Keynes. En el corto plazo, todas las crisis dejan montones de perdedores (casi siempre los mismos) y un puñado de ganadores (de nuevo los mismos, o parecidos): la subprime, por ejemplo, hizo millonario a John Paulson , ejecutivo de un fondo de alto riesgo que apostó a que el mercado inmobiliario estadounidense se iría a pique (e hizo sus buenos dólares trabajando con Goldman Sachs en varios negocios que están siendo investigados por fraude, lo que confirma lo de las peores cosas, pero tal vez no lo del bienestar de todos). La crisis fiscal de la eurozona tiene también un ganador claro. Es Alemania. Y tampoco esta vez queda claro que ese triunfo vaya a redundar en el bienestar de todos los europeos, a pesar de Keynes. El euro se desploma y eso favorece el ya de por sí abultado superávit comercial alemán. Y el incendio en los mercados de deuda de los países periféricos deja el mismo caballo ganador: de nuevo Alemania. Nunca en los últimos 20 años su deuda había pagado tipos de interés tan bajos: el 2,5% en el bono a 10 años. Un punto menos que hace un año, y dos menos que antes de la quiebra de Lehman Brothers. Cuando nació el euro, hace una década, Alemania pagaba más del 5% por el famoso bund. Veinte años atrás, en plena reunificación, casi el 10%. Esa caída de los intereses se explica por la huida en desbandada de los inversores hacia la seguridad. Alemania tiene una reputación intachable de buen pagador, y como país refugio se beneficia del bajo coste de su financiación cuando se incendian los mercados. Este es uno de esos momentos: la credibilidad deja un ahorro colosal en las arcas del Tesoro alemán, directamente proporcional al sobrecoste que paga ahora la periferia del sur del Europa. Pero tamaña caída también da disgustos. Hace unos días, Alemania sufrió para colocar una emisión de bonos a cinco años ante la muy baja rentabilidad que ofrecen sus bonos, por debajo del 1,5%. Aun así, los ahorros son millonarios. Alemania tenía una deuda pública de 1,76 billones de euros a finales del año pasado, el 73,2% del PIB. Según Barclays, asumiendo que el 20% de la deuda debe ser refinanciada cada año, al final Alemania se ahorra 3.500 millones anuales por cada punto que cae el coste de financiación de su deuda. Wolfgang Münchau, presidente de Eurointelligence, explica que los mercados valoran, ahora más que nunca, "el compromiso de Alemania con la reducción del déficit". "Los inversores creen que pase lo que pase en la eurozona siempre estarán seguros en Alemania. Y mientras persistan los rumores, Alemania seguirá beneficiándose de ese halo de refugio seguro: eso hace que el Ejecutivo alemán tenga muy poco interés en hacer desaparecer los rumores", relativos a posibles reestructuraciones de deuda en Grecia y Portugal, o incluso a un eventual fractura de la eurozona.

233 Mientras las cosas sigan igual, los alemanes seguirán sacando provecho a esa situación: "Pueden recaudar mucho dinero de forma barata [con las emisiones de deuda] y obtener un gran retorno con los préstamos a los países con problemas", explica Münchau por teléfono. "El problema es que esas cosas funcionan bien hasta un determinado punto. Puede llegar el momento en el que Alemania se encuentre con un montón de deudas incobrables, y el sentimiento del mercado se vuelva en su contra como un vendaval", advierte. Las razones de la confianza de los mercados en Alemania están bien fundadas. Una regla constitucional limita al 0,35% del PIB el déficit del Estado, y al 0,15% el de los länder. La deuda total es elevada, pero inferior a la de otros países. "Quizá lo más importante es que Alemania llegó a esta crisis bien pertrechada: flexibilizó su mercado laboral y ganó competitividad en la eurozona y en los mercados asiáticos, cuya recuperación facilita su salida de la crisis y de paso la consolidación fiscal: eso es un círculo virtuoso", señala Tomás Baliño, ex ejecutivo del FMI. Y sin embargo, no todo son luces. Un parte importante de la banca alemana tiene serios problemas. El sistema de pensiones preocupa. Y, en definitiva, la crisis fiscal europea favorece ahorros en el pago de intereses, pero a la postre Alemania necesita que los compradores de sus exportaciones (los países más golpeados, en gran medida) sigan siendo capaces de comprarlas. "Si el resto de la UE se hunde en la recesión, Alemania también pagará las consecuencias", dice Luis Servén, del Banco Mundial. A Alemania se le achaca insolidaridad, pero el Ejecutivo de Angela Merkel responde con datos: aporta 22.400 millones al rescate griego, hasta 148.000 millones al bazuka para salvar el euro y el 20% del presupuesto de la UE, 10.000 millones al año. Y sin embargo los analistas achacan a Merkel buena parte del contagio de la crisis fiscal porque obligó a dilatar en exceso la respuesta europea y ha sembrado de dudas el futuro de la UE. Los alemanes están mejor porque hicieron las grandes reformas antes de la crisis. Son más competitivos. Y ahorran más. Pero a menudo pasan por alto que fueron los primeros en incumplir el Pacto de Estabilidad y Crecimiento, que sus bancos fueron los que más se metieron en el cenagal de las subprime, que han sacado inmensas ventajas económicas y financieras de la Unión. "Hay una cosa más: Alemania no va a cambiar. Porque le va muy bien así. Va a aprobar una subida de impuestos en lugar de incentivar la demanda interna, que es lo que la UE necesita para salir de la crisis. Pero olvida que si todo el mundo hiciera lo mismo el mundo iría directo hacia el desastre", remacha el economista Ángel Ubide desde Washington. C. P Alemania siempre gana La huida de los inversores de la deuda de países periféricos reduce a mínimos históricos el coste de financiación germano 06/06/2010 http://www.elpais.com/articulo/economia/Alemania/siempre/gana/elpepueco/20100606elpepi eco_2/Tes

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EDITORIAL Un gesto político Zapatero necesita una remodelación ministerial si quiere recuperar un mínimo de autoridad 06/06/2010 El debate sobre el estado de la nación, previsto para mediados de julio, se perfila como la última ocasión de que dispone el presidente Zapatero para acompañar su reciente, y correcto, giro económico con un gesto político que le permita recobrar, si no la credibilidad dilapidada, al menos el mínimo de autoridad imprescindible para encarar la elaboración de los nuevos Presupuestos. En la actual coyuntura económica, y al menos hasta constatar los apoyos parlamentarios de que disponga el Gobierno para aprobar las cuentas del próximo año, las alternativas teóricas para realizar ese gesto son limitadas. En realidad, se reducen a la solicitud de un voto de confianza al Parlamento y a la remodelación del Gabinete, improcedente mientras España ejerza la presidencia de la Unión Europea, que concluye este mes. La cuestión de confianza es desaconsejable no solo porque la votación de las resoluciones del debate sobre el estado de la nación será un signo inequívoco de la situación parlamentaria en la que se encuentra el Gobierno; lo es también, y sobre todo, porque el riesgo de añadir incertidumbre política a la difícil situación económica es mayor que el eventual beneficio que cabría esperar. Podría darse la paradoja de que, aun en el supuesto de que Zapatero reuniese la mayoría requerida, no por ello obtuviera la confianza en el sentido político fuerte que exige este tiempo. Entre otras razones, porque la pérdida de esa confianza se debe principalmente al hecho de que el equipo de Zapatero está amortizado, en unos casos por la escasa autonomía que le ha concedido, desautorizando sus decisiones, y en otros por un problema de origen, que remite a la frívola selección de algunos de sus componentes. Sin una crisis de Gobierno, es previsible que la situación política siga deteriorándose hasta dejar a Zapatero sin margen de maniobra justo cuando más lo necesite. Pero, de llevarla a cabo, la crisis no puede parecerse a las que ha realizado en el pasado, inspiradas por criterios que nada tienen que ver con la competencia técnica ni el talento político. Un Gobierno es algo muy distinto de la dirección de un partido o de un reclamo propagandístico, más cuando se trata de afrontar la más grave coyuntura económica desde 1929. El desafío que tiene ante sí Zapatero es de tal magnitud que carece de sentido vincular la formación de un nuevo equipo al calendario electoral, como también posponerla alegando argumentos tan débiles como que es necesario que los actuales titulares de los diversos departamentos lleven a cabo el recorte del gasto público ya decidido. Más que en ningún otro momento, Zapatero está solo frente a sus responsabilidades. Mantener a su partido en el poder es, sin duda, una de ellas, pero no será esa por la que se le juzgue. La crisis económica ha mermado gravemente la riqueza del país, y existe un creciente riesgo de que arruine el esfuerzo de muchos años. Los pasos para evitarlo están contados, y son pasos que, tanto política como institucionalmente, solo esperan la decisión de Zapatero. http://www.elpais.com/articulo/opinion/gesto/politico/elpepuopi/20100606elpepiopi_2/Tes

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G20 drops support for fiscal stimulus By Chris Giles and Christian Oliver in Busan Published: June 5 2010 11:54 | Last updated: June 5 2010 11:54 Finance ministers from the world’s leading economies ripped up their support for fiscal stimulus on Saturday, recognising that financial market concerns over sovereign debt had forced a much greater focus on deficit reduction. The meeting of the Group of 20 finance ministers and central bank governors in Busan, South Korea, also dropped proposals for a global banking levy, instead giving countries leeway to do what they thought best for their domestic circumstances. The G20 communiqué in full - Jun-05 Money Supply: All change on the fiscal front - Jun-05 Money Supply: G20 drops the global banking levy - Jun-05 Eurozone woes hit US reform agenda - Jun-04 China takes interest in Osborne reading list - Jun-04 G20 to delay tough bank regulations - Jun-04 The communiqué of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries’ public finances. “The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability,” the communiqué stated. “Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” it added. “We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions”. These words were in marked contrast to the G20’s previous communiqué from late April, which called for fiscal support to “be maintained until the recovery is firmly driven by the private sector and becomes more entrenched”. After the meeting, finance ministers acknowledged that the landscape had changed. George Osborne, British chancellor, claimed credit for the change. The new words were a “significant success in getting endorsement from the G20 for … a significant change in tone in the language on fiscal sustainability”. Many other finance ministers accepted market realities had changed the G20’s policy, Christine Lagarde, French finance minister, said: “There’s a large majority for whom redressing the public finances is priority number one. For a minority, it’s supporting growth”. Even Dominique Strauss Kahn, managing director of the International Monetary Fund who championed fiscal stimulus since January 2008, recognised the world was suddenly different. Asked whether he felt comfortable with the change in tone from the G20, he replied: “Totally comfortable. I am not the champion of fiscal stimulus, but the champion of right fiscal policy”.

236 But there were concerns around the G20 that the rush to reduce budget deficits, necessary though officials now thought it was, would undermine the recovery in the near term. In a letter to the rest of the G20, Tim Geithner, US Treasury secretary, argued: “Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery”. Ministers from many countries stressed the need for structural reforms to boost the potential for private sector growth In private, G20 officials said that the US had been the country most concerned about the new austerity drive and feared for the momentum for global growth. In the meetings it had been frank in the meeting in calling for China to revalue the renminbi and for Germany to boost domestic demand, officials said. Mr Geithner, himself, was open about his fears in his letter to the G20. “Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery,” he wrote, adding that fiscal tightening won’t “succeed unless we are able to strengthen confidence in the global recovery.” When discussing reforms to the financial system, the G20 found there was no consensus for a global levy on banks. The decision to allow countries to pursue their own domestic agendas on new taxes on banks was particularly pleasing for Canada, which has long opposed the idea. Jim Flaherty, Canadian finance minister, said: “The debate on … bank levies has been a distraction form the core issues and it has been apparent again from out meetings that most of the G20 members do not support the concept of a universal levy”. Instead, the G20 “recognis[ed] there is a range of policy approaches” and that countries could develop their own thinking, “taking into account individual country’s circumstances and options”. For countries such as the US and UK still wanting to go ahead with unilateral banking levies, the G20 agreed that they should be devised within a set of principles to minimise the opportunities for banks to pick and choose between different jurisdictions depending on the levies introduced. Chris Giles and Christian Oliver in Busan G20 drops support for fiscal stimulus June 5 2010 11:54 http://www.ft.com/cms/s/0/786776b4-708f-11df-96ab-00144feabdc0.html

G20: All change on the fiscal front June 5, 2010 12:02pm by Chris Giles Policy makers perform U-turns only at times of no alternative. Though there was a lot of talk about growth here in Busan, South Korea, the big news was that the global community now thinks fiscal stimulus is yesterday’s idea. All in all, it is pretty sobering stuff. Fiscal stimulus has been ditched, not because the G20 thinks the private sector is surging ahead in Europe, but because there is no other option.

237 As recently as April, the G20 communique concluded: “In economies where growth is still highly dependent on policy support and consistent with sustainable public finances, it should be maintained until the recovery is firmly driven by the private sector and becomes more entrenched.” But today, all talk of continued policy support until recovery is entrenched has disappeared and the tone is very different. “The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth- friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances. Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions”. Although Britain, in particular, claimed credit for the change of tone and some deficit hawks such as Jean Claude Trichet, president of the European Central Bank, seemed genuinely pleased, many other ministers and officials worried that there might not be alternatives to fiscal support in the near term. This view was particularly prevelent among the US delegation. Tim Geithner sent a letter to the rest of the G20 warning about the possibility of a lack of demand. He wrote: “Fiscal reforms are necessary for growth, but they will not succeed unless we are able to strengthen confidence in the global recovery. The challenge is to demonstrate the capacity to deliver fiscal sustainability over the medium term without creating the perception that this will require a generalized, undifferentiated, move to pull forward consolidation plans. The necessary and inevitable withdrawal of fiscal and monetary stimulus needs to be calibrated to proceed in step with the strengthening of the private sector recovery in our economies.” And Dominique Strauss Kahn, also accepting the time for fiscal stimulus is over also warned of a “negative effect on growth” unless domestic demand was boosted in emerging markets. This is the upshot of the IMF’s Mutual Assessment Process, an exercise undertaken by the Fund to see what policies individual G20 countries need to adopt to have consistent policies which add up to a global whole. One piece of good news. The IMF says the forecasts given to it by each G20 country did not suffer from the “adding up” problem Mr Strauss Kahn had feared. Countries were not predicating all of their growth on exports. From this, the IMF believes that if the “right” policies are adopted - these remain to be defined - then global growth can be 2.5 per cent higher every year. Expect to hear a lot more of this at the G20 summit in Toronto at the end of the month. Tags: G20, global economy, growth June 5, 2010 12:02pm in G20, Global, IMF, consolidation | 7 comments Chris GilesG20: All change on the fiscal front June 5, 2010 12:02pm http://blogs.ft.com/money- supply/2010/06/05/g20-all-change-on-the-fiscal-front/

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Global rebalancing policies need coordination: IMF Sat, Jun 5 2010 By David Lawder and James Pomfret BUSAN, South Korea (Reuters) - The International Monetary Fund believes global growth will suffer if the Group of 20 rich and developing economies fail to coordinate efforts to rebalance global demand, IMF officials said on Saturday. Coordinated policies to encourage savings and cut budget deficits in wealthy countries such as the United States and to spur domestic demand in developing economies like China could boost growth substantially. Speaking at the end of a G20 summit for finance ministers and central bank governors in the Southern Korean port city of Busan, the IMF's managing director Dominique Strauss- Kahn said he was also "totally comfortable" with a final communique calling for troubled euro zone countries to accelerate fiscal consolidation. "They have to consolidate strongly even if it has some bad effect on growth," he said, referring to Greece and other southern European countries saddled with huge debts. "Some countries have to go back rapidly to normalcy. Some others may go on with letting the stimulus expire by its own." An IMF report presented at the G20 meeting earlier estimates that coherent adoption of the adjustment policies could increase global growth by as much as 2.5 percent annually over a medium-term five year period. Strauss-Kahn said 30 million extra jobs could be created with these policy moves. Last September, the G20 leaders pledged to take steps to rebalance global growth to eliminate huge trade surpluses in Asia and a massive buildup of debt in wealthier countries. They asked the IMF to study effects of differing speeds of implementing such policies. Strauss-Kahn said Europe's woes were a global problem and it was important that Asia, through its currencies, help with the vital global economic rebalancing. "The IMF still believes the renminbi (yuan) is till substantially undervalued ... (but) even a revaluation of 20-25 percent doesn't solve all the imbalances and you have more to do, so it's only part of the problem and you still have other imbalances." It found that if the wealthy countries cut deficits and increased savings without complementary actions by developing export-oriented economies to boost domestic demand, short term growth would suffer in both. The wealthy countries would see more growth in the longer term as a result of an improved fiscal footing, but developing countries would see lower growth in both the short term and long term. The paper was one of three presented by the IMF to G20 meetings in Busan. In a final draft of its study of bank taxes to pay for bailouts, it recommended that financial institutions pay levies similar to insurance premiums.

239 These would be based on risk-weighted liabilities. "The more risk you create, the more you should pay," the official said. The IMF favors collecting the levies before a financial crisis hits because this would spread costs of banking failures evenly -- to both survivors and failed institutions. The bank tax recommendations, however, may fall on deaf ears, as there was little agreement at Busan on bank levies, with some countries steadfastly against them, and differing views on their methods. The final communique by the ministers made no reference bank levies. "I won't say it's the end of this idea," said Strauss-Kahn, while conceding countries might end up doing different things. The IMF's other briefing paper reaffirmed its global economic forecasts issued in April, which predicted global economic growth at 4.2 percent for 2010. The IMF official said the financial turbulence emanating from Europe has "added to the realism of the downside risks that were already described in the World Economic Outlook." (Additional reporting by David Milliken; Editing by Jonathan Thatcher) David Lawder and James Pomfret Global rebalancing policies need coordination: IMF Jun 5 2010 http://uk.reuters.com/article/idUKTRE65412G20100605?feedType=RSS&feedName=internationalFinancialNews&rpc =423&virtualBrandChannel=11702

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June 4, 2010 Debtors’ Prism: Who Has Europe’s Loans? By JACK EWING FRANKFURT IT’S a $2.6 trillion mystery. That’s the amount that foreign banks and other financial companies have lent to public and private institutions in Greece, Spain and Portugal, three countries so mired in economic troubles that analysts and investors assume that a significant portion of that mountain of debt may never be repaid. The problem is, alas, that no one — not investors, not regulators, not even bankers themselves — knows exactly which banks are sitting on the biggest stockpiles of rotting loans within that pile. And doubt, as it always does during economic crises, has made Europe’s already vulnerable financial system occasionally appear to seize up. Early last month, in an indication of just how dangerous the situation had become, European banks — which appear to hold more than half of that $2.6 trillion in debt — nearly stopped lending money to one another. Now, with government resources strained and confidence in European economies eroding, some analysts say the Continent’s banks have to come clean with a transparent and rigorous accounting of their woes. Until then, they say, nobody will be able to wrestle effectively with Europe’s mounting problems. “The marketplace knows very little about where the real risks are parked,” says Nicolas Véron, an economist at Bruegel, a research organization in Brussels. “That is exactly the problem. As long as there is no semblance of clarity, trust will not return to the banking system.” Limited disclosure and possibly spotty accounting have been long-voiced concerns of analysts who follow European banks. Though most large publicly listed banks have offered information about their exposure — Deutsche Bank in Frankfurt says it holds 500 million euros in Greek government bonds and no Spanish or Portuguese sovereign debt — there has been little disclosure from the hundreds of smaller mortgage lenders, state-owned banks and thrift institutions that dominate banking in countries like Germany and Spain. Depfa, a German bank that is now based in Dublin, is one of the few second-tier European banking institutions that have offered detailed disclosures about their financial wherewithal, and its stark troubles may be emblematic of those still hidden on other banks’ books. Despite boasting as recently as two years ago of its “very conservative lending practices,” Depfa, which caters primarily to governments, has flirted with disaster. It narrowly avoided collapsing in late 2008 until the German government bailed it out, and today its books are still laden with risk. DEPFA and its parent, Hypo Real Estate Holding, a property lender outside Munich, have 80.4 billion euros in public-sector debt from Greece, Spain, Portugal, Ireland and Italy. The amount was first disclosed in March but did not draw much attention outside Germany until

241 last month, when investors decided to finally try to tally how much cross-border lending had gone on in Europe. Before Greece’s problems spilled into the open this year, investors paid little heed to how much lending European banks had done outside their own countries — so it came as a surprise how vulnerable they were to economies as weak as those of Greece and Portugal. “Everybody knew there was a lot of debt out there,” said Nick Matthews, senior European economist at Royal Bank of Scotland and one of the authors of the report that tallied up Greek, Spanish and Portuguese debt. “But I think the extent of the exposure was a lot higher than most people had originally thought.” Concern has quickly spread beyond just the sovereign bonds issued by the three countries as well as by Italy and Ireland, which are also seriously indebted. Private-sector debt in the troubled countries is also becoming an issue, because when governments pay more for financing, so do their domestic companies. Recession, along with higher interest payments, could lead to a surge in corporate defaults, the European Central Bank warned in a report on May 31. Hypo Real Estate has hundreds of millions in shaky real estate loans on its books, as well as toxic assets linked to the subprime crisis in the United States. In the first quarter, it set aside an additional 260 million euros to cover potential loan losses, bringing the total to 3.9 billion euros. But that amount is a drop in the bucket, a mere 1.6 percent of Hypo’s total loan portfolio. Hypo has not yet set aside anything for money lent to governments in Greece and other troubled countries, arguing that the European Union rescue plan makes defaults unlikely. The European Central Bank estimates that the Continent’s largest banks will book 123 billion euros ($150 billion) for bad loans this year, and an additional 105 billion euros next year, though the sums will be partly offset by gains in other holdings. Analysts at the Royal Bank of Scotland estimate that of the 2.2 trillion euros that European banks and other institutions outside Greece, Spain and Portugal may have lent to those countries, about 567 billion euros is government debt, about 534 billion euros are loans to nonbanking companies in the private sector, and about 1 trillion euros are loans to other banks. While the crisis originated in Greece, much more was borrowed by Spain and its private sector — 1.5 trillion euros, compared with Greece’s 338 billion. Beyond such sweeping estimates, however, little other detailed information is publicly known about those loans, which are equivalent to 22 percent of European G.D.P. And the inscrutability of the problem, as serious as it is, is spawning spoofs, at least outside the euro zone. A pair of popular Australian comedians, John Clarke and Bryan Dawe, who have created a series of sketches about various aspects of the financial crisis, recently turned their attention to the bad-debt problem in Europe. After grilling Mr. Clarke about the debt crisis in a mock quiz show, Mr. Dawe tells Mr. Clarke that his prize is that he has lost a million dollars. “Well done,” says Mr. Dawe. “That’s an extraordinary performance.” On a more serious front, Timothy F. Geithner, the United States Treasury secretary, visited Europe at the end of May and called on European leaders to review their banks’ portfolios, as American regulators did last year, to separate healthy banks from those that need intensive care. Others say that if such reviews do not occur, the banking sector in Europe could be crippled and the broader economy — dependent on loans for business expansions and job growth — could stall. And if that happens, says Edward Yardeni, president of Yardeni Research, the

242 Continent’s banks could find themselves sinking even further because “European governments won’t be in a position to help them again.” LENDING practices at Depfa may have seemed conservative before its 2008 meltdown, but its business model had always been based on a precarious assumption: borrowing at short-term rates to finance long-term lending, often for huge infrastructure projects. From its base in Dublin, where it moved from Germany in 2002 for tax reasons, Depfa helped raise money for the Millau Viaduct, the huge bridge in France; for refinancing the Eurotunnel between France and Britain; and for an expansion of the Capital Beltway in suburban Virginia. Depfa was also a big player in the United States in other ways, like lending to the Metropolitan Transportation Authority in New York and to schools in Wisconsin. Before the current crisis, Depfa was proud of its engagement in Mediterranean Europe. In its 2007 annual report, the company boasted of helping to raise 200 million euros for Portugal’s public water supplier and 100 million euros for public transit in the city of Porto. In Spain, it helped cities such as Jerez refinance their debt and helped raise money for public television stations in Valencia and Catalonia as well as raise 90 million euros for a toll road in Galicia. And in Greece, Depfa raised 265 million euros for the government-owned railway and in 2007 told shareholders of a newly won mandate: providing credit advice to the city of Athens. Depfa said it performed a rigorous analysis of the creditworthiness of its customers, including a 22-grade internal rating system in addition to outside ratings. More than a third of its buyers earned the top AAA rating, the bank said in 2008, while more than 90 percent were A or better. The public infrastructure projects in which Depfa specialized were considered low-risk, and typically generated low interest payments. Yet because long-term interest rates were typically higher than short-term rates, Depfa could collect the difference, however modest, in profit. To outsiders, Depfa still looked like a growth story even after the subprime crisis began in the United States. Hypo Real Estate, which focused on real estate lending, acquired Depfa in 2007. After the acquisition, Depfa kept its name and its base in Dublin. But when the United States economy reached the precipice in September 2008, banks suddenly refused to make short-term loans to one another, blowing a hole in Depfa’s financing and leaving it with a loss for the year of 5.5 billion euros and dependent on the German government for a bailout. As Hypo’s 2008 annual report said of Depfa: “The business model has proved not to be robust in a crisis.” Even with Depfa’s myriad travails, most investors weren’t aware of the extent of its cross- border problems until it disclosed them this year. The question now hanging over Europe is how many other banks have problems similar to Depfa’s, but haven’t disclosed them. On May 7, the cost of insuring against credit losses on European banks reached levels higher than in the aftermath of the Lehman Brothers collapse in the United States. Officials at the European Central Bank warned that risk premiums were soaring to levels that threatened their ability to carry out their fundamental role of controlling interest rates. Three days later, European Union governments joined with the International Monetary Fund to offer nearly $1 trillion in loan guarantees to Europe’s banks. At the same time, the European Central Bank began buying government bonds for the first time ever to prevent a sell-off of Greek, Spanish and other sovereign debt.

243 The measures, widely regarded as a de facto bank rescue, restored some calm to the markets, but critics said that the aid merely bought time without reducing overall debt load. Europe’s major stock indexes and the euro have continued to fall as investors remain dubious about the ability of Greece and perhaps other countries to repay their debts. Even so, figuring out which banks may be most exposed to those countries largely remains a guessing game. Regulators in each country know what assets their domestic banks hold, but have been reluctant to share that information across borders. Lucas D. Papademos, vice president of the European Central Bank, which gets an indication of banks’ health based on which ones draw heavily on its emergency credit lines, said at a news conference Monday that a small number of banks were “overreliant” on that funding. But Mr. Papademos, who retired last Tuesday at the end of his term, wouldn’t be more specific. He said European banks would undertake a vigorous round of stress tests by July. It’s obvious that Greek and Spanish banks hold large amounts of their own government’s bonds. Spanish banks hold 120 billion euros in sovereign debt, according to the Spanish central bank. But a central bank spokesman said that those holdings were not a problem because, thanks to the European Union’s rescue plan, the prices of Spanish bonds have recovered. Guessing also falls heavily on public and quasipublic institutions like the German Landesbanks, which are owned by German states sometimes in conjunction with local savings banks. Five of Germany’s nine Landesbanks required federal or state government support after they loaded up on assets that later turned radioactive, ranging from subprime loans in the United States to investments in Icelandic banks that failed. According to the Royal Bank of Scotland study, banks in France have the largest exposure to debt from Greece, Spain and Portugal, with 229 billion euros; German banks are second, with 226 billion euros. British and Dutch banks are next, at about 100 billion euros each, with American banks at 54 billion euros and Italian banks at 31 billion euros. “Banks continue to not trust each other,” says Jörg Rocholl, a professor at the European School of Management and Technology in Berlin. “They know other banks are sick, but they don’t know which ones.” DEPFA and Hypo Real Estate, meanwhile, face continued setbacks as they try to steer back to health. Hypo reported a pretax loss for the group of 324 million euros in the first quarter, down from 406 million euros a year earlier. At the end of May, the German government raised its guarantees for Hypo to 103.5 billion euros from 93.4 billion. Some analysts say they think the bank may need more aid in the future. “I don’t think it’s over yet,” says Robert Mazzuoli, an analyst at Landesbank Baden- Württemberg in Stuttgart. Raphael Minder contributed reporting from Madrid. JACK EWING Debtors’ Prism: Who Has Europe’s Loans? June 4, 2010 http://www.nytimes.com/2010/06/06/business/global/06toxic.html?th=&emc=th&pagewanted =print

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Finding a bolthole in a risky world Published: June 4 2010 19:44 | Last updated: June 4 2010 19:44 Not much investor good cheer to be had from the G20 summit in South Korea. Rather than radiate confidence, all the officials meeting in the port town of Busan seemed openly worried about the chance of a double-dip global recession. And then there were the patrol boats prowling outside, a dark reminder of North Korea. In fact, it can often feel as though there is no longer anywhere in the world for investors to safely and profitably sink their money. Developed markets are a crashzone. Emerging Europe’s fate is closely tied to the euro’s. Africa is a possibility; although given the size of their economies, Asia and Latin America are probably the regions to beat. Furthermore, of this pair Latin America might even have the best prospects of all. In depth: Americas - Jan-11 Editorial: Tragedy in Tivoli - May-27 beyondbrics: Emerging markets coverage - Dec-09 Peru grants parole to US prisoner - May-26 Shining Path offshoot swaps ideology for drugs - May-16 Brazil and Mexico embrace closer economic ties - May-12 That may sound absurd. Brazil is hot, and Mexico warming-up, but how can Argentina or Venezuela compare to manufacturing giants such as South Korea, let alone China? Yet high savings rates and large manufactured export bases are no guarantee of economic success. Look at Germany or Japan. Like them, China depends on exports; trade accounts for 70 per cent of output. That makes it vulnerable to recession elsewhere. Brazil’s economy, by contrast, is led by growing domestic demand. Latin America may trade less with the rest of the world than Asia. But in a synchronised downturn, such isolation can have its merits. Latin America also looks safe from domestic financial blow-up. Due to past crises, credit penetration is low, and lending prudent. By contrast, China’s state-owned banks are on a lending spree. As has been said: if you have no potatoes, you cannot get potato blight. Then there is productivity. Latin America is usually assumed to be a laggard. Yet from 2005 to 2008, Brazilian total factor productivity rose at an annual average rate of 2.1 per cent, with Peru much the same. That is respectable, given that productivity rose 2.9 per cent in China and South Korea, which lead the Asian pack. Latin America’s biggest problems are low savings and low investment. In the long term, these need to be addressed. Yet for now the need for foreign savings also ensures open capital markets. A history of low investment also means the marginal return on the marginal invested dollar should be higher in the west than the east. The clincher, though, is surely geopolitics. Latin America has no rogue nuclear powers, nothing like the China-Taiwan dispute, Indonesia’s febrile religious atmosphere, let alone Thailand’s coup. Colombia-Venezuela frictions are a plaything by comparison. Indeed, the biggest immediate risk of trouble is probably from Brazil if Argentina wins the World Cup. At seven-to-one, the risk of an angry booing match erupting at the Iguazu Falls is safe enough to live with.

245 Finding a bolthole in a risky world June 4 2010 19:44http://www.ft.com/cms/s/0/fb57a1fe-7006-11df- 8698-00144feabdc0.html

China takes interest in Osborne’s reading list By Chris Giles in Busan Published: June 4 2010 17:38 | Last updated: June 4 2010 17:38 George Osborne flew to China on his way to the Group of 20 finance ministers meeting in Busan expecting to talk about budget deficits, trade and perhaps the renminbi exchange rate. But when confronted in Beijing this week by Wang Qishan, the Chinese vice-premier responsible for economic affairs, it was his literary, not economic, skills that were put to the test. Eurozone woes hit US reform agenda - Jun-04 G20 to delay tough bank regulations - Jun-04 Long view: Banks gasp for breathing space - Jun-04 Lex: Asian monetary policies - Jun-04 Money Supply: Global row over bank capital - Jun-04 In depth: G20 - Jun-04 Mr Wang commented first on his youth – the chancellor celebrated his 39th birthday last month with a day in his Treasury office – and then informed him of his love for Jane Austen. Pride and Prejudice and Sense and Sensibility were the favourites of the Chinese vice- premier. The Treasury could not confirm on Friday which were the chancellor’s favourites, nor whether he had read them. But literary surprises notwithstanding, Mr Osborne was delighted by his hastily arranged trip to China, which he saw as an opportunity to “fly the flag” and promote Britain’s potential for exports to the world’s fastest-growing large economy. “Our message is loud and clear: the UK is open for business. China’s ever-growing middle class is a huge opportunity for our firms,” the Treasury said. Officials claimed this approach was in stark contrast to the previous Labour government in which trade missions had gone out of fashion. The words used by Mr Osborne’s team, however, closely resembled those offered by David Miliband, former foreign secretary and candidate for the Labour leadership, who went to China in March and said: “The growth of a new middle class in emerging economies can fuel the next wave of global demand”. But as Mr Osborne arrived in South Korea and dived into bilateral meetings with his G20 counterparts, it became clear that the main interest for other countries was how far Britain had moved from being the champion of fiscal stimulus to that of a deficit hawk. In spite of flying business class – contrary to the new edict for officials to go economy – the chancellor’s team feel they have been instrumental in shifting the mood of the global debate from stimulus to austerity. “Countries with high budget deficits must show the world they can deal with those deficits,” Mr Osborne said on the sidelines of the G20 meeting.

246 This change of position is alarming some in the international community because they believe it will help to legitimise a push for austerity that will destroy growth. They are unwilling to say so in public, however, for fear of undermining a politician who has just won an election. It will be difficult for Mr Osborne to change the tone of the G20 communiqué. Christine Lagarde, France’s finance minister, has already fired a warning shot at countries seeking sharp deficit reductions, insisting: “We need to be careful to avoid brutal shifts”. In light of these divisions, Mr Osborne is careful to ameliorate his language, explaining that countries in surplus should boost global growth at the same time as those in deficit rein back spending to keep the world economy on track. Travel comforts notwithstanding, the new message of Mr Osborne’s team is austerity. Where once officials would praise the British pavilion at the Shanghai Expo, one of Mr Osborne’s entourage arrived in Busan to declare that, at £25m, it was “a complete waste of money”. This is the new Treasury; other departments beware. Chris Giles in Busan China takes interest in Osborne’s reading list: June 4 2010 17:38 http://www.ft.com/cms/s/0/7ebb5d2a-6ff2-11df-8698-00144feabdc0.html

Eurozone woes hit US reform agenda By Alan Beattie in Washington Published: June 4 2010 19:31 | Last updated: June 4 2010 19:31 The credibility of the eurozone and the unbroken sleep of European finance ministers are not the only victims of the crisis in Greece and the European banking system. The US, which some say appeared slow to grasp the global implications of the Greek crisis, has seen its plans for financial reform and rebalancing the world economy pushed back. China takes interest in Osborne’s reading list - Jun-04 G20 to delay tough bank regulations - Jun-04 Long view: Banks gasping for breathing space - Jun-04 Lex: Asian monetary policies - Jun-04 Money Supply: Global row over bank capital - Jun-04 In depth: G20 - Jun-04 This weekend’s meeting of G20 finance ministers in Korea is likely to be notable for what it fails to agree. Some observers say that Washington appeared content to characterise the Greek crisis as a European problem for which European authorities were responsible. “Back in January and February, no-one was really focusing on it,” says Desmond Lachman of the American Enterprise Institute, a conservative think-tank. “Only around early May was there recognition that this would be a serious problem for the European banking system, and hence the world banking system.” Mr Lachman says lawmakers on Capitol Hill were reluctant to see the global implications. Some complained about the huge €110bn ($132bn, £91bn) rescue package part-financed by the International Monetary Fund, of which the US is the largest shareholder. Now Washington is recognising that the eurozone crisis will delay progress on some of its highest priorities in international economic diplomacy. Its number one goal is to encourage

247 flexibility in the Chinese exchange rate, persuading Bejiing to allow the renminbi to resume the appreciation against the dollar that it suspended in 2008. But the fall of the euro has pushed back the likely date for action. The recent “strategic and economic dialogue” between the US and China in Beijing, attended by Treasury secretary Tim Geithner and secretary of state Hillary Clinton, was originally regarded by many investors as a potentially pivotal meeting at which Beijing might promise to let the currency rise in the following weeks. But Beijing is concerned about letting the renminbi rise against both the euro and the dollar, and the meeting turned into something of a damp squib amid sharply diminished expectations of near-term progress. One of the other main goals of the US is for countries to institute a levy on banks to pay for bail-outs. But the hand of those opposing the move, such as Canada, has been strengthened by a recognition that now is not the best time to be forcing the weakened European banking sector to fork out new taxes. Speaking before this weekend’s meeting, Mr Geithner was quick to play down expectations that there would be rapid agreement on pressing US issues, such as the bank tax. “There’s not universal support for that [levy] across the G-20, at least at this stage, and I don’t think that’s going to change in Korea,” he told reporters. Uri Dadush at the Carnegie Endowment in Washington says: “In the last three or four weeks the importance of the crisis has hit home here in a big way. To begin with, people thought that the wider impact would be simply on reducing [US] exports. Now they recognise it is much wider than that.” http://www.ft.com/cms/s/0/fbef3c2c-7005-11df-8698-00144feabdc0.html

Europe’s banks gasping for breathing space By James Mackintosh Published: June 4 2010 20:05 | Last updated: June 4 2010 20:05 For finance ministers meeting this weekend in Busan, South Korea, the agenda looks as though it could solve itself. There are two items of note: Europe’s debt crisis and plans, vigorously promoted by Germany’s Wolfgang Schäuble, for more taxes on banks. Perhaps the banks could simply pay for the deficits. No such luck. Europe’s banks are much less solid than they look, and some already look pretty bad. Market jitters during the past two weeks have owed much to worries about the Spanish banking system, where mutual savings banks are being rescued or merged. Italy’s banks have been relieved of the need to mark government bonds to market prices, to avoid blowing a hole in their capital bases. And in France banks have rushed to explain their $79bn holdings of Greek government debt. Investors’ willingness to believe the worst was shown on Friday when market talk that France’s Société Genéralé had a troubled derivatives position led to its shares tumbling 7.6 per cent. This matters, and not just to Spanish, Italian or French depositors. Banks are tightly linked by an intricate web of loans and trade exposures, which mean the failure of one can have ripple effects around the world. The last financial crisis led to multi-trillion dollar bail-outs of the banking system, which is supposed to be back on its feet again as a result. Unfortunately, in Europe, the banks have not taken advantage of the breathing space they were offered.

248 Consider a few data points. First, the cost of borrowing. Dollar Libor, the rate at which banks lend US dollars to each other, has stabilised in the past few days, but at double the levels of a couple of months ago. Euribor, a similar measure for euros, is still rising. Second, European banks were barely making money even before these rises. True, their profits (and bonuses) look great compared with the past two years. But that is only due to still-high leverage. The return that big banks earn on their assets – primarily the loans they make – doubled in the first three months compared with 2009, but was still a paltry 0.45 per cent. A healthy figure would be closer to triple that. Third, they are making that money only thanks to the easy money policies of the European Central Bank. Broadly speaking, banks borrow at short-term interest rates, from depositors, bondholders, central banks and wholesale markets, and lend at higher long-term rates. As central banks keep short-term rates at rock-bottom levels, while long-term rates remain high on the expectation of an eventual return to a normal environment, banks profit from the difference. But both sides of this trade are under pressure. Longer-term rates are coming down, as austerity packages depress growth and inflation expectations; and short-term borrowing is getting more expensive for banks, both from rising Libor/Euribor on the wholesale side and from rising competition for retail deposits. This is not to say that the banking system is about to implode, in spite of fears about Spain. But it is reasonable to ask what could trigger failures. The fundamentals of banking – bad loans – remain a problem. The ECB estimates loan losses across the eurozone at €123bn this year and €105bn next, after €238bn of bad loan provisions during the past three years. Austerity packages could make these numbers worse. But banks are rather good at dealing with bad debts, and rarely fail because of them. More important is the flip side of lending: borrowing. Turmoil in the markets in the past month has made it tough to raise debt, at a sensitive time for banks. Large European banks need to refinance €800bn of long-term debt by the end of 2012, almost half the total. This when governments will also be pushing as much paper as they can at investors. At the same time, banks need to raise long-term funding to meet new standards due in 2012. Barclays Capital estimates European banks have a €3,000bn funding shortfall, and would need to shrink loans by 35 per cent to meet the new rules if they do not raise the money. It will not take much of a rise in the cost of debt to have a big impact on the banks, given the tiny margins they make. Signs of funding trouble are brewing. According to the ECB, about 45 per cent of eurozone bank bonds issued in April still used government guarantees – the highest in a year; inter-bank markets are quoting widely varying rates for different banks; while BBVA, one of Spain’s big two, abandoned efforts to raise €1bn in US commercial paper. Governments cannot, then, rely on the banks. But governments are also one of the major risks facing the banks. A default by Greece would be a disaster, but the simple fact of increasing government bond risk is itself bad news for eurozone banks, which hold about half of eurozone government bonds, most of which are falling in value. The good news for the banks is that the Group of 20 is likely to leave the beaches of Busan without an agreement on new taxes. The bad news is the process of cleaning the banks is ahead of us. [email protected] http://www.ft.com/cms/s/0/325d2a9a-7005-11df-8698-00144feabdc0.html

249 COMPANIES G20 to delay tough bank regulations By Chris Giles in Busan Published: June 4 2010 12:59 | Last updated: June 4 2010 15:14 Group of 20 finance ministers are set to delay the implementation of tougher regulations for the world’s banks as splits emerge over the scope of the new regulations. Officials and ministers from the G20 group of industrialised nations, meeting in Busan, South Korea, acknowledged there were still big differences on the “Basel III” proposals that are due to be finalised by November. The disagreements cover the scale, scope and timing of the increases in capital and liquidity banks will be required to hold, as well as the leverage they will be allowed. China take interest in Osborne’s reading list - Jun-04 Lex: Asian monetary policies - Jun-04 Money Supply: Global row over bank capital - Jun-04 In depth: G20 - Jun-04 G20 ministers aim to bolster global recovery - Jun-03 UK and US call for bank transparency - Jun-03 In response to the splits, the UK and the US are offering to delay the implementation of the Basel reforms in a bid to ensure that the principles do not get watered down. Speaking on the sidelines of the G20 finance ministers meeting, George Osborne, the UK chancellor of the exchequer, said: “One of the things I will be pressing for is that the agreements that were reached last year on capital, leverage and liquidity are now concluded. We want an end to the uncertainty.” An aide to the chancellor said the UK was adamant that there needed to be no dilution of the principle that common equity should form the basis of new capital rules and other forms of hybrid capital should not be allowed to count, under those new rules, as being the same. But the aide added that if this was agreed, it would be possible to have a discussion over the transition period before banks were required to meet the new standards. The UK’s position chimes with that of the US and Canada. Jim Flaherty, Canadian Finance minister, said: “Some would like a shorter period [of transition], some would like a longer period. I think that can be worked out over time”. On Wednesday, Tim Geithner, US Treasury secretary, said: “It is perfectly reasonable to use transition periods to make it easier for countries to adjust to what we believe should be a substantially more demanding, more ambitious set of constraints on leverage”. Christine Lagarde, French finance minister, denied that France is trying to delay the process and said she hoped the reforms would be completed on schedule. But hinting at the disagreements on issues of substance on the definition of capital, she added: “We have to do a quality technical appraisal on the subject that is too complicated to be rushed through.” Some G20 officials privately complain that France and Germany are seeking to reopen arguments thought to be settled last year in a bid to dilute capital requirements for their banks by allowing them to include deferred tax assets and minority interests in tier one capital.

250 The Basel rules were originally expected to be phased in by the end of 2012, but sources familiar with the discussions said that the latest idea was that the new rules were likely to be put in place between 2014 and 2016. Another G20 source said that the transition period did not matter much because once the new regulations were agreed, banks would come under enormous pressure to meet them quickly or explain why they could not, even if the formal transition was much longer. The new rules were always going to be phased in and Nout Wellink, chairman of the Basel Committee on Banking Supervision, told the Financial Times last month that a longer-phase- in period might be needed to minimise disruption. Banks are actively preparing to launch a large lobbying effort in the coming week to press their case for less stringent regulations, arguing that great economic harm would result from too stringent rules. The banks’ analysis is not accepted by regulators with Stephen Cecchetti, the chief economist of the Bank for International Settlements, telling the FT last week that their “doomsday scenarios” were based on their assuming “the maximum impact of the maximum change with the minimum behavioural change”. The splits within advanced countries about capital and liquidity requirements is repeated in the discussions over new levies on banks, which have been pushed back for lack of a consensus. More countries are joining Canada in its rejection of the idea of a banking levy. Pranab Mukherjee, India’s finance minister, said: “Regulated mechanisms instead of taxing the banking system is better.” Additional reporting by Christian Oliver in Busan http://www.ft.com/cms/s/0/17d4ae9e-6fcb-11df-8fcf-00144feabdc0.html?ftcamp=rss

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Morgan Stanley's Stephen Roach heading back to New York Nisha Gopalan and Jamie Miyazaki From: The Wall Street Journal June 04, 2010 3:38PM STEPHEN Roach, the Hong Kong-based Asia chairman of Morgan Stanley, will be transferred to New York to be non-executive chairman for Asia at the Wall Street bank, and will also take on an academic role at Yale University, the bank said today. Mr Roach will be moving July 1. He said there are no current plans to replace him. The bank said he will continue to meet clients, governments and regulators in Asia and other parts of the world. As well as being non-executive chairman, he will also join the faculty of Yale University, with a joint appointment at the Jackson Institute for Global Affairs and the School of Management. Mr Roach said he will be teaching a course on the Chinese economy in the fall at Yale University. "My commitment to Morgan Stanley remains unwavering," said Mr Roach. "I'll be coming to Asia once a month." "But this is a unique opportunity to spread my wings a bit and the firm has been very supportive of my plans to take on academic responsibilities." Before he became Hong Kong-based Asia chairman, Mr Roach was based in New York and oversaw Morgan Stanley economists in New York, London, Tokyo and Hong Kong as the bank's chief economist. He replaced Alasdair Morrison as Asia chairman in June 2007, and relocated to Hong Kong from New York in September that year. Owen Thomas, who is chief executive officer of Morgan Stanley Asia, will continue to run the regional business. Nisha Gopalan and Jamie Miyazaki Morgan Stanley's Stephen Roach heading back to New York June 04, 2010 3:38PM http://www.theaustralian.com.au/business/news/morgan-stanleys-stephen-roach- heading-back-to-new-york/story-e6frg90x-1225875578836

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ECB Advocates Tightening as U.S. Urges Domestic Demand Growth By Mark Deen and Timothy R. Homan June 5 (Bloomberg) -- European Central Bank President Jean- Claude Trichet and Treasury Secretary Timothy F. Geithner diverged on prescriptions to sustain growth, with Europe set to tighten budgets and the U.S. seeking stronger domestic demand. The impact of narrower budget gaps “on growth could not be considered negative because it would improve confidence,” Trichet told reporters yesterday after meeting with Group of 20 finance chiefs in Busan, South Korea. The need for such action is clear in “old industrialized economies,” he said. The remarks underline determination within the 16-nation euro area to shrink budget deficits in the wake of a sovereign debt crisis that has led to a 750 billion-euro ($913 billion) rescue fund for the region’s weakest members. The emphasis contrasts with the message delivered to the G-20 by the U.S., which wants countries with trade surpluses, including China and Germany, to stoke demand to help sustain the global recovery. “Stronger domestic demand growth in Japan and in the European surplus countries” is needed, Geithner said at a separate press briefing in Busan. Spending in both areas is “relatively weak,” he said. Fiscal Horizon While Geithner echoed the view that fiscal consolidation is needed, he said it should be done over the “medium term.” European officials said yesterday that budget tightening needs to come next year, and German Chancellor Angela Merkel said that growth can’t come at the price of high state budget deficits. International Monetary Fund estimates backed up Geithner’s concern. Managing Director Dominique Strauss-Kahn said at a press briefing that efforts to cut budget deficits in rich countries could hurt growth over the next two years. Stimulus measures implemented in the last two years that haven’t expired yet should remain in place in advanced economies, he said. A study by the fund showed that fiscal consolidation, without market deregulations that would bolster domestic demand, could shave as much as 2.5 percentage points off global growth and cost 30 million jobs worldwide. “The world may end up in a period of sub-potential growth for two or three years,” Venkatraman Anantha-Nageswaran, who helps manage about $140 billion in assets as global chief investment officer at Bank Julius Baer & Co. in Singapore, said in an interview yesterday. “Asia is too small to support export-led growth for both euro zone and the U.S.”

G-20 Pledge G-20 finance ministers and central bank governors said in their joint statement yesterday that “within their capacity, countries will expand domestic sources of growth.” Recent volatility in

253 financial markets shows “significant challenges” remain for the global economy, and policy makers stand ready to “safeguard” the recovery and job growth, the statement said. Concerns about the ability of Greece, Spain and Portugal to repay public debts have pushed down the value of the euro, helping the region’s exporters. The single currency last week touched $1.1956, its lowest level since 2006, and has depreciated 16 percent since the year began. “Europe’s No. 1 priority” must be to implement its 750 billion-euro plan to contain the debt crisis, Geithner said yesterday. He added that “people want to see” the program implemented as parliaments finish ratifying it in coming days. Some European leaders say they see benefits to the euro plunge. French Welcome “I see good news from the current euro-dollar rate,” French Prime Minister Francois Fillon told reporters in Paris June 4. President Nicolas Sarkozy “and I have been saying for years that the euro-dollar rate didn’t reflect reality and was penalizing our exports,” he said. In the U.S., the Obama administration is aiming to double exports during the next five years. Geithner warned that other countries can’t rely on the U.S. consumer to propel the global economy. Meantime, China’s government has kept in place a currency peg to the dollar adopted in July 2008 to help its exporters after allowing the yuan to appreciate 21 percent over the previous three years. “Something has to be done on the currency,” Strauss-Kahn told reporters in Busan. “The IMF still believes that the renminbi is substantially undervalued,” he said, using another term for China’s currency. Japan’s Recovery Japan’s economic recovery depended on trade for more than half of growth in the first quarter, when consumer spending slowed. At the same time, Bank of Japan Governor Masaaki Shirakawa yesterday said at a press briefing that his country’s economic recovery is stronger than previously expected and there are bright signs for a pickup in domestic demand. U.S. indicators show little scope to propel global growth. The savings rate climbed to 3.6 percent in April, the highest level since January, from 3.1 percent in March as incomes increased and purchases cooled. Job growth was less than forecast in May, with a jobless rate of 9.7 percent. Bill Gross, co-chief investment officer and manager of the world’s biggest bond fund at Pacific Investment Management Co., said last week the unemployment rate may rise to 10 percent within the next several months with job growth “anemic.” “The market was assuming that the private sector was coming back, but obviously we’ve seen none of that,” Gross said in a radio interview on Bloomberg Surveillance with Tom Keene. Europe’s Banks Geithner also singled out Europe as a region needing to push forward with financial regulation reform. “Further progress on financial repair is critical to global economic recovery,” he wrote in a June 3 letter to G-20 counterparts. “This requires, particularly in parts of Europe, further efforts to restructure and recapitalize the banking system.” Bank of Italy Governor Mario Draghi, a member of the ECB’s governing council, countered

254 Geithner’s assessment. Speaking at a press briefing yesterday in Busan, he said European banks are properly capitalized. The Busan meeting ended with no agreement on a universal bank levy and with finance chiefs pledging to work toward a November deal on increasing capital requirements for lenders. G-20 members, which account for about 85 percent of global output, include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., U.K. and EU. There’s been “a lot of heat,” in the G-20 talks, Shin Je- Yoon, deputy minister for international affairs at South Korea’s finance ministry, told reporters yesterday, citing discussions of European fiscal consolidation and “structural policies” to bolster growth.

Last Updated: June 5, 2010 12:01 EDT Mark Deen and Timothy R. Homan ECB Advocates Tightening as U.S. Urges Domestic Demand Growth June 6 http://www.bloomberg.com/apps/news?pid=20601087&sid=ayjDOTEq8CKo&pos=1#

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La UE y Budapest consideran "salvajemente exagerados" los pronósticos sobre la quiebra de Hungría El propio Ejecutivo húngaro rectifica el pronóstico que hizo ayer y que llevó a las Bolsas a mínimos.- El FMI investiga las cuentas públicas EL PAÍS | AGENCIAS - Madrid | Budapest - 05/06/2010 Nueva vuelta de tuerca a la situación de Hungría, que ayer reveló datos sobre su economía que dejaron de nuevo a las bolsas en mínimos y a los inversores, gobiernos y medios preocupados por una posible bancarrota que deje al país en una situación peor que la de Grecia. Mientras los funcionarios del Fondo Monetario Internacional (FMI) investigan las cuentas húngaras en Budapest, la Unión Europea (UE) y el propio gobierno húngaro han asegurado que los temores son "salvajemente exagerados" y que la situación es grave pero que el país está lejos de la quiebra. El comisario europeo para Asuntos Económicos, Olli Rehn, ha afirmado en la reunión del G- 20 que se celebra en Corea del Sur que "la economía húngara se encuentra ahora en el camino de la recuperación y ha exhibido en el primer trimestre de este año señales de fortalecimiento. Por lo tanto, cualquier comentario sobre un default, ya sea fiscal o de deuda, es una salvaje exageración". Altos representantes del Gobierno húngaro citados por Reuters creen que las declaraciones realizadas ayer por el Ejecutivo son "exageradas" y "desafortunadas". "Esos comentarios eran exagerados. Tengo que decir que la situación está consolidada y que el objetivo de déficit es alcanzable. Si un colega ha dicho eso es desafortunado", aseguran. Por su parte, el secretario de Estado Mihaly Varga, ha asegurado que el país "necesita un plan de acción conjunta tan pronto como sea posible para poder llegar al objetivo de reducción del déficit", que el propio Ejecutivo ha cifrado hoy en el 3,8% del PIB. Eso sí, Varga acusó al anterior gobierno, liderado por el economista independiente Gordon Bajnai, de haber mentido sobre el estado real de las cuentas públicas. Ayer, el reconocimiento de su Gobierno de que se habían falseado las cuentas y de que la situación del país es "muy grave" supuso un empeoramiento de la crisis de la deuda y llevó los mercados de Europa, en especial el Ibex, y EE UU, con el Dow Jones al frente, a nuevos mínimos. El FMI vigila Un equipo de expertos del Fondo Monetario Internacional (FMI) analiza desde hoy en Budapest las cuentas públicas del país, según aseguró ayer la entidad, después de que el nuevo Gobierno revelara que el déficit puede ser mucho mayor que lo pensado. El nuevo Gobierno, que tomó posesión hace una semana, publicará hoy un informe sobre el verdadero estado de la economía y se ha comprometido a elaborar un plan de acción en un plazo no superior a tres días. Christoph Rosenberg, encargado de la institución en ese país pasará "algunos días" en la capital húngara con el objetivo de examinar junto al nuevo gobierno "los acontecimientos

256 económicos recientes y las perspectivas" de crecimiento, según dijo a Efe Simonetta Nardin, una portavoz del organismo. La visita estaba marcada desde antes de que la nueva administración hiciera sus declaraciones sobre el erario público. Péter Szíjjártó, portavoz del Ejecutivo húngaro, aseguró ayer que "la economía está en una situación muy grave" y acusó al anterior gabinete de haber manipulado los datos económicos, tal y como había hecho Grecia El Gobierno quiere dejar el déficit en el 3,8% El Gobierno húngaro se ha marcado como objetivo dejar el déficit del Producto Interior Bruto en el 3,8%.- El Banco Nacional de Hungría pronostica para este año un déficit del 4,5%, mientras que fuentes del partido gobernante lo elevan ahora al 7,5%. El Gobierno no ha querido hacer estimaciones sobre el déficit presupuestario previsto para 2010

La UE y Budapest consideran "salvajemente exagerados" los pronósticos sobre la quiebra de Hungría05/06/2010http://www.elpais.com/articulo/economia/UE/Budapest/consideran/salvajeme nte/exagerados/pronosticos/quiebra/Hungria/elpepueco/20100605elpepueco_1/Tes

EDITORIAL

Accidente húngaro El temor a otro desastre como el de Grecia desafía la estabilidad del sistema financiero europeo 05/06/2010 Un nuevo accidente financiero se adivina por el este de Europa y amenaza con debilitar todavía un poco más los mercados europeos. El nuevo Gobierno húngaro anunció ayer que el Ejecutivo anterior había manipulado las cuentas públicas, afirmación que dibuja una crisis de la solvencia financiera como si se tratara de una reedición del desastre de Grecia. Tan delicada es la situación que las autoridades económicas húngaras presentarán en un plazo de 72 horas un plan de choque para sanear las cuentas públicas. A pesar de que Hungría no forma parte del euro y de que su peso relativo en la economía de los 27 es reducido (el 0,8% del PIB total), la convulsión se extendió inmediatamente por los mercados bursátiles, afectados también por los rumores de graves dificultades en el negocio de derivados de Société Générale. El Ibex se hundió el 3,8%, el Dax alemán cayó el 1,91% y Londres bajó el 1,63%. Pero la presión mayor se está ejerciendo sobre el diferencial de deuda. En el caso de España, está en torno a los 200 puntos básicos y la atmósfera se hace más irrespirable cada día que pasa. El caso de Hungría prueba que cualquier incidente excita el pánico de los inversores. Grecia y Hungría repiten el terrible mensaje de que hay países que falsean sus finanzas públicas y de que otros Gobiernos europeos pueden haber hecho lo mismo. El caso de Société Générale reafirma ante los mercados que queda por reconocer un importante volumen de deuda y activos depreciados en las entidades financieras europeas. Ambas incertidumbres confluyen inevitablemente sobre los bancos, cuyos balances están en cuestión y cargan con la amenaza de una tasa o impuesto bancario en el área del euro. El entorno financiero europeo es hoy el peor de los conocidos desde la creación de la moneda única, hasta el punto de que cualquier alarma menor puede disparar el pánico; pero empeorará

257 un poco más por el miedo a la exposición de la banca europea a la deuda húngara (en el caso de la banca española, la exposición total es de 1.137 millones de euros). No existen remedios rápidos contra este desorden financiero público y privado que seguirá castigando a las economías periféricas (Grecia, Portugal, Irlanda y España) incluso con más dureza de lo que merecen tras los planes de ajuste del gasto aprobados por sus respectivos Gobiernos. No hay resortes de control económico para garantizar por encima de cualquier sospecha la veracidad de las cuentas públicas o la salud de los balances bancarios; ni resortes de control político que afronten las crisis de confianza en los activos nacionales como si fuesen una cuestión de confianza de toda Europa. La única solución, aunque llegue con retraso, es crear esos resortes unificados. La lección para España es que no solo se trata de acertar con el remedio a los riesgos conocidos, sino que los desconocidos e imprevistos, como este accidente húngaro, se encuentran al acecho. http://www.elpais.com/articulo/opinion/Accidente/hungaro/elpepueco/20100605elpepiopi_1/Tes

El peligro de quiebra en Hungría agudiza la crisis de la deuda Budapest admite que la situación es tan grave como la de Grecia - La prima de riesgo española se dispara y la Bolsa se desploma ANDREU MISSÉ - Bruselas - 05/06/2010 Hasta ahora, todos los Gobiernos insistían en proclamar las diferencias de sus países con Grecia. Pero ayer Hungría dio un sobresalto al subrayar que atraviesa una situación económica gravísima, "comparable a la de Grecia", y que la posibilidad de impago de su deuda no es exagerada. Hasta ahora, todos los Gobiernos insistían en proclamar las diferencias de sus países con Grecia. Pero ayer Hungría dio un sobresalto al subrayar que atraviesa una situación económica gravísima, "comparable a la de Grecia", y que la posibilidad de impago de su deuda no es exagerada. Lo hizo por boca del Gobierno de centro-derecha que acaba de tomar posesión, y que acusa al anterior Ejecutivo socialista de haber mentido sobre la situación económica y manipulado las cuentas. Eso, unido al mal dato de empleo en EE UU, provocó otro día de miedo en los mercados en el que España volvió a ser una de las peor paradas. El Ibex cayó un 3,8% y la prima de riesgo de la deuda española roza ya los dos puntos porcentuales, casi el cuádruple que hace seis meses. http://www.elpais.com/articulo/portada/peligro/quiebra/Hungria/agudiza/crisis/deuda/elpepueco /20100605elpepipor_5/Tes

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Hungría agrava la crisis de la deuda El euro y las Bolsas europeas se hunden por el riesgo de que el país siga los pasos de Grecia - El nuevo Gobierno de Budapest dice que las cuentas se han falseado ANDREU MISSÉ - Bruselas - 05/06/2010 ¿Hungría será una segunda Grecia que precise un rescate de la UE? Lejos de calmarse, el clima de incertidumbre en los mercados financieros europeos se deterioró sensiblemente tras las manifestaciones del nuevo Gobierno húngaro de centro-derecha acusando al Ejecutivo socialista saliente de haber falseado las cifras del déficit. ¿Hungría será una segunda Grecia que precise un rescate de la UE? Lejos de calmarse, el clima de incertidumbre en los mercados financieros europeos se deterioró ayer sensiblemente tras las manifestaciones de varios responsables del nuevo Gobierno húngaro de centro- derecha acusando al Ejecutivo socialista saliente de haber falseado las cifras del déficit. Lajos Kósa, vicejefe del partido del Gobierno, Fidesz, aseguró que Hungría sufre una situación "comparable a la de Grecia" y que la quiebra del Estado "está próxima". Hungría, con un PIB próximo al 1% de la Unión, recibió ya un auxilio financiero para evitar la quiebra de unos 19.000 millones de euros por parte del Fondo Monetario Internacional (FMI), la UE y el Banco Mundial en octubre de 2008. Hay que destacar que Hungría no pertenece a la zona euro, por lo que los efectos de la crisis serán muy distintos y de un contagio menos impactante que los de Grecia que provocó el inicio de la desestabilización del euro. Pero la gravedad de la nueva realidad económica provocó un hundimiento de la divisa húngara, el florín, en un 5,5%. La Bolsa de Budapest perdió un 3,14%, tras haber cedido un 1% el día anterior. Las malas noticias de Hungría contagiaron inmediatamente los mercados financieros europeos con fuertes caídas en las Bolsas de Madrid (3,8%), Milán (3,7%), París, (2,8%), Francfort (1,8%) y Londres (1,6). El euro cayó hasta 1,19 dólares, el nivel de cambio más bajo desde hace cuatro años. Los mercados también sufrieron por un dato de empleo en EE UU peor que el esperado y hasta por rumores sobre pérdidas de Société Générale en operaciones con derivados. El nerviosismo de los mercados se desató tras las manifestaciones que pusieron al descubierto la gravedad de la situación económica por parte de varias autoridades del nuevo Gobierno de centro-derecha, presidido por Viktor Orbán, que arrasó en las últimas elecciones logrando una mayoría de dos tercios. El secretario de Estado, Mihaly Varga, especialista en asuntos económicos del Fidesz, dijo que el déficit público podría alcanzar hasta el 7,5% del PIB en 2010, el doble del 3,8% previsto por el Gobierno. Las afirmaciones de Kósa referentes a la crítica situación de las cuentas públicas del país fueron confirmadas por el portavoz de Orbán, Péter Szíjjártó, quien consideró que "no eran exageradas". El portavoz manifestó que "en Hungría el anterior Gobierno falsificó las estadísticas". "En Grecia", añadió, "también falsificaron los datos. En Atenas el momento de la verdad ya ha llegado, mientras que Budapest está todavía antes de esto", añadió. Szíjjártó precisó "que esto es lo que queremos evitar", y señaló que "este Gobierno está dispuesto para evitar el camino que Grecia siguió". Cabe recordar que el anterior primer ministro Ferenc Gyurcsany fue sorprendido con unas palabras que no creía que fueran divulgadas en las que reconoció haber engañado a los ciudadanos sobre la realidad económica del país.

259 El nuevo Gobierno ha anunciado un inminente plan de acción para evitar la quiebra, que se dará a conocer en las próximas 72 horas. Su objetivo es estimular el crecimiento económico y medidas de estímulo económico. Unas medidas, que sin embargo, difícilmente pueden reducir el déficit. Tras un encuentro con Orbán el pasado jueves, el presidente de la Comisión Europea, José Manuel Barroso exigió a Hungría una reducción del déficit más acelerada. "El mensaje para Hungría", dijo Barroso, "es acelerar la consolidación fiscal, no reducirla". Y precisó que "en Europa ir contra la consolidación fiscal sería un desastre". Y añadió que "Hungría estaba en una situación muy delicada por lo que no cabían complacencias". Viktor Orbán considera que la superación de la crisis "no puede ser mediante un ajuste, o mediante chapuzas en la economía". En su opinión "las medidas deben ir dirigidas a mejorar la situación financiera con profundos cambios estructurales". La nueva realidad húngara puesta al descubierto por el nuevo Gobierno sorprende porque esta no es la visión que tenían los expertos del FMI. En su quinto informe sobre el plan de ayuda, redactado el pasado marzo, los expertos del Fondo señalan que el programa económico del Gobierno "ha puesto a Hungría en el camino de la estabilidad y el crecimiento". Igualmente señalan que bajo el programa de apoyo del Fondo, la posición fiscal subyacente ha mejorado, se proporcionó oportuna liquidez al sistema y se mejoró significativamente la supervisión bancaria. En definitiva, "las vulnerabilidades macrofinancieras han sido rebajadas, la confianza de los inversores está volviendo y la economía está en el camino de la recuperación". Lo cierto es que según los datos publicados ayer por Eurostat, la oficina estadística de la Unión, el PIB de Hungría durante el primer trimestre creció el 0,9%, muy por encima del 0,2% de media europea. Hungría tiene una deuda pública del 78% del PIB, algo por encima de la media de la UE. http://www.elpais.com/articulo/economia/Hungria/agrava/crisis/deuda/elpepueco/20100605el pepieco_2/Tes

260 Eurointelligence Daily Morning Newsbriefing The rebellion against Merkel

04.06.2010 As Christian Wulff is set to become Germany’s next president, Merkel is once again accused of leading from behind, when she agreed to drop her preferred candidate; there is much commentary in the German press this morning about Merkel’s increasing isolation in the party; George Paul Hefty, the veteran political commentator of Frankfurter Allgemeine, calls on her to quit the party leadership and focus on governing; the conservative die Welt endorses the opposition candidate; El Pais has a good primer on Spanish labour market reform, which is likely to be decided by decree on June 16; the trade unions are considering a general strike in response to the measures; the IMF welcomes Italy’s austerity package, but says more needs to be done; Tito Boeri and Massimo Bordignon do not welcome the austerity packaging, saying it relies on bad and mostly unenforceable spending cuts, and assaults on tax avoidance; Hungary’s deficit is set to explode, as the government party is warning of a Greek-style situation; Thomas Piketti says the ECB should refinance governments just as they refinance the banks – a 0% interest; we have a graph showing the rise, fall, and rise of CDS spreads; Mark Schieritz, meanwhile, argues that the German panic over ECB bond purchases is out of proportion, and that even the worst-case scenario of a Greek default is unlikely to cause disaster. 04.06.2010 The rebellion against Merkel She has seen them off in the past, playing off one against each other, but it is no longer working. Angela Merkel had a hard time yesterday persuading the public and the media that Christian Wulff, the state premier of Lower Saxony, is really her first choice for the now vacant job of the German presidency. It happened after the CDU rebelled against Merkel’s preferred candidate, labour minister Ursula von der Leyen, but having two protestant women at the head of the state was going too far for many, especially for the catholic west German Christian Democrats. George Paul Hefty, the veteran political commentator of Frankfurter Allgemeine Zeitung, says that Merkel’s autocratic style of leadership was bearable for the CDU for as long as she delivered the goods, but as her coalition is failing that is no longer the case, and the internal opposition to her is mounting. The conservatives were outraged, when Roland Koch, the ambitious state premier of Hesse, decided to quit because Merkel kept him at bay. Now with Wulff at the presidency, all her erstwhile rivals for the party leadership are gone. But ironically, this does not make Merkel’s position more secure – as the party is in open rebellion. The stories told in German newspapers yesterday was that Wulff walked into her office, told her that von der Leyen was unacceptable to the CDU, and that he himself wanted the job. In his comment, Hefty concluded Merkel will probably need to withdraw from the leadership of the CDU, and focus on her role of chancellor to rescue the situation, though he also notes

261 that the precedents for such a split are not good. Schroder was a similar position, when he handed over to Muntefering, which was the beginning of the end for him. The conservative newspaper Die Welt led with a front page commentary this morning, arguing that the opposition candidate for the presidency, Joachim Gauck, would be the better choice. The paper attacked Merkel for treating this as a party political affair, not even talking to the opposition about this. And FT Deutschland makes the point in a commentary that Merkel has damaged von der Leyen not for the umpteenth time. She wanted to run the health ministry, or go to Brussels as EU Commissioner. (This is the opinion of conservative Germany. Merkel’s tactic to surround herself with relatively weak, and mostly unimpressive people is now backfiring in a big way. But don’t conclude that there is about to be a revolt. If this is the beginning Merkel-Dammerung, it is still going to take a while. We think the coalition is going to limp until its bitter end, which is not before the end 2013.) A good primer on Spanish labour reforms El Pais has a good primer on Spanish labour market reform – what the government’s labour market decree is likely to contain in detail. At present, Spanish companies have two dismissal options – paying 45 days for year worked in normal cases, and paying 20 days, but only for specific reasons. The latter category only applies to 15% of dismissals. The governments wants to reduce the number of days in the first category from 45 to 33, and relax the conditions on the second category, which is likely to become a more general redundancy regime. So if a company needs to reduce the workforce during a downturn, it will be pay able to pay 20 instead of 45 days redundancy pay, per year worked. In addition, the reforms envisage of what the Spanish call the Austrian model, which allows companies to reduce working hours during a downturn, without having to lay off workers. There are several other components to increase labour market flexibility. The paper also an interview with Candido Mendez, the head of the biggest union, who is threatening a general strike if this decree comes into force. He says the government and the employers are only interested to placate the financial markets, rather than solve the problems. And he predicted that it will not place the financial markets either, because it comes at the expense of economic growth. (we agree that the combination of fiscal austerity and labour reform is potentially toxic. We would have preferred more reform, less austerity) Austerity Watch: IMF welcomes Italian austerity, but demands pensions and labour reforms Il Sole 24 ore has an article about the IMF’s general approval of Italy’s recently announced €24bn austerity package, but warns that Italy will need to do more. The most urgent measures recommended by the IMF are pensions reform, as the pension age remains one of the lowest among industrial national, and – as in Spain – a reform of the labour market, specifically of the wage contract of ordinary employment, as well as reforms in the welfare system. Tito Boeri and Massimo Bordignon take a detailed look at Italy’s austerity programme, and detect a giant confidence trick This is good stuff from Boeri and Bordignon. They look at the numbers of Italy’s austerity programme, and find that once again, it does not add up, and it transfers the costs on the young, who suffer from hiring freezes in the public sector, and a reduction in fixed-term

262 contracts. Specifically they find, that the programme is not focussing much on real spending cuts, but on revenue increases. Most of those come from – guess what – a fight against tax avoidance and evasion. And most of the cut are not in the form of structural measures but linear across-the-board departmental cuts. There are article includes a very useful table that breaks down all the measures, and shows how it all adds up to €24bn. Why the ECB should help governments reduce their debts and deficits Thomas Piketty, a French economist, has been asked by Le Monde to outline how France should get out of this crisis. He warned against kneejerk austerity, saying it would aggravate the crisis. What he suggests is for the ECB to provide cheap liquidity to governments, just as they did with the banking sectors – in other words monetise government debt through quantitative easing, which is what the Fed is doing when it buys US Treasuries yielding almost nothing. (needless to day, this will not happen over here) Hungary’s deficit is widening Not exactly a eurozone story, but it is indicative of the fiscal strains now everywhere. This is from Reuters, hat tip Calculated Risk. The 2010 projected Hungarian deficit is going to be much worse than predicted, and the vice chairman of the ruling party said there was only a “slim chance of avoiding a Greek-style scenario”.

The CDS spreads in the eurozone Yesterday was a relative good day in the CDS markets, as risk aversion receded a little. But spreads remain elevated as this chart from the Atlanta Fed, via Calculated Risk, shows.

Mark Schieritz on the ECB

263 Writing in Herdentreib, Mark Schieritz says there was no real alternative to the ECB’s bond purchasing programme – the alternative would have been a meltdown of European capital markets. He says the German paranoia about French banks is extremely exaggerated, as every bank, include those that have not sold their Greek bonds, benefits from the ECB’s bond purchases, since bonds are marked-to-market in the accounts. He concludes with an example of a hypothetical 50% Greek haircut, and says the math does not suggest a catastrophic impact on the ECB’s balance sheet http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2812&tx_ttnews[ba ckPid]=901&cHash=31018f80c5

264 Versión para imprimir

El Ejecutivo busca redefinir las causas objetivas del despido Un borrador de la reforma apunta a la extensión del contrato de 33 días M. V. GÓMEZ - Madrid - 04/06/2010 Las líneas básicas de la reforma laboral se van concretando poco a poco. Al fin y al cabo, el Gobierno pretende sacar adelante los cambios, "con o sin acuerdo", el próximo 16 de junio. Tras escuchar durante cuatro reuniones a los líderes de empresarios y sindicatos el Gobierno va perfilando su propuesta de reforma laboral. Las líneas básicas de la reforma laboral se van concretando poco a poco. Al fin y al cabo, el Gobierno pretende sacar adelante los cambios, "con o sin acuerdo", el próximo 16 de junio. Tras escuchar durante cuatro reuniones a los líderes de empresarios y sindicatos -la última, el jueves por la noche- el Gobierno va perfilando su propuesta de reforma laboral. Entre sus objetivos, extender el uso del contrato con una indemnización por despido de 33 días, adaptar en España el modelo austriaco de rescisión de contratos y restringir la contratación temporal. El borrador del documento de la reforma que prepara el Ministerio de Trabajo apunta a una medida adicional, cercana a las tesis que ha planteado la patronal: redefinir las causas objetivas del despido. La redefinición de las causas objetivas del despido que plantea el Ejecutivo podría ser más favorable a las empresas en mala situación, según el borrador que difundió ayer RNE, ya que haría menos difícil la modalidad más barata de despido (20 días). Fuentes de La Moncloa explican que el Gobierno todavía no tiene listo el decreto y que éste no será definitivo hasta que se sepa si hay acuerdo o no. Las causas económicas ya existen en la actualidad el Estatuto de los Trabajadores, tanto para expedientes de regulación de empleo como para despidos individuales. Pero lo que busca el Ejecutivo sería acercar la redacción de la norma a la jurisprudencia del Tribunal Supremo, más comprensiva con las tesis empresariales que los juzgados de lo social. El cambio abriría la puerta a los despidos procedentes (apenas el 15%) que conllevan una indemnización de 20 días por año trabajado, frente a los 45 o 33 de la vía improcedente (casi el 80%). Para casi generalizar el uso del contrato de fomento del empleo, el Gobierno pretende además ampliar el ya extenso número de colectivos que se puede acoger a esta modalidad de contratación. Ahora solo deja fuera a los hombres de 30 a 45 años que lleven en paro seis meses. Trabajo prevé rebajar este requisito a solo tres meses de permanencia en el paro. Además, se abriría la puerta a todas las conversiones de temporales a fijos. Ambas propuestas provocan el rechazo sindical, pues suponen de hecho una rebaja del coste del despido. De hecho, Fernando Lezcano, de CC OO, advirtió ayer que de salir adelante esta propuesta, se abre de par en par la puerta a la huelga general. Desde UGT, Toni Ferrer, reclamó al Gobierno que lleve ya sus medidas a la mesa de negociación. Para compensar a los sindicatos, los planes de Trabajo pasan por restringir la contratación temporal. Para ello, el Ejecutivo limitaría a dos años los contratos de obra o servicio (cuya duración real es similar a la que tienen los contratos de fomento del empleo en la práctica) y aumentaría la indemnización por despido en las subcontratas (ocho días por año trabajado). El

265 documento que prepara el Gobierno también incluye medidas para impulsar la reducción de jornada para facilitar el ajuste salarial en lugar de los despidos, el llamado modelo austriaco. Y la adaptación del modelo austriaco en España, que consistiría en el pago de ocho días de despido por parte del Fondo de Garantía Salarial en las rescisiones procedente e improcedentes. El Gobierno expondrá su modelo a los agentes sociales en la reunión del 9 de junio, al día siguiente de la huelga de funcionarios. http://www.elpais.com/articulo/economia/Ejecutivo/busca/redefinir/causas/objetivas/despido/ elpepueco/20100604elpepieco_3/Tes

ENTREVISTA: La sostenibilidad del Estado de bienestar - 9. EMPLEO Y PRODUCTIVIDAD. LOS SINDICATOS CÁNDIDO MÉNDEZ Secretario general de UGT "Nada garantiza que los mercados se contenten con la reforma laboral" MANUEL V. GÓMEZ - Madrid - 04/06/2010 Pesimista y crítico con Gobierno y patronal. Así se muestra el secretario general de UGT al abordar la posibilidad de un acuerdo para reformar el mercado de trabajo. En su opinión, la cifra de paro demuestra que despedir en España no es ni difícil ni caro. El problema, sostiene, es una cultura empresarial deficiente Apenas hace unas horas que Cándido Méndez, secretario general de UGT, ha salido de la última reunión estéril con el Gobierno y la patronal para pactar la reforma laboral. La cita acabó el miércoles por la noche. Es jueves a primera hora. Méndez (Badajoz, 1952) admite que el pacto está casi imposible. Se resigna por "obligación moral" a mantener una negociación agonizante hasta el último minuto. El Ejecutivo ya no es el del verano que descartaba cambios en el Estatuto de los Trabajadores para salir de la crisis. Ahora Zapatero avisa de que su reforma del 16 de junio tocará "aspectos esenciales" del mercado laboral. Méndez responde: si el decreto es "lesivo" habrá huelga general. Pregunta. Zapatero ha anunciado que la reforma saldrá por decreto. ¿Por qué siguen negociando? Respuesta. Tenemos la obligación de negociar hasta el último momento. Si llegamos a un acuerdo, la norma sería el reflejo del pacto. Está justificado que intentemos llegar a un acuerdo. P. Si no hay avances desde hace semanas. R. Tenemos la obligación moral de seguir intentándolo. P. La situación exige un acuerdo o, al menos, el decreto. R. Ese es uno de los elementos clave que explica por qué no encontramos la coincidencia. Hay una diferencia de enfoque seria que se ha endurecido como consecuencia del plan de

266 ajuste. Los sindicatos queremos acordar cambios en el mercado laboral útiles a la economía real. La patronal está más pendiente de calmar a los mercados financieros. P. También Zapatero quiere tranquilizar a los mercados. R. Indudablemente, el anuncio de Zapatero, si es esa la razón, no estimula a la patronal a buscar un acuerdo. P. La agresividad de un decreto laboral casi está en su esencia. ¿De verdad esperan que no sea lesivo con los derechos de los trabajadores? R. Cuando lo conozcamos, haremos la valoración. Si menoscaba los derechos de los trabajadores, tendrá mala calidad. Y un decreto de mala calidad empeorará la crisis, aumentará el paro y generará un conflicto social. P. Las señales que ha mandado el Gobierno apuntan hacia lo que ustedes llaman lesionar los derechos de los trabajadores. R. Yo no me guío por señales, sino por contenidos. P. Uno de ellos parece que será generalizar el contrato de 33 días de despido. R. Es archiconocido que la generalización en la práctica de ese contrato es casi total. Ahora mantiene su naturaleza jurídica. Sería inaceptable que se desnaturalizara. P. Organismos internacionales, analistas, el Banco de España y ahora el Gobierno coinciden: hay que rebajar el despido. Los sindicatos se han quedado solos. R. Ese no es el problema. Si en España fuera caro y difícil despedir, los ajustes no se habrían producido por el empleo. La realidad refuta a lo que se plantea. Pretenden presentar como propuestas para mejorar el mercado laboral lo que busca tapar la boca de los mercados financieros. Si se llevaran a efecto, se cometería un destrozo que no tendría vuelta atrás. Nada garantiza que los mercados financieros se contenten con la reforma laboral. En estos momentos tenemos una muy dura experiencia. Los mercados han solicitado que se imponga el ajuste. Pero una vez que se han tomado esas medidas en España la fiesta ha durado muy poco. Inmediatamente han alertado que lastran el crecimiento. P. Retraso de la edad de jubilación, bajada de sueldo a los funcionarios, congelación de las pensiones, ahora un decreto, ¿no hay huelga general? R. Hemos hecho una seria advertencia. Estamos en fase de acuerdo y si, tras el desenlace de la negociación, se impone un decreto lesivo para los derechos de los trabajadores, iríamos a la huelga general. P. ¿Los sindicatos pueden permitir que se rompa el Pacto de Toledo sin ir a la huelga? R. El Gobierno ha roto el Pacto de Toledo en el ámbito parlamentario, pero ninguna de las medidas que ha planteado es efectiva ya. La congelación de las pensiones tendría efectos el 1 de enero. Hasta entonces hay mucho tiempo para torcer esa decisión. En el Pacto de Toledo se ha solicitado nuestra comparecencia, y allí los sindicatos vamos a solicitar que los grupos parlamentarios enmienden la congelación. P. Uno de los puntos sobre la mesa del diálogo social es redefinir las causas del despido. El 80% de los despidos son improcedentes en España. ¿No le parece que este dato pone sobre la mesa la necesidad de cambios? R. Lo que pone sobre la mesa es lo fácil que es despedir en España. No será muy caro cuando utilizan el de 45 días, y no el de 20 días. P. Pero usted mismo ha admitido hablar de las causas.

267 R. Se puede dar un repaso. Pero no para que desaparezca la tutela judicial o facilitar el despido. Además, ya hemos hablado de este tema en la negociación. Pero cuando se plantea que la decisión última sea del empresario, las cosas se complican mucho. P. El mayor problema del mercado laboral es la división entre temporales y fijos. ¿Qué plantean los sindicatos para superarla? R. Tenemos un diagnóstico preciso y alternativas claras. Es consecuencia de la estructura productiva. No tiene su origen en el mercado laboral. P. No solo. R. Es cierto. El abuso de la contratación temporal también tiene culpa. Es un problema de nuestra estructura productiva, pero también del abuso. Se debe al tamaño de las empresas, al escaso valor añadido que aportan y a una cultura empresarial que apuesta por el despido para traducir la realidad económica en despidos. Si en el mercado laboral se respetaran las causas, esto no sería así. Pero eso no servirá para paliar el paro. P. ¿Por qué? R. Debemos huir de un equívoco, el de quienes establecen una relación entre los 4,6 millones de parados y que no se haya hecho una reforma laboral. España era una máquina de construir empleo en la época de crecimiento. P. Sí. Empleo precario y frágil. ¿No exige eso un cambio? R. Por qué era precario, porque las líneas de financiación se orientaban hacia el conglomerado inmobiliario financiero. Había menos disposición a financiar a la industria. Ese problema no lo hubiera resuelto el cambio laboral. P. El FMI y la patronal exigen cambios en la negociación colectiva. Concretamente, en las cláusulas de descuelgue. R. Hay que utilizar la negociación colectiva para facilitar un repliegue de la ley. Empresarios y sindicatos estamos de acuerdo en este repliegue, pero el vacío lo quieren llenar los empresarios de forma unilateral. Lo tiene que ocupar la negociación colectiva. http://www.elpais.com/articulo/economia/Nada/garantiza/mercados/contenten/reforma/laboral /elpepueco/20100604elpepieco_1/Tes

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REPORTAJE: Vida & Artes SOSTENIBILIDAD DEL ESTADO DE BIENESTAR 8. EMPLEO Y PRODUCTIVIDAD El drama es doble: el paro y su factura Pagar el desempleo cuesta ya un 3,2% del PIB español - La baja productividad ligada a la temporalidad es nuestro cáncer Los expertos discrepan sobre si los subsidios estimulan el paro El plan de recorte de Zapatero ha respetado a los desempleados Los contratos temporales fueron eficaces; hoy son devastadores El empleo eventual se ha convertido en la sala de espera de uno indefinido MANUEL V. GÓMEZ 30/05/2010 Si la democracia española tiene algunas asignaturas pendientes, caben pocas dudas de que el paro ocupa un lugar destacado entre ellas. Ver tasas superiores al 10% se ha convertido en una mala costumbre. Tres veces se ha situado por encima del 20%. Con tozudez, las encuestas oficiales lo sitúan como la primera preocupación de los españoles. Si la democracia española tiene algunas asignaturas pendientes, caben pocas dudas de que el paro ocupa un lugar destacado entre ellas. Ver tasas superiores al 10% se ha convertido en una mala costumbre. Tres veces se ha situado por encima del 20%. Con tozudez, las encuestas oficiales lo sitúan como la primera preocupación de los españoles. Y no es para menos. Basta un vistazo rápido al parte laboral de la crisis: más de dos millones de puestos de trabajo destruidos, 4,6 millones de parados, 3,2 millones de personas recibiendo ayudas al desempleo, una tasa de paro juvenil por encima del 40%... Los datos son apabullantes. Y la comparación con los vecinos y socios, odiosa. La tasa de paro española destaca con mucho entre los países desarrollados. Tras este tétrico escenario se esconde el pinchazo inmobiliario y el gran peso de los contratos temporales. Conforme se ha ido dibujando este escenario, la necesidad de reformar el mercado laboral ha ganado peso. El propio Gobierno señala el principal objetivo: rebajar la temporalidad, la rendija que ha acabado por convertirse en boquete y ha permitido el rapidísimo aumento del paro y su factura, que en apenas dos años ha pasado de casi 15.000 millones a 34.000 en 2009. Un agujero que, además, contagia a la productividad, como explica Francisco Pérez, del Instituto Valenciano de Investigaciones Económicas. "A largo plazo no es aceptable el gran peso que tiene la contratación temporal. Además, esto ha puesto de manifiesto una gran injusticia que ha castigado, sobre todo, a los jóvenes", señala Josep Oliver, catedrático de Análisis Económico de la Universidad Autónoma de Barcelona. El calificativo de injusto lo usan la mayoría de expertos consultados. "Ha puesto de relieve la facilidad del despido ", continúa Oliver. Y esa facilidad se ha convertido en un duro golpe para las arcas públicas. Si el gasto en desempleo suponía un 1,4% del producto interior bruto en 2007, el año pasado suponía el 3,2%, y ya hay quien calcula que este año puede llegar al 3,9%. Las cotizaciones al desempleo dejaron de ser suficientes en 2008 para financiar este gasto, y los impuestos tienen que aportar el resto. Esto llevó al gobernador del Banco de España, Miguel Ángel Fernández Ordóñez, a mirar hacia esta factura cuando el Gobierno deshojaba la margarita de los recortes tijera en mano.

269 A continuación surge una pregunta: ¿se puede mantener esta factura cuando todos los vaticinios apuntan a un paro alto durante años? "Claro que se puede mantener", zanja contundente Paloma López, responsable de Empleo de CC OO. "No se puede hacer un análisis econométrico. Claro que es sostenible si hay voluntad política", responde tajante Jesús Caldera, ex ministro de Trabajo la pasada legislatura. Y voluntad política hay. Cuando ha tenido que elegir, Zapatero ha dirigido la tijera a obras públicas, funcionarios o pensionistas, no a parados. Es una de sus señas. El verano pasado creó un nuevo subsidio para los desempleados, al contrario que los Ejecutivos de 1993 y 2002. "Ahora mismo no tendría sentido tocarlas", añade un antiguo ministro de Trabajo con José María Aznar, Manuel Pimentel. Pero si entre los políticos se rechaza esta opción, entre los analistas cabe al menos el matiz. "Es una carga muy gravosa desde el punto de vista financiero", explica Ángel Laborda, director del Panel de Coyuntura de la Fundación de las Cajas de Ahorros. "Hay una regla económica que dice que si se mantienen prestaciones altas por desempleo, se mantiene alto el paro estructural", sigue. En su opinión, algo hay que hacer en este punto, pero añade que ahora no es el momento. "Debería reformarse cuando el paro fuera más bajo", admite. Para el catedrático de Hacienda Pública, Ignacio Zubiri, la factura no sólo es sostenible, sino que es necesaria. Cuando analiza la aportación de las cuentas del paro al déficit les quita hierro. "Cuando teníamos superávit, el gasto era del 1,4% del PIB; el año pasado fue un poco más del 3%. La diferencia es de un punto y medio, y el déficit total subió al 11,2%, por lo que su aportación a los números rojos apenas supone un 10% del total", detalla. Al teléfono desde la Universidad del País Vasco, Zubiri desprecia las teorías de que los subsidios estimulan el paro. También Oliver lo hace. "La historia del mercado laboral español no avala esa tesis. Además, las ayudas más bajas no van más allá de 420 euros al mes, que son propias de situaciones de miseria", explica. Quien sí reformaría este aspecto del mercado laboral español es Valeriano Gómez, ex secretario general de Empleo. Pero su opción no pasa por tocar los gastos, sino los ingresos. Defiende que se aumenten las cotizaciones empresariales al desempleo que se pagan por los contratos temporales y se reduzcan las de los indefinidos. Por los primeros se paga un 6,5% de la masa salarial, por los segundos la cuota puede llegar al 8,3%. Sustenta su teoría en vastas tablas de cálculo que demuestran que el gasto en prestaciones para trabajadores que perdieron su empleo temporal en 2009 (unos 22.000 millones) duplicó el de quienes se quedaron sin un puesto de trabajo permanente. La propuesta busca también combatir el primer problema del mercado laboral: la temporalidad. Si hay una fecha clave para el mercado laboral español es 1984. Ese año, el primer Gobierno de Felipe González abrió la mano a la temporalidad. Fue un arma eficaz a corto plazo. A largo, devastadora. La combinación de los contratos temporales y el pinchazo inmobiliario han sido un cóctel demoledor. De los más de dos millones de puestos de trabajo destruidos, 1,6 millones eran eventuales. La alta tasa de temporalidad sirve para explicar más de uno de los males que aquejan al mercado laboral. La reforma laboral de 2006 fijó en ella su punto de mira. La rebajó algo, pero ha sido la crisis la que más ha contribuido a ello. Ha caído al 25%, pero sigue siendo muy alta. A ella hay que mirar a la hora de explicar por qué en España no han tenido impacto mecanismos de contención del paro como la reducción de jornada, como en Alemania. Basta un vistazo rápido a las estadísticas para ver cómo a lo largo de la historia los ajustes de jornada han perdido peso a medida que lo ganaba la temporalidad.

270 Así que ahora el Gobierno la ha señalado como el enemigo a batir. "La dualidad entre trabajadores fijos y temporales constituye el problema estructural más grave de nuestro mercado de trabajo", reza uno de los textos que hay en las mesas del diálogo social. Y ahí coinciden expertos, organismos internacionales, políticos y sindicatos. A partir de ahí, discrepancias. Ni la explicación ni las soluciones confluyen. "El coste del despido es un tema tabú", apunta Ángel Laborda, "en las pequeñas y medianas empresas es un tema importante. Retrae a la hora de contratar". Es su disparo contra los contratos temporales. Esta tesis la comparten los servicios de estudios, organismos internacionales (FMI y OCDE) y Banco de España. Para Miguel Ángel Malo, de la Universidad de Salamanca, el problema no el coste del despido. Reconoce que es alto respecto a otros países europeos. Pero defiende que este coste laboral no tiene gran incidencia a medio plazo sobre la creación de empleo, sino en su dinámica. Si el gasto en la rescisión es bajo, el paro no da grandes bandazos; si es alto, se crean puestos de trabajo y se destruyen rápido. "No queremos tocar los derechos adquiridos, pero todo lo que sea acercar los derechos de los temporales a los indefinidos es bueno", explica José Ignacio Echániz, del Partido Popular. Para él, la temporalidad es consecuencia de la excesiva rigidez que hay en mercado laboral cuando se habla de contratos indefinidos. Más explícito es Florentino Felgueroso, de la Fundación de Estudios de Economía Aplicada. Él se remite a un contrato único con indemnización creciente conforme aumenta la antigüedad en la empresa como primera solución. Tampoco Jesús Caldera, presidente de la Fundación Ideas, se cierra a esta idea. "Se puede aliviar los costes del despido", afirma quien no obstante advierte que su propuesta es crear un fondo con cotizaciones que se destinaría a la formación del trabajador que pierde su empleo, una variación del modelo austriaco. "Los cambios tienen que caminar en una dirección: revalorizar el valor social del empleo y considerarlo así incluso en momentos de crisis. Hay un campo de trabajo para el cambio cultural, hay predisposición a que cuando las cosas van mal se te envíe a casa", añade, mirando así hacia los contratos temporales. La opción sindical no camina por estas vías. Admiten la posibilidad de un modelo austriaco que alivie los costes empresariales del despido sin que los trabajadores pierdan indemnización, pero no creen que esa sea el arma principal. Su opción: "Volver a las causas", resume Paloma López, de CC OO. La legislación laboral española exige que los contratos temporales estén justificados. Es decir, que tengan una causa y no sean el mecanismo de entrada al trabajo y la sala de espera del empleo indefinido. Pero la realidad choca con ley. "El sistema español es bastante exigente, pero no se cumple", resume contundente Caldera. El ex ministro reclama más control. Del tronco principal nacen ramas. La temporalidad lleva a otro gran problema del empleo en España: su baja productividad. Entre 1995 y 2008, esta variable clave para impulsar la competitividad economía apenas creció un 0,51% frente a tasas del 1,88% en Estados Unidos y el 1,5% en Alemania. Para Florentino Felgueroso, también los contratos temporales juegan un papel clave, pues cree que los empresarios no invierten en la formación de estos trabajadores, ni ellos la demandan. "Lo que hay que hacer es formar a los trabajadores", apunta Zubiri, que además añade soluciones para quienes ya no tienen trabajo, donde se centra ahora el verdadero problema: "Hay que mejorar la intermediación y las políticas activas de empleo". En este punto, la secretaria general de Empleo, Maravillas Rojo, señala que España tiene un reto. "Hay que vincular las políticas activas a las prestaciones", admite. "El proceso de

271 activación y reinserción en el mercado laboral no es tan eficiente como en otros países", describe con mayor crudeza, Torres, de la OIT. Actuar en este campo es una de las recomendaciones que lleva haciendo la OCDE en sus informes sobre empleo en los últimos años. Para llegar a esto no hace falta un gran cambio legal, basta con profundizar más en la relación entre comunidades autónomas y Ministerio de Trabajo. Y es que si la crisis ha puesto algo de relieve, además de la necesidad de reformar el mercado laboral, es que hay que utilizar con propiedad los mecanismos que ya existen. El cambio número 53 de la norma laboral en España en democracia es necesario, más que nunca. Aunque sin perder la perspectiva de que la reforma puede arreglar problemas pero no crear empleo. Como recuerda Cándido Méndez, líder de UGT: "Si fuera por reformas, en España el empleo nos saldría por las orejas". © EDICIONES EL PAÍS S.L. - Miguel Yuste 40 - 28037 Madrid [España] - Tel. 91 337 8200 http://www.elpais.com/articulo/sociedad/drama/doble/paro/factura/elpepisoc/20100530elpepis oc_1/Tes

TRIBUNA: FRANCISCO ARANDA La colaboración en la búsqueda de empleo como solución FRANCISCO ARANDA 02/06/2010 Regresé con cierta dosis de optimismo tras haber asistido, en Zaragoza, a la jornada organizada por el Ministerio de Trabajo español, bajo la Presidencia de turno de la UE, titulada "Nuevos Enfoques de los Servicios Públicos de Empleo para promover la Empleabilidad y la Adaptabilidad de los trabajadores a las nuevas formas de empleo". El Gobierno es consciente de que no puede, ni Europa le va a permitir, cometer el error de sentenciar al mercado laboral a una lenta y dolorosa recuperación. Y sabe que en el tablero cuenta con agentes privados que pueden ayudarle, igual que sucede ya en todos los países de la OCDE. En nuestro país tenemos en la actualidad más de 4,5 millones de desempleados, los hogares con todos sus miembros activos en paro no dejan de aumentar, la tasa de paro para los jóvenes supera el 40%, y así, podríamos continuar. Pero es momento de cortar el problema de raíz. El Ejecutivo necesita la misma decisión y diligencia que mostró para anunciar su recorte, para ya poner en marcha los principales cambios que necesitamos en materia de empleo. Y para ello todos somos necesarios. Quiero confiar en las palabras de Salgado de la pasada semana, cuando afirmaba que así lo harían. Definitivamente, necesitamos una modernización del mercado de trabajo y eso debe traducirse entre otras cosas, en ofrecer a los desempleados, sin excepción, todos los agentes garantistas de intermediación para que puedan abandonar lo antes posible esa terrible situación. En ese sentido, la colaboración leal y transparente entre servicios públicos de empleo y ETT?s es un elemento clave. Ya no hay dudas acerca de la eficacia de nuestro sector como elemento integrador en el empleo, especialmente de aquellos colectivos de difícil inserción.

272 En el entorno europeo, el sector ha colocado a más de 9 millones de trabajadores. Además, un estudio de la consultora Bain para la Confederación Europea de Agencias Privadas de Empleo, sostiene que sin nuestra presencia hay puestos de trabajo que no se hubieran creado. En España, durante 2009, las ETTs intermediaron 4,5 veces más que los Servicios Públicos de Empleo (SPE). Pero eso no es lo importante, porque no se trata de competir. Los Servicios Públicos están haciendo una labor encomiable y no suficientemente valorada, pero están saturados por el brutal aumento de la demanda de empleo, y al no poder colaborar con la iniciativa privada, no pueden atender adecuadamente a las necesidades de los 4,6 millones de parados que ya tenemos en España. Podría continuar dándole datos que muestran la eficacia de las ETTs en casar la oferta y la demanda de empleo, en la reducción de la temporalidad y en la contención del desempleo; pero prefiero aportarle ideas y mostrar que las cosas pueden ir a mejor. En este contexto, la necesaria modernización de los SPE y, simultáneamente, su colaboración con las Agencias Privadas de Empleo (todavía ETTs en España), se hace más necesaria que nunca. La gestión de las ETTs en España, es muy significativa, aunque no puedan actuar en determinados sectores como la construcción, la sanidad o la Administración pública, por las injustas restricciones a las que aún se encuentran sometidas. Pero no pretendemos luchar por ver quién coloca a más trabajadores, ni tampoco sustituir su función. Hablamos de complementar de forma ordenada. Creemos en los Servicios Públicos de Empleo como la espina dorsal de la intermediación laboral y ofrecemos una colaboración eficaz que además de ahorrar costes para el Estado (vía menores costes de desempleo), mejoraría la eficiencia de la intermediación, con todas las garantías para los trabajadores, los empresarios y de la misma forma, para la administración pública. España, socialmente no puede permitirse prescindir de esta colaboración público-privada y debe apostar por aprovechar los recursos, las garantías y la experiencia de las ETTs para agilizar su labor, aumentar las posibilidades de empleo de nuestros parados, y en definitiva, dotar a la malla de intermediación de mayor solidez. Lo importante no es quién da el servicio, sino que todos gocemos, de forma universal, de unos agentes de empleo que aporten de forma personalizada información, formación eficaz, orientación y acompañamiento, de forma gratuita. Público y privado no son opciones enfrentadas, sino complementarias. http://www.elpais.com/articulo/economia/colaboracion/busqueda/empleo/solucion/elpepueco/ 20100602elpepueco_4/Tes

TRIBUNA: La sostenibilidad del Estado de bienestar Modernizar los servicios públicos MARAVILLAS ROJO TORRECILLA 02/06/2010 A lo largo de los más de 30 años de existencia de los servicios públicos de empleo, las circunstancias y la dinámica en la que han desarrollado sus cometidos han cambiado sustancialmente. Los requerimientos del empleo y las necesidades de los mercados de trabajo actuales, en unos sistemas productivos cada vez más competitivos y globales, comportan exigencias de cualificación, flexibilidad y movilidad que garanticen las transiciones en el empleo y en las empresas y su capacidad de adaptación. Por ello, los servicios públicos de empleo son imprescindibles en todas las épocas, en las de crisis y en las de bonanza. Su actualización es inaplazable, hay que reforzarlos y modernizarlos, homologándolos a los servicios europeos de esta naturaleza.

273 Toda Europa está reforzando sus servicios públicos de empleo para afrontar la crisis y su salida. Se están potenciando las webs y los instrumentos para un amplio acceso en Internet de todos los servicios que prestan, se amplían los sistemas de orientación profesional, se extiende la participación en la formación para el empleo y se vincula cada vez más activamente la cobertura económica por desempleo a la participación activa en la búsqueda de empleo y en la mejora profesional. Todo ello en un contexto de adecuación de espacios físicos y de personal a los nuevos requerimientos del servicio. En términos generales, en Europa los servicios públicos de empleo comparten cuatro funciones básicas: acompañar itinerarios personalizados de empleo para facilitar la actividad de las personas en desempleo; hacer accesible el empleo disponible facilitando el contacto entre oferentes y demandantes; mejorar y adecuar las competencias profesionales para poder adaptarse a los cambios en los perfiles profesionales y gestionar la protección por desempleo para ofrecer cobertura económica. En España, la Ley de Empleo del año 2003 configuró el Sistema Nacional de Empleo como una red territorial, cuyos pilares básicos son el Servicio Público de Empleo estatal y los Servicios Públicos de Empleo de las comunidades autónomas. El servicio estatal gestiona las prestaciones por desempleo; ordena las políticas activas de empleo y coordina la red territorial. Los servicios autonómicos gestionan la atención a las personas desempleadas o en mejora de empleo y a las empresas que necesitan cubrir puestos de trabajo, también son quienes organizan y mantienen los espacios de las oficinas donde se presta el servicio. La red se completa con un amplio conjunto de instituciones y entidades colaboradoras: Administraciones locales, departamentos gubernamentales, organizaciones empresariales y sindicales, instituciones sin ánimo de lucro y otras. En el contexto actual, en el que han cambiado los paradigmas del empleo (cómo se trabaja, con qué competencias, con qué capacidades profesionales, con qué materiales, en qué organización...), en el que las ocupaciones están en un proceso de transformación, en el que Internet cambia nuestra vida profesional y permite la personalización, y en el que los mercados de trabajo son a la vez locales y globales se plantean nuevos retos. Un primer reto es avanzar en el cambio cultural de la relación entre usuarios y Administración, que supone estar bien conectados y lograr un amplio uso de Internet, para ampliar oportunidades y personalizar respuestas mediante webs accesibles, gratuitas y bien posicionadas. Es lo que en España estamos haciendo mediante www.redtrabaja.es. Otro de los retos es vincular la cobertura económica por desempleo a actividades de mejora de la empleabilidad para reducir en lo posible el tiempo de permanencia en el desempleo. Es también un reto la complementariedad para disponer del mapa de políticas activas de empleo en España, gestionadas en cada comunidad autónoma y logrando una mayor eficiencia en la gestión del conjunto de los recursos disponibles. Asimismo es preciso lograr la complementariedad con servicios privados. Un cuarto reto es el de generar confianza en el Sistema Nacional de Empleo, haciendo visible la actuación y resultados. Modernizar es disponer de servicios de empleo desburocratizados, complementarios, conectados, eficientes y creíbles. Este es, pues, el reto que compartimos con el resto de países europeos, con el objetivo de afrontar la crisis y salir de ella en mejores condiciones. http://www.elpais.com/articulo/economia/Modernizar/servicios/publicos/elpepieco/20100602 elpepieco_11/Tes/

274 - Nada es Gratis - http://www.fedeablogs.net/economia - La Sostenibilidad del Estado del Bienestar: Congelar Menos, Reformar Más Posted By Luis Garicano On 03/06/2010 @ 12:28 In Uncategorized | 11 Comments Muchos analistas evalúan la sostenibilidad de la deuda pública atendiendo a la relación entre deuda y PIB. De acuerdo con este criterio, argumentan, la situación fiscal de España es sostenible, ya que la ratio de deuda a PIB es relativamente baja (España 0.60, Japón 1.92, Italia 1.15, Grecia 1.10, Reino Unido .65). La figura siguiente, tomada del reciente Fiscal Monitor del FMI con fecha 14 de mayo del 2010) confirma esta observación.

Aunque esta ratio estática, es sin duda un indicador útil, no tiene mucho sentido económico en una situación de cambio y crisis como la actual. En el numerador hay un stock en €, la deuda acumulada en el pasado por el sector público de un país. En el denominador un flujo en € por año, la producción actual. Es decir la ratio da una magnitud en años. La interpretación sería “¿cuantos años de producción actual harían falta (si no comemos ni nos vestimos) para pagar la deuda que hemos contraido?” Los problemas con este cálculo son análogos a los que surgen cuando se evalúa el valor de una acción usando la ratio de precio a beneficios (Price-earnings ratio o P/E). En este caso en

275 el numerador está el precio en € por acción, en el denominador los beneficios anuales (de este año) en € por acción y año. La interpretación de nuevo, en años: ¿cuantos años de beneficios tendríamos que recibir para recuperar el precio de la acción? Por ejemplo, una tienda que genera beneficios anuales de 100,000 euros, ¿sería razonable pagar por ella un precio que supusiera esperar ocho años a recuperar los beneficios? Depende. ¿De qué? De nuestras expectativas sobre el crecimiento futuro de los beneficios, es decir del riesgo del negocio, de las posibilidades de crecimiento, de la competencia… Comprar acciones de Google en la IPO a $85 hubiera sido una ganga a pesar del centenario P/E . De forma similar, la deuda de un país puede parecer excesiva cuando en realidad hay unos activos relativamente líquidos para compensarla. Por ejemplo, si se obligara al Reino Unido a consolidar la deuda de Lloyds y RBS, subiría la deuda del Reino Unido a 1.65 veces el PIB [1], ¿sería esta medida, que ignora los activos de estos bancos, mejor que la actual? Por otro lado, la deuda de un país puede no parecer elevada pero ser peligrosa si el crecimiento económico se estanca y los gastos crecen anualmente de forma elevada porque, por ejemplo, el déficit estructural es demasiado elevado. ¿Como medir la sostenibilidad de la posición fiscal adecuadamente? En una economía sin moneda propia (es decir, ignorando la posibilidad de monetizar) la deuda es sostenible si el valor presente de los ingresos futuros es mayor que el valor presente de los flujos de gasto, más los intereses, más el principal de la deuda. Es decir, el futuro (como en Google, o en la compra de una tienda), en todo esto, es la clave. Pero el futuro no lo conoce nadie, sólo hay expectativas más o menos “racionales”. O sea que las expectativas del mercado importan, y muchísimo. El mercado (que no son los especuladores, Sr. Blanco y Sra. Merkel, sino los pensionistas holandeses que temen por sus bonos, los inmigrantes ingleses que tienen una pequeña cuenta de ahorro en su banco de Alicante y lo pueden mandar, con un click de su ratón, a su cuenta de Liverpool, los gestores de grandes multinacionales con sede en España que ven que se exponen a una OPA hostil dado el castigo bursátil que reciben por estar basados en España y se plantan llevarse la sede del negocio a Londres o a Ginebra) necesita ver una senda sostenible de ingresos y gastos, y una política previsible, bien diseñada, que se adelante a los acontecimientos en vez de ir por detrás de ellos. Por ello, las políticas de contención del gasto que se han llevado a cabo hasta ahora sirven para parar el pánico inicial, pero no sirven para dar la confianza necesaria a los inversores extranjeros. Es necesario planificar una senda de crecimiento del gasto más baja, y una senda de crecimiento de los ingresos, y de la economía en su conjunto, mayor. Sobre esta aritmética no puedo añadir nada al excelente post de ayer [2] Jesús Fernández Villaverde de ayer. Lo contrario nos somete al vaivén de los planes repentinos, que son, como Grecia ha aprendido, como la pescadilla que se muerde la cola: viene la crisis, se plantea un repentino plan de ajuste duro, baja la previsión de crecimiento, con lo que viene otro pánico, otro ajuste, y así hasta que no queda economía que ajustar porque nos la hemos cargado. Pues bien, en lo que serán en los próximos años con toda seguridad las dos fuentes principales de crecimiento del gasto, la sanidad y las pensiones, el gobierno ha adoptado, de momento, políticas cortoplacistas, de congelación, no de reforma. Y sin embargo los problemas demográficos van a a requerir mayor ajustes fiscales en España que en el resto del mundo, como demuestra este muy esclarecedor gráfico del FMI. Como podemos ver, en España, a largo plazo, crecen más que la media los gastos relacionados con la demografía, y a la vez nos encontramos con la necesidad de hacer uno de los ajustes fiscales más duros del mundo- de acuerdo con el FMI, sólo EEUU e Irlanda van a requerir un ajuste fiscal tan duro en los próximos 20 años.

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Lógicamente, una política más pro-activa y menos reactiva debería ir enfocada a las reformas en profundidad para solucionar estos dos problemas en el medio plazo. La ventaja de tales medidas es que no afectaría negativamente al crecimiento presente (y si positivamente debido al efecto “Alesina” como le llama Jesús F-V, vamos la caída del tipo de interés y la subida de la confianza). En las dos áreas, pensiones y sanidad, hemos propuesto varias iniciativas de reforma que os invito a leer con calma. En Sanidad, en un estudio de la Cátedra FEDEA-McKinsey [3] que dirijo, con mucho trabajo (¡no remunerado!) de la consultora McKinsey. En Pensiones en un documento suscrito por un grupo de 100 economistas españoles [4]. Creo que esas propuestas, y otras similares, contienen las bases para hacer más sostenible el estado del bienestar y, por tanto, la economía en su conjunto. Pensiones Es bien sabido que el sistema de pensiones públicas de reparto español es insostenible a largo plazo como consecuencia de la evolución demográfica. Ofrece unas prestaciones que, para ser sostenibles en el tiempo, requerirían una pirámide de población de base ancha y cúspide estrecha, justo lo contrario de lo que prevé la demografía. La esperanza de vida al nacer de los españoles ha aumentado desde 1991 a un ritmo anual de 0,2 años por año (si conseguimos que llegue a aumentar a 1 año por año, pues no nos moriremos, estadísticamente, nunca). Los

277 gráficos de natalidad y las pirámides demográficas son asombrosos, como podéis ver en la entrada que escribí sobre este tema [5]. Lo explosivo no es, sin embargo, la demografía por si sola, sino la combinación de demografía y sistema de pensiones. La cifra clave es la relación entre la pensión media y salario medio. Mirad el gráfico de la OCDE, no incluido en mi entrada previa, pero si en el estudio:

Podéis hacer el cálculo más reciente usando estos datos [6]: la pensión media de los entrantes en la jubilación en España en el régimen general es de 1.357 Euros al mes en Marzo de 2010, o alrededor de 18.000 euros al año (son 14 pagas pero no completas). Por otro lado, el salario medio es de aproximadamente 21,500 euros. Creo que no hace falta nada más para ver que el sistema que tenemos no es sostenible. Los pensionistas que hayan llegado hasta aquí, que por favor no piensen que “vamos contra ellos”. Creo que el sistema de pensiones es la conquista más importante del estado del bienestar. Pero para que la conquista perdure debe hacerse de manera que sea sostenible. Como dijo Antonio Cabrales en un excelente y provocativo post [7] en N€G, las pensiones no serán sostenibles si los que las tienen que pagar descubren que no va haber nada para ellos y se niegan a pagar (Antonio puso el argumento muy claro “A mi me entran muy serias dudas de que, dadas las proyecciones demográficas, la generación de mis hijos vaya a querer sostenerme cuando me jubile en la década de los 30. ¿Y si no me van a pagar, para qué demonios estoy dejándome

278 hoy el 10 por ciento de mi renta?”). En cualquier caso ninguna de las reformas estructurales necesarias deben afectar a los jubilados actuales. ¿Qué hace falta hacer? La propuesta del gobierno en este tema, congelar el año que viene pero no reformar puede ser negativa desde el punto de vista de sostenibilidad a medio plazo. Rompe el consenso político sin conseguir un cambio sustantivo; y si al final no hay inflación el año que viene (bastante probable) todo por no conseguir nada. Congelar es poner parches. Por otro lado el gobierno ha propuesto dos valientes reformas estructurales (1)posponer la edad de jubilación en dos años poco a poco (dos meses cada año por ejemplo) y (2) cambiar la fórmula de cálculo de las pensiones, ahora basada en 15 años de contribución; esta segunda propuesta parece ser literalmente radioactiva porque tuvo una vida útil de dos o tres horas antes de desintegrarse — fue retirada y tachada de error burocrático (como la propuesta de parar el endeudamiento de las corporaciones locales). Las dos propuestas son buenas , las dos necesarias para hacer un sistema justo (recordemos que alguien que cotiza exactamente 15 años al final de su vida puede tener una pensión mejor que alguien que haya trabajado y cotizado toda su vida aunque la cantidad pagada por el segundo sea muy superior) y sostenible. O sea que en este tema el Gobierno está por delante de la oposición- el gobierno ve la realidad clara, sabe lo que hay que hacer, y está dispuesto a hacerlo. La oposición juega en este asunto a la fábula de la cigarra- canta, observa y no se da plantea que, dentro de uno o dos años, el problema va a ser probablemente suyo, y que va a ser una reforma increíblemente difícil de hacer sin consenso (y el PSOE estará enrabietado y no dispuesto a ayudar, y así seguiremos). Como veremos, en el otro gran tema, la sanidad, el problema ha sido el opuesto. Sanidad Es bien sabido que el consumo sanitario de los españoles es muy superior a la media mundial. En 2006 los españoles acudieron al médico más de 8 veces al año, lo que supone un 40% más que el promedio del EU-15 ; el gasto farmacéutico per cápita en España es un 40% superior al de países como Bélgica, Dinamarca, Reino Unido o Portuga. El problema demográfico también es clave aquí, ya que el 70% de las recetas se concentran en un 20% de la población que está exenta de pago (pensionistas), que recibían en 55 recetas por año entre 2000 y 2004 (frente a las 7 de la población activa). Estas mismas personas, en sistemas donde se debe contribuir con un 30% del coste (por ejemplo, todos los funcionarios públicos en MUFACE), consume un 40% menos (el estudio de McKinsey-Fedea [3] contiene las fuentes de estas afirmaciones) Y sin embargo el sistema sanitario español es bastante barato, de momento. ¿Por qué? Básicamente, y este es el secreto del asunto, porque los médicos trabajan casi gratis (bueno, el grupo que trabaja a destajo, claro, porque hay otro grupo en cada servicio que no da golpe) comparado con los sueldos en otros países. Por ello, de nuevo, el tipo de recortes salariales, peores que lineales, que se han hecho en la función pública son pan para hoy y hambre para mañana. Los salarios en los puestos de entrada porteros, bedeles etc. en la función pública son mayores que los equivalentes del sector privado, mientras que en la parte más alta (Médicos, Jueces, Abogados del Estado, etc.) son bastante inferiores. Es necesario por tanto controlar el aumento de la demanda y aumentar la cantidad y calidad de la oferta. ¿Qué hacer? La solución obvia es el copago sanitaria: un pago reducido, similar al coste de una película de cine, que se paga por cada visita al médico o a urgencias hospitalarias. En el estudio de Fedea- McKinsey podréis encontrar los detalles de una propuesta. Hay multitud de sistemas de cobro e implementación que evitan perjudicar a los más débiles, como el expuesto por el excelente economista sanitario español Guillem López

279 Casanova en la sección 3 de este artículo [8]. Se podrían utilizar los ingresos recibidos para desarrollar un sistema de incentivos para compensar a los profesionales del sistema que llevan la mayor parte de la carga de este. Pues bien, en este caso la situación es la opuesta. Algunas de las CCAA del PP y algunas de las del PSOE, lideradas por la Consejera Catalana Marina Geli, trabajaron en el Consejo de Sanidad durante todo el año pasado para tratar de comprometer a todas las autonomías (una historia algo inexacta aquí [9] ) y al Gobierno a un sistema de este tipo. Al final, el Gobierno, no se ha atrevido a proponer el cambio [10] y en la reunión del martes 1 de Junio lo ha dado por enterrado, a pesar del posible apoyo general a la medida. En su lugar, recorte farmacéutico, como se anunció en el Consejo previo (de 19 de marzo) y “congelación de la masa salarial”, que ahora se ha transformado en reducción del 5%. Conclusión La presencia de un importante desequilibrio estructural a largo plazo, de raíz demográfica, es una de las razones (la otra es la interacción entre el sector financiero e inmobiliario de la que hemos hablado en otras ocasiones y de la que seguiremos hablando) por las que las decisiones de contención del gasto que el gobierno español ha tomado últimamente, aunque han servido para frenar la catástrofe que se avecinaba, no han creado la confianza necesaria. Restablecer la confianza requiere tomar decisiones de calado con respecto al gasto en pensiones y al sanitario, cuyo potencial de crecimiento a largo plazo es muy alto en España por razones demográficas e institucionales. Como el mercado laboral, estos son problemas que hay que resolver de todas formas, crisis o no crisis, y cuanto antes se haga, mejor. Compartir [11]

[12] [13] [14] [15] [16] [17] [18] [19] [20] [21] Hide Sites [11]

Article printed from Nada es Gratis: http://www.fedeablogs.net/economia URL to article: Luis Garicano La Sostenibilidad del Estado del Bienestar: Congelar Menos, Reformar Más03/06/2010 http://www.fedeablogs.net/economia/?p=4622 URLs in this post: [1] subiría la deuda del Reino Unido a 1.65 veces el PIB: http://discussions.ft.com/longroom/tables/the-wall-of-worry/jp-morgan-on-uk-government- bank-exit-strategies [2] post de ayer: http://www.fedeablogs.net/economia/?p=4535#more-4535 [3] de la Cátedra FEDEA-McKinsey: http://www.cambioposible.es/sanidad/ [4] un documento suscrito por un grupo de 100 economistas españoles: http://www.crisis09.es/pensiones/pensiones.pdf [5] escribí sobre este tema: http://www.fedeablogs.net/economia/?p=3021 [6] usando estos datos: http://www.seg- social.es/Internet_1/Estadistica/Est/Pensiones_y_pensionistas/Altas_y_Bajas_de_Pensiones_Cont ributivas/index.htm [7] excelente y provocativo post: http://www.fedeablogs.net/economia/?p=3039 [8] de este artículo: http://www.upf.edu/pdi/cres/lopez_casasnovas/_pdf/copagCampalanscast.pdf

280 [9] aquí: http://www.google.com/hostednews/epa/article/ALeqM5jiPFzlOTNfEf98yXyL9a7QFltvUw [10] se ha atrevido a proponer el cambio: http://www.abc.es/20100601/sociedad- sanidad/comunidades-aparcan-copago-pero-20100601.html [11] Compartir: # [12] Image: http://buzz.yahoo.com/submit?submitUrl=http%3A%2F%2Fwww.fedeablogs.net%2Feconomia %2F%3Fp%3D4622&submitHeadline=La+Sostenibilidad+del+Estado+del+Bienestar%3A+Co ngelar+Menos%2C+Reformar+M%C3%A1s&submitSummary= [13] Image: http://del.icio.us/post?url=http%3A%2F%2Fwww.fedeablogs.net%2Feconomia%2F%3Fp%3D 4622&title=La+Sostenibilidad+del+Estado+del+Bienestar%3A+Congelar+Menos%2C+Reform ar+M%C3%A1s [14] Image: http://digg.com/submit?phase=2&url=http%3A%2F%2Fwww.fedeablogs.net%2Feconomia%2 F%3Fp%3D4622&title=La+Sostenibilidad+del+Estado+del+Bienestar%3A+Congelar+Menos %2C+Reformar+M%C3%A1s [15] Image: http://www.facebook.com/sharer.php?u=http%3A%2F%2Fwww.fedeablogs.net%2Feconomia %2F%3Fp%3D4622 [16] Image: http://www.google.com/bookmarks/mark?op=edit&output=popup&bkmk=http%3A%2F%2Fw ww.fedeablogs.net%2Feconomia%2F%3Fp%3D4622&title=La+Sostenibilidad+del+Estado+del +Bienestar%3A+Congelar+Menos%2C+Reformar+M%C3%A1s [17] Image: http://www.linkedin.com/shareArticle?mini=true&url=http%3A%2F%2Fwww.fedeablogs.net %2Feconomia%2F%3Fp%3D4622&title=La+Sostenibilidad+del+Estado+del+Bienestar%3A+ Congelar+Menos%2C+Reformar+M%C3%A1s [18] Image: http://reddit.com/submit?url=http%3A%2F%2Fwww.fedeablogs.net%2Feconomia%2F%3Fp %3D4622&title=La+Sostenibilidad+del+Estado+del+Bienestar%3A+Congelar+Menos%2C+Re formar+M%C3%A1s [19] Image: http://www.technorati.com/faves?add=http%3A%2F%2Fwww.fedeablogs.net%2Feconomia%2 F%3Fp%3D4622 [20] Image: http://twitter.com/home/?status=Check+out+La+Sostenibilidad+del+Estado+del+Bienestar%3A +Congelar+Menos%2C+Reformar+M%C3%A1s+@+http%3A%2F%2Fwww.fedeablogs.net% 2Feconomia%2F%3Fp%3D4622 [21] Image: http://myweb2.search.yahoo.com/myresults/bookmarklet?u=http%3A%2F%2Fwww.fedeablogs .net%2Feconomia%2F%3Fp%3D4622&t=La+Sostenibilidad+del+Estado+del+Bienestar%3A+ Congelar+Menos%2C+Reformar+M%C3%A1s

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Greetings from RGE! (Enviado el Miércoles 02/06/2010 9:01 This week we focus our attention on financial regulation, one of the “bogeymen” that have spooked asset markets over the past month. The contents of this note are drawn from an RGE Analysis we released to clients last week—“Financial Regulation: The Devil in the Details”— in which Jennifer Kapila, Parul Walia and Arnab Das assess the plans that are currently being circulated in Congress. Our newly released Cross Asset Monthly, available exclusively for Strategy level clients, further discusses how new regulation might affect asset markets and how clients should position themselves with respect to these pressures. The SEC’s case against Goldman Sachs has revitalized the regulatory reform dialogue and renewed concerns of earnings volatility and valuations. The outcome is of little consequence now that Goldman Sachs, and by association other large banks, have been publicly vilified. The case has demonstrated the logic behind Glass-Steagall, calling into question the remit and obligations of entities that operate under the protection of implicit federal assistance. The Volcker rule aims to unbundle highly risky activities from the institutions we entrust with our savings by pulling the shadow banking system under the scrutiny of regulation. However, it could fall victim to “soft-touch” habits by allowing financial institutions control of its interpretation. Ideally, universal banks would be disaggregated into smaller specialized entities whose risk profiles could be more accurately priced by investors while insured deposit-takers would be restricted in their activities. Removing the expectation of federal assistance would reduce the impact and frequency of failures. Yet we are a long way away from such a potentiality.

The core dilemma in regulatory reform entails a choice between a robust financial system and leverage-fueled economic growth. Derivatives that allow banks effectively to “shed” risk, to free capital, and to grow more and faster, have become a focal point. Current proposals, aimed at decreasing the counterparty risk of individual participants or banning certain products, fail to combat the mispricing of risk, which enabled significant leverage. Legislation though, is only one step and the devil will be in the details. Greater regulation will potentially alter relative valuations and should reduce price volatility across the capital structure. In its most “effective” form, it should reduce potential leverage/credit growth and lead to more sustainable macroeconomic growth. The bulk of the impact will affect equity through repeated bouts of volatility due to earnings uncertainty on the back of litigation risk and political/regulatory risk as completed legislation gives way to debates on specific standards. In isolation, these rules would have a marginal effect on the largest U.S. banks, but in aggregate, they could account for anywhere from 10-25% of annual earnings, depending upon asset allocations and the cycle, which should have a negative effect on sustainable earnings power and ROE (and therefore equity valuations). These potential effects do not consider the impact of potential size caps nor do they capture the ancillary, albeit potentially significant effect on earnings and credit extension implicit in a systematic reduction of leverage in the financial system. The full extent of the impact will depend upon the details of implementation. This rule would have the most significant impact on brokers, but universal banks would face

282 negative repercussions as well. The Volcker Rule is a step in the right direction in that it aims to withdraw federal assistance expectations from entities that engage in risky activities, therefore reducing moral hazard and bringing parts of the shadow banking system under regulation. It would reduce a volatile form of income, but falls short of addressing conflicts and the continued leveraging of insured deposits in securities underwriting. Its utility and potential loopholes will rely upon how prop trading is defined. While there is no such Volcker rule on the table in the EU, there is a strong impetus in the EU to bring alternative investments under greater regulatory oversight (to the chagrin of the UK). Recent proposals envision significantly increased disclosure requirements, minimum capital and liquidity requirements, and greater investor protections. Stopping short of a ban could limit the earnings impact associated with passage of the Volcker rule in the United States. However, should a Volcker rule be implemented in Europe, earnings in the European “core” (UK, France and Germany) and Switzerland would be most affected, given that these countries have the largest universal/investment banks. RGE believes that more radical reforms like eliminating the “too-big-to-fail” card and adopting Glass-Steagall-like regulation that unbundles different types of financial activity is necessary to ward off asset bubbles and combat systemic risks, but may not be feasible for political reasons. In the event of a Glass-Steagall type separation, we would expect a divergence in credit spreads between banks with and without insured deposits (a differential that would fluctuate with the credit cycle, and would be tighter at the top), but expect the cost of credit for depository institutions to be very close to sovereign risk. On the flip side, dilution risk will be concentrated in depository institutions. We could see higher PEs/ROEs in the non-depository institutions, though the ability to increase leverage will be dependent upon the level of regulation of non-depository institutions. All of this, of course, rides upon the credibility of regulatory agents and the utility of the reform.

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02 juin 2010 Dette : “la Banque centrale doit créer de la monnaie et prêter à 0 % aux Etats”

J’ai interrogé plusieurs économistes dans le cadre d’une “enquête” pour Le Monde dans sa version “papier” sur le thème suivant : “s’il veut vraiment tenir son engagement de ramener le déficit public à un niveau de 3 % du produit intérieur brut (PIB) en 2013, et donc de réduire également la dette publique, le gouvernement ne devra-t-il pas se résoudre à jouer de la carte fiscalité, c’est-à-dire augmenter les prélèvements ?” Cette enquête est publiée aujourd’hui, mercredi 2 juin. On peut la lire ici (mais pour cela il faut être abonné, ce que je vous invite à faire). A l’occasion de cette enquête, j’ai notamment rencontré Thomas Piketty, qui est directeur d’études à l’École des hautes études en sciences sociales (EHESS) et professeur à l’Ecole d’économie de Paris. Sans exonérer la France d’“efforts sur les finances publiques” - il considère qu’ils seront “nécessaires”, mais qu’ils doivent être mis en place “de façon équilibrée, sans coupes brutales du jour au lendemain” - il “décale” la problématique au niveau européen. En tout cas une partie de la problématique : comment résorber la partie du “trou” qui est directement liée à la crise financière et à la crise économique qui a suivi. Voici, ci-dessous, ce qu’il dit, sachant qu’il faut avoir en mémoire les chiffres suivants : le déficit public français était équivalent à 7,5 % du PIB fin 2009 (soit 143,8 milliards d’euros) et devrait atteindre 8,2 % cette année; la dette publique atteignait 78,1 % du PIB fin 2009 (soit 1 489 milliards d’euros), et devrait se situer à 83,2 % cette année. “Ce n’est pas avec la rigueur, les coupes dans les dépenses publiques et les hausses d’impôts qu’il faut sortir de cette crise. La réduction des coûts publics pour sortir d’une récession cela mène toujours au désastre. Cela ne marche pas. Serrer la ceinture des citoyens et des contribuables, cela risque de retarder la sortie de crise, d’aggraver les choses : l’impact sur la croissance notamment pourrait être négatif et, au final, on va se retrouver avec plus de déficit et plus de dette”. Le problème étant de résorber la dette publique, une solution consiste à monétiser une partie de cette dette, le surplus lié à la crise. Il faut que la Banque centrale européenne (BCE) fasse avec les Etats ce qu’elle a fait avec les banques : émettre de la monnaie et leur prêter à 0 % ou 1 % pour que les Etats se débarrassent du surplus de dette créé par la récession.

284 L’exemple américain Les banques centrales européenne et américaine ont en effet prêté à un taux voisin de zéro aux banques sur une période relativement longue : entre septembre et décembre 2008, elles ont créé près de 2 000 milliards d’euros de monnaie nouvelle, soit 10 points de PIB européen et américain, pour les prêter. Pourquoi a-t-on pu prêter aux banquiers et pourquoi les citoyens devraient-ils se serrer la ceinture pour payer les effets d’une crise dont le secteur financier est responsable ? C’est d’ailleurs exactement ce que fait la Federal Reserve américaine depuis début 2009 : en achetant à 0 % des centaines de milliards de bons du Trésor américain, elle allège le fardeau des contribuables américains, et permet de sortir de la récession plus vite qu’en Europe. Si les Etats-Unis sortent aussi vite de la récession, c’est parce qu’ils ont agi ainsi et qu’ils n’ont pas fait de réduction des dépenses, de hausse d’impôts. Il y a un pragmatisme américain qui nous fait défaut. Dans les circonstances actuelles, il n’existe pas d’autre solution que de monétiser une partie de la dette publique. Cela permettrait de remettre les compteurs à leurs niveaux d’avant crise. Cela ne se traduirait pas forcément par de l’inflation. Dans le cas des prêts aux banques, cela n’en a pas créé par exemple. On était au bord d’une dépression, d’un déflation (baisse des prix, baisse des actifs). En injectant de l’argent, on a évité cette déflation et il n’y pas eu d’inflation derrière.” http://bercy.blog.lemonde.fr/2010/06/02/dette-la-banque-centrale-doit-creer-de-la-monnaie-et- preter-a-0-aux-etats/#xtor=RSS-3234&mf_sid=182661076

285 06/03/2010 04:14 PM Austerity Pays Off for Estonia Former Soviet Republic Could Be Next to Adopt Euro By Jan Puhl No European country has been more adept than the former Soviet republic of Estonia in dealing with the global economic crisis. Tallinn implemented some of the toughest austerity measures seen in Europe and, in one year's time, has qualified to become the next country to introduce the euro.

Meeli Hunt is Estonia's best-known unemployed person. When she appears on TV talk shows, she is always perfectly coiffed and still wears designer glasses. She is now even slimmer than she was when she worked as a government press officer. She goes to the gym every day, and she doesn't look her age of 52. She developed her exercise habit when she suddenly lost her job. Hunt has had a typical Estonian career, which took off after the country gained its independence from the Soviet Union in 1991, a time when everything seemed possible. But in 2008, her career took an equally precipitous nosedive when economic growth came to a grinding halt in Estonia. She managed to survive tough times with her savings, and now things are slowly starting to look up for Hunt, and for the rest of the country. "I've become tougher and more frugal," she says. As a press officer at the Defense Ministry, she established a good reputation as a multimedia manager. Hunt marketed Estonia, a new NATO member, on the Internet. Later on, she handled public relations for the Freedom Monument, a source of national pride that was erected in downtown Tallinn last year. Then, one day, her superior walked into her office and began hemming and hawing. She shouldn't take it personally, he said, but the government had to save money and she was being

286 let go. At the time, a law protecting employees against termination, which has since been abolished, allowed her to keep her job for another month before becoming unemployed. An Unparalleled and Painful Austerity Program Since the fall the Soviet Union, Estonia has enacted what is probably the most liberal set of economic regulations in Europe. The Estonians can attribute a booming decade of double- digit growth to these regulations, but they have also been responsible, after the brutal crash, for an unparalleled and painful austerity program. Fiscally, the program has been effective. Estonia has cleaned up its finances in only one year, and the country now satisfies all criteria for membership in the euro zone, the countries that use Europe's common currency. Tallinn is taking on new debt that amounts to only 2.4 percent of gross domestic product (GDP), and the country's total debt at the beginning of the year was only 7.2 percent of GDP, compared with 115 percent for Greece. Estonia intends to introduce the euro in January 2011. The coins, which have already been designed, depict the contours of the country, which is so far in the east of the European Union that the Baltic Sea is called the Western Sea. But there is a price for this success: 137,000 people are out of work, which, for a population of 1.3 million, makes for 19.8 percent unemployment. 'A Liberal Test Laboratory' Hunt has described her unemployment experiences in a blog. "Without a job, you're suddenly alone," she says. People who used to be good friends suddenly stop calling. Hunt was one of 26 people who lost their jobs in her office. They formed a club and vowed not to disband until all of them had found new jobs. What went wrong in Estonia? "We installed a liberal test laboratory in our country," says economics professor Rainer Kattel. "It worked well, too well, in fact." In the 1990s, Tallinn privatized all unprofitable government-owned companies, ports and banks and introduced a flat income tax, which is currently at 22 percent for all Estonians. Scandinavian banks, in particular, began investing heavily in Estonia. They took over the financial sector and acquired real estate, and investors built office towers. An Imbalanced Economy Suddenly it seemed that the Estonians could afford anything, and everyone was buying new cars and homes. Loans were available at favorable rates, and those in a hurry could even borrow small sums via text message on their mobile phones. All this cheap money stimulated domestic consumption. "Unfortunately, Estonia failed to develop a strong export sector," says Kattel. The value of imports exceeded that of exports by 20 percent. When the real estate crisis shook the United States and Scandinavian banks became more cautious, growth suddenly declined. And given that the Estonian kroon is pegged to the euro at a fixed exchange rate, the option of simply devaluating the currency simply wasn't available to the government in Tallinn. Instead, it had to make the country more competitive by cutting government expenditures. Economists refer to this painful recipe for austerity as internal devaluation. The government economized on civil servants, in health care, in pensions and in infrastructure, and it raised consumption taxes. Many companies reduced their wages by more than 10 percent -- and the Estonians suffered quietly. "We have a Nordic coolness. We don't get as upset as the Greeks," says Hunt. In her blog, she has proposed that everyone who is unemployed should meet in Tallinn for a major singing

287 festival. Song festivals are a national tradition, and the Estonians were singing when they took to the streets to demand independence from the Soviet Union. But there has not been a single protest march against the austerity program. And in parliament, few have truly contested the government's economic policies. Despite Crisis, Estonians Fare Reasonably Well The government pays graduated unemployment benefits for one year, followed by negligible welfare benefits. Many Estonians are now using up their savings. Perhaps one of the reasons they are so patient is that, despite the crisis, the country has rarely been in a better position. Estonia is independent, the standard of living has risen tremendously in recent years, and its citizens still have vivid memories of the bad times when Estonia was a remote Soviet republic. Finance Minister Jürgen Ligi, 50, is the man in charge of implementing the government's austerity program. He is the right man to enforce unpopular decisions with his spoiled fellow Estonians. He has the broad shoulders of a top athlete and the necessary self-confidence. Ligi has reduced his own salary by about 20 percent. "We had a real estate bubble and a financial bubble. They burst and now, economically speaking, we are back where we were in 2005," he says. "We have learned from it. The way we do business has become much more cautious and conservative than in the past." When asked whether, in light of the current euro crisis, Estonians even want the common currency anymore, he answers: "Without a doubt. The common currency brings stability and confidence, particularly for such a small country as Estonia." Tallinn newspapers are now speculating over how the EU governments intend to explain to their voters that the euro zone is to be expanded to include, of all things, a former Eastern Bloc country. Ligi finds such skepticism to be unfair. "We don't come from the jungle," he says. "Estonia is a model of Nordic budgetary discipline." The European Commission in Brussels, the EU executive, has already spoken out in favor of accepting the Estonians, and now the decision is up to the euro-zone countries. Bizarrely enough, three highly indebted countries, Italy, Spain and Portugal, will be among those deciding whether model pupil Estonia should be permitted to introduce the euro by as early as next year. The economy in the small country on the Western Sea is expected to grow slightly this year. Meeli Hunt, at any rate, recently landed a new job as a PR manager. She has given up her blog, and her club of unemployed former colleagues has disbanded. None of the 26 original members satisfies the acceptance criteria anymore. Translated from the German by Christopher Sultan URL:http://www.spiegel.de/international/europe/0,1518,698299,00.html RELATED SPIEGEL ONLINE LINKS: • Germany Thinks So, Too: Estonia Looks Ready to Join the Euro Zone (01/14/2010) http://www.spiegel.de/international/business/0,1518,671897,00.html • The Hangover after the Party: Eastern Europe's Economic Crash (03/23/2009) http://www.spiegel.de/international/europe/0,1518,614960,00.html • Europe's Coolest Cities: Tallinn, Estonia's Wired Capital (08/29/2007) http://www.spiegel.de/international/europe/0,1518,502322,00.html

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01.06.2010 Why the optimists are wrong about the eurozone By: Wolfgang Münchau

Want to hear the optimists’ case for the eurozone’s future? Austerity programmes coupled with a weak euro might just save it. The argument is that fiscal indiscipline has caused the crisis. Austerity must therefore solve it. A weak euro and a global recovery would cushion the impact of austerity. In addition, the financial guarantees and the bans on short sales would see off the speculators. End of crisis. The optimists have not had a good crisis so far. This will not change. Here is why. First, fiscal adjustment programmes will be necessary eventually but European governments are currently repeating their age-old mistake of cutting spending and raising taxes well before the economy has recovered. In the US there is a debate about another stimulus package to ensure the recovery does not prematurely run of out steam. The Europeans are choking off the recovery before it has even started. The premature austerity programmes will ultimately impede debt reduction, as nominal growth remains very weak. Furthermore, Italy and Spain will both need to accompany fiscal adjustment with structural reforms. There are no such reforms on the horizon in Italy. Spain is about to decide a labour reform package. But it will almost certainly not deal with the fundamental problem of a divided and extremely inflexible labour market. Even in Germany, where domestic spending remains anaemic, the government coalition is discussing a tax increase. Second, the euro’s exchange rate has indeed weakened, and may weaken further. But it will probably not do so sufficiently to solve southern Europe’s competitiveness problems. In Greece, for example, tourism is the main export industry. A slump of the euro against the dollar is not going to change the country’s relative competitive position against the eurozone nations of the Mediterranean Sea. It could improve competitiveness against Turkey and Croatia, for example, but only to the extent that the lira and kuna also revalue. For the euro exchange rate alone to do the heavy lifting in restoring southern European competitiveness, it would take a massive further depreciation – to about 60 or 80 US cents to the euro. Assume this were to happen, and then consider the overall effects. The Organisation for Economic Co-operation and Development last week forecast that Germany’s current account surplus, which fell to 5 per cent of gross domestic product in 2009, would rise again to 7.2 per cent in 2011. That forecast is based on current exchange rates. An extreme further fall in the euro would have two effects: it would increase Germany’s surplus even further, probably to well over 10 per cent of GDP, and thus increase internal imbalances within the eurozone. It would also contribute to a deterioration of global imbalances, as the eurozone as a whole would turn a small current account deficit into a large surplus. Relying on the exchange rate would be the ultimate beggar-thy-neighbour policy. Third, lingering doubts remain about the €750bn financial rescue package to help weaker eurozone countries. The German constitutional court has still to rule on the package and,

289 while its rulings are difficult to predict, there are some legitimate reasons for concern. I am not sure the court will accept the force majeure argument invoked by the European Council in deciding to permit the rescue package. The Council invoked Article 122 of the treaty on the functioning of the European Union, under which financial assistance is allowed “where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control”, but I think there are legitimate doubts about whether the multiple policy failures that led to this crisis constitute an event beyond one’s control. I also fear the German justices will express misgivings about the European Central Bank’s decision this month to buy bonds. Fourth, the assumption that the crisis was caused, or triggered, by speculation, is not just legally dubious. It may also deflect from the overriding need to reform the eurozone’s governance framework. If you blame speculators, it may be an obvious policy response to ban short sales and penalise hedge funds rather than reform the framework. I therefore expect little substantive reform. At most there will be a souped-up stability pact, to be announced in another pompous press conference at the next European summit in June. Governments are already watering down the European Commission’s sensible, though not very ambitious, proposals. This means European governments are very likely to miss the opportunity to fix the problems in the long run. What the eurozone really needs is a consolidation strategy based on growth and a credible fiscal adjustment plan. It needs to encourage domestic demand in northern Europe to facilitate the adjustment in the south. And it needs a new and functioning system of economic governance. But instead, governments have chosen to chase speculators and to impress each other with austerity packages. They are thus contributing further to the eurozone’s increasingly probable though still distant disintegration. http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2807&tx_ttnews[ba ckPid]=901&cHash=01664abb0e#

290 Conti Pubblici I VERI NUMERI DELLA MANOVRA di Tito Boeri e Massimo Bordignon 01.06.2010 Da ieri è finalmente disponibile il testo della manovra. Abbiamo così scoperto che un provvedimento presentato come quasi interamente di riduzioni alle spese è composto in realtà al 40 per cento di maggiori entrate, che molti tagli sono di carta, di dubbia praticabilità. Serve più che altro a dare un segnale ai mercati. Non è detto che sia credibile perché rinvia ai posteri gli aggiustamenti strutturali di spesa ed entrate. Ben poco rimarrà in vigore dopo il 2012. E chi paga davvero sono, una volta di più, i giovani. Da più di una settimana i giornali commentano la manovra economica del governo per i prossimi due anni e mezzo, definita spesso come “di lacrime e sangue”. Si è perfino parlato di una manovra così dura da richiedere un gioco delle parti nell'esecutivo, con il ministro del Tesoro che interpreta il poliziotto cattivo e il presidente del Consiglio quello buono. Ma fino a ieri non c’era un testo con la definizione precisa degli interventi. Il governo stesso ha poi contribuito alla confusione, tant’è che diverse misure annunciate durante la conferenza stampa di presentazione della manovra – dalla soppressione di nove province ai tagli alla cultura, al blocco degli stipendi pubblici ai livelli del 2009 – sono state poi cancellate dal decreto presentato al Senato. Insomma, sin qui si è discusso sostanzialmente al buio. E al buio si lavora molto con la fantasia. I VERI NUMERI DELLA MANOVRA Un po’ di luce arriva finalmente dalla Relazione tecnica che accompagna il testo del provvedimento. La tabella che segue ne riassume i numeri principali. Tre elementi emergono con chiarezza. 1. Non è affatto una manovra incentrata solo sui tagli alla spesa; al contrario ben il 40 per cento della manovra a regime (nel 2012) è composto da maggiori entrate. 2. L’incremento delle entrate è dovuto in gran parte ai nuovi provvedimenti anti- evasione, da cui il governo si aspetta di ottenere fino a 8 miliardi di euro, in aggiunta a quanto già stimato nella Relazione previsionale e programmatica. 2. Per più del 70 per cento, i tagli sono rappresentati da riduzioni lineari nelle spese dei ministeri o da semplici riduzioni dei trasferimenti agli enti locali, senza che siano state varate misure strutturali di contenimento delle spese; l’esperienza passata ci insegna che questi sono spesso tagli di carta. La Relazione tecnica rivela non poche sorprese rispetto a quanto anticipato dal dibattito mediatico. Intanto, i tagli agli enti inutili e ai costi della politica, di cui tanto si è parlato, contano praticamente nulla in termini di riduzione della spesa, nell’ordine di qualche milione di euro. Il congelamento dei contratti nel pubblico impiego conta un decimo di quanto anticipato dai giornali (attorno ai 500 milioni anziché più di 5 miliardi). In effetti, il blocco scatta nel 2010 (quindi salva i tre contratti firmati quest’anno) e contempla l’erogazione della

291 “vacanza contrattuale” per il pubblico impiego. Non è la prima volta che si congelano i contratti, spostando spese più in là, senza risparmi strutturali. In passato, questi blocchi hanno comportato a regime addirittura incrementi di spesa perché il recupero dei rinvii è sempre molto oneroso. Pesanti sono, invece, gli interventi su scuola e sanità. Per la prima, è soprattutto il blocco degli incrementi automatici delle retribuzioni nel triennio a determinare la riduzione della spesa; per la seconda, è un complesso di riduzioni nel personale e di riclassificazione della spesa farmaceutica. La chiusura di alcune finestre per pensioni di vecchiaia e anzianità comporta risparmi di circa un miliardo di euro, sperando che l’effetto annuncio non spinga molti ad anticipare l’andata in pensione. La parte del leone dei tagli la subiscono ancora una volta Regioni e altri enti territoriali, chiamati a contribuire a regime per 8,5 miliardi di euro, oltre il 60 per cento della riduzione prevista nella spesa. Per le Regioni si tratta del sostanziale annullamento dei trasferimenti per il finanziamento delle funzioni devolute con le leggi Bassanini nel 1997; per comuni e province, di un taglio ai trasferimenti dell’ordine del 20 per cento del totale. Come questi enti territoriali potranno gestire riduzioni così imponenti non è chiaro. Infine, la manovra è accompagnata dai soliti tagli lineari ai vari ministeri di spesa, la cui efficacia si è sempre rilevata assai limitata. Per le entrate, 10 miliardi in più a regime, la leva è la lotta all’evasione. Che ci sia tanto da recuperare su questo fronte è indubbio. Il problema è che è impossibile stimare con precisione il valore delle misure di contrasto, tant’è che nella passata legislatura il governo aveva avuto la buona creanza di non inserire le stime nella manovra, considerandole semmai, a consuntivo, come sorprese positive. I numeri su cui conta questa manovra sono, invece, imponenti. Quasi 8 miliardi verrebbero dal recupero dell’evasione. Si noti che tutto questo avviene in aggiunta al recupero di evasione già contemplato nello scenario tendenziale della Relazione unificata sull’economia e la finanza e che in questa legislatura il governo ha già varato un condono (lo scudo fiscale) e, per ammissione dello stesso ministro dell’Economia, si accinge a vararne un altro sulle dichiarazioni al catasto. Verrà anche questa volta presentato dalla maggioranza in Parlamento anziché dall’esecutivo. Ma non per questo renderà più credibili le misure di contrasto all’evasione. UN GIUDIZIO INFORMATO In sintesi, si tratta di una manovra visibilmente improvvisata, che bada a esibire grandi numeri per offrire un quadro macro rassicurante. Le “lacrime e sangue” sono per pochi, i soliti. Chi paga davvero sono i giovani, colpiti dal taglio dei contratti a tempo determinato e dal blocco delle assunzioni e delle carriere nel pubblico impiego (che penalizza soprattutto chi è entrato con salari molti bassi contando sugli scatti di anzianità) oltre che dall’ennesimo rinvio della riforma degli ammortizzatori sociali. Non una, ma due mani, vengono messe nella tasche dei giovani. L’aggiustamento strutturale langue. Coerente con questa impostazione la scelta di operare sulla cassa (rinvii di spese e tagli ad erogazioni) anziché sulla competenza. La manovra conta su misure che rischiano di riservarci sorprese negative. Un esempio su tutti. Nel dibattito mediatico si è spesso vagheggiato del contributo che anche i comuni possono dare alla lotta all’evasione, tanto che questi percepiscono già il 30 per cento delle maggiori somme riscosse a seguito della loro partecipazione all’attività di accertamento delle imposte, una percentuale che la manovra di questi giorni porta al 33 per cento. Ebbene, la relazione aiuta a far chiarezza su questo fronte. Risulta che nel 2009 e nei primi mesi del 2010 la

292 partecipazione dei comuni abbia complessivamente condotto a maggiori accertamenti di imposte per 6 milioni di euro e a maggiori risorse riscosse per 450mila euro, di cui un po’ meno di 150mila sono andati ai comuni. Speriamo che non sia questo il modo con cui si pensa di saldare i conti degli enti locali e recuperare gettito all’evasione. 2010 2011 2012 Totale contributo spese -686 7941 14874 (in % alla manovra) 66% 60% di cui Tagli ministeri e PCM 45 1415 2050 Costi politica 0 0 Soppressione enti 0 2 2 Congelamento contratti PI 5 7 312 Blocco assunzioni e turnover AC 0 59 85 Personale sanità 0 246 628 Blocco carriere (scuola e PS) 0 644 417 Tagli spesa farmaceutica 0 580 580 Pensioni e TFR 0 760 2841 Regioni 0 4000 4500 Comuni 0 1500 2500 Province 0 300 500 Regioni SS 0 500 1000 Spese aggiuntive -736 -2072 -541

Totale contributo entrate 693 4095 10091 (in % alla manovra) 34% 40% di cui Lotta all'evasione 415 5325 7781 Pedaggi e altre entrate non fiscali 141 1288 912 Altre entrate 137 -2518 1399

Totale manovra 7 12036 24965 http://www.lavoce.info/articoli/pagina1001748.html

293

ZEIT ONLINE

Así es como el capitalismo

Si el mal banco BCE? Por Marcos Schieritz tercero Junio de 2010, 08:07 reloj En la actualidad se debate bastante animado en cuanto a si el Banco Central Europeo, su programa para la compra de bonos del gobierno a un banco malo es a través de los bancos privados descargar sus riesgos pulg Comparto esta evaluación con restricciones - pero creo que es el precio para evitar el desastre. Recordatorio: En los días de fin de semana antes del rescate del mercado de bonos se desplomó - si nada hubiera pasado, había en los días por media Europa Entra quiebra. Por lo tanto, la política ha de elaborar su paquete de rescate, y porque era evidente que los mercados a los líderes divididos ya no confían en la forma en que el BCE ha tenido que pasar, porque sólo ellos podían actuar con rapidez y decisión. Cuando las cosas se ponen difíciles, la enseñanza de esta crisis, a continuación, en una democracia parlamentaria, sólo los bancos centrales a actuar. La teoría de la democracia se pueden encontrar problemas, pero es justo así. Bueno, luego compra los bonos € sistema de Estados europeos y se basa la deuda para que el precio de los bonos. Lo que sigue? Depende. En primer lugar, los tipos de mercado son en realidad resultado de "disfuncionales" procesos, como sostiene el BCE. Por lo tanto, los precios de pánico, que no reflejan el verdadero valor de los bonos. Las intervenciones del BCE lo ideal sería eliminar estos errores. Debido a que el precio natural de la mentira distorsionada artificialmente, la Fed tiene que temer ninguna pérdida. Sería una operación clásica de liquidez, en comparación con una intervención en el mercado de divisas para corregir los errores de fijación de precios allí. En segundo lugar, el mercado está bien y los precios de los bonos a su valor nominal. Caen porque, por ejemplo, se espera que Grecia ya no pagan sus deudas. Entonces, el BCE tiene una manipulación de los precios artificiales. El título, que a su juicio caería en valor tan pronto como se detenga con las compras y hacer que el banco central necesita ajustes. En ambos casos, se benefician los bancos. En el primer caso, porque el mercado operación de asistencia se estabiliza y por lo tanto no marca a precios de mercado las pérdidas representaron debe institutos (por lo que la charla no tiene sentido, sólo el banco francés se benefició debido a que el Instituto Alemán de sus promesas hechas al Ministro de Hacienda, los bonos Grecia no no la vendas, sus balances podría limpiar. beneficiar a todos - especialmente después de

294 todo lo que oímos el convenio colectivo alemán no es digno de su papel y han firmado el algo similar francés). En el segundo caso consiste en añadir que los bancos que han tenido éxito en sus bonos a la venta al Banco Central, que han transferido sus riesgos. En el caso de una reestructuración, por lo tanto, el BCE - y por lo tanto los contribuyentes - la carga y no los bancos privados (Pero de nuevo, depende de los detalles. Un banco, que ahora vende sus bonos para el BCE debe ser de acuerdo a los precios de compra cuenta a los precios actuales probablemente la primera pérdida. La cuestión de si los posibles fallos que ser mayor debido a la reprogramación o no). ¿Es todo esto un escándalo? En realidad no. Siempre estuvo claro que el paquete de rescate para el euro, en particular, un paquete de rescate para los bancos porque los bancos ahora incluso necesidad de mantener viva la economía. Encuentro la indignación por la forma artificial. La alternativa sería el colapso del sistema financiero y ahora puede ser que nadie. Los bancos alemanes tienen más de 500 millones de € en la periferia. Si se bloquea, entonces el sistema bancario local es aniquilado. Que se diviertan. Supongamos que el contingente griego de la fianza se cae, de hecho, y un euro vale sólo 50 centavos. En ese caso sería una pérdida de (mi estimación) alrededor de 5 millones de euros, desglosados por ratio de capital que es de 1,5 millones de euros para Alemania. Cacahuetes en comparación con el costo del desastre. Goldman Sachs (sin enlace) evaluó la pérdida de un compromiso del BCE de 150 millones de euros y un recorte de valoración del 50 por ciento a poco menos de cuatro por ciento del balance del banco central. Usted puede hablar acerca de si sería mejor, la política se habría hecho cargo del rescate, sino que claramente no fue posible, dadas las restricciones dadas acción. Y, por cierto, nada impide que la política sobre él, el dinero de los bancos (o más precisamente, los titulares de los bonos, incluyendo los protectores de corriente hacia atrás). Mi propuesta de impuestos: los tipos de interés. Y a toda velocidad. http://blog.zeit.de/herdentrieb/2010/06/03/wird-die-ezb-zur-bad-bank_1900 http://translate.google.es/translate?hl=es&sl=de&u=http://blog.zeit.de/herdentrieb/2010/06/03 /wird-die-ezb-zur-bad- bank_1900&ei=gsMITIDXOYelOPqErQI&sa=X&oi=translate&ct=result&resnum=2&ved=0 CA4Q7gEwAQ&prev=/search%3Fq%3DWird%2Bdie%2BEZB%2Bzur%2BBad%2BBank% 253F%26hl%3Des%26rls%3DGGLD,GGLD:2004-35,GGLD:es

295

Report: More than 1,400 former lawmakers, Hill staffers are financial lobbyists By Dan Eggen Friday, June 4, 2010; A14 Even for Washington, the revolving door between government and Wall Street spins at a dizzying pace. More than 1,400 former members of Congress, Capitol Hill staffers or federal employees registered as lobbyists on behalf of the financial services sector since the start of 2009, according to an exhaustive new study issued Thursday. The analysis by two nonpartisan groups, Public Citizen and the Center for Responsive Politics, found that the "small army" of financial lobbyists included at least 73 former lawmakers and 148 ex-staffers connected to the House or Senate banking committees. More than 40 former Treasury Department employees also ply their trade as lobbyists for Wall Street firms, the study found. Some of the biggest names highlighted in the study include former Senate majority leaders Robert J. Dole (R-Kan.) and Trent Lott (R-Miss.); former House majority leaders Richard K. Armey (R-Texas) and Richard A. Gephardt (D-Mo.); and former House speaker J. Dennis Hastert (R-Ill.). Ex-Rep. Vin Weber (R-Minn.) has the largest number of financial-services clients of any former lawmaker, representing 13 companies and groups, including Deloitte, Ernst & Young and the Real Estate Roundtable, the report shows. The revolving door is evident in almost every major issue that comes before Congress, from regulation of the coal industry to the auto industry to the health-care sector. But the sheer scale of the overlap within the financial sector is remarkable: For every sitting member of Congress, the study shows, there are three former colleagues or government staffers lobbying for banks. David Arkush, director of Public Citizen's Congress Watch division, said "Wall Street hires former members of Congress and their staff for a reason," especially at a time when lawmakers are debating a historic overhaul of the way Wall Street does business. "These people are influential because they have personal relationships with current members and staff," Arkush said. "It's hard to say no to your friends, but that's what Congress needs to do." "Companies pay a premium for lobbyists who've spun through the revolving door because it can be a small price to pay relative to the huge payoff if they can shape legislation," said Sheila Krumholz, executive director of the Center for Responsive Politics. "These lobbyists tap insider knowledge and personal relationships, knowing that their old friends and former co-workers won't want to let them down." http://www.washingtonpost.com/wp- dyn/content/article/2010/06/03/AR2010060302740.html?wpisrc=nl_headline

296

Economy growing slowly but steadily By Neil Irwin Washington Post Staff Writer Friday, June 4, 2010; A13 The headlines right now are ominous -- from the European debt crisis to a gargantuan gulf oil spill to renewed political tensions in several corners of the world. Financial markets have faltered as a result. But the U.S. economic recovery is still plugging along. That is the message from the latest wave of economic data, including several reports Thursday. And Friday morning, the Labor Department plans to release what is expected to be the best report on job growth in years, though the numbers will be boosted by temporary hiring by the Census Bureau. It all adds up to continued steady -- though hardly exceptional -- economic growth, despite various threats to its continuation. Recent data "suggest that the recovery is more broad-based and self-sustaining, and perhaps even stronger than anticipated," Thomas M. Hoenig, president of the Federal Reserve Bank of Kansas City, said Thursday in a speech in Oklahoma, even as he acknowledged that the European crisis will have a "modest net negative" effect on growth. Thursday's data showed the various elements of the recovery. Consumer spending has continued its gradual rise, as reflected in a 2.6 percent increase in sales last month at major retail chains compared with May 2009. The corporate sector is expanding steadily, with activity at service businesses rising at the same rate in May that it did in April, according to a survey by the Institute for Supply Management. That progress is resulting, if slowly, in an improved job market. The number of people filing new claims for unemployment insurance benefits dipped last week to 453,000, a drop of 10,000 from the previous week. And the payroll-processing firm ADP announced its estimate that private employers added 55,000 jobs in May. The reports Thursday followed a slew of data this week pointing to a similar conclusion, including an index showing continued strong growth in the manufacturing sector in May and better-than-expected sales of cars and trucks. Friday's employment report is the most important release of the week and could provide the strongest evidence yet of whether the economy is maintaining its momentum. Analysts predict that the economy added 536,000 jobs in May, which would be the most gained in a single month since 1983. But much of that expected gain is due to workers hired to perform the once-a-decade census who will lose their jobs in the second half of the year. Economists forecast solid growth in private payrolls as well, expecting 180,000 jobs to have been added outside the government. That would be down a bit from April, when private payrolls rose by 231,000, but suggests that businesses continue to ramp up their hiring. And that, in turn, will be the key to the recovery continuing apace through the second half of the year. So far, consumers have increased their spending by reducing savings. Job growth -- and a resulting rise in incomes -- will be key to a self-sustaining recovery.

297 "If you get a strong job-growth number, that will go a long way in allaying some of those concerns about the sustainability of consumer spending," said Anthony Chan, chief economist at J.P. Morgan Private Wealth Management. Still, the unemployment rate is expected to edge down only slightly, to 9.8 percent from 9.9 percent, which reflects the continued dire situation facing American workers. Even as jobs are being created, some workers are returning to the labor force, keeping upward pressure on the unemployment rate. Speaking in Detroit, Federal Reserve Chairman Ben S. Bernanke emphasized that high joblessness can have long-lasting consequences. "High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole," Bernanke said at an event where he encouraged banks to resume making loans available to quality borrowers, aiming to use his bully pulpit to fight one of the factors that has held back the economy. Neil Irwin Economy growing slowly but steadily June 4, 2010; A13 http://www.washingtonpost.com/wp- dyn/content/article/2010/06/03/AR2010060304940.html?wpisrc=nl_headline

298 Eurointelligence Daily Morning Newsbriefing CDS, spreads etc, it is all getting worse again

03.06.2010 We are back to where we were before the rescue package was announced, as markets panic over continue failure to reach agreement on the SPV, and the destructive comments by Germany’s Bundesbank; as Spanish spreads reach new record, Zapatero sets June 18 as the decision date for the labour reforms; Nada es Gratis says fiscal adjustment in Spain will extremely painful, and will not bring the fast deficit reduction that people hope for; use of the ECB’s deposit facility have reached a new record as banks have a high demand for low- yielding liquidity; Germany’s finance ministers is pondering to raise the solidarity surcharge from 5.5% to 8% of a taxpayers’ total tax liability, plus other tax increases; Greece announced a privatisation programme of state-own holding companies; Chris Patten, meanwhile, writes that Europe has thrived on a combination of pragmatism and vision.

03.06.2010 CDS, spreads etc, it is all getting worse again

So much for rescue. Compared to the Friday, May 7, when EU leaders met to work out the mother of all rescue packages, the CDS spreads are back to where they were. Jean Quatremer took a close at the spreads in his blog this morning, noting that the markets are nowadays just as sceptical about the eurozone as they were right before that fateful summit. CDS prices are over 721bp for Greek five-year bonds, Portugal 345bp, Ireland 260bp, Spain 247bp, and Italy 234bp. The reasons for the return of mistrust are doubts about the package itself, doubts about the future governance of the eurozone, the cacophony of European governments, the persistent criticisms of Axel Weber. Germany insists that the SPV does not borrow at average eurozone market rates, but at the market rates of the recipient country (which would rendered the whole project ad absurdum).

299 As Spanish spreads reach a record, Zapatero sets date for labour reforms On June 18, the Spanish government will impose a labour reform package, irrespective of whether or not the social partners reached agreement in their current negotiations, or not. El Pais says it is significant that Zapatero announced the deal with a view to the financial markets, on a day when the spread on Spanish sovereign bonds reached 176bp. Also yesterday, it was announced that Spanish consumer confidence fell 13 points in May because of the instability of the markets and the expected effects of the austerity package plan on the economy. The timing is also relevant in respect of the EU summit June 17/18. The unions complained yesterday that the deadline would discourage negotiation – as the employers will always get a better deal from Zapatero than from the unions. (But then again, they have been negotiating for months, without result. One of the expected changed to be imposed by the government is a cut in the compulsory dismissal pay from 45 to 33 days per year worked (which is still extremely high by EU standards.) This will apply to new contracts only, and only for men between 30 and 45 years, as well as for conversions from temporary to permanent contracts. El Pais also said there will probably not much progress on making it easier for companies to redefine the reasons for dismissal. The Unpleasant Arithmetic of Fiscal Adjustment The Spanish blog Nada es gratis has done the math on fiscal adjustment. It is a very long post, we cannot conceivably do justice to the calculations, but the overall result is that the adjustment is going to be brutal. Starting off, here are some budgetary of the recession: 1. Indirect taxes: 11.73% of GDP in 2007, 8.73% in 2009. Difference: -3.00%. 2. Direct taxes: 12.90% of GDP in 2007, 9.61% in 2009. Difference: -3.29%. 3. Social contributions: 12.99% of GDP in 2007, 13.35% in 2009. Difference: +0.36% Do the maths on the austerity programme, and taking into account shortfalls of tax revenue, Spain will still have a deficit of 5.54% after the recently announced austerity programme. In other words, don’t be too optimistic that austerity is going to do the job. Use of ECB’s deposit facility rise The FT writes that the high use of the deposit facility highlighted the excess liquidity demanded by banks in recent weeks, which they have nowhere else to place. The ECB data underscore the still-difficult financial market conditions the ECB faces as it ponders when and how to resume its “exit strategy”, to dismantle the emergency measure in place since the end of 2008. Demand for liquidity in recent ECB open market operations has also crept higher in recent weeks, suggesting banks are building up liquidity on a precautionary basis. There are also concerns that the amounts of liquidity in the financial system could alter dramatically when early next month banks have to repay €442bn in one-year loans, which they borrowed a year ago. The ECB will, however, smooth the transition with a special operation to bridge the gap before the next offer of weekly liquidity. Germany’s taxes are about to rise again FTD Deutschland reports of a press conference given by Wolfgang Schauble, who open talked about a whole range of tax increases. He is considering raising the lower VAT rate, as well as tobacco taxes, and levy a new carbon tax on nuclear power, and a special tax on

300 airline tickets. But the big plan is an increase in the solidarity surcharge from 5.5% of a person’s tax bill to 8%, to finance health reform. The junior coalition partners FDP and CSU are extremely hostile to the idea, since they had campaigned for tax cuts. The solidary tax, which was used to finance the transfers from west to east is particular unpopular in west Germany – and a sure vote loser. Greece sells state-owned companies Greece announced a firesale of state assets to raise sufficient funds to finance its deficit reduction plan. The government hope to raise €1bn annually from 2011 to 2013 through the sale of a 49% stake in the train company, a share of the Athens water company, and the post office. Kathimerini reports that PM Papandreou called for solidarity within his cabinet, criticising ministers’ for regarding their portfolios as fiefdoms. The paper also says that the economics team also expects substantial revenue from concessionary fees from airports, ports and roads. The opposition criticised the plan on the grounds that it would not raise sufficient income. Pattern on Europe’s federalists Chris Patten argues in the Financial Times that the EU owes its success to a combination of vision and pragmatism. He said it all went wrong when political leaders took the approach to take a step forwards, in the hope that the electorate failed to notice. He said this discredits the EU, and gives voters the impression that it is an elitist conspiracy. The danger today is again that vision will be taken as the solution to the EU’s problems, and pragmatic reforms will be criticised as small-minded and inadequate. An optimistic view on Greece from Germany Writing in the blog Herdentrieb, Dieter Wehrmuth said small countries can achieve the miracle of turning around their economies within a short period of harsh adjustment, as is happening in Ireland and Estonia, and he suspects that Greece, Portugal and Spain will also manage to do the same. He quotes a paper of the ever optimistic Michael Heise of Allianz, who said it was not inevitable at all that Greece will have to default on its debt. (But then we quickly realise that the analysis is shallow. As ever, they are only talking about the ability of Greece to constrain its defict to 3% of GDP. The problem is that Greece may well achieve that, but will still have to default/restructure because of the likely debt-to-GDP trajectory. ) He says the best option for small countries would be to do fast-track adjustment, which would reduce the interest rates, and regain credibility in the financial markets. http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2810&tx_ttnew s[backPid]=743&cHash=9984d2efc5#

301 Eurointelligence Syndicated Column

03.06.2010 What do markets want? By: Kevin O’Rourke

The news that the European Commission's Economic Sentiment Indicator fell sharply in May underlines the economic risks the continent is now facing. With governments around Europe moving towards fiscal austerity, at a time when over-indebted households are still reluctant to spend, the danger is that Europe will move back into recession. Why are European governments embarking on such a risky strategy? In peripheral economies such as Greece, Ireland or Spain, the governments have no choice: the markets have made it clear that otherwise they will no longer be willing to continue lending to them. Governments have thus had to cut spending and raise taxes at the worst possible time. While this will worsen peripheral downturns, it is what the markets are demanding. And so it must have been utterly exasperating for the Spanish government when, late last week, Fitch downgraded Spanish debt on the basis that Spain's adjustment process will lower its medium run growth prospects. It seems a case of damned if you do, damned if you don't. What, might Spanish politicians well ask, do markets want? As it happens, the EMS crisis of 1992-1993 taught us a lot about what markets want. While the context was entirely different, the lessons are still relevant today. Readers will recall that the commitment of peripheral European economies to stick to the Deutschemark was challenged when German interest rates started to rise after German reunification, and countries like Italy and the UK started to suffer serious competitiveness problems. The initial response of politicians was a macho one: get the fundamentals right and the problem would go away. The fundamentals concerned were low inflation, low deficits, and low levels of government debt. But speculation did not stop. The lesson of the EMS crisis is that low inflation, low deficits and low government debt are not, it turns out, enough on their own. Low unemployment and economic growth are part of the fundamentals which have to be right, if government policies are to be credible in the eyes of the markets Speculators bet that governments would not, in the long run, be able to sustain policies which led to rising unemployment: far from enhancing credibility, the 'responsible' and deflationary policies which governments thought markets wanted fatally undermined it. And thus it was that the market forced governments in the UK and elsewhere to adopt policies that were softer, and more growth-oriented, than what orthodoxy had been demanding. This should not have been a surprise to the governments concerned, since it is a constant theme in 20th century economic history. As Barry Eichengreen points out in his classic book,

302 Golden Fetters, a major turning point came with the widespread democratization of European society in the wake of World War I. During the 19th century, governments' commitment to the gold standard was unquestioned. In consequence, when countries lost gold, and raised interest rates as a result, capital flowed in, thus restoring balance to the system. In the interwar period, however, the markets realised that governments were accountable to their electorates, and that there was a limit to how much unemployment they could tolerate. The lessons for today seem clear. Markets may indeed not be willing to lend to peripheral governments unless they take remedial action to fix their public finances: so be it. But in the long run, markets will not be willing to lend to countries whose economies are continually contracting. This is not just because of the mechanical facts that that shrinking economies will experience rising deficits, and that smaller economies are less able to pay off existing debts -- although these considerations are obviously important. It is also because the markets will eventually start to worry that contractionary economic policies and rising unemployment will not be politically sustainable in the long run. Markets want debts to be kept under control, but in the long run they also want tolerable levels of unemployment, since this is what democracy demands of governments. In our current circumstances, this means economic growth. Too much austerity at the wrong time will not make governments more credible, but less so. Where will this growth come from? Like everyone else, Europe hopes that it will export its way to recovery. Looser monetary policy and a weaker currency can also help, but one wonders whether the ECB will be willing to loosen sufficiently to offset the impact of fiscal retrenchment. Furthermore, if it did so, this could lead to US and Asian retaliation against what would be perceived as a beggar-thy-neighbour policy, thus exposing to world economy to dangerous new risks. Those economies with fiscal room to manoeuvre need to use it now, for the good of the European economy. Furthermore, we should be asking whether the European Union as a whole should embark on a growth and investment strategy. Major European investments in new transportation and energy infrastructures are needed in the long run anyway. If the Union embarked on such a growth strategy now, it would become part of the solution to our problems. If the EU turns itself into a mechanism for imposing asymmetric and deflationary adjustment on the continent, it will be seen, rightly, as one of the causes. And the markets won't like that. Kevin O’Rourke is a Professor of Economics at Trinity College Dublin, and a co-organiser of the CEPR’s Economic History Initiative.

Kevin O’Rourke What do markets want? 03.06.2010 http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2811&tx_ttnews[ba ckPid]=901&cHash=9247ee6091#

303 06/02/2010 06:24 PM Berlin's Budget Plans German Austerity Program Offers Chance for New Beginning

By SPIEGEL Staff As Chancellor Angela Merkel's embattled government gets ready to thrash out an austerity program to rein in the budget deficit, fears are growing that stringent cuts might choke off growth and anger voters. But after 50 years of near-continuous spending hikes, there is ample scope for radical savings that would not hurt public services and may even boost the economy. The German government is putting the finishing touches this week on an austerity program that offers a chance of a fresh start, not just for the country's complex and bloated tax and welfare system, but also for Chancellor Angela Merkel. Her ruling center-right coalition plans tax hikes, new taxes and radical savings in areas including defense to rein in the budget deficit starting in 2011, SPIEGEL ONLINE has learned. It aims to finalize its planned savings program at a meeting on Sunday that the government hopes will give it a boost after months of setbacks that have triggered a plunge in public support for it. According to sources in the coalition of conservatives and pro-business Free Democrats (FDP), the parties are discussing raising the tobacco tax and introducing new levies on nuclear fuel rods, airline ticket purchases and financial transactions. Media reports this week said Defense Minister Karl-Theodor zu Guttenberg is reviewing a possible reduction in the Bundeswehr German army by as many as 100,000 troops to 150,000 and suspending mandatory military service.

304 The spending cuts and tax hikes are part of Merkel's pledge to foster a new "culture of stability" in Europe by helping to slash the continent's burden of public debt that has plunged the European single currency into crisis.

The Americans don't like the plans. The atmosphere was decidedly frosty at a meeting last week in Berlin between US Treasury Secretary Timothy Geithner and German Finance Minister Wolfgang Schäuble, because the two men fundamentally disagree. Geithner urged the Europeans to spend more and to run up debts to boost economic growth and help the global economy. Schäuble countered that high debts were the root of the turmoil now engulfing the euro zone. Back to Reality The meeting didn't just highlight a rift between Germany and the US on economic policy. It also marked a fundamental shift in thinking in Merkel's coalition. Ever since Merkel won re- election in September, her policies have seemed divorced from reality. Her coalition pledged tax cuts and passed a "Growth Acceleration Law" that accelerated the pace of public borrowing. There was a cut in the inheritance tax, corporate taxes were lowered and the statutory health insurance system got a record injection of tax money. In addition, child benefits were increased. The government decided to put off all the difficult reform policies until after the important state election in North Rhine-Westphalia on May 9. That was a ploy to keep voters sweet, but it backfired. Merkel's conservative Christian Democrats (CDU) suffered heavy losses in the state and the center-right coalition lost its majority in Germany's upper legislative chamber, the Bundesrat, which represents the interests the country's 16 states, as a result. A poll by the Forsa Institute released on Tuesday showed support for the Christian Democrats and their Bavarian sister party -- the Christian Social Union, which share power at the national level -- at just 30 percent, its lowest level in four years. The slide in support for the CDU and FDP has been greater than any ruling coalition has suffered since the end of World War II.

305 That is why next Sunday's coalition meeting in the town of Meseberg west of Berlin is so crucial for Merkel's beleaguered government. She needs to ditch a mentality that has prevailed in German administrations for the last 60 years -- to finance public spending programs with borrowed money. It's an approach that is placing a huge burden on coming generations.

Massive Debt Burden Statistically, every person working in Germany shoulders €43,000 ($52,500) in public debt. Even if the debt mountain doesn't rise any further, that figure will soon reach €48,000 because the working population is shrinking as a percentage of the total population. It can't go on like this. Germany has already committed itself to two sets of rules that are designed to force the nation to become more frugal. Firstly, the Stability Pact for Europe's monetary union will force the government to reduce the deficit from 5 percent of GDP now to below the 3 percent ceiling by 2013. Secondly, Merkel's previous government, a so-called grand coalition of conservatives and center-left Social Democrats, agreed on a "debt brake," a balanced budget and debt reduction program forcing the government to reduce its structural deficit -- the recurring gap between revenues and spending -- to €60 billion from the current €70 billion. Now Merkel and Schäuble face the mammoth task of saving €10 billion per year from 2011 onwards to meet those requirements. They must also adapt the cradle-to-grave social welfare system so that it can cope with demographic changes -- namely a population that is expected to shrink considerably in the coming years. In the pension, nursing and health insurance systems, the government has no option but to scale back benefits and find new sources of income. Germany is at a crossroads. For decades, the nation was accustomed to economic growth and rising benefits. Now Germany must save its way back to health.

306 The task facing Merkel's coalition is greater than in 2003 and 2004 when the center-left government under then-Chancellor Gerhard Schröder launched its "Agenda 2010," the country's most radical program of welfare cuts since World War II. Concern Over Political Fallout In public, the coalition politicians claim to be determined to make wide-ranging cuts. But behind the scenes they are deeply worried that the cutbacks could choke economic growth. How can they shield their own voters from the pain? And is it possible to win elections while imposing cuts? Trade unions and business lobbies are getting ready to resist any savings that might hurt their interests. It is clear, however, that after half a century of uninterrupted increases, the catalogue of public spending contains a wealth of dubious items. The state has built ports, bridges and canals that turned out to be unnecessary. It subsidizes industry sectors whose products no one wants and spends billions on defense technology that doesn't work. Instead of motivating the unemployed to find work, it creates incentives to stay at home. Saving in these areas would in many cases not only be more efficient, but fairer too. Slashing unwarranted financial subsidies often leads to greater economic growth as well as reduced spending. Curtailing tax benefits helps create the simple and fair tax system that the FDP keeps demanding. VAT Ís a Bureaucratic Monster Take value-added tax. When it was introduced at the end of the 1960s it was still an easily understandable tax designed to secure stable tax revenues. There was a single rate on most goods, and only food and important consumer products were subject to a reduced rate. Forty years on, the tax has grown into a bureaucratic monster, a jungle that even perplexes tax experts. The Finance Ministry's list of products exempt from the standard 19 percent rate amounts to 200 pages. Mules for example are taxed at a lower rate than donkeys, for some reason. And why is there a reduced VAT rate for truffles, goose and duck liver and meat products from beavers, whales, frogs and tortoises? The previous government introduced a reduced VAT rate for ski lifts. The new center-right government recently cut the rate for hotels and camping sites in a move that will reduce tax revenue by €1 billion this year. Existing government programs aren't having the desired effect. Germany spends more money on family policy than most other nations and gets precious little in return. Researchers at the University of Frankfurt calculated that Germany has 150 different benefits for families and children, distributed by 40 separate authorities, which amount to €150 billion per year. There is no evidence that this money has achieved a significant reduction in the number of children living in poverty, or an improvement in their education prospects. According to the government's annual report on poverty, the number of children judged to be dependent on state benefits is rising steadily. State benefits designed to encourage people to have children aren't having much effect in increasing the birth rate, either. The average number of births per woman has stagnated at the low level 1.38. A radical overhaul of state spending is also needed in other areas of government, for example in transport policy. Whenever it comes to trains, planes and automobiles, politicians are in their element. Sometimes the subsidy is intended to improve public transport, sometimes to

307 help the environment or boost competitiveness. The fact that these goals sometimes contradict each other rarely deters politicians. Rampant Subsidies The tax on gasoline is around 65 cents a liter while diesel tax is 47 cents. But that doesn't apply to farmers -- they only pay around 26 cents in tax for their liter of diesel. The tax breaks for diesel fuel cost the state more than €6.4 billion in lost revenue each year. It's one of many examples of rampant subsidization involving fuel. Aviation fuel has been exempt from tax for more than 30 years to protect German airlines. So is diesel for ship's engines. Michael Thöne, the head of the Cologne Center for Public Economics, and Clemens Fuest, an economics professor at Oxford University who is an advisor to the German Finance Ministry, have proposed a way to save significant sums of public money in the medium term. It involves the state examining the standard of public service it achieves for the money it spends and comparing the results with those of other nations. Sweden and Japan, for example, have scored better than Germany in the OECD's "Pisa" surveys of international education standards, yet they spend less on education. Fuest and Thöne suggest that Germany should follow the example of countries that spend their public money more efficiently. The aim is to spend less and get the same or even better quality of public service. They see considerable scope for saving not just in education, but in the health service, infrastructure investment, public administration and social welfare programs too. Copy Japan, Spain, Denmark and Switzerland They see Japan as a model in some areas and Spain, Denmark and Switzerland in others. If Germany's national and regional governments reached the same price-performance ratio as those countries, the nation could save up to €80 billion, the economists have calculated. Despite Schäuble's insistence that he won't increase taxes, Fuest believes he will have to in 2013 or 2014 at the latest. He expects the VAT rate to be raised by one point to 20 percent and the reduced VAT rate to rise by three points to 10 percent. That would yield extra revenues of €12 billion and provide the government with significant breathing space. Germany's inheritance tax, which currently only brings in €4.5 billion a year, could easily be increased without hurting the poor. One particularly easy way to boost revenues would be to enforce the existing taxes more effectively by hiring more tax inspectors. Dieter Ondracek, head of the German Tax Union, which represents the staff of Germany's fiscal authorities, estimates that stricter enforcement could boost revenues by €10 billion per year. Ondracek says Germany needs an extra 15,000 tax inspectors and that they would easily recoup their salaries. A tax inspector collects around €1 million in revenue per year but only costs €80,000, he said. Schröder, the former chancellor, showed that it is possible to achieve a better balance between tax revenues and public spending by reforming the welfare system. Schröder cut pensions and tax breaks and revamped the labor market by reducing benefits for the long-term unemployed. It was an unpopular program, but it was successful. The reforms created around a million new jobs and boosted revenues for the welfare system. Gifts for the Voters But instead of continuing in that vein, Merkel soon succumbed to the temptation to please voters by boosting benefits during her first term in office between 2005 and 2009. As economic growth improved, the grand coalition reversed important elements of Schröder's

308 reforms. And once the financial crisis struck in late 2008, the public deficit crept back up to the pre-Agenda 2010 levels. Merkel should tackle benefits for the country's army of privileged civil service retirees whose retirement benefits are 50 percent higher than those of average private sector employees. So far, successive governments have balked at the task as the figures show: ordinary pensioners have faced a succession of cuts that civil service retirees have been largely spared. The challenges Merkel's government faces in reforming the budget are huge, but so are the potential benefits: • cutting tax subsidies would lead to more than €10 billion in savings • raising taxes that are low by international comparison, such as inheritance tax, could also yield significant sums • reforming the welfare system would have the twin benefits of alleviating the budget and reducing welfare contributions • scrapping superfluous defense projects and family subsidies that don't work would also save many billions of euros All these measures need not hurt the economy. On the contrary, the removal of questionable subsidies would enhance economic growth in the long term. Former Finance Minister Hans Eichel, who faced overwhelming opposition from vested interests while trying to scale back the budget deficit under Schröder, recalls the outraged reaction from florists when he tried to raise VAT on cut flowers. Even attempts to raise VAT on cat food provoked angry hisses. One of the main problem, Eichel says, is that no government can radically cut public spending unless it has the backing of the 16 regional states which have huge taxation and spending powers. A broad "social consensus" is needed to carry out any rigorous program of savings, says Eichel, adding that it tends to works in Scandinavian countries. And in Germany? "As long as the principle of linking spending to revenues is still frowned on in this country, I'm not optimistic, to be honest," says Eichel. MATTHIAS BARTSCH, ULRIKE DEMMER, MARKUS DETTMER, ALEXANDER NEUBACHER, MICHAEL SAUGA, CHRISTIAN REIERMANN, MERLIND THEILE, JUDITH VOSS

URL: German Austerity Program Offers Chance for New Beginning06/02/2010 06:24 PM http://www.spiegel.de/international/germany/0,1518,698378,00.html RELATED SPIEGEL ONLINE LINKS: • Letter from Berlin: Merkel's Search for New German President Full of Potential Pitfalls (06/01/2010) http://www.spiegel.de/international/germany/0,1518,698030,00.html • Letter from Berlin: Germany's Lonely Chancellor (05/24/2010) http://www.spiegel.de/international/europe/0,1518,696435,00.html • 'New Culture of Stability': Germany Forges Ahead on Reforming the Euro (05/19/2010) http://www.spiegel.de/international/europe/0,1518,695679,00.html

309 . Coulisses de Bruxelles, UE Jean Quatremer mercredi 02 juin 2010 Dette souveraine: la crise n'est pas terminée

Rassurés au lendemain de l'annonce du plan européen de stabilisation financière, le 10 mai dernier, les marchés ont vite déchanté: ils ont rapidement renoué avec leur méfiance à l'égard de la dette souveraine des pays du sud de la zone euro et de l'Irlande, comme le montre ce schéma représentant l'évolution des CDS (credit default swap) à cinq ans sur un an. L'effet du plan européen est quasiment effacé, ce qui montre qu'il y a un vrai risque que la crise rebondisse. Les marchés restent d'une nervosité extrême, comme le montre la faiblesse - relative - de l'euro qui ne devrait pas tarder à passer sous la barre des 1,20 dollar, et la moindre mauvaise nouvelle est susceptible de déclencher un sauve-qui-peut général. Les CDS, ce sont ces contrats d'assurance que les prêteurs souscrivent afin de se couvrir contre le possible défaut d'un Etat. Le marché des CDS s'est autonomisé et fait partie de l'ensemble des produits dérivés: on peut négocier un CDS sans posséder le sous-jacent, c'est- à-dire la dette qui va avec... Un prix élevé indique que les investisseurs craignent un défaut du pays. C'est pour cela que ce marché est plus indicatif que celui des bons d'Etat sur l'état d'esprit des marchés financiers, surtout depuis que la Banque centrale européenne (BCE) rachète de la dette sur le marché secondaire afin de faire baisser -avec succès - les taux d'intérêt. Or, les prix des CDS montrent que les marchés continuent à croire à un défaut de la Grèce d'ici à cinq ans, le CDS grec se négociant aujourd'hui à plus de 721 points, le niveau qu'il avait atteint quelques jours avant le plan européen du 9 mai. Juste derrière viennent le Portugal (345 points), l'Irlande (260), l'Espagne (247) et l'Italie (234). Comme me l'expliquait la semaine dernière un opérateur de marché basé à Londres, "la confiance n'est absolument pas revenue. Les marchés continuent à douter du plan européen dont le mode de fonctionnement n'est toujours pas connu et se demandent si les gouvernements de la zone euro sont vraiment sur la même longueur d'onde et donc capables de s'entendre sur la gouvernance économique de la zone". Il est vrai que la cacophonie,

310 soigneusement entretenue par l'Allemagne y est pour beaucoup. Outre les déclarations fracassantes d'Axel Weber, le président de la Bundesbank, qui affaiblissent la BCE, Berlin persiste à refuser de donner une coloration communautaire au plan de sauvetage européen : elle s'oppose à ce que la société ad hoc qui sera chargée d'emprunter 440 milliards d'euros sur les marchés le fasse à un taux moyen européen. Pour l'Allemagne, elle devra emprunter chaque tranche au taux auquel se finance l'Etat qui garantit ladite tranche du prêt (réparti entre les Etats selon sa participation au capital de la BCE), ce qui revient en fait à mettre en place une série de prêts bilatéraux... De quoi inquiéter effectivement les marchés, puisqu'il n'y a en réalité qu'une solidarité minimale. Surtout, cela montre que Berlin refuse tout progrès vers davantage de fédéralisme budgétaire, seule solution durable à la crise actuelle. Pour autant, les marchés ont des réactions pour le moins curieuses. Ainsi, ils ne veulent pas voir que la situation du Royaume-Uni est bien pire que celle de la Grèce ou de l'Espagne: le CDS britannique est toujours à 84,6 alors que son déficit public est plus important que celui d'Athènes et que sa dette est en train d'exploser et dépassera dès 2015 celle de la Grèce... C'est exactement la même chose pour les Etats-Unis. Car la question de la dette souveraine ne touche pas que l'Irlande ou les pays du sud de la zone euro, mais l'ensemble des pays développés qui ont dû éponger les effets de la crise bancaire et économique. Source: Bloomberg http://bruxelles.blogs.liberation.fr/coulisses/2010/06/dette-souveraine-la-crise-nest-pas- termin%C3%A9e.html - Nada es Gratis - http://www.fedeablogs.net/economia - La Desagradable Aritmética del Ajuste Fiscal Posted By Jesús Fernández-Villaverde On 01/06/2010 @ 22:30 In Jesús Fernández- Villaverde | 48 Comments Yo he hecho lo que he podido; Fortuna, lo que ha querido. Henry Kamen [1] ha señalado en alguna ocasión que uno de los atributos más singulares de nuestra comunidad imaginada [2] es el papel central que el Siglo de Oro juega en su articulación interna. Quizás por ello, y en tanto que la imaginación transciende sin mayor dificultad la distancia de mi exilio americano, me ha resultado imposible resistir la tentación de comenzar este artículo sobre nuestros problemas fiscales sin citar a alguien, que como Quevedo, hubo de sufrirlos en su vida entera. Y es que hoy voy a intentar transcribir muchas conversaciones que en los dos últimos meses he tenido con mis amigos de este blog, con periodistas y con algunos de los excelentes lectores que nos honran todos los días con su atención y que han resurgido en vista de mi artículo [3] la semana pasada sobre la imposición en España y Suecia. Esto me sirve, además, como motivación para mi próximo artículo acerca de cómo diseñar un cambio de estructura impositiva en nuestro país. LA SITUACIÓN Estas conversaciones a las que me acabo de referir suelen empezar con un ¿cómo hemos llegado hasta aquí? Como veréis más adelante, la cita de Quevedo, resume de manera precisa mi diagnóstico.

311 En el 2007, último año de la bonanza, el conjunto de las Administraciones Públicas (AA.PP.) cerró el ejercicio con un superávit del 1.91% del PIB (todos los datos que voy a citar hoy vienen del informe de Marzo del 2010 de la Intervención General de la Administración del Estado, que se puede encontrar aquí [4] y están elaborados para concordar con el Sistema Europeo de Cuentas Integradas 95). En el 2009, y a falta de números finales, las AA.PP. cerraron con un déficit del 11.19% (con un poco de mayor precisión: superávit es la capacidad de financiación de las AA.PP. y déficit la necesidad de financiación). Es decir, en apenas dos años tuvimos un cambio neto de 13.1% del PIB, un movimiento absolutamente sin precedente en nuestra historia económica. Una manera sencilla de percatarse del orden de magnitud es pensar que nuestro PIB es algo más de un billón de Euros (1.051.152 millones en el 2009) con lo que cada punto del PIB es algo así como un poquito más de 10.000 millones. Así que el déficit del 2009 es unos 118.000 millones de Euros en cifras redondas. Otra consideración a no olvidar es que el PIB del 2009 es, en términos reales, algo menos de un 3% más pequeño que el del 2007, con lo que comparar porcentajes en ambos años implica que las cifras absolutas están muy cercanas. Por ejemplo, un cifra que sea el 10% del PIB en el 2007 y que en valor real absoluto no haya cambiado, será el 10.29% en el 2009. ¿De dónde ha salido este agujero? 6.38 puntos han venido de caída de recaudación, en otras palabras, casi la mitad del cambio presupuestario (0.49=6.38%/13.1%). 6.7 puntos han venido de incremento de gasto (0.51=6.7%/13.1%). En un sorprendente ataque de casualidad, la mitad del cambio ha sido por ingresos y la mitad por gasto. ¿Cómo han cambiado los ingresos? Aquí hay muchísimas partidas, así que voy a fijarme en las tres principales: impuestos indirectos (fundamentalmente IVA y especiales), impuestos directos (IRPF y sociedades) y cotizaciones sociales: 1. Impuestos indirectos: 11.73% del PIB en 2007, 8.73% en el 2009. Diferencia: -3.00%. 2. Impuestos directos: 12.90% del PIB en 2007, 9.61% en el 2009. Diferencia: -3.29%. 3. Cotizaciones sociales: 12.99% del PIB en 2007, 13.35% en el 2009. Diferencia: +0.36% De nuevo grosso modo, la mitad de la caída de recaudación ha venido de impuestos indirectos y la otra mitad de los impuestos directos (se podrá decir lo que se quiera de esta crisis, pero al menos los números fundamentales son fáciles de recordar, lo que ayudará a las generaciones futuras de estudiantes y opositores). ¿Cómo se han incrementado los gastos? Dos son en este caso los principales culpables. Primero las prestaciones sociales, que han pasado del 11.64% del PIB en el 2007 al 14.57% del PIB, un incremento del 2.93%. La práctica totalidad de esta cifra son prestaciones de desempleo. El segundo culpable es la remuneración de funcionarios, que ha pasado del 10.24% del PIB en el 2007 al 11.82% del PIB en el 2009, un incremento de un 1.58%. Parte ha venido por un incremento del empleo público, de 2.512.038 de empleados en enero del 2007 a 2.659.010 en julio de 2009 (últimas cifras en la página web [5] del Ministerio de la Presidencia). De este incremento de 146.972 empleos, la inmensa mayoría han sido contratados por las administraciones autonómicas y locales, 110.273 nuevos empleados netos, y casi 17.000 han sido incrementos de las fuerzas de seguridad del estado. La Administración General del Estado solo ha crecido en 7.264 personas (aunque como también han terminado algunos flecos de transferencias a las CC.AA., 72 competencias desde el 2007, este número debería ser ligeramente corregido al alza). Pero una parte no despreciable del incremento en gasto de funcionarios ha venido de unas subidas salarias por encima del IPC.

312 Ya, a mucha distancia, nos queda el incremento de los consumos intermedios (del 5.26% al 5.81% del PIB, esto es cuando las AA.PP. compran papel para las impresoras o pagan el teléfono) y de la inversión pública (del 4.05% del PIB a 4.38%, aquí es donde salen los famosos Fondos Locales para cambiar aceras enfrente de FEDEA una vez al mes). Es interesante resaltar que los pagos de interés de la deuda apenas han subido (de 1.61% del PIB a 1.79%) porque los tipos medios a los que nos hemos financiado han seguido siendo muy bajos. En resumen y redondeando, el cambio en nuestra posición fiscal de 13 puntos del PIB ha venido, desde una perspectiva contable, de: 1. 3 puntos de caída de IVA y otros impuestos indirectos. 2. 3.3 puntos de caída de IRPF y Sociedades. 3. Casi 3 puntos de prestaciones de desempleo y asociadas. 4. Casi 1.6 puntos de gasto en funcionarios. 5. Algo más de medio punto de consumos intermedios. 6. Como un tercio de punto de inversión pública. 7. Algo menos de un quinto de punto de intereses de la deuda. 8. Alrededor de un punto de todo lo demás. Creo que ahora se entiende mi cita de Quevedo. La caída de recaudación, excepto por medidas como los 400 euros y cambios menores como la supresión del impuesto de patrimonio (que habría recaudado con mucha suerte en el 2009 unos 1.800 millones, es decir menos del 0.18 del PIB) ha venido casi entera causada por la crisis. De manera análoga, la subida de las prestaciones de desempleo está causada por la recesión. Total, que nos quedamos que algo así como 9.2 puntos del cambio presupuestario son lo que ha querido la fortuna (6.3 de caída de recaudación-0.3 de reducciones de impuestos+3 puntos de desempleo+casi todo el incremento de intereses). Lo llamo fortuna porque es poco probable que nadie que hubiese sido nombrado Ministro de Economía y Hacienda el 1 de enero del 2008 pudiese haber hecho algo muy distinto al respecto. En el contrafactual de una política fiscal más restrictiva hubiésemos tenido efectos positivos (los famosos efectos no- keynesianos de Alesina y compañía [6] basados en los efectos riqueza causados por expectativas de menores impuestos futuros) pero también efectos negativos de demanda agregada de toda la vida. Mi distribución a priori personal es que unos y otros hubiesen sido más o menos iguales y que en vez de 9.2 puntos, podríamos haber estado en un rango entre 8 (dominan los efectos no-keynesianos) y 10 (dominan los efectos de demanda). Pero también hemos contribuido nosotros y en no poca medida: de los cálculos de antes nos quedan casi 4 puntos de PIB de déficit generados por nuestras decisiones (1.6 de funcionarios+0.5 de consumos intermedios+0.33 de inversión pública+0.3 de reducción de impuestos+1 punto de todo lo demás). Es decir, que sin los incrementos de gasto y, bajo mi hipótesis que los efectos no-keynesianos y keynesianos tienden a cancelarse, una contención de gasto nos habría dejado en el 2009 con un déficit del 7.2-7.4% del PIB. Particularmente creo, y esto es mi opinión personal que he de reconocer no puedo fundamentar en un modelo formal cuantitativo, que, con esas cifras de déficit, no estaríamos en la punta de mira de los mercados (como de nuevo vemos en las jornadas recientes), ya que nos pondríamos más en línea con Italia (que ha tenido un déficit del 5.3% en el 2009) que con Portugal o Grecia.

313 En resumen, no cabe culpar solo a la fortuna de nuestras tristezas actuales. Buena parte de la responsabilidad de las penurias cotidianas es bien nuestra por habernos gastado un dinero en el 2008 y 2009 que no teniamos. EL FUTURO Una vez respuestas las preguntas con las que mis amigos inician la conversación, solemos pasar a debatir qué nos deparará el futuro. Aquí entramos en terreno más proceloso pues tendré que asumir muchas cosas y hacer muchos cálculos de esos que los economistas llaman “back-of-the envelope” y los más castizos, “a ojo de buen cubero.” ¿Qué pasará con la recaudación en el medio plazo? Mi impresión es que, de los 6.38 puntos recuperaremos como la mitad sin tener en cuenta los posibles cambios normativos de los que se ha hablado tanto los últimos días. Mi visión se basa en que: 1) Una parte importante de la recaudación del 2007 venía del boom inmobiliario (Juan Rubio y yo hemos calculado que entre 1.5 a 2 puntos del PIB) y que por tanto esta no volverá. 2) Que es muy poco probable que la economía crezca en los próximos 5 años a más del 3% (pero no imposible, como ocurrió, en circunstancias muy distintas pero con cierto paralelismo en las economías asiáticas tras la crisis de los 90). 3) Que el grado de cumplimiento fiscal, que había subido mucho durante la bonanza, probablemente haya caído bastante (yo aventuraría que haciéndonos perder entre un 1-2% de PIB de recaudación). Por muchos esfuerzos que se ponga en ello, tardaremos mucho tiempo en recuperar los niveles de cumplimiento del 2007. ¿Qué pasará con el gasto en el medio plazo? Calculo que bajará como un 2.5%. Por un lado las prestaciones de desempleo se reducirán, aunque solo sea por la lógica inexorable del agotamiento de las mismas (en parte se substituyan por ayudas sociales, pero estas serán siempre de menor cuantía). Pongamos que esto sea como un 1.5% del PIB. Si el gasto en funcionarios baja, por congelación de plantillas y cortes salariales, a los niveles medios de 1995-2007, como un 10%, tendremos casi otros dos puntos de PIB (aunque incluso esta reducción puede ser demasiado ambiciosa por el incremento del personal sanitario causado por el envejecimiento de la población: no nos olvidemos que el sueldo del médico del Sistema Público de Salud que usted visita es parte de la remuneración de asalariados de las AA.PP.). Reducciones varias en consumos intermedios e inversión pública nos pueden dar como otro 0.5%. Total de reducciones 4% = 1.5% de desempleo+2% de funcionarios+0.5% de otros. Pero a la vez, tendremos que pagar más en intereses de la deuda (sobre todo cuando los tipos a corto empiecen a subir) y la nueva financiación autonómica nos va a costar otro 0.75 (por mucho que se afirme lo contrario, las CC.AA. van a seguir con su táctica de gastar todo lo que reciben y un poco más: al 1% de incremento de su financiación aprobada el verano pasado le quito un 0.25 por el optimista control de gasto en funcionarios que ya he contabilizado antes). Total de incrementos 1.5% = 0.75% de intereses de la deuda+0.75% de CC.AA. En conclusión: total neto de reducción de gasto 2.5% = 4% de reducciones-1.5% de incrementos. Ahora, ponemos juntos 3.15% de incrementos de recaudación+2.5% de reducción de gasto y nos queda una mejora del saldo presupuestario de 5.65%. Es decir, que en tres o cuatro años, me sale que tendremos un déficit del 5.54%. Pongamos un intervalo de probabilidad relativamente generoso hacia abajo (la recaudación se recupera más de lo que asumo gracias a una recuperación muy alegre) y hacia arriba (no se corta el gasto en funcionarios casi 2 puntos

314 del PIB) y me queda que mi predicción puntual es algo así como el 5.5% y mi banda de confianza al 95% es 4%-7%. Es decir que incluso confiando en una recuperación generosa tenemos un serio problema en el largo plazo de déficit estructural. Y a este habría que sumarle el déficit a más largo plazo causado por el sistema de pensiones y el envejecimiento de la población, que en otros lugares se ha valorado entre 5 a 6 puntos del PIB. De repente los nervios de los mercados no parecen tan infundados. Aunque nuestro relativamente bajo nivel de deuda pública inicial nos da cierto margen de maniobra en el corto plazo, es este déficit estructural el que nos llena de nubarrones el horizonte. ¿Cómo nos quitamos este 4-7% de déficit a medio plazo que hemos calculado? Aquí es donde las cosas realmente desagradables del título de este artículo aparecen. Empecemos por el gasto. Después los recortes que ya he asumido para llegar al 4-7%, no nos queda ya mucha menos grasa que eliminar. Pongamos el caso de la remuneración de asalariados. En primer lugar acordémonos que aquí sale todo el gasto de personal, desde el sueldo del catedrático al maestro de primaria, del sueldo del médico del Ramón y Cajal al famoso y vilipendiado alto cargo, del sueldo del Guardia Civil al sueldo de los diputados (y a más y a mayores la mayoría de ellos dependen de las CC.AA., con lo cual la disciplina fiscal es aún más tenue). En mis cálculos anteriores ya asumo que hemos pasado del 11.82% del PIB a 10.0%. ¿Se puede reducir mucho más? Difícil lo veo. En el periodo 1995-2009, el mínimo de remuneración fue en el 2006, un 9.98% del PIB. Durante los años de Aznar, 1996-2004, el mínimo fue en el 2002, con el 10.0% del PIB. Es decir que habría que hacer cortes más grandes incluso que volver al 2002. Y como argumentaba anteriormente, retornar al nivel del 2002 es arduo complicado por el incremento desbocado (y probablemente inevitable) del gasto sanitario. Bajar el gasto en remuneración de empleados públicos por debajo del 9% del PIB sin cortes dramáticos en empleo y sueldo de médicos, maestros o policías nacionales es, sencillamente, imposible. Pensémoslo de esta manera: si sumamos el personal público en educación, sanidad y seguridad (policía, justicia, etc.), nos salen 1.451.312 personas del total de 2.659.010 al que nos referíamos antes, es decir, casi el 55% de todo el empleo público. Y los ciudadanos reaccionarán de una manera muy negativa a cualquier recorte en estas tres áreas, más allá de los ahorros absolutamente mínimos y testimoniales que vengan de eliminar algún sueldo de un alto cargo en los ministerios afectados. Podemos también meterle la tijera a la inversión pública incluso más de lo que asumí anteriormente. Tener AVE en todas las capitales de provincia es muy bonito, pero la verdad es que no nos los podemos permitir. Ahí nos ahorramos otro 1% o así de gasto. Esto tendrá efectos en el crecimiento en el largo plazo pero esperemos que no muy graves (las infraestructuras que ya tenemos nos tendrán que valer por una década). Siendo optimistas, quizás entonces tengamos otro 1% de funcionarios, un 1% de inversión pública y un 1% de todo lo demás (quitando teléfonos, coches oficiales, reduciendo al mínimo viajes y en general siendo tacaños hasta un extremo espectacular). Pues aún nos quedamos cortos por un 2.5%, con un intervalo del 1-4%. Para resolver esta brecha solo nos quedan tres posibilidades: 1. Un incremento de impuestos. Una buena subida de especiales, emisiones de CO2, IVA, y retoques a IRPF son, en ese orden, las mejores opciones. 2. Una reducción de gasto aún mayor que la descrita. Pero como argumentaba antes, mucho me temo que bajar el gasto más allá de lo que ya me refería antes es muy poco factible

315 políticamente dada nuestra estructura de pensiones y sanidad y educación pública y los intereses de la nueva deuda emitada. Recordemos que el mínimo de gasto público en España como porcentaje del PIB desde 1995 fue en el 2006 con un 38.39%. Incluso si retornasemos a esos niveles de gasto (que implican dado la subida en pensiones, sanidad y pagos de deuda una reducción en todas las demás partidas con respecto al nivel del 2006), mis calculos me dan que el déficit no desaparecería. 3. Volver a crecer al 4%. Pero esto solo sería posible con reformas estructurales profundas como las que hemos venido defendiendo en este foro una y otra vez (mercado de trabajo, educación, flexibilización de mercados de bienes y servicios, etc.). Desafortunadamente, mi distribución priori es que incluso con esas reformas es poco probable que volvamos a crecer al 4% y que un escenario del 2-3% es más plausible (esto no quiere decir que no haya que implantar las reformas: sin reformas nos quedaremos en el 0-1% y eso sí que sería horrible). Las primeras dos opciones son dolorosas. La tercera sufre del pecado de que hope is not a plan. Cuanto antes aceptemos la realidad de la desagradable aritmética del ajuste fiscal será mejor para todos. 7]

Article printed from Nada es Gratis: Jesús Fernández-Villaverde La Desagradable Aritmética del Ajuste Fiscal 01/06/2010http://www.fedeablogs.net/economia URL to article: http://www.fedeablogs.net/economia/?p=4535 URLs in this post: [1] Henry Kamen: http://es.wikipedia.org/wiki/Henry_Kamen [2] comunidad imaginada: http://en.wikipedia.org/wiki/Imagined_communities [3] artículo: http://www.fedeablogs.net/economia/?p=4405 [4] aquí: http://www.igae.pap.meh.es/sitios/igae/es- ES/InformesCuentas/Contabilidad/Documents/AAPP_A/AAPP_2009-marzo_2010- PIB.pdf [5] página web: http://www.mpr.es/servicios/empleo_publico/boletin/boletin/document_es/AVANCE- Boletin_Estadistico_Julio_09-.pdf [6] Alesina y compañía: http://www.economics.harvard.edu/faculty/alesina/files/Large%2Bchanges%2Bin%2Bfi scal%2Bpolicy_October_2009.pdf [7] Compartir: # [8] Image: http://buzz.yahoo.com/submit?submitUrl=http%3A%2F%2Fwww.fedeablogs.net%2Fe conomia%2F%3Fp%3D4535&submitHeadline=La+Desagradable+Aritm%C3%A9tica +del+Ajuste+Fiscal&submitSummary= [9] Image: http://del.icio.us/post?url=http%3A%2F%2Fwww.fedeablogs.net%2Feconomia%2F%3 Fp%3D4535&title=La+Desagradable+Aritm%C3%A9tica+del+Ajuste+Fiscal

316 [10] Image: http://digg.com/submit?phase=2&url=http%3A%2F%2Fwww.fedeablogs.net%2Fecono mia%2F%3Fp%3D4535&title=La+Desagradable+Aritm%C3%A9tica+del+Ajuste+Fis cal [11] Image: http://www.facebook.com/sharer.php?u=http%3A%2F%2Fwww.fedeablogs.net%2Feco nomia%2F%3Fp%3D4535 [12] Image: http://www.google.com/bookmarks/mark?op=edit&output=popup&bkmk=http%3A%2 F%2Fwww.fedeablogs.net%2Feconomia%2F%3Fp%3D4535&title=La+Desagradable+ Aritm%C3%A9tica+del+Ajuste+Fiscal [13] Image: http://www.linkedin.com/shareArticle?mini=true&url=http%3A%2F%2Fwww.fedeabl ogs.net%2Feconomia%2F%3Fp%3D4535&title=La+Desagradable+Aritm%C3%A9tic a+del+Ajuste+Fiscal [14] Image: http://reddit.com/submit?url=http%3A%2F%2Fwww.fedeablogs.net%2Feconomia%2 F%3Fp%3D4535&title=La+Desagradable+Aritm%C3%A9tica+del+Ajuste+Fiscal [15] Image: http://www.technorati.com/faves?add=http%3A%2F%2Fwww.fedeablogs.net%2Fecon omia%2F%3Fp%3D4535 [16] Image: http://twitter.com/home/?status=Check+out+La+Desagradable+Aritm%C3%A9tica+de l+Ajuste+Fiscal+@+http%3A%2F%2Fwww.fedeablogs.net%2Feconomia%2F%3Fp% 3D4535 [17] Image: http://myweb2.search.yahoo.com/myresults/bookmarklet?u=http%3A%2F%2Fwww.fe deablogs.net%2Feconomia%2F%3Fp%3D4535&t=La+Desagradable+Aritm%C3%A9t ica+del+Ajuste+Fiscal - Nada es Gratis - http://www.fedeablogs.net/economia - Estructuras Impositivas: España frente a Suecia Posted By Jesús Fernández-Villaverde On 26/05/2010 @ 00:01 In Jesús Fernández- Villaverde | 46 Comments Estos días son apasionantes para los que nos dedicamos a pensar un poco sobre la política fiscal: nunca se ha hablado tanto sobre el tema ni ha recibido tanta cobertura por los medios de comunicación. A la vez, a uno siempre le queda una cierta desazón porque preferiría, claro, que las cosas no fueran tan complicadas y la situación fiscal fuera trivialmente aburrida. Yo tenía una amiga suiza y una vez me enseño el libro de texto de historia suiza que utilizaban en el instituto: era la cuarta parte del mío de historia de España, básicamente porque después de 1847, el año de su Sonderbundskrieg [1], la historia de Suiza se puede resumir grosso modo como paz, democracia y prosperidad y esto no da para contar mucho (o como dijo Orson Wells en The Third Man: “You know what the fellow said – in Italy, for thirty years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace – and what did that produce? The cuckoo clock.”)

317 Pero bueno, volvamos a lo nuestro. Una de las cosas que más se ha discutido en los últimos días es la posibilidad de incrementar los impuestos para que el ajuste fiscal venga tanto del gasto como de los ingresos. El posible incremento de impuestos trae, casi por definición, una discusión del nivel de redistribución adecuado y más en general sobre la estructura impositiva. Esto es un tema que apasiona y como prueba de ello, en los comentarios al último artículo [2] de Juan Rubio he conversado en detalle con varios de nuestros lectores sobre el tema. Me parece pues, después de pensarlo un poco, que es importante resumir los argumentos y sistematizarlos en este artículo para que tengan una mayor difusión. La cuestión básica es cómo de diferente es la estructura impositiva de España de la de otros países de la UE. Un país que es nombrado a menudo es Suecia ya que por mucho tiempo ha sido el paradigma del modelo escandinavo de estado del bienestar. Por eso voy a comparar, en cierto detalle España con Suecia (además, en otros posts, he hablado de la consolidación fiscal sueca [3] de los 90 o del consejo de política fiscal sueco [4], en ambos casos de manera francamente positiva, así que no creo que pueda ser acusado de antisueco). Antes de entrar en percal, quiero que queden claras varias cosas. En primer lugar, voy a intentar ceñirme a los datos lo más que pueda y minimizar las valoraciones. Este es un tema en el que existen fuertes pre-concepciones ideológicas de unos (los de un lado que admiran a Suecia por su estado del bienestar) y de otros (los que demonizan a Suecia por sus altos impuestos). Lo que yo pretendo es aclarar, no enturbiar más las cosas, así que cuando diga que algo es alto o bajo solo quiero decir eso, que es alto o bajo, no que sea excesivo o insuficiente. Segundo, las comparaciones internacionales siempre son difíciles y por tanto uno tiene que poner un cierto intervalo de confianza en los números. Mientras yo conozco razonablemente bien los datos Españoles, entiendo mucho menos de Suecia, aunque sea un país de grandes economistas (Wicksell [5], Ohlin [6], …). Tercero, Suecia y España son países muy distintos, uno muy homogéneo, unitario, con 9 millones de habitantes, otro muy diverso, cuasi-federal, con 46 millones. Suecia es también más rica en términos de ingreso per cápita (un 19% en el 2005 en PPP, el año que voy a utilizar luego en mis comparaciones). Empecemos. Siempre que pueda voy a utilizar datos de Eurostat [7], que es la agencia europea estadística. Como regla por defecto es una buena idea tirar de los datos de Eurostat para estas comparaciones porque tienen muchos más medios que otras agencias, como la OCDE, y una metodología uniforme y bien pensada (la influencia francesa de contabilidad nacional en esto es fantástica) que concuerda con los datos nacionales de cada miembro de la UE. Los datos a los que me referiré son del 2005 y vienen de esta nota metodológica en el parrafo anterior. Cojo el 2005, en primer lugar porque solo tenemos datos uniformes y finales hasta el 2007 (2008 y 2009 todavía no están cerrados del todo de manera contable). En segundo lugar, porque los datos del 2006 y 2007 están más contaminados por la burbuja inmobiliaria. En el 2005 está era más reducida y había impactado menos en la estructura impositiva, es decir que tenemos menos componente cíclico. De todas maneras, el lector debe de quedar tranquilo, ya que los comentarios que voy a hacer son robustos a utilizar el 2007 (en el lenguaje de los economistas, que cambian poco vaya y lo que cambia refuerza mi argumento). Primero pongo Suecia, luego España, datos de Eurostat (nota metodologica que citaba antes: paginas 222 y 226): Total impuestos como porcentaje del PIB: Suecia, 49.6%, España 35.6% Este número ilustra claramente que Suecia recauda bastante más que nosotros: 14% del PIB. ¿De dónde vienen los impuestos? Tres categorías fundamentales:

318 Impuestos sobre el Consumo como porcentaje del PIB: Suecia 12.9%, España 9.8%. Impuestos sobre el Trabajo como porcentaje del PIB: Suecia 29.6%, España 16.2%. Impuestos sobre el Capital como porcentaje del PIB: Suecia 7.1%, España 10.1%. (En España hay que ajustar la recaudación total por 0.5 por deudas impagadas, que con los datos no se pueden dividir entre los distintos grupos.) ¿Qué es lo que vemos en estas cifras? 1. Suecia recauda más del consumo que nosotros, 12.9% versus 9.8%. Esto se explica por un IVA mucho más alto, 25% de tipo básico frente al 16% (en ambos países hay tipos reducidos para ciertos bienes). 2. Suecia recauda muchísimo más sobre el trabajo que nosotros, 29.6% versus 16.2%. Es más, si dividimos la recaudación en cotizaciones sociales y resto (básicamente IRPF sobre rentas del trabajo), vemos que Suecia recauda más o menos lo mismo de cotizaciones sociales, 12.8% , que España, 12.1%. La gran diferencia es IRPF sobre trabajo, que mientras son unos cuatro puntos de PIB en nuestro país, son casi 17 puntos en Suecia. 3. Suecia recauda menos del capital que nosotros: 7.1% versus 10.1%. Y no es de sorprender. Solo por poner un ejemplo, en el 2005, el tipo del Impuesto de Sociedades en Suecia era del 28% mientras que en España era del 35% (un 40% en las petroleras y una reducción para las PYMES), lo que se traduce en que el impuesto de sociedades recaudaba en el 2005 el 3.6% del PIB en Suecia y 3.9% en España. ¿Cómo se trasladan estas cifras en tipos impositivos medios? Este cómputo es un poco más complejo porque requiere que podamos computar las rentas del trabajo, capital y consumo. Para no aburrir a las ovejas, me voy a saltar alguno de los detalles (creedme, cuando doy clase de esto en Penn se me duermen todos los estudiantes). Pero lo que sale a Eurostat es, para el 2005: Impuestos medio sobre el Consumo: Suecia 27.5%, España 16.3%. Impuestos medio sobre el Trabajo: Suecia 45.0%, España 30.3%. Impuestos medio sobre el Capital: Suecia 35.9%, España 36.4%. De nuevo vemos que el impuesto medio en Suecia sobre el consumo y el trabajo es mucho más alto, y sobre el capital ligeramente más bajo. Una cosa importante: estos impuestos medios son iguales a la cantidad de impuestos pagada por esa actividad dividida por la cuantía de esta actividad. Es decir, que son diferentes de los tipos legales tanto por la existencia de desgravaciones como por la existencia de distintos grados de cumplimiento fiscal. Por ejemplo, el impuesto medio sobre el trabajo puede ser más bajo en España porque el grado de cumplimiento fiscal de los autónomos sea menor (en la parte que corresponde al salario imputado correspondiente a su trabajo). Calcular este efecto y cuanto se podría corregir es extraordinariamente difícil. Una idea nos puede venir del tamaño de la economía sumergida (la economía sumergida no es igual al tamaño de lo que no se declara: por ejemplo, muchos ingresos de la economía sumergida pagan IVA cuando se transforman en consumo. En dirección contraria, yo puedo apuntarme a una desgravación que en realidad no se podría aplicar a mí y la agencia estadística saber mi ingreso total para el cálculo del PIB pero la agencia tributaria no darse cuenta de mi trampa). El mayor experto del mundo sobre economía sumergida es Friedrich Schneider [8] y sus números los más aceptados. Esto no quiere decir que no sean los números perfectos, solo que el tipo lleva toda su vida dedicado a esto, es muy serio y concienzudo y si alguien no está de acuerdo con él, mejor que tenga un argumento más fundamentado en datos que “sus números

319 no me convencen” o “mi primo trabaja en negro con lo que debe haber mucha economía sumergida.” En este artículo [9], le sale que, para el 2002/2003 (un poco antes del 2005 para el que son los otros números), la economía sumergida en Suecia era el 18.3% del PIB y en España el 22.0% (tabla 3.5, p. 28). Es decir, que el grado de economía sumergida en España solo es un poco más grande. Que la economía sumergida es un problema en Suecia queda claro por una serie de modificaciones en el IRPF sueco en el 2007 y 2008 destinadas a hacer que el fraude fuera menos rentable o de un estudio detallado de la agencia estadística sueca que encontró que, en el 2002, menos del 50% de los ingresos de los restaurantes eran declarados a la Hacienda sueca (hay ejemplos similares para otros sectores). De esto concluyo de manera más tentativa que, las diferencias causadas en las estructuras impositivas generadas por el fraude no son extraordinariamente importantes. Por favor: fijaos en el cuidado con el que escribo la frase. SOLO digo que las diferencias causadas por el fraude probablemente no sean de primer orden, no niego que existan o que con mejores datos no tenga que revisar mi opinión. Pero con la evidencia en la mesa eso es lo que veo. Otro tema del que no tengo mucho tiempo para hablar es el de la imposición medioambiental, que es también mucho más alta en Suecia que en España y donde mis preferencias personales (que creo bien justificadas) me hacen favorecer claramente el modelo sueco. Concluyo con un resumen y una valoración. Sí, Suecia recauda mucho más que nosotros, pero no gravando el capital, sino gravando el consumo y el trabajo. Otro día intentaré explicar cómo los economistas piensan acerca de que factor gravar más (esto se llama enfoque de Ramsey) pero puedo ya aventurar que la mayoría de los economistas académicos van a tender a preferir imponer más el consumo y el trabajo que el capital (con matices). Hoy solo voy a enfatizar que, si queremos lanzarnos a una reforma impositiva, debemos, al menos, tener una idea objetiva y no ideológica de cómo se hacen las cosas en otros países. Compartir [10]

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COMMENT Europe must focus on what works By Chris Patten Published: June 2 2010 21:59 | Last updated: June 2 2010 21:59

Start from the top. Over the past half century, the European Union, the largest economy in the world, has been a spectacular success. On a blood-soaked continent, it has buried the worst xenophobic nationalism of the past without destroying patriotism. Its institutions have won acceptance for binding disputes settlement that has enabled the transformation of sovereignty through sharing it in an unprecedented number of sensitive areas. It is a union of nation states that has created something less than a federation and more than an alliance. Editorial: Not ready for exit - Jun-02 Temps signal easing of EU recession - Jun-01 UK manufacturing recovery continues - Jun-01 Wolfgang Münchau: Austerity and weak euro - May-30 Analysis: State of the eurozone - May-31 Opinion: Solutions for crisis - May-31 All this has been the result of both vision and pragmatism, sometimes subordinating national decision-making to European institutions and rules (the so-called community method), sometimes working through intergovernmental agreement. Vision provided the EU’s original impulse with the historic reconciliation between France and Germany. The visit of Helmut Kohl and François Mitterrand to the Verdun ossuary in 1984 dramatically exemplified the message that political integration would be achieved through generous-spirited diplomacy as well as economic means. But how much did that vision presume the blurring or even fading away completely of national boundaries and identities? Was ever closer political union a way of describing a federal or super state? Obfuscation and deliberate dissembling have complicated this fundamental debate. Some political leaders have concluded that the best way of making progress towards a more

322 federalist outcome is to play “grandmother’s footsteps”. Take a political step forward, and if the electorate does not notice then take the ground gained as the starting point for the next advance. This discredits the EU, and gives voters the impression that it is an elitist conspiracy. The danger today is that vision – short-hand for a great leap forward – will be taken as the solution to the EU’s problems, and pragmatic reforms will be criticised as small-minded and inadequate. The truth is that the vision we are offered is too often dated, irrelevant and impractical, and that we require pragmatism, common sense and honesty to bridge the yawning gulf between rhetoric and reality. To argue that the democratic legitimisation of what happens in the EU depends on its component nation states is not to display a lack of vision. Germany’s attitude to inflation and prudent public financing is a result of its history and social culture; so too is France’s approach to industrial policy. Britain’s approach to parliamentary sovereignty owes much to our own history. So, to take two occasional aspirations of the soi-disant visionaries, there will not be a single economic government for Europe nor a single foreign and security policy. Pragmatism would address Europe’s major problems differently, sometimes using the community method, sometimes intergovernmentalism. One is not inherently superior to the other. What matters is which works best in particular circumstances. Europe’s woes today begin with the crisis of confidence in the eurozone. That, of course, requires greater openness about national economic management and properly policed rules governing performance. But beyond the immediate crisis, there are larger worries down the road. Europe set out in 2000 at Lisbon to turn itself into the world’s most competitive, knowledge- based economy by 2010. Having failed first time round, it has recently reiterated the same ambition for the end of the coming decade. With an ageing and falling population and a growth rate well below that of our competitors, the prospect is that we will soon have a rapidly falling share of world trade and output. We will find it more difficult to compete in high-technology industries. These issues require strong and resourceful political leadership if we are ever to combine high employment with high productivity – something that only the Netherlands currently achieves in Europe. Europe’s political leaders have been heard to say they know what needs to be done; they just don’t know how to get elected if they do it. It is time for a display of what London cabbies call “bottle”. The second accumulation of issues concerns whether we are to matter globally in foreign and security policy. What Americans call the demilitarisation of Europe results in insufficient and badly deployed defence expenditure. Moreover, there is a lack of willingness in some countries to commit to actions abroad that involve risk. This too is the product of our history. To be undiplomatically blunt, our parents and grandparents used to grumble about Germany spending too much on armaments. Today, the complaint is the reverse. If Europe is to play a bigger role in geopolitics, much will depend on how much France and the UK can do together. A third question points to the role of Europe beyond the achievement of a sort of glorified customs union. Through example and enlargement Europe has promoted stability around its borders. The task is not yet completed. We still have much to do in the Balkans. Above all, we should understand that the really existential issue for Europe is how we handle Turkey’s membership application.

323 What narrative do today’s advocates of a federal union offer? Are we to be shown the prospect of implausible surrenders of national accountability in pursuit of a destiny that remains obscure and undefined? Better to aim for welcoming a reformed and democratic secular Islamic state to our union, a bridge between civilisations, an energy hub, a dynamic contributor to our labour and product market. The sooner Europe focuses on the century that lies ahead rather than on the century in which its institutions were founded and its ideas first formed, the more prosperous, competitive and globally relevant it will be. Lord Patten is chancellor of Oxford university. He is a former Conservative party chairman and cabinet minister and a former European commissioner Chris Patten Europe must focus on what works June 2 2010 21:59 http://www.ft.com/cms/s/0/a0092e2c-6e70-11df-ad16-00144feabdc0.html

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European banks: leaning lenders By Sarah Gordon and Megan Murphy Published: June 3 2010 22:42 | Last updated: June 3 2010 22:42

For nearly 150 years, CajaSur has served the people of Córdoba in southern Spain. One of the country’s 45 savings banks, it has long been little more than a curiosity in Europe’s financial sector: controlled by the Roman Catholic church and chaired by a priest, Santiago Gómez Sierra. By no means large, it accounts for less than 1 per cent of Spain’s banking assets. In depth: European banks - May-31 Spain to tighten provisioning rules - May-27 Bankers’ ‘doomsday scenarios’ under fire - May-30 BBVA squeezed out of US funding - May-27 Scepticism as Spain’s cajas reveal merger - May-25 CajaSur seizure sends warning shot - May-24 But when CajaSur was seized late last month by the Bank of Spain, market reaction to the implications of the central bank’s move was severe. Bank stocks globally were marked down and the euro wobbled. As one of Europe’s banking regulators asked incredulously: “How was a priest in Córdoba able to weaken the euro? The world has gone mad.” Perhaps. But there are good reasons why the failure of CajaSur not only added another ruined temple to the age-old city’s Roman remains but also sent tremors round the world. For a start, the takeover highlights how slowly Europe’s authorities have moved to clean up the banking sector. In the wake of the Lehman Brothers collapse nearly three years ago, banks in Britain and the US were obliged to shore up their capital buffers and take huge writedowns on their loan portfolios. Across continental Europe, however, where banks at least initially appeared less exposed than others to the global financial crisis, many regulators shied away from the opportunity to force banks to build up their capital cushions or to tackle their debt loads.

325 Share prices have come to reflect that dichotomy. Since September 2008, the month of Lehman’s demise, shares in European banks as measured by the FTSE Eurofirst index have lost nearly half their value – compared with less than one-third for US banks. Since the beginning of last month alone, European bank stocks have fallen by 18 per cent, underperforming their US rivals by 8 percentage points. The failure of CajaSur also shed a painful light on the dire state of the country’s property market, to which the savings banks are heavily exposed. Allied to investors’ anxiety over the state of the Spanish economy are broader worries about European banks’ exposure to Greece’s financial woes and the worsening eurozone sovereign debt crisis. Signs of the effects on the global economy of this new round in the financial crisis are already appearing. The interest rate premium on bank bonds over government debt has risen sharply, raising borrowing costs for many companies. This week, the president of Japan’s Hitachi warned that Europe’s latest bout of financial turmoil was damaging industry. “The financial confusion in Europe is affecting various parts of our business,” Hiraoki Nakanishi told the Financial Times, saying this was causing problems in big capital goods projects such as for power stations and railway rolling stock. “If financing is not stable, then investment in social infrastructure does not go as you expect.” Senior bankers are alarmed that their share prices are continuing to deteriorate even after European finance ministers tackled the most acute manifestation of the problems by agreeing on a bail-out for the Athens government last month that propped up the 16-nation currency. They have been quick to argue that the sector’s direct exposure to Greek sovereign debt remains containable. France’s BNP Paribas, for example, one of the institutions hardest hit by the sell-off, has revealed about €5bn ($6.1bn, £4.2bn) in exposure to Greek sovereign debt. Banking executives insist that even if bondholders are forced to accept a partial forfeiture of repayments, known as a haircut, the hit would represent a tiny fraction of their earnings. BNP Paribas would lose about €1bn from a 20 per cent haircut on its holdings, less than 3 per cent of group revenues in 2009. “What’s that, a month and a half’s work?” asks one executive. Investors, however, are concerned not just about banks’ exposure to individual countries but also about the interlinked nature of that exposure. Lending by the global banking sector, excluding domestic banks, to the public and private sectors in Greece, Spain, Portugal, Ireland and Italy – the five eurozone economies currently regarded as the most troubled – was $4,000bn at the end of 2009, according to the Basel-based Bank for International Settlements. European banks’ exposure accounted for three-quarters of this total, of which French banks made up nearly one-third and German banks almost a quarter.

326 Worries about the size, not to mention the quality, of banks’ exposure to those economies are entwined with concerns about their ability to fund themselves. On Monday, the European Central Bank, in its six-monthly financial stability review, said European banks would have to write off a further €195bn of bad debts by 2011 – and pointed out that governments’ needs to finance their large budget deficits would make it more difficult for banks to raise money in the bond markets. “The main risks for the euro area financial system include the possibility of concerns about the sustainability of public finances persisting or even increasing with an associated crowding-out of private investment,” the ECB wrote. While the worst-case scenarios – such as default by a eurozone government or even the demise of the euro – still seem improbable, there is no question that the challenges for Europe’s banks are exacerbated by the sector’s structure. Not just Spain but Germany, Italy, Greece and even the UK are still weighed down by a bloated network of banks. This state of affairs contributed to the crisis, as banks competed against each other to offer low-margin mortgage products. Now, it hinders the resolution of the crisis. Local political support and a historical lack of transparency have permitted smaller banks in particular to delay consolidation and drag their feet over cleaning up their balance sheets. Germany’s Landesbanken, for example, the regionally owned banks that make up about one-fifth of the country’s banking assets, have been a weak spot for years. In 2008 the sector lost nearly €10bn, the consequence of years of cheap financing being unwisely invested in a range of securities – including US subprime mortgages – that then went spectacularly sour. In 2009 the four most troubled – HSH Nordbank, WestLB, Landesbank Baden-Württemberg and BayernLB – made a combined €5.3bn net loss. The Landesbanken say they can manage losses from traditional lending activities and give themselves time to boost capital. But there is a widespread belief that the scale of writedowns still to be taken has been underestimated. What is more, the government has failed to force even the banks that need it to use its “bad bank” scheme – WestLB is the only Landesbank that has so far agreed to carve out a portfolio of assets to be ring-fenced within the scheme. In Spain, the leading banks such as Santander and BBVA weathered the financial crisis relatively well. But the smaller savings banks, or cajas, like the Landesbanken, are long overdue for a restructuring, say analysts. Since CajaSur’s collapse, some of the other unlisted savings banks – which cumulatively make up about half of Spain’s financial system by assets – have rushed to unveil co-ordination agreements in an attempt to stave off a similar fate. Simply merging or combining the weaker institutions will not eliminate the sector’s woes, however. Regulators and economists claim that only a far more drastic restructuring process will deliver the required cost cuts and efficiency savings. Interacting with concerns over the pace of reform is the fact that Europe’s banks still have huge capital requirements. Their core “tier one” capital ratios – essentially shareholders’ equity plus retained earnings – vary from country to country. But they are generally well below what the market is likely to demand after the Basel Committee on Banking Supervision – which formulates supervisory standards and guidelines for the global banking industry – finalises tough new requirements designed to head off another crisis. In addition, the Basel proposals on liquidity include a new “net stable funding ratio” that requires banks to keep a minimum level of long-term funding relative to their assets. Analysts

327 at Barclays Capital recently estimated that this would leave Europe’s banks with a funding shortfall of as much as €3,000bn. Adding to concerns is the hundreds of billions of euros in bank debt that will fall due by 2012 and will not be nearly as easy to refinance, as the ECB pointed out in its stability review. According to traders, US banks and US money managers have been significantly paring their exposure to European banks in recent months, a retreat that has contributed to pushing the benchmark US dollar London interbank offered rate – the interest rate banks charge each other to borrow – up to levels not seen since July. While analysts say that recent panic over European banks’ dollar funding requirements has been overblown, and that institutions are still rolling over their funding at reasonable rates, there is the larger systemic issue of European banks’ overall dependence on the ECB. European institutions have taken out more than €800bn in loans from the Frankfurt-based central bank, near an all-time high, according to analysts at UBS. This means that while US and UK banks are increasingly funding themselves in the private markets as governments wind down their exceptional liquidity programmes, European banks have actually become more reliant on central bank credit. So far, there are few signs of a true funding crisis developing. But credit markets can freeze up very quickly, as investors learnt to their cost in the credit crunch that began in the autumn of 2007. Concerns over European banks’ health are interacting with broader worries over the pace of economic recovery and the adequacy of the political reaction to the continuing crisis. The austerity programmes put in place across the southern eurozone lack detail – and investors are unsure whether they will work in terms of reining in fiscal deficits without destroying prospects for economic growth. Overarching those worries is what many see as a lack of coherence in the policy response from governments and regulators. Evidence of that came last month when Germany made the surprising unilateral move to ban so-called “naked” short-selling – the process of selling a financial instrument that is neither owned nor borrowed by the vendor – in bank shares, government bonds and credit default swaps. This triggered outrage among senior European bankers, who accused Angela Merkel, the German chancellor, of playing politics with already jittery markets. At the same time, there remain few signs of any emerging regulatory consensus on critical issues ranging from a bank levy or the separation of riskier investment banking activities from banks’ more pedestrian retail banking operations, to hedge fund supervision and the clearing of derivatives. This is the concatenation of concerns that has resulted in sharp falls for European banking stocks. Analysts, investors and bankers are divided over whether these declines are exaggerated. The bulls point out that European banks, particularly the stronger ones, are still able to fund their operations freely. Exposure to the Greek sovereign debt crisis looks manageable and Spain’s financial authorities are forcing reform there. But the one lesson from the last two years is that central bankers, policymakers and bankers have always talked down potential next legs in the crisis – and have, so far, always been wrong.

328 Additional reporting by James Wilson, Victor Mallet and Robin Harding Political capital spent, banks await their regulatory fate As the banking industry faces its biggest regulatory overhaul for a generation, analysts and senior bankers say they are at a loss to predict the impact of the myriad proposals proliferating around the world, writes Megan Murphy. Consider the following attenuated list: the Basel Committee on Banking Supervision is aiming to adopt new capital and liquidity rules by the end of the year; the European Union is crafting rules for derivatives; and US lawmakers are moving closer to passing the toughest financial reform bill since the 1930s. Furthermore, the Group of 20 industrialised and developing nations is expected this month to discuss global bank taxes, while Britain has recently created a commission to investigate whether big institutions should be broken up. In light of this, many senior bankers have been forced into the role of industry lobbyists in an attempt to stave off or water down what they believe are the most damaging reforms in both the US and Europe. The general consensus is that, while several of the individual proposals might be a step in the right direction, taken in concert they threaten to choke off a still fragile economic recovery, sharply curtailing banks’ ability to lend to struggling corporates and limiting their profits to unsustainably low levels. For example, analysts at Barclays Capital recently observed that under the draft proposals for bank capital requirements put forward by the Basel committee, Crédit Agricole’s “core” capital ratio – based on its level of shareholders’ equity and retained earnings – would fall from about 8 per cent to zero. “A rule book that, if adopted, would put France’s largest bank out of business will either be massively redrafted or there will have to be a special ‘opt out’. Either way, it renders the maths somewhat meaningless,” the analysts noted. The industry, however, lost much of its political capital in the financial crisis, and the global controversy over pay. It has been left with little choice but to sit tight and wait it out. Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web. Sarah Gordon and Megan Murphy European banks: leaning lenders June 3 2010 22:42 http://www.ft.com/cms/s/0/9cf6d2b6-6f3d-11df-9f43-00144feabdc0.html

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COLUMNISTS A plan to live with ‘imbalances' By Samuel Brittan Published: June 3 2010 22:13 | Last updated: June 3 2010 22:13 Some of my older readers may remember national savings drives. These were prominent in the second world war as part of the “civilian effort”. But they lingered for many decades; and within living memory every UK Budget speech contained a sentence of thanks to the chairman of the National Savings Movement. Now the citizens of some countries, especially China and Germany, are being subjected to the opposite kind of propaganda: to spend more for the sake of the world economy. My own belief is that individuals and families should make up their own minds about how much to save. Official efforts should not go beyond school lessons in personal finance. The reason why some experts suppose otherwise can be summed up in the words “international imbalances”. This simply refers to current balance of payments surpluses and deficits. Total world imbalances grew, according to International Monetary Fund estimates, from negligible amounts at the end of the last century to 2½ per cent of world gross domestic product in 2006-08. By 2009 this total had shrunk dramatically to about 1½ per cent. This was largely due to the recession. A worldwide excess of attempted saving over desired investment was brought into line by a drop in output and income, which reduced the desire to save in the surplus countries and the desire to invest in the deficit ones. The IMF fears that economic recovery may lead to a return to larger imbalances, which will put that recovery at risk. There are basically two views about imbalances. The goody-goody view is that “excess” surpluses and deficits need to be reduced by appropriate policies, preferably co-ordinated internationally. The alternative view is that so-called imbalances are the natural outcome of international borrowing and lending. A German surplus or a US deficit is no more pathological than a payments imbalance between Yorkshire and Sussex – as David Hume pointed out two and a half centuries ago. The remedy for slumps and booms should be monetary and fiscal policies to expand or contract demand without attempting to play God with the pattern of inter-country payments. There is, however, not an economic but a political case for doing something about imbalances. The Chinese government is not going to launch an anti-savings drive to please the IMF. But it is getting restive about holding its huge and ever increasing reserves in short- term dollar securities of minimal yield and uncertain value. The natural course would be to diversify into tangible real investments with better likely returns. But there is a limit to how far the US and Europe would want key strategic facilities to be held by China. The alternative would be for Asian surplus countries to put savings into other emerging countries, which to some extent they are doing. But this is a slow process. Governor Zhou Xiaochuan of the Chinese central bank put forward in April 2009 the case for a “super-sovereign reserve currency”. Such a currency already exists in embryonic form in the IMF Special Drawing Rights. Total SDRs in existence are now worth $300bn or 3 to 4 per cent of world reserves. At the moment they are only a quasi-money. The best attempt I have

330 seen to explain their status is in Goldman Sachs’ Global Economic Paper No. 196. The main point is that they only come into existence if a member country borrows from the Fund. That is why it was so easy for the G20 to agree in 2009 to a potential “tripling of IMF resources”. Unless and until this is taken up it is a costless operation. Why not, however, gradually give the SDR more of the characteristics of a genuine money and allocate new issues to emerging countries? This was originally proposed in a now long- forgotten plan by the late Maxwell Stamp. The purpose of a revival would not be to add permanently to emerging country reserves but to provide these countries with the wherewithal to increase investment. Surplus nations such as China would then receive payments in non- depreciating currency guaranteed against default and SDR users would have much less reason to fear undue Chinese political influence. Moreover, instead of the uphill task of persuading the western political and financial establishments that budget deficits are permissible and desirable in the face of a potential world savings surplus, the offset to that surplus would be provided by development expenditure, which would be doubly blessed as “investment” and as part of an attack on world poverty – all this would attract bien-pensant lobbies in a way that the more abstract Keynesian arguments on their own evidently cannot. I can already hear German leaders denouncing the plan as inflationary; and an honest answer to their objections would require giving the IMF the power not to issue, or even withdraw, SDRs if it judged that the main danger was of excessive rather than deficient world demand. If we went along this route the IMF would acquire some of the characteristics of a world central bank. But at least this approach is more promising than droning on and on about “imbalances”. www.samuelbrittan.co.uk Samuel Brittan A plan to live with ‘imbalances' June 3 2010 22:13 http://www.ft.com/cms/s/0/a4eb3cd2- 6f3d-11df-9f43-00144feabdc0.html

MARKETS Lessons to be learnt from Kazakhstan By Gillian Tett Published: June 3 2010 22:27 | Last updated: June 3 2010 22:27 Ever since the film Borat was released, the word “Kazakh” has tended to provoke sneers on western bank trading floors. Right now, however, it merits more respect – at least as far as the issue of financial restructuring is concerned. A few days ago, Kazakhstan announced that it had completed the restructuring of BTA, one of the largest Kazakh banks, by imposing severe haircuts on investors holding BTA bonds and loans. These creditors, which include ABN Amro, Commerzbank, Standard Chartered, ING, KfW, and funds DE Shaw and Fortis Investment Management, have effectively had to swallow some $6.8bn of write-downs to enable the bank to cuts its debt burden from $12.2bn to $4.4bn. Russia in customs union with Kazakhstan - May-29

331 Kazakh bank debt shake-up approved - May-28 Kazakhs vote to give immunity to president - May-12 Former Kazakh nuclear chief given jail term - Mar-12 Kazakhstan in western oil deals threat - Jan-26 OSCE role highlights slow Kazakhstan reforms - Jan-04 The news has attracted little outside interest. After all, with the eurozone in turmoil and American politicians fighting over financial reform, traders and policy makers have had plenty else on their mind. But what has just occurred on the Kazakh steppes is looking surprisingly relevant to this hand-wringing about European banks and US reform. Until recently it was generally assumed in the emerging market world that when a bank ran into problems it would either be bailed out by the government (or, more likely, the International Monetary Fund) or go spectacularly bust and close its doors. And indeed, when BTA, along with several other Kazakh banks, first started to collapse almost two years ago, that was what most western investors assumed would occur. Hence, some of the powerful western creditors who held the debt of BTA and other banks started pushing for a furtive state rescue, of sorts – and warned that if this did not occur Kazakh-style financial Armageddon would occur. However, to its credit, the Kazakh government faced down some of the more aggressive western banks by insisting on something rarely seen anywhere in the world: an orderly restructuring, with creditor haircuts, of a still-functioning bank. Now, it would be naive to think that this process could be easily transposed on to the west. Kazakh banks are much smaller than American or European banks and their operations do not straddle numerous different borders or bankruptcy regimes. Nevertheless, the core principle of the BTA story is thought provoking. By a happy coincidence a couple of days before the Kazakh news Michel Barnier, Europe’s financial services commissioner, announced plans to create a new European resolution fund to deal with failing banks, funded by a bank levy. In some respects this is encouraging news, since the sooner that Europe starts thinking about this problem, the better. But in other respects, Mr Barnier’s proposal is riddled with problems. For even if the Commission could persuade all the European governments to impose a bank levy for such a fund, it is unlikely to become big enough in size, fast enough, to absorb all the potential losses if a big bank went down. However, another option, as demonstrated in Kazakhstan, is to demand that creditors absorb all, or part, of the losses, even as the bank remains a going concern. And indeed, this is precisely the idea that is now starting to gain traction in some regulatory quarters. In Europe, for example, Paul Tucker, deputy governor of the Bank of England, is one of those who is now championing this idea of creditor haircuts as a way to deal with the “too big to fail” issue. In America, there is every chance that the future financial reform bill will contain some features that would impose creditor losses in the future (though it remains a point of fierce dispute whether this would be imposed by a central, third-party body or the law courts.) Unsurprisingly, the concept remains very controversial. Many investment groups hate the concept, since bond holders have generally been protected from losses until now. Many European bankers are also opposed, since they fear it could raise funding costs. Some international lawyers are also wary, since it would be challenging to thrash out any deal with creditors operating in different bankruptcy regimes. But, notwithstanding those (big) drawbacks, to my mind this seems the least bad option. After all, the concept has one big merit: namely it spares taxpayers. There is another: the prospect

332 of haircuts could prod creditors to exercise more badly-needed oversight in the future. After all, it is evident from the last bubble that equity investors are lousy at this, partly because they are incentivised to cheer revenue growth. But if bondholders thought they might face haircuts in the future, they would have a real incentive to impose discipline on banks – and perhaps make them more transparent in the future. This would be better than the alternative: building a system based on ever tighter bank rules and implicit taxpayer bail-outs. Which, unfortunately, is where Europe is heading. http://www.ft.com/cms/s/0/050d003a-6f4a-11df-9f43-00144feabdc0.html

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Obama hopes oil spill boosts support for climate bill By Steven Mufson and Michael D. Shear Washington Post Staff Writer Thursday, June 3, 2010; A01 President Obama tried Wednesday to channel public outrage about the Gulf of Mexico oil spill into support for a climate-change bill, seeking to redefine an issue that threatens to tarnish his presidency. In a speech at Pittsburgh's Carnegie Mellon University, Obama made one of his strongest pitches for comprehensive climate legislation, arguing that the case for breaking the nation's addiction to fossil fuels has been made clearer by the environmental catastrophe in the gulf. The president vowed to gather votes for the climate bill in the "coming months" and repeated his intention to roll back billions of dollars in tax breaks for big oil companies, to tap natural gas reserves as an alternative to coal, and to increase reliance on nuclear power -- although energy experts said that such a program would leave the country just as dependent on offshore oil. "I will make the case for a clean-energy future wherever I can, and I will work with anyone from either party to get this done. But we will get this done," Obama said. "The next generation will not be held hostage to energy sources from the last century." Allies of the president have argued for weeks that the administration should stop talking about BP, the oil company responsible for the spill, and instead tap into the public attention to the catastrophe in hopes of giving it at least some redemptive value in the long term. "The oil disaster adds new urgency and a new opportunity for connecting with the public," said Daniel J. Weiss of the Center for American Progress. "The administration was going to do it anyway, but this gives it a new way to talk about it." Those urging action have sent White House Chief of Staff Rahm Emanuel briefs that argue for a final push on the climate legislation, and others have had conversations with climate adviser Carol M. Browner and legislative director Phil Schiliro. In an online column posted Wednesday, Weiss and CAP President John D. Podesta argued that "the horrible BP oil disaster has reminded Americans that we must reduce our oil use," adding: "We share the view that this presents an unprecedented opportunity to take bold action to achieve this goal." Energy experts warned that climate legislation would have little impact on the need to search for oil in the Gulf of Mexico to meet U.S. demands. Offshore oil provides a growing portion of U.S. oil production, and deep-water wells account for a rising share of the offshore output. The gulf provides about 40 percent of U.S. oil production. Obama's earlier mandate to improve automobile fuel efficiency will do much more than a climate bill to cut oil use, but even a sharp drop in U.S. consumption would leave the nation a net importer and thus dependent on offshore oil. The president made this point when he endorsed an expansion of offshore drilling weeks before a drilling rig exploded April 20 and triggered the spill. "The president is correct that we need more [renewable energy], but we need more oil, too," said J. Robinson West, chairman of PFC Energy, a Washington consulting firm.

334 The leading supporters of climate-change legislation on Capitol Hill cheered Obama's remarks as a clear step up from his rhetoric in recent months, when he often left unclear whether he was going to push for energy reform this year. "This is just what we needed with Congress coming back into session next week," Sen. John F. Kerry (D-Mass.), the co-sponsor of the main Senate bill, wrote in an e-mail to supporters. "Just as we saw with health care, when the president throws down the gauntlet, and puts his prestige on the line and puts the full weight of the White House behind it, we can do big things." It was not clear whether Obama's pitch for a climate bill would deflect public discontent about the oil spill. "It wasn't about having [the administration's] foot on the throats of BP but about giving their hearts to the fishermen and the people in Louisiana," said pollster Peter D. Hart. "All the things aimed at showing an additional remedy, I don't think get to the true touchstone of this issue." Moreover, the administration will have trouble finding enough support in Congress, where Republicans will try to keep Obama from turning the issues of climate change, financial regulation and health-care reform into a trifecta of legislative achievement heading into November's midterm elections. Senate Republicans immediately challenged Obama's call to action, saying he is using the gulf disaster to promote legislation that would undermine the nation's economy. "Instead of devoting every possible resource to getting the gulf cleaned up, the Obama administration is once again using a crisis to push its job-killing agenda," said Rep. Tom Price (Ga.), chairman of the Republican Study Committee. "The president seems to think American ingenuity cannot produce 21st-century energy solutions unless Washington raises the cost of everything Americans buy with a national energy tax." Senate Democrats have said for weeks that they hoped to bring a climate bill to the floor this summer, but the prospects for that have been in doubt. The White House was unclear about its preferred timing, and the sole Republican cooperating on the bill, Sen. Lindsey O. Graham (S.C.), pulled out of the talks, accusing the Democrats of prioritizing immigration reform over energy reform in an attempt to score political points. Graham said he still supports the bill in principle, but his willingness to bring other Republicans on board is in question. The oil spill initially made the White House more reluctant to push the climate bill, fearing that the public would see Obama as focusing on a political problem instead of the environmental one. But Senate Democrats are now voicing confidence about the legislation's chances, and White House aides say they see a "window." Schiliro, the administration's legislative liaison, visited senators this week to discuss the measure, while Emanuel called Senate Majority Leader Harry M. Reid (Nev.) and other Democrats to alert them to Obama's Carnegie Mellon speech and to reiterate the president's desire to have the bill come up this summer. The biggest sticking point on a Senate measure, aides said, would almost certainly be language about expanding offshore drilling, which had been intended as way to draw Republican support but is now looking far more questionable in light of the disaster. Also welcoming Obama's more aggressive rhetoric were House Democrats, who have lamented for months that the Senate has not moved more quickly. The House passed its own bill limiting carbon emissions a year ago.

335 Drew Hammill, a spokesman for House Speaker Nancy Pelosi (D-Calif.), said Obama's remarks were "extremely helpful" in the effort to get legislation through the Senate and into a conference. "He's turning up the volume," Hammill said. Staff writer Alec MacGillis contributed to this report. Steven Mufson and Michael D. Shear Obama hopes oil spill boosts support for climate bill June 3, 2010; A01http://www.washingtonpost.com/wp- dyn/content/article/2010/06/02/AR2010060200380.html?wpisrc=nl_headline

The danger of a government with unlimited power By George F. Will Thursday, June 3, 2010; A17 Today, as it has been for a century, American politics is an argument between two Princetonians -- James Madison, Class of 1771, and Woodrow Wilson, Class of 1879. Madison was the most profound thinker among the Founders. Wilson, avatar of "progressivism," was the first president critical of the nation's founding. Barack Obama's Wilsonian agenda reflects its namesake's rejection of limited government. Lack of "a limiting principle" is the essence of progressivism, according to William Voegeli, contributing editor of the Claremont Review of Books, in his new book "Never Enough: America's Limitless Welfare State." The Founders, he writes, believed that free government's purpose, and the threats to it, are found in nature. The threats are desires for untrammeled power, desires which, Madison said, are "sown in the nature of man." Government's limited purpose is to protect the exercise of natural rights that pre-exist government, rights that human reason can ascertain in unchanging principles of conduct and that are essential to the pursuit of happiness. Wilsonian progressives believe that History is a proper noun, an autonomous thing. It, rather than nature, defines government's ever-evolving and unlimited purposes. Government exists to dispense an ever-expanding menu of rights -- entitlements that serve an open-ended understanding of material and even spiritual well-being. The name "progressivism" implies criticism of the Founding, which we leave behind as we make progress. And the name is tautological: History is progressive because progress is defined as whatever History produces. History guarantees what the Supreme Court has called "evolving standards of decency that mark the progress of a maturing society." The cheerful assumption is that "evolving" must mean "improving." Progressivism's promise is a program for every problem, and progressivism's premise is that every unfulfilled desire is a problem. Franklin Roosevelt, an alumnus of Wilson's administration, resolved to "resume" Wilson's "march along the path of real progress" by giving government "the vibrant personal character that is the very embodiment of human charity." He repudiated the Founders' idea that government is instituted to protect pre-existing and timeless natural rights, promising "the re- definition of these rights in terms of a changing and growing social order."

336 He promised "a right to make a comfortable living." Presumably, the judiciary would define and enforce the delivery of comfort. Specifically, there could be no right to "do anything which deprives others" of whatever "elemental rights" the government decides to dispense. Today, government finds the limitless power of dispensing not in Madison's Constitution of limited government but in Wilson's theory that the Constitution actually frees government from limitations. The liberating -- for government -- idea is that the Constitution is a "living," evolving document. Wilson's Constitution is an emancipation proclamation for government, empowering it to regulate all human activities in order to treat all human desires as needs and hence as rights. Unlimited power is entailed by what Voegeli calls government's "right to discover new rights." "Liberalism's protean understanding of rights," he says, "complicates and ultimately dooms the idea of a principled refusal to elevate any benefit that we would like people to enjoy to the status of an inviolable right." Needs breed rights to have the needs addressed, to the point that Lyndon Johnson, an FDR protege, promised that government would provide Americans with "purpose" and "meaning." Although progressivism's ever-lengthening list of rights is as limitless as human needs/desires, one right that never makes the list is the right to keep some inviolable portion of one's private wealth or income, "regardless," Voegeli says, "of the lofty purposes social reformers wish to make of it." Lacking a limiting principle, progressivism cannot say how big the welfare state should be but must always say that it should be bigger than it currently is. Furthermore, by making a welfare state a fountain of rights requisite for democracy, progressives in effect declare that democratic deliberation about the legitimacy of the welfare state is illegitimate. "By blackening the skies with crisscrossing dollars," Voegeli says, the welfare state encourages people "to believe an impossibility: that every household can be a net importer of the wealth redistributed by the government." But the welfare state's problem, today becoming vivid, is socialism's problem, as Margaret Thatcher defined it: Socialist governments "always run out of other people's money." Wilsonian government, meaning (in Wilson's words) government with "unstinted power," is hostile to Madison's Constitution, which, Madison said, obliges government "to control itself." Thus our choice is between government restraint rooted in respect for nature, or government free to follow History wherever government says History marches. [email protected] George F. Will The danger of a government with unlimited power June 3, 2010; A17 http://www.washingtonpost.com/wp- dyn/content/article/2010/06/02/AR2010060203278.html?wpisrc=nl_pmheadline

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2 Jun - 15 Jun ¿Poner el parche antes de la herida?: Claves para entender y gestionar el riesgo corporativo Uno de los principales cometidos de cualquier gestor es crear valor sostenible en el tiempo para, de este modo, asegurar la supervivencia de la empresa. Por eso, resulta sorprendente comprobar la frecuencia con que se toman decisiones empresariales que infravaloran la importancia del riesgo –uno de los componentes esenciales del valor económico-, confundiendo la rentabilidad aparente con la real. De hecho, el origen de muchas de las crisis financieras se encuentra en esta indebida valoración del riesgo que, erróneamente, se considera inexistente o suficientemente controlado, señalan los profesores del área de Finanzas de IE Business School Francisco J. López Lubián y Pablo García Estévez, en el libro recientemente publicado “Cómo gestionar los riesgos corporativos”. El libro, escrito desde el punto de vista de un gestor de una empresa no financiera, ofrece las herramientas indispensables para que éste sea capaz de identificar, cuantificar y analizar los elementos clave de la gestión del riesgo de forma adecuada y evitar que se convierta en un problema. Existe una situación con riesgo en una empresa cuando hay una volatilidad en los resultados esperados, pero la futura evolución no es totalmente nueva. Es decir, la historia puede decir algo sobre el futuro, lo que permite analizar estas situaciones de riesgo como una distribución estadística sobre la que se tiene información previa para estimar parámetros como la media, la varianza, la desviación típica, etc. Sin embargo, los autores recomiendan no olvidar que un requisito fundamental para gestionar adecuadamente el riesgo empresarial es comprender que no se trata de un elemento objetivo, sino que depende del criterio subjetivo de los responsables económicos. “En la definición, cuantificación y gestión del riesgo empresarial debe primar el criterio de razonabilidad, más que la ilusión de la medida exacta a través de complicados cálculos matemáticos, que suelen tener una tendencia innata a disimular la ignorancia”. Universia Knowledge@Wharton: Esta crisis económica ha puesto de manifiesto las grandes dificultades que tienen las empresas a la hora de gestionar el riesgo. ¿A qué cree que se debe? Francisco J. López Lubián: Cuando alguien tiene un problema, una típica reacción equivocada es negar su existencia. Esta negación puede tomar diversas formas, desde considerar que “esto a mí no me afecta”, hasta el convencimiento de que “la culpa es de los otros”. Esto es lo que puede pasar con algunos riesgos concretos en empresas. O no se es consciente de su existencia (se piensa que es para otros), o se considera que es muy difícil de cuantificar y de gestionar. Pero dificultad no es lo mismo que imposibilidad.

338 En mi experiencia, cuando un gestor piensa en los riesgos de su empresa el problema que tiene es que no sabe cómo integrarlos. Por ejemplo, si tengo un apalancamiento financiero alto, cómo me puede afectar el riesgo de tipo de cambio. En muchos casos, falta una metodología que ayude a identificar e interrelacionar los riesgos. En definitiva, la solución es tratar de ser más proactivos en la gestión del riesgo, evitando reacciones desproporcionadas. Y tan desproporcionado es creer que el riesgo no existe, como pensar que sólo se puede actuar cuando se ha eliminado totalmente el riesgo. Universia Knowledge@Wharton: Dado este relativo fracaso, ¿cree que sería necesario un replanteamiento de la gestión del riesgo y otras herramientas usadas por los bancos y otros sectores? Pablo García Estévez: Más que un replanteamiento, habría que volver a la prudencia. Siempre se han tenido herramientas y protocolos. Otra cosa es que se les haya hecho caso. En nuestro libro explicamos una metodología para identificar riesgos y detallamos las herramientas financieras que se pueden utilizar para hacer coberturas de estos riesgos. Ahora estamos y vamos a seguir en una época de más conservadurismo, porque no hay alternativas. Antes de la crisis, los responsables de las inversiones eran capaces de esquivar a los comités de riesgo con la excusa de que si no aprobaban un proyecto, la entidad se quedaba fuera del mercado. Ahora volvemos al deber ser; los comités de riesgo recuperan la importancia que siempre han tenido. Esperemos que cuando se vuelva a una situación de crecimiento, no vuelvan los excesos. Universia Knowledge@Wharton: ¿Qué lecciones se han aprendido con esta crisis? López Lubián: La principal es que no se puede confundir rentabilidad aparente con rentabilidad real o económica. Y que el riesgo es un componente esencial de la rentabilidad económica. Siempre que se confunde la rentabilidad aparente con la real es porque se infravalora el riesgo. En el caso de la crisis actual, todo empezó por un valor aparente (mágicamente desaparecía el riesgo) creado por activos titulizados que se basaban en créditos hipotecarios de tipo subprime. Estos activos titulizados pasaron de ser las estrellas del firmamento financiero, a unos parias infectados ó tóxicos: la rentabilidad aparente se convirtió en pérdidas reales que se extendieron como un cáncer. He aquí algunas otras lecciones que todos deberíamos aprender de esta crisis: • No delegar el control y la gestión del riesgo en las agencias de rating. • Estar preparado por si pasa lo que creemos que nunca pasará. • No apurar al máximo el apalancamiento financiero. La flexibilidad siempre tiene recompensa. • Conocer la exposición a los riesgos que tenemos en nuestro balance. A modo de ejemplo. Ahora todo el mundo (que puede) está dedicado a refinanciar y reestructurar su deuda. En estos momentos es cuando se nota si los que negociaron la deuda comprendieron y tuvieron en cuenta los riesgos que asumían. Universia Knowledge@Wharton: El libro se centra en la gestión del riesgo bajo la perspectiva de un directivo de una empresa no financiera. En este sentido, ¿qué tipos de riesgo existen? ¿Son todos igualmente fáciles de gestionar? López Lubián: En nuestro libro, proponemos una metodología para analizar riesgos, distinguiendo entre riesgos operativos y riesgos financieros. Los riesgos operativos se relacionan con los aspectos operativos de la empresa, y se

339 identifican y miden de manera semejante a cómo se clasifican las operaciones de la empresa. En general, el riesgo operativo de una empresa no financiera se puede medir por la volatilidad de los flujos de caja que genera. A mayor volatilidad los flujos, mayor riesgo operativo. El riesgo financiero se mide por el grado de participación de la deuda en la financiación de los activos de la empresa. Es, decir, el apalancamiento financiero. Para una empresa no financiera, los riesgos operativos son más relevantes que los financieros. De hecho, se producen problemas financieros cuando se mantiene una política de endeudamiento que no es coherente con los flujos que genera la empresa. O dicho de otra manera: el mejor indicador de la salud financiera de una empresa es su capacidad de generar flujos de caja de manera sostenible, fiable, estable. Universia Knowledge@Wharton: ¿Cree que, hoy en día, las empresas están tomando suficientemente en cuenta la importancia del riesgo a la hora de tomar decisiones o están mirando demasiado a lo que hace el vecino, tal y como sugieren en el libro? García Estévez: Mirar al vecino es consecuencia de no tener suficiente información para actuar por sí mismo. Y este comportamiento se da tanto en situaciones de crisis como de bonanza. Cuando hay crisis, todo el mundo se preocupa por el riesgo. Cuando el problema es gestionar el crecimiento, al que habla de riesgo se le tacha de agorero. Ni una cosa, ni otra. La solución está en analizar las decisiones empresariales conjugando el equilibrio rentabilidad/riesgo. Algunas reglas básicas: Regla 1: No hay rentabilidad sin riesgo. Aunque estamos acostumbrados a hablar de rendimiento y después del riesgo, la realidad es al revés. El rendimiento es el pago por soportar un riesgo. El gestor debe analizar si el rendimiento prometido satisface la exposición al riesgo de la empresa. Regla 2: Conocimiento. Lo primero que debemos hacer es estudiar y entender los riesgos a los que nos exponemos. Si no lo hacemos, es mejor no asumirlos. Si accedemos a mercados cuyos riesgos no comprendemos, podemos conducir nuestra empresa al desastre. Regla 3: Pedir ayuda a expertos. Los gestores no tienen por qué saber de todo, hay expertos que nos pueden ayudar a comprender los riesgos de ciertas inversiones. Si un banco se propone financiar una central termosolar, deberá asesorarse primero de la tecnología que pretende financiar, de sus circunstancias legales y de su evolución. En el fondo, son las personas las que gestionan los riesgos, no los algoritmos matemáticos. Regla 4: Comunicación. Cuanto más se implique el equipo directivo con la gestión del riesgo, más probabilidad tendremos de obtener una gestión eficiente del mismo. Tenemos que comunicar las amenazas y las contingencias potenciales a todo nuestro equipo. Universia Knowledge@Wharton: En general, ¿en qué errores caen las empresas cuando tratan de medir el riesgo? ¿Y qué recomendaciones les dan para medirlo y que no se convierta en un problema? López Lubián: Los errores más comunes son: primero, identificar incorrectamente los riesgos, lo que incluye pensar que “no nos afecta”; segundo, confundir la rentabilidad aparente (sin riesgo) con la real (con riesgo); y tercero, no emplear adecuadamente los instrumentos de cobertura. Una recomendación para el gestor es que utilice asesoramiento externo que aporte soluciones concretas. Por ejemplo: El riesgo operativo depende de la volatilidad de los flujos de caja.

340 ¿Qué acciones se pueden implantar para reducir esa volatilidad? O también, ¿hay coherencia entre las políticas operativas y financieras de la empresa? ¿Tenemos un apalancamiento financiero razonable? Universia Knowledge@Wharton: ¿Con qué instrumentos cuentan? ¿A qué desafíos se enfrentan hoy en día? García Estévez: Esta crisis no ha creado nuevos instrumentos de cobertura de riesgos. Lo importante es utilizarlos correctamente, sin confundir especulación con cobertura. Para afrontar los desafíos sugiero los siguientes pasos: 1) Identificar el riesgo/riesgos 2) Analizar si es necesario/posible cubrirlo 3) Buscar qué contrato minimiza las posibles pérdidas, a un coste razonable? 4) Y, finalmente, desgranar cuál es el momento para formalizar el contrato? Universia Knowledge@Wharton: ¿Qué lugar ocupa la gestión del riesgo en las empresas españolas? García Estévez: Si hablamos de empresas no financieras, hay que diferenciar entre las grandes empresas y el resto. Las pequeñas y medianas empresas suelen carecer de una cultura financiera que les permita gestionar el riesgo como, en teoría, lo hacen las grandes empresas. En la mayoría de las ocasiones, la gestión del riesgo se concreta en el seguimiento de los proyectos. Es sorprendente la facilidad con que se toman decisiones que luego no tienen un seguimiento adecuado.

Publicado el: 02/06/2010 http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1898

El tigre enfermo: ¿Por qué Irlanda sigue sin ver la luz? El país apodado en el pasado como el “Tigre Celta”, por la transformación económica experimentada que le llevó a niveles de crecimiento extraordinarios, atraviesa actualmente una fase impresionante de mala suerte. Aunque la tempestad económica de los últimos dos años no haya esquivado a ningún país, pocos sintieron tanto su ira como Irlanda. Desde 2008 a finales de 2010, se espera que la economía irlandesa se contraiga un 11,6%, según datos del Fondo Monetario Internacional (FMI). “Irlanda es un desastre”, dice Desmond Lachman, investigador residente de American Enterprise Institute of Public Policy Research (AEI), un think tank de Washington, D.C. “Llamar recesión a lo que está sucediendo en Irlanda es un eufemismo. El país está, en realidad, a medio camino de la depresión”. El colapso, y el crecimiento vertiginoso que le precedió, fueron causados por una

341 confluencia de factores. Colaboró también la entrada de Irlanda en la zona euro en 1999. Los bajos tipos de interés fijados por el Banco Central Europeo (BCE) alimentaron el boom inmobiliario en el país, que fue alegremente sostenido por el Gobierno. “El Gobierno quería que la explosión del sector inmobiliario y comercial siguiera adelante dada su importancia para el empleo, el consumo y otros indicadores económicos”, señala Mary O'Sullivan, profesora de Gestión de Wharton. “En algún momento, el Gobierno se convirtió en rehén de ese ciclo y arremetió contra todos los que decían que la prosperidad era insostenible”. Pero cuando el mercado inmobiliario se sobrecalentó, desmoronándose a continuación, arrastró a la economía irlandesa. ¿Será posible volver a aquellos días de gloria? “No creo que Irlanda pueda volver a los mismos niveles de crecimiento de los años de prosperidad”, afirma Melanie Bowler, economista de Economy.com, de Moody’s. “Ese tiempo ya no volverá”. Tiempos de provocación En los últimos 20 años, Irlanda fue testigo de dos momentos diferenciados de prosperidad económica. A finales de los años 80 y 90, la economía del país se alimentó, en gran medida, por la cuota reducida del impuesto a las empresas —hoy en un 12,5%— y también por montantes considerables de inversiones directas externas, principalmente de EEUU y de países europeos. De acuerdo con Economy.com, las empresas extranjeras empleaban cerca de un 15% de la fuerza de trabajo del país antes de la recesión y continuaban representando aproximadamente un 90% de las exportaciones, entre productos farmacéuticos, químicos y de alta tecnología. Según observa Philip Nichols, profesor de Estudios jurídicos y de Ética en los negocios de Wharton, “Irlanda estaba en el sitio acertado, en el momento adecuado, ya que se trata de país de lengua inglesa y con instituciones fuertes y confiables; posee una fuerza de trabajo relativamente bien instruida que aceptó ganar salarios comparativamente bajos y que acogió al libre comercio de la Unión Europea. Junto con él, vino la industria de alta tecnología, de movilidad relativamente fácil y que buscaba un hogar”. La segunda mitad del crecimiento, después del año 2000, fue obra del sector inmobiliario. El BCE mantuvo los tipos de interés bajos durante la década pasada mientras las grandes economías de la zona del euro, Alemania y Francia entre otras, crecían lentamente. El PIB de Irlanda aumentaba rápidamente, y el dinero barato era como gasolina en la hoguera. “La economía se sobrecalentó”, observa Diego Iscaro, economista senior de la empresa de investigaciones IHS Global Insight. “Eso llevó no sólo a un aumento enorme del gasto del consumidor, sino que también hizo prosperar al sector inmobiliario”. El gobierno irlandés, con sus políticas fiscales, hizo muy poco para atenuar tales excesos. “Se redujeron los impuestos sobre ganancias de capital y el Gobierno dio incentivos a los inversores de bienes inmuebles”, dice O'Sullivan. “Si el Gobierno hubiera querido acabar con la burbuja inmobiliaria, debería, ante todo, haber puesto fin a las amnistías fiscales”. Con relación a las restricciones que la UE imponía a los gobiernos de los países, O'Sullivan añade: “No hay evidencias de que el Gobierno, si hubiera tenido control sobre la política monetaria, habría actuado con sensatez estallando la burbuja inmobiliaria”. Esa burbuja es lo que Lachman, del AEI, llama “la madre de todos los booms inmobiliarios”. De acuerdo con un estudio publicado en diciembre de 2009 por Morgan Kelly, profesor de Economía del Centro de Investigación Económica de la Universidad College Dublín (UCD), en los años 90 la construcción de viviendas en el país aumentó del 4% al 6% del PIB— franja típica de cualquier nación desarrollada —

342 hasta un 15% en 2007. Otros tipos de construcción contribuyeron con un 6% más a la renta nacional. Los bancos prestaban con avidez y satisfacción, lo que ayudó a empujar los precios de la vivienda hasta niveles estratosféricos. En 1995, quien compraba una casa por primera vez contrataba, de media, una hipoteca equivalente a tres veces la media anual de ingresos de un trabajador irlandés. A finales de 2006, ese número se había disparado llegando a ocho veces el valor de los ingresos anuales de un trabajador, según datos del UCD. La preparación de un desastre Entre 2001 y 2007, el PIB de Irlanda creció una media del 5,5% al año frente a un 1,9% registrado en toda la zona euro. Todas las actividades de construcción, entre las que se incluyen impuestos sobre ventas de casas, ayudaron a llenar los cofres del Gobierno irlandés, que pasó a depender exageradamente de esos fondos. Esa mezcla de factores, junto con los aumentos de salarios concedidos a los funcionarios públicos, impulsó la renta per cápita, haciendo que el país se volviera cada vez menos competitivo. Las señales de que algo no iba bien comenzaron a aparecer a principios de 2007. Las pérdidas de los bancos aumentaron, el crédito se contrajo y el desempleo se disparó. De acuerdo con el estudio de la UCD, los nuevos precios de la vivienda y de las propiedades comerciales podrían llegar, a fin de cuentas, a 2/3 del valor que tenían cuando estaban en auge. Con la caída en la recaudación de impuestos, el déficit del Gobierno se hinchó llegando a un porcentaje estimado del 14,3% del PIB. Hoy, el país se prepara para una desaceleración prolongada y una recuperación frágil. Las repercusiones de la pérdida de la ventaja competitiva que tanto atrajo a los inversores han sido terribles. A principios de 2009, Dell, peso pesado de la industria de ordenadores, anunció que estaba cerrando una fábrica en Limerick, la mayor fuera de los EEUU. La empresa despidió a 1.900 trabajadores y transfirió las operaciones a Polonia, donde la mano de obra es más barata. Irlanda, que antes era un país barato para las empresas, hoy es el segundo más caro de la zona del euro después de Luxemburgo, según datos de un informe de 2009 del FMI. El porcentaje de capital extranjero invertido en la zona del euro cayó drásticamente de cerca de un 13%, en 2001, a aproximadamente un 6% en 2007”. La gran interrogación que pesa sobre el país en el transcurso de los próximos 15 años, y que tiene que ver con su estrategia de desarrollo, es la siguiente: ‘¿Y ahora qué?’”, dice O'Sullivan. “Irlanda ha ganado fama de destino internacional de las inversiones y, en consecuencia, el país ha crecido en volumen de exportaciones y en productividad. Pero no ha sido fácil pasar de eso a convertirse en una economía extremadamente innovadora por mérito propio. Por lo tanto, a Irlanda le faltan los fundamentos de una prosperidad sostenible en lo que se refiere a los indicadores económicos que las personas valoran más, como empleo y salarios”. La respuesta del Gobierno contrastó poderosamente con la de otros países debilitados. Mientras Grecia se movía despacio, el Gobierno irlandés recortó los gastos rápidamente. Los salarios de los trabajadores públicos cayeron entre un 5% y un 15%, y se redujeron los beneficios sociales. En cierta manera, el Gobierno irlandés no tuvo elección: si no ponían la casa financiera en orden, los costes de financiación de la deuda pública habrían llegado a niveles impensables y dejado al país al borde del impago. Sin embargo, el Gobierno no actuó deprisa en lo que concierne a la introducción de un plan de rescate para los bancos necesitados. En 2009, el Gobierno nacionalizó el Anglo

343 Irish Bank, invirtió 3.500 millones de euros en otras dos instituciones financieras y creó la Agencia Nacional de Gestión de Activos (NAMA) para la adquisición de préstamos problemáticos de los bancos irlandeses. El Gobierno anunció un paquete de medidas el 30 de marzo —apodado en el país “Rescate Financiero del Martes”— para controlar las acreedoras hipotecarias Irish National Building Society y EBS Building Society, inyectando al mismo tiempo 8.000 millones de euros en Anglo Irish Bank. Elevó también el capital que los bancos deben tener para hacer frente a pérdidas. Con las manos atadas Aunque Moody’s haya rebajado la deuda soberana de Irlanda el verano pasado, los mercados no parecen creer en un posible impago. Pero a medida que la situación en Grecia se hace más aguda con protestas y actos violentos en respuesta al plan de austeridad del Gobierno, los inversores están cada vez más nerviosos con el volumen de la deuda de los países en dificultades, como Irlanda. Jon Taylor, director-gerente de bonos globales e internacionales de Principal Global Investors, de Londres, resalta que con el empeoramiento de la situación de Grecia, las tasas referentes a los bonos a diez años del país subieron un 12% frente a cerca de un 5,8% para los bonos a diez años de Irlanda. Aunque los trabajadores públicos irlandeses estén protestando contra los recortes en sus salarios y beneficios, el país no parece, de momento, estar ante los mismos problemas observados en Grecia. “En Irlanda, se es consciente de lo que hay que hacer, y hay voluntad para llevarlo a cabo”, dice Taylor. El trabajo, sin embargo, todavía es enorme. El plan de austeridad tal vez calme los mercados de crédito, pero prolongará y profundizará la recesión en el país. Mientras, el desempleo ha llegado al 13,3% a finales de 2009 y el FMI espera que se sitúe, de media, en un 13,5% este año. Además de eso, los especialistas advierten que la NAMA no será la poción mágica que pondrá en orden el sector bancario, tal y como muchos esperan. El director de la institución reveló recientemente que el rendimiento de los préstamos que están siendo adquiridos por la agencia ha sido peor de lo que se imaginaba. La investigación de UCD muestra que aunque NAMA proporcione alguna estabilidad para los bancos, no será suficiente. A medida que otras fuentes de financiación que no sean depósitos —como títulos y préstamos interbancarios— vayan desapareciendo de los bancos, su balance patrimonial se reducirá aún más. Eso podría intensificar la caída del sector inmobiliario, elevando aún más las pérdidas por viviendas, creando lo que el informe llama bancos “zombies”, o instituciones totalmente dependientes de garantías gubernamentales y comprometidas exclusivamente con la reducción de sus deudas. En muchas cosas, las manos del Gobierno irlandés están atadas. Aunque EEUU y otros países hayan recurrido a paquetes de estímulo para poner en movimiento sus economías, la UE limita el tamaño de los déficits a sus miembros, lo que hace que ese esfuerzo sea imposible para Irlanda. Al mismo tiempo, como país miembro de la zona euro, Irlanda no puede devaluar su moneda, lo que haría sus exportaciones más competitivas dando a los irlandeses el alivio económico tan necesario. Sin embargo, formar parte de la UE es importante para Irlanda. El BCE proporcionó liquidez a las instituciones asociadas durante la crisis. La pertenencia a la UE permite también al país obtener préstamos a tasas menores que si tuviera que contratarlos por cuenta propia, ya que los acreedores saben que la UE no permitirá que un país miembro deje de cumplir con sus compromisos. Pero la situación de dificultad por la que pasa el país —y por la que pasan también otras

344 economías como Grecia, España y Portugal— está probando los fundamentos de la UE. John Kimberly, profesor de Gestión de Wharton, dice que la UE se pregunta actualmente hasta qué punto los países miembros que gozan de buena salud tendrán que esforzarse para ayudar los que se encuentran en situación financiera amenazadora, e incluso se pregunta: ¿esos países deberían ser expulsados de la zona del euro en caso de que no pongan sus finanzas en orden? Además de eso, él dice que la UE necesita encontrar una forma de equilibrar la necesidad de unidad con la realidad del ritmo de desarrollo de cada economía asociada. El mes pasado, la UE anunció un paquete de ayuda de 750.000 millones de euros para los países con endeudamiento elevado. “¿Dónde están los elementos de estandarización en los países miembros y a partir de dónde es posible crear elementos de adaptabilidad?”, se pregunta Kimberley. “La situación suscitó interrogantes serios en las mentes de muchos en lo que concierne a la viabilidad de una UE ampliada y, más aún, de su propia existencia. El paquete de ayuda propuesto tiene como objetivo, sin lugar a dudas, demostrar la creencia en la viabilidad de esa idea. El tiempo lo dirá”. Mientras el paquete de ayuda se pone en práctica, hay datos positivos para Irlanda. La recesión y la caída de la renta personal ayudarán al país a recuperar parte de la competitividad perdida. La cuota reducida de impuestos continúa intacta, un factor que deberá atraer la inversión extranjera a medida que la economía se recupera. “Irlanda cuenta con una ventaja tremenda en relación a la mayor parte de las economías emergentes”, observa Nichols, de Wharton. “No hay barreras comerciales entre el país y la mayor economía del mundo. En la medida en que los consumidores y las industrias europeas vayan recuperándose, el país estará bien posicionado para satisfacer las necesidades de esos mercados”. Publicado el: 02/06/2010

02/06/2010 http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1897

La búsqueda urgente de nuevas estrategias para financiar el sistema de jubilación Tras la crisis financiera global, los sistemas de jubilación de todo el mundo, presos de incontables problemas, se enfrentan ahora a nuevos desafíos que pueden tener como resultado la reducción drástica de las pensiones de los jubilados. Además, los trabajadores más jóvenes podrían tener que alargar su vida laboral, observa Olivia S. Mitchell, profesora de Gestión de Seguros y de Riesgo de Wharton. En reciente trabajo de investigación titulado “Implicaciones de la crisis financiera para la seguridad de la jubilación a largo plazo” ""Implications of the Financial Crisis for Long Run Retirement Security,"], Mitchell, que es directora del Consejo de Investigaciones de Pensiones de Wharton, describe una serie de nuevos riesgos para la estabilidad del sistema de jubilación, que van desde el ahorro individual inadecuado hasta la incertidumbre global, que ha resurgido como consecuencia del colapso

345 financiero. Las generaciones actuales y futuras ya no podrán depender de un modelo “anticuado” de jubilación en que el trabajador ahorra durante los años de servicio activo, necesitan comenzar a pensar en nuevas estrategias de financiación de la vejez, dice. “Es irónico y triste saber que en el momento en que estamos a las puertas del envejecimiento global y de la jubilación de la generación del baby boom [nacida en la posguerra], el sistema que esperábamos que fuera a ampararlos parezca tan frágil.”" Mitchell es también directora asociada del Financial Literacy Center [Centro de Alfabetización Financiera], institución de investigaciones de Wharton en asociación con Dartmouth College y Rand Corp. Creado en 2009, con el respaldo de la Administración de la Seguridad Social de EEUU, el centro investiga las barreras a la alfabetización financiera y está recogiendo datos sobre los programas que funcionan. (Ver la entrevista sobre alfabetización financiera de Knowledge@Wharton con Annamaria Lusardi, que liderará el nuevo Centro, y Michelle Greene, secretaria asistente interina de educación financiera del Departamento del Tesoro de EEUU, en: [Tackling Financial Illiteracy -- and the Costs that Go With It]). Diversas agencias gubernamentales y organizaciones sin ánimo de lucro están trabajando para formar en conceptos financieros a trabajadores de la Seguridad Social, observa Mitchell. “La Seguridad Social cree que debe estar al frente de ese proceso por el hecho de ser la mayor organización gubernamental dedicada al problema del envejecimiento y de la jubilación”. El fin de la jubilación precoz En su estudio, el primer nivel de riesgo que Mitchell identifica se refiere a las personas que se ven obligadas a financiar una parte cada vez mayor de su jubilación a medida que la dependencia de las pensiones de las empresas se muestra cada vez más frágil. Ella dice que hay una falta alarmante de comprensión acerca de conceptos económicos importantes —como el concepto de inflación y el valor de los intereses compuestos sobre el ahorro destinado a la jubilación— en EEUU y en todo el mundo. Ahorrar para la jubilación es particularmente difícil para las personas que no tienen una alfabetización financiera básica, dice ella. El estudio cita una investigación según la cual, en un universo nacional representativo de americanos en la franja de los 50 años, sólo un 18% sabía lo que era interés compuesto. “El riesgo de inflación también me preocupa mucho porque temo que tengamos que enfrentarnos a una tasa de inflación muy alta en los próximos años”, dice Mitchell. La investigadora observa que a las personas siempre les resulta difícil adecuar sus inversiones a la inflación después de haberse jubilado. Un activo útil en ese sentido, dice ella, y que podría ser incluido en las carteras de jubilación, son los Títulos del Tesoro Protegidos contra la Inflación [Treasury Inflation-Protected Securities, o TIPS]. El capital del TIPS aumenta con la inflación y disminuye con la deflación, según la medición hecha por el Índice de Precio al Consumidor. En el vencimiento del título, los inversores reciben el capital reajustado o el capital original, lo que sea mayor. El riesgo de la longevidad, es decir, la posibilidad de que los jubilados sobrevivan a sus ahorros, es otro problema. La investigación muestra que mucha gente subestima sus oportunidades de tener una vida larga y, en consecuencia, deja de ahorrar lo suficiente para toda la vida. Mitchell señala que algunos actuarios británicos fijan ahora en 125 años la edad de referencia para los precios de los contratos de seguros. En EEUU, la edad de referencia es de 120 años. Una forma de evitar el riesgo de la longevidad consiste en adquirir una anualidad (el

346 comprador deposita dinero, como inversión) de una compañía de seguros que pague beneficios al jubilado durante toda su vida. Esos planes encuentran resistencia en virtud del rechazo por parte del jubilado para entregar sus ahorros a un proveedor de anualidades, y también debido a la incertidumbre sobre la estabilidad de las compañías de seguros. La crisis financiera generó un rechazo aún mayor en lo que concierne a la compraventa de anualidades. De hecho, dice Mitchell, el colapso de AIG, que tuvo un gran impacto sobre el público, “lanzó una sombra” sobre la industria de seguros, aunque los problemas de la empresa no se deban al negocio tradicional de esa industria. Diversas compañías de seguros recibieron ayuda de los órganos reguladores, lo que les permitió operar con las reservas agotadas. Otras piensan pedir ayuda federal, actitud que Mitchell clasifica en su estudio como “un hecho que inspira preocupación”. Para la profesora, una forma de protegerse contra los ahorros incompatibles con la jubilación consiste en trabajar hasta después de los 70 años. La investigación muestra que si las personas pudieran aplazar la jubilación en dos o cinco años, conseguirán mejorar significativamente su seguridad financiera cuando se jubilen. Postergar la jubilación no sólo permite a los trabajadores ahorrar e invertir más durante los años de más empleo, también les permite aplazar el día en que el ahorro acumulado se acabe. “Para las generaciones más jóvenes”, dice ella, “75 años sería una buena meta de jubilación precoz, y más tarde aún si fuera posible”. En el escenario económico actual, en que relativamente poca gente ejerce actividades que exigen esfuerzo físico, Mitchell dice que el trabajador puede continuar trabajando durante mucho tiempo. De acuerdo con la profesora, varios estudios muestran que trabajar más tiempo mejora la salud en la vejez. Los empleadores, sin embargo, van a querer contratar a quienes se mantengan actualizados, por lo tanto el aprendizaje y el entrenamiento continuo deben ser un proceso que perdure toda la vida. “El aprendizaje no termina después de que el individuo se forma. Es preciso reciclarse todos los años, y no parar a los 50 o 60 años”, dice Mitchell. “Tenemos que volver a pensar en el proceso de inversión en el capital humano y la adquisición de conocimientos, y continuar aprendiendo durante toda la vida”. Riesgo en todos los niveles Otro nivel de riesgo analizado por el estudio tiene que ver con las instituciones que supervisan las pensiones públicas y privadas. “La crisis financiera ha puesto en el punto de mira algunos problemas muy arraigados en las pensiones corporativas”, dice Mitchell, que cita a GM, con un pasivo de pensiones descubierto de US$ 20.000 millones, como ejemplo de la magnitud de los problemas a los que se enfrentan muchos planes corporativos tradicionales de beneficio definido. En el estudio, la profesora señala que varios de esos planes invirtieron fuertemente en acciones y se vieron afectados por las devaluaciones ocasionadas por la desaceleración de la economía. En el sector público, Estados y municipios disponen, de media, de cerca de la mitad del dinero necesario para el cumplimiento de sus obligaciones con las pensiones, informa el estudio. Mientras, las reaseguradoras del Gobierno creadas para proteger las pensiones, como Pension Benefit Guaranty Corporation (PBGC), en EEUU, y Pension Protection Fund, en Reino Unido, también andan con problemas financieros. “Aunque PBGC tenga dinero suficiente para cubrir las jubilaciones actuales, no es solvente a largo plazo, y podrá necesitar un plan de auxilio financiero semejante al TARP [Programa de alivio para activos problemáticos]”, dice Mitchell. “Las pensiones, como institución, están en situación difícil en muchos países”. Los planes individuales conocidos como 401(k) [en que el trabajador invierte parte de lo

347 que gana en una cuenta especial] ayudarán a suplir el déficit financiero de mucha gente, dice Mitchell, pero no de todos, ya que el colapso del mercado bursátil durante la crisis también afectó a estos planes duramente. Al mismo tiempo, dice ella, factores de comportamiento —como la tendencia a invertir insistentemente en las acciones del empleador y evitar recurrir a anualidades— continúan limitando la posibilidad de los planes de contribución definida de proporcionar la seguridad para la jubilación. “Los planes del tipo 401(k) son parte de la respuesta, pero no son toda la respuesta”. La crisis financiera y la caída acentuada de los precios de las acciones también desafían el pensamiento tradicional sobre la constitución de carteras que exigen un riesgo mayor por parte de los trabajadores más jóvenes que podrían beneficiarse de ganancias más generosas en el mercado bursátil, pero que aún tienen tiempo para recuperarse del colapso económico. Muchas empresas con planes 401(k) han incluido automáticamente al trabajador en la fecha de jubilación fijada por la compañía. Los fondos basados en ese modelo de ciclo “de vida” tienen, en general, mayor exposición al mercado bursátil en el caso de los trabajadores más jóvenes, sin embargo los gestores de esos fondos reequilibran sus carteras con inversiones más seguras como obligaciones, a medida que el momento de jubilarse se aproxima. “El hecho es que cualquier cartera repleta de acciones el año pasado ha tenido un pésimo rendimiento, lo que desafía la estrategia de auto-inclusión en la fecha objetivo de vencimiento futuro de los fondos”, dice Mitchell. La existencia de problemas de ámbito nacional también es una amenaza para la renta del jubilado, dice Mitchell. Al decidir cuánto ahorrar y cuándo jubilarse, es fundamental que se tenga alguna idea sobre impuestos futuros, inflación y costes de salud, escribe Mitchell. “Sin embargo, simplemente no hay buenos pronósticos”. Además de eso, los programas de jubilación del Gobierno, como la Seguridad Social en EEUU, están cediendo por el peso de la población cada día más vieja combinado con los déficits de ingresos y la demanda cada vez mayor de los trabajadores desempleados. Mitchell dice que debido a la severa recesión, más gente desempleada ha decidido jubilarse o buscar los beneficios de la Seguridad Social. Por esa razón, el sistema tendrá menos ingresos que el montante que tendrá que pagar este año, un umbral que la agencia no esperaba alcanzar hasta 2016. Mitchell destaca que aunque Medicaid, programa de salud del Gobierno estadounidense para los pobres, se enfrenta a nuevas presiones debido al clima económico, así como a nuevas cláusulas previstas en la reciente legislación de reforma de la salud que hace imperativa la cobertura de salud de largo plazo. La recuperación de la economía podría revertir esa tendencia durante algún tiempo, dice ella, “pero el problema es que estamos en el filo de la navaja”. Además del riesgo en el ámbito nacional, la crisis financiera ha mostrado que la economía global tampoco es necesariamente un puerto seguro para la inversión. “En los viejos tiempos, aprendíamos que teníamos que diversificar nuestras carteras globalmente y cosechar los beneficios de la diversificación geográfica”, dice Mitchell. “Ahora, a causa de la crisis financiera, nos dimos cuenta de que la marea sube y hunde todos los barcos al mismo tiempo. Simplemente no hay un beneficio significativo de la diversificación global tal y como se creía en el pasado”. Haciendo las cuentas Un requisito importante para la seguridad de la jubilación futura consiste en mejorar la educación financiera, dice Mitchell. “Si tuviera que hacer todo de nuevo, comenzaría educando a los niños a una edad temprana”. Su investigación muestra que en los Estados

348 donde los estudiantes de bachillerato han tenido clases de finanzas obligatorias, esos alumnos llegaron a la edad adulta con más conocimiento y más capacidad para lidiar con decisiones financieras fundamentales, como, por ejemplo, la planificación de la jubilación. Esos programas son más eficaces cuando los distritos escolares canalizan dinero para dar apoyo a la educación. No basta simplemente con obligar a que se enseñen finanzas en las escuelas. “Es preciso invertir algo más en eso”. Mitchell también se muestra preocupada por los trabajadores de mediana edad, que no tienen conocimientos básicos de matemáticas y finanzas, gente que puede ser cada vez más vulnerable a los golpes del sistema económico internacional. La autora reconoce que “su mensaje es objetivo y, me temo, no muy popular”. Ella dice que la crisis financiera ha dejado claro que los sistemas de jubilación de todo el mundo necesitan ser revisados de forma profunda. “La economía del siglo XXI requiere una perspectiva totalmente nueva sobre la gestión de riesgo de la jubilación”, dice. “Tenemos que crear una nueva estructura con asociaciones públicas y privadas para educar mejor a las personas acerca de los riesgos a los que se enfrentan. Ayudarlas a trabajar más tiempo, crear y forjar nuevas instituciones financieras y nuevos contratos, aprendiendo a regular productos y mercados en sintonía con un mundo de población envejecida”. Publicado el: 02/06/2010 http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1895

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Smaller euro nations trail Germany's 'locomotive' By Howard Schneider Washington Post Staff Writer Wednesday, June 2, 2010; A10 BAD MUNSTER-EBERNBERG, GERMANY -- Buy a bottle of champagne and it puts money in the pocket of Schneider and Co., a family-owned manufacturer that from a remote perch in the German countryside has created a global monopoly on the wire cages that secure the corks on sparkling wine.

Germany's imports and exports to Greece

Obscure in a country of marquee exporters such as Mercedes-Benz and Siemens, the company's international focus is common among small and often family-owned firms in Germany. Schneider's highly automated plants here and in Italy, Spain and Brazil churn out 2 billion of the devices a year. Its dominant market share -- amassed over 30 years -- helps explain Germany's complex and controversial role in the European economy. The nation's $200 billion annual trade surplus has been blamed as one cause of the current crisis -- Germany is cast as an industrial powerhouse drawing wealth from economically weaker nations like Greece with which it shares a currency. But conversations with economists and business people and an analysis of trade statistics paint a more complex picture of trade patterns that predate the euro by decades, and they show a German business culture organized around selling outside its borders. German companies "follow a very conservative approach," said Thomas Kraus, Schneider's chief executive. "We are happy to have a small profit, but a sustainable profit, a long-term profit. We have to go outside because the domestic market is limited."

350 Calls have grown for Germany to "rebalance" -- to buy more from struggling European neighbors so they can keep more money at home. German officials including Finance Minister Wolfgang Schäuble have been adamant that it is better to be Europe's "locomotive" than its open-wallet patron. Euro anxiety Germany's export success may in fact be difficult to replicate or -- in the case of eurozone nations like Greece -- reverse in the near term. "If you look at the volumes of exports and imports over the years, it has intensified," said Helge Berger, deputy chief of the division in charge of European policy at the International Monetary Fund. "But it is a very old pattern. The euro is a continuation rather than a structural break." As Greece stumbled toward a possible default on its government debt, the structure of the eurozone was cited as putting the country at a disadvantage. It has also sparked anxiety of a renewed global crisis. Without a national currency, Greece as well as larger debt-ridden economies such as Spain lack an important tool -- the ability to devalue their money and make their goods cheaper and more competitive. Germany is seen as the flip side of that equation -- the industrial powerhouse that profits by drawing money from European countries caught in the orbit of the common currency. But eurozone countries like Greece and Spain have run trade deficits with Germany since at least 1980 -- 20 years before the euro was established -- while a handful, like Ireland and the Netherlands, have trade surpluses with Germany. In one case, the countries serve as a large internal market for German manufactured goods and automobiles; in the other, they have profited by attracting German capital and business. Global strategy Talk to German businessmen and the conversation inevitably turns global -- a treatise into what supplies come from which countries, where finished products end up, and how niche manufacturing can support an industry. On the factory line at Nord Micro, workers take material from the United States, Mexico and Israel to make parts for the climate-control systems that go into Boeing and Airbus passenger jets, said Bjorn Kranz, a purchasing agent for the company. The drop in the value of the euro might make him look in eurozone countries for parts, he said, but his real focus is whether factories in Poland can make some of the more-advanced pieces he needs. "It is going more towards Eastern Europe because of the prices," he said. According to IMF statistics, since the introduction of the euro in 1999, Germany's trade surplus with the rest of the world has grown faster than its surplus with the other eurozone countries -- and faster still with European nations that have not adopted the euro. Some of Germany's most dramatic trade growth has been with the East European nations, like Poland, that opened themselves to market capitalism after the fall of the Berlin Wall -- a development that Germans were well positioned to exploit. Trade between Germany and the former Czechoslovakia, for example, was a few billion dollars annually before the country was dissolved in 1992. Trade between Germany and the Czech Republic grew to more than $80 billion in 2008. Trade with Slovakia, which recently adopted the euro, is around $20 billion and last year provided Germany with a $1 billion surplus. The Czech Republic and Slovakia both joined the European Union in 2004.

351 In the United States, increasing exports -- a way to generate jobs from another country's cash - - is among the Obama administration's top economic priorities. It is encouraging smaller companies to look outside the domestic market -- or move beyond exporting to a single supplier in a single country, a practice U.S. trade officials say they have noticed among American firms. For Axel Schramm, who has helped turn the upholstery and saddle-making shop created by his grandfather into a luxury mattress and bedding company, exports account for about 40 percent of his business. Most of those sales are to European countries, though the company is testing markets in Hong Kong, Japan and elsewhere for made-to-order, hand-assembled mattresses that start at around $5,000. Unlike U.S. companies, Schramm said, German firms don't have a continent-size domestic market for their goods. So they have created one abroad, working the trade fairs and interior design shows and carefully picking sales agents. "We don't have the power of a big company to start in a new country," he said at the showroom attached to the Schramm factory, where 100 employees produce about 7,000 mattresses a year, hand-fitting the metal springs into sleeves and sewing on the high-end coverings. "You have to work to find people in the right markets in the right place." Howard Schneider Smaller euro nations trail Germany's 'locomotive' June 2, 2010; A10 http://www.washingtonpost.com/wp- dyn/content/article/2010/06/01/AR2010060103890.html?wpisrc=nl_headline

352 Global Business

June 1, 2010 Spain Struggles to Agree on a Path to Recovery By RAPHAEL MINDER and LANDON THOMAS Jr. MADRID — Caught between a populace resistant to more austerity measures and investors demanding budget cuts and more flexible labor markets, the Spanish government is finding it increasingly difficult to keep a grip on power. Last week, the government of José Luis Rodríguez Zapatero narrowly won approval for an extra 15 billion euros, or $18.4 billion, in spending cuts — in an effort to bring the budget deficit down to 6 percent of the national economic output by 2011, from 11 percent last year. With labor unions and business leaders at loggerheads, Mr. Zapatero is also expected to present a plan for loosening labor rules this week. Three months ago, a package that reduced the pay of civil servants and made it easier to hire and fire workers would have been hailed as transformative, especially in an economy stuck in a recession for two years and nearing 20 percent unemployment. Instead, the proposals are being seen as a desperate bid by an unpopular government to remain in office. On Friday, Spain suffered another downgrade of its debt even as calls were increasing for early elections after the close budget vote. Together, the two events suggest to political leaders throughout Europe that voters and investors are fed up with the lack of resolve and leadership in dealing with the economic situation. “The government made a real mistake in being late in recognizing this crisis and continues to make a mistake in the ‘drip by drip’ measures to solve it,” said Jordi Sevilla, one of Mr. Zapatero’s former ministers. “You can only get credibility by presenting one strong and coherent package.” Coming up with something strong and coherent that would satisfy all the various constituencies is no easy task. And Mr. Zapatero is under pressure from all sides. In light of the international rescue package for Greece, investors want Spain to demonstrate that it can cut its bloated deficit fast enough to avoid emergency aid. Given the size of the Spanish economy, a rescue would be much more costly than the Greek bailout. Yet a debt default or severe restructuring would be even worse, crippling foreign banks whose lending underpinned Spain’s debt splurge. In domestic politics, meanwhile, the center-right Popular Party opposition is smelling blood. The parliamentary review last week of the spending cuts, which Mr. Zapatero won by a single vote, suggests that an even bigger struggle looms in budgetary talks later this year, perhaps even requiring him to call early elections. In fact, most Spaniards now say they would like to cast their vote again, according to an opinion poll conducted by Sigma Dos and published Sunday by the newspaper El Mundo.

353 Mr. Zapatero, whose term in office is due to end in 2012, requires support from smaller parties to pass legislation because his Socialist party does not command a majority in Parliament. Adding to the government’s woes, labor unions, a mainstay of the Socialists, have started to rally against Mr. Zapatero’s plans for change. Civil servants are expected to strike next week over a 5 percent cut in their wages. Unions also warned last week that a general strike would be their response to any “hurtful” labor market changes. Even though early elections are rare in Spain, they are now “absolutely” needed, said José María Aznar, the center-right former prime minister who led Spain into the euro. “The problem is not if we have a government of the right or the left,” Mr. Aznar said. “It’s a question of competence, and at the moment we just don’t have a competent government. Living six more months with this government is taking an enormous risk for this country.” The 19.7 percent jobless rate in Spain is almost twice the euro zone average of 10.1 percent — even as Spanish companies face some of Europe’s highest costs for dismissing workers with open-ended contracts, according to the World Bank. Trying to avoid rigid labor rules, employers have shifted a quarter of the country’s work force to temporary contracts, helping explain the sharp swing in Spain’s employment level. The result has been to pass the pain mostly on to younger workers because older employees are generally well protected. “For 10 years, we were the machine for creating employment in Europe, and now we have turned into the machine for destroying employment,” said Ángel Torres Torres, secretary general for economic policy and international affairs in the Spanish Economics Ministry. Mr. Zapatero has pledged to cut the budget deficit to 3 percent of gross domestic product by 2013 — the limit under euro rules — from 11.2 percent in 2009. Spain’s central bank said on Monday the latest austerity measures “strengthened substantially” the likelihood of reaching that goal. But the government also lowered its 2011 growth forecast on Friday to 1.3 percent from 1.8 percent. Moreover, many private economists are skeptical of those projections, which suggest that Spain could fall far short of its deficit-cutting goals. Mr. Zapatero recently warned the rich to expect higher taxes, an indication that his austerity package was not yet complete. In the government’s defense, José Manuel Campa, the deputy finance minister, argued that officials were not dithering, but could only introduce changes as fast as Spain’s divisive political context allowed. “We’re a government that does not have a parliamentary majority, so we need to think about the right timing for every measure,” he said. In neighboring Portugal, the main rival parties recently agreed on an austerity package, but in Spain the Popular Party voted against spending cuts last week, without convincing most analysts that it had anything better to offer. With 25 billion euros in refinancing coming due in July and with Spain’s cost for issuing new debt now elevated by more than a full percentage point, Mr. Campa acknowledged that even the government’s best efforts may not appease impatient investors. “We have to get ahead of the curve for the markets,” he conceded.

354 Part of what worries investors is the tremendous overhang of souring real estate loans — the residue of Spain’s collapsed property boom — that languish on the balance sheets of the country’s banks. José García Montalvo, an economist in Barcelona, estimates that of the 450 billion euros in loans to the property sector, 165 billion euros are problematic and this number is bound to rise if real estate prices keep falling. Mr. Campa cited an International Monetary Fund stress test that concluded Spanish banks would need to raise no more than 25 billion euros against bad loans. Spaniards once thought their country was largely insulated from the debt crises in Ireland and Greece. Their mood has changed from giddy, when their homes tripled in value and they were protected by an elaborate safety net of public aid and family support, to grim. Always a country of savers — in contrast to Portugal and Greece — Spaniards have begun to sock away even more. Household savings have almost doubled in two years to 19 percent, according to data from Spain’s central bank. Now, as they make their own sacrifices, some wonder whether Mr. Zapatero, who has been broadly criticized for not owning up to the seriousness of the crisis, can bring himself and other officials, particularly those in the regional governments, to do the same. “He spends money on everything, from cars for his ministers to recreation facilities for the trade unions,” said Adriano Molina, a retired lawyer in Madrid. “But we can no longer afford all that.”

RAPHAEL MINDER and LANDON THOMAS Jr.Spain Struggles to Agree on a Path to Recovery June 1, 2010 http://www.nytimes.com/2010/06/02/business/global/02peseta.html?ref=business

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Foxconn raises pay by 30% in China By Kathrin Hille in Beijing and Tom Mitchell in Hong Kong Published: June 2 2010 06:29 | Last updated: June 2 2010 18:59 Foxconn, the world’s largest electronics contract manufacturer, has upped the scope of a planned pay rise for its workers in China by one-third, underscoring the growing pressures for better working conditions in the country’s export manufacturing base. Wages for production workers in all Chinese factories of Foxconn companies were raised by 30 per cent as of June 1, according to Hon Hai Precision, the group’s Taiwan-based parent. Lex: Chinese wage inflation - Jun-02 Analysis: China: Showing the strain - May-28 Honda 24% pay offer fails to appease workers - Jun-01 In depth: Chinese labour - Jun-01 Chinese workers swap angst for anger - Jun-01 Last week, Foxconn, which has been thrown into the international spotlight after a series of worker suicides at its manufacturing plant in Shenzhen, said it was planning to raise wages by an average of 20 per cent. Some labour activists had argued that Foxconn’s initial increase was not as generous as it seemed. China Labour Bulletin noted that government authorities in Shenzhen, a manufacturing centre where Foxconn operates a large factory complex, would announce a 10-20 per cent hike in the minimum wage on July 1. The pay rise comes amid a surge of debate about pay and other conditions for migrant workers labouring in the Pearl river delta, a manufacturing belt in southern Guangdong province dubbed the “workshop of the world”. The debate was triggered by the suicides in Shenzhen this year and by a rare strike at a Honda factory in Foshan. Hon Hai said on Wednesday that some group factories which had raised wages earlier this year would adjust the rise to bring workers’ pay to a level of 30 per cent higher than last year’s. Foxconn employs about 800,000 workers in more than 20 locations in China. Analysts said the unexpectedly large rise would put new pressures on Foxconn’s customers – companies such as Hewlett-Packard, Apple, Dell, Motorola and Sony which have their handsets, PCs and game consoles assembled by the Taiwanese-owned company. Hon Hai said it might pass on some of the financial burden from the pay rise to customers but it would take months to determine the net cost of the move. “There will be extra cost but also better efficiency as the rise is expected to lower the staff turnover rate,” Hon Hai said. Steve Jobs, Apple chief executive, said on Wednesday that he was upset about the suicides at Foxconn, and that Apple was sending outsiders to learn about conditions at the complex. “We’re all over this,” he said, adding that the facility “is not a sweatshop” but a complex with pools, restaurants and movie theatres. Meanwhile, Honda said its transmission plant in Foshan had restarted production after “a large portion” of the factory’s 1,800 workers accepted a 24 per cent wage increase to Rmb1,900 ($280) per month. http://www.ft.com/cms/s/0/46edc9aa-6e03-11df-ab79-00144feabdc0.html

356 Eurointelligence Daily Morning Newsbriefing Bundesbank suspects a French conspiracy 02.06.2010 German central bankers spread the story that French banks are dumping their Greek stocks onto the ECB – which is fast becoming a bad bank; Le Monde notes a perfume of divorce was hanging over Germany’s relationship with the ECB; eurozone unemployment rises everywhere, except in Germany; Spanish youth unemployment has reached 40%; Fitch downgrades the ratings of Spanish banks; Noyer says central banks are too dependent on rating agencies; European Commission propose new rules for rating agencies, including forcing the agencies to release all the information to all agencies; the euro falls to a four-year low against the dollar of $1.21; Rob Parenteau forecasts a massive increase in Spanish private sector indebtedness, as a direct consequence of the government’s austerity programme; Dennis Snower says the eurozone policies are not working because they are pro-cyclical, insufficiently transparent, and haphazard; Wolfgang Münchau says Horst Kohler was symbolised, more than any other politician, Germany’s drift into a neo- nationalism.

02.06.2010 Bundesbank suspects a French conspiracy

This is what happens when policy lacks transparency. We briefly referred to this Spiegel report yesterday, but since it has making big waves, we want to go back into some of the details. The report alleges that French banks, the largest holders of Greek, have been dumping their Greek bonds at the ECB, while the German banks have agreed with the finance ministry to hang on to their bonds until 2013. The article, whose are anonymous central bankers in Germany, says the Bundesbank wonders why the ECB was still buying Greek paper at a time when the financial shield is already in place. The answer is that they suspect a French conspiracy, according to the article, a presumption that French banks are using the ECB purchase programme to clean their balance sheet. The article then takes to the conclusion, and calls the ECB a “bad bank” . The article goes on to ask, whether and how the ECB can get out of this, because stopping the purchase programme would lead to a collapse in prices – as the ESCB is the only buyer. And if Greece were to restructure (which is what everybody who has looked into the numbers in some detail) knows, then the ECB itself would need to be bailed by the German taxpayer. We assume that this article is unlikely to win a Franco-German friendship prize. French newspapers have picked up on it, including Le Monde, which said yesterday that “a perfume of divorce float between the Germans and the ECB” (i.e. Trichet). Please also note that the source of Der Spiegel’s information do not hail from France. They are German central

357 bankers, who voice their suspicions. So do not treat it as fact that French banks are selling, and German banks are not selling. But the article raises an interesting question: how to prevent moral hazard arising in this situation? And if the ECB were to reveal what it bought in its open market operation, we would know a lot more. At present, the only information ordinary Germans have is the Spiegel report.

Eurozone unemployment rises everywhere except Germany One of the surprising and badly forecasts aspects of the recession has been German unemployment, which rose only marginally during the crisis, and is now falling strongly. In May, the unemployment rate stood at 7.7%, which is lower than during May 2009, while in all the other 26 EU member states, unemployment rose, most dramatically in the Baltic Republics, and Spain. The latter has a particular problem with youth unemployment, which has now reached 40% (and 30% in Italy according to La Repubblica). Experts say reason for the German success has been the short-time work regulation, under which the government pays the social security for companies and employees in cases of forced reduction in working hours. This mitigates the net wage effect of a short-time work, and helps employers cut costs in the crisis, while employees maintain a large percentage of their income. See Frankfurter Allgemeine for more details on the German situation. Fitch downgrades the ratings of Spanish banks Having cut Spain’s sovereign rating to AA+ last week, Fitch has now cut the ratings of a whole number of Spanish banks, including Banco Sabadell, Banco de Valencia, and Bancaja. FT Alphaville notes that “Spanish banks in trouble” was no longer a shocking headline, and Fitch may even be behind the curve. The downgrades suggests that the problems of the Spanish banking sector will not go away soon. Euro-Dollar reaches another low Oh and by the way the euro has reached a four-year low yesterday, when it traded at $1.2174. It was up at $1.22 overnight. Noyer says central banks too dependent on rating agencies Le Monde reports Christian Noyer saying that central banks are too dependent on rating agencies. Instead of providing information to the market, they take their information from the market, and thus add procyclically. This is a particular problem, as their interventions usually come at a bad time. An interesting proposal from Michel Barnier to force more competition among rating agencies FT Deutschland reports that debt issuers will in future have to provide the information of their structured products, not only to the rating agency they have employed, but also to other rating agencies as well. The goal would be to entice the agencies , if they want to rate it without an explicit order by the issuer. (The fundamental problem with this decision in our view is the business model of the rating agencies, who get paid directly from the issuer. So why would a competing rating agency want to go to the trouble of rating a product if they are not getting paid? The article contains a suggestion from an independent expert who preferred it would have been better to force the issuer to pay for two ratings.)

358 Why financial balances are important Rob Parenteau is one of the economist who keep on emphasising the need to look at financial balances to estimate the effect of a fiscal tightening or a fiscal expansion. There is an accounting identity according to the balance of the private sector, plus those of the public sector (the budget deficit) must equal the current account balance. So that means if you change on them say, say a reduction in the budget defict, this has implications for the others. As Paranteau says. This is not a theory, but an identity. If it is wrong, it would mean that 500 years of double-entry booking must also be wrong. Here is what he has say about Spain. From Naked Capitalism: “We can apply the financial balances approach to make the current predicament plain. If, for example, Spain is expected to reduce its fiscal deficit from roughly 10% of GDP to 3% of GDP in three years, then the foreign and private domestic sectors must be together willing and able to reduce their financial balances by 7% of GDP. Spain is estimated to be running a 4.5% of GDP current account deficit this year. If Spain cannot improve its current account balance (because remember, it relinquished its control over its nominal exchange rate the day it joined EMU), the arithmetic of sector financial balances is clear. Spain’s households and businesses will need to spend 7% of GDP more than they earn over the duration of the next three years, thereby adding more private debt to their balance sheets.” Dennis Snower on why the eurozone’s economic rescue is not working A very interesting analysis by the president of the Institute for International Economics in FT Deutschland. He says European rescue approach is disbelieved by investors for three reasons. First, premature austerity is very likely to kill the recovery. Second, lack of transparency. Nobody knows what would happen if several countries were to fall into a debt crisis simultaneously? Would the eurozone become a transfer union? Or would there another austerity orgy? Or would there be renewed pressure on the ECB to monetise debt? Third: unpredictable populism, for example the uncoordinated financial market regulation proposed by various governments, including the US and Germany. He proposes that governments should set up target debt-to-GDP ratios to be achieved in the long term, and to set up independent debt commissions, which implement the fiscal rule. Wolfgang Münchau on Horst Kohler In his FT Deutschland column, Wolfgang Münchau invokes Robert Musil’s Man without Qualities in his description of Horst Kohler, who quit as German president this week. Kohler spent his entire political life where Germany interacted with the world, as head of the EBRD and IMF, and earlier as Kohl’sG7 sherpa, and deputy finance minister. But despite his internationalism, he, more than any other politicians, symbilised Germany leap into neo- nationalism, and it is no accident that he stumbled over a comment in which he considered a widening of the Bundeswehr’s mandate to including the defence of Germany’s economic interests. Münchau says that the resurgent nationalism is an interesting pathological development that has now engulfed Germany’s entire political class that is now rediscovering the nation state, and to test its limits. http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2809&tx_ttnews[ba ckPid]=901&cHash=70421fff6a#m

359

Chronique

Les Allemands ne reconnaissent plus "leur" BCE par Marie de Vergès LE MONDE | 01.06.10 | 13h55 n parfum de divorce flotte entre les Allemands et la Banque centrale européenne (BCE). Rancoeur, déception et grincement de dents : la décision historique prise par l'autorité monétaire, le 10 mai, de racheter la dette publique des pays en difficulté de la zone euro n'a toujours pas été digérée outre-Rhin. Au sein même de la BCE, le "camp allemand" ose dire son amertume après avoir été mis en minorité. "La politique monétaire a pris de nouveaux chemins pour combattre la crise que je continue à considérer de façon critique étant donné les risques", a déploré, lundi 31 mai, le patron de la Bundesbank, Axel Weber, qui a voté contre cette mesure. Ce n'est pas la première fois que l'Allemand, candidat à la présidence de la BCE à partir de 2011, fait connaître son désaccord. Une double entorse aux règles tacites de l'institution, qui prend généralement ses décisions par consensus et se garde de faire étalage de ses divergences. Mais "des différences d'opinion sur des aspects aussi fondamentaux de la politique monétaire ne concernent pas seulement le Conseil, mais aussi et surtout le grand public", défend Thorsten Polleit, économiste en chef de Barclays Capital à Francfort. Si M. Weber s'est permis de parler tout haut, explique l'économiste, "c'est qu'il juge cette décision incompatible avec le mandat de la BCE", celui - primordial outre-Rhin - de la lutte contre l'inflation. Selon l'hebdomadaire Der Spiegel publié lundi, les dirigeants de la Bundesbank soupçonnent même, derrière les initiatives de la BCE, un "complot français"... Un rachat des obligations grecques était inutile, puisque le plan d'aide à Athènes de 110 milliards d'euros était validé et les premiers crédits déjà débloqués. L'institution, sous la présidence de Jean-Claude Trichet - un Français ! -, ne fait que soutenir artificiellement les cours, prétend l'hebdomadaire, et permettre aux banques françaises de se défaire de leurs titres à bon compte... alors que les banques allemandes ont promis de conserver leurs emprunts grecs jusqu'en 2013. Pourtant, à Bercy, on affirme que les banques françaises aussi "se sont engagées à maintenir leur exposition sur la Grèce sans limite de durée". Faux procès ? Une chose est sûre : aux yeux des Allemands, la vénérable institution, pourtant sise à Francfort et façonnée sur le modèle de la Bundesbank, a trahi ses principes. Et les efforts de M. Trichet n'y changent pas grand-chose : ce dernier a multiplié les entretiens dans les plus grands journaux d'Allemagne, ces dernières semaines, pour défendre une BCE gardienne fidèle de la stabilité des prix. Sans grand succès. En jeu aussi, la sacro-sainte indépendance de la Banque centrale vis-à-vis du pouvoir politique, que nombre d'observateurs allemands estiment désormais en péril. Il convient "de tirer un trait de séparation clair entre les responsabilités de la politique monétaire et de la

360 politique des finances", a d'ailleurs fait valoir M. Weber, lundi, dans un discours prononcé à Mayence. Le patron de la Bundesbank sait qu'il joue gros. Bien parti dans la course à la succession de M. Trichet, il pourrait perdre des appuis en Europe à force d'intransigeance et d'orthodoxie. Et si la gestion de la crise par la BCE froisse les Allemands, l'inverse est aussi vrai. Vendredi 28 mai, l'Italien Lorenzo Bini Smaghi, membre du directoire de la BCE, a accusé l'Allemagne dans une allusion à peine voilée d'avoir "jeté de l'huile sur le feu" en pleine crise de l'euro. "Dans un grand pays de la zone euro, on a pensé que l'on n'obtiendrait l'appui de l'opinion publique (pour renflouer la Grèce) qu'en dramatisant la situation, par exemple en disant que "l'euro est en danger" ou en mentionnant la possibilité d'exclure un pays de la zone euro", a-t-il dit. De telles paroles - clairement attribuées à la chancelière, Angela Merkel - "ne pouvaient que faire augmenter le coût du sauvetage", a-t-il jugé. Marie de Vergès

Article paru dans l'édition du 02.06.10 http://www.lemonde.fr/opinions/article/2010/06/01/les-allemands-ne-reconnaissent-plus-leur- bce-par-marie-de-verges_1366089_3232.html#xtor=RSS-3232

28 de mayo 2010 10:30 ET (14:30 GMT) PERSPECTIVAS / desempleo alemán cae ligeramente en mayo FRANCFORT (Dow Jones) - La tasa de desempleo ajustada estacionalmente en Alemania es probable que se dejó caer de nuevo en abril. Al Dow Jones Newswires economistas consultados esperan que el número de desempleados respecto al mes anterior se ha reducido en 17.500 después de la reducción de 68 000 se registró fue en abril. En los últimos meses los informes de trabajo alemán de mercado casi se han ofrecido de manera consistente sorpresas positivas. Así que para abril, una disminución de la tasa de desempleo ajustada estacionalmente se esperaba que sólo 10,00. En marzo, la tasa de desempleo había caído, contrariamente a las expectativas y en febrero aumentó significativamente más débil de lo esperado. Por otra parte, la tasa de desempleo medida por la recesión económica del año pasado registró un total de a un nivel muy manejable, lo que no es sólo del uso intensivo de corta duración, sino también de los reglamentos internos de la empresa a mantener el empleo y, lentamente, explicó atraer pedidos. La tasa de desempleo ajustada estacionalmente de 7,6% en noviembre de 2008 - el nivel más bajo desde mediados de 1992 - hasta el 8,3% (junio-agosto 2009). Los expertos encuestados espera que la tasa de mayo se mantuvo en el mes anterior del 7,8%. La Agencia Federal de Empleo (BA) publicará los datos el martes a las 9,55 de reloj en su sede central en Nuremberg. De acuerdo con el Landesbank Berlin (LBB), la tasa de desempleo medida por la tendencia del empleo se ha reducido considerablemente modificados. En parte, esta discrepancia se explica por los participantes de nuevo a cambiar el tratamiento de las medidas de integración laboral en el último informe, pero también tendría efectos de calendario (una pronta recuperación después del final previsto de la Semana Santa) desempeñó un papel. "En cuanto a la tendencia del desempleo amigable que es engañoso", dijo el banco estatal, pero también señala que el barómetro de empleo pertinente señalar hacia arriba. El LBB espera un descenso en el número desestacionalizado de desempleados en 20.000 y una tasa sin cambios de 7,8%. UniCredit es generalmente asumido que la tasa de desempleo sin ajustar es fuerte (por 150.000). "En el desempleo ajustado, esperamos que después de la caída sorprendentemente fuerte el mes anterior, mientras que otro menos, una suave pero clara", dice el análisis por UniCredit. El Banco señala que el final antes de la Semana Santa de este año se han reforzado la caída desestacionalizada en el mes anterior. En general, los planes de empleo se han mejorado en la actualidad no se espera ola de despidos más. El número de desempleados debería disminuir respecto al año anterior en el año 2010 incluso. En mayo, un descenso en la tasa de desempleo ajustada estacionalmente se espera a 10.000. Por Hans-Bentzien, Dow Jones Newswires, +49 (0) 69 29 725 300, Hans.Bentzien @ DJG dowjones.com / ha / KTH (END) Dow Jones Newswires

361

Christian Noyer juge les banques centrales trop dépendantes des agences de notation

LEMONDE.FR avec Reuters et AFP | 01.06.10 | 10h07 e gouverneur de la Banque de France, Christian Noyer, estime que les banques centrales sont trop dépendantes des agences de notation et que cette situation est "totalement insatisfaisante". Les agences de notation "ne donnent pas d'informations sur le marché mais en tirent de celui-ci", a déclaré M. Noyer lors d'une conférence de la Bank of Korea à Séoul, mardi. "Pour nous, évidemment, c'est un gros problème, car cela intervient toujours au mauvais moment", explique-t-il, en s'appuyant notamment sur l'exemple de la crise grecque. Le rôle des agences de notation fait déjà l'objet de critiques de la part du FMI et de la Commission européenne, après la dégradation des notes de la Grèce ou de l'Espagne, qui a contribué à faire plonger les marchés financiers. Aujourd'hui, trois grandes agences font la pluie et le beau temps : Standard and Poor's, Moody's et Fitch. Leurs notes sur la capacité d'une entreprise ou d'un Etat à rembourser ses dettes sont des éléments essentiels pour fixer les taux d'intérêt sur les marchés. Les banques centrales doivent aussi veiller à ne pas encourager les prises de risque excessives, qui nourrissent les situations d'insolvabilité en cas d'éclatement d'une bulle spéculative, ajoute Christian Noyer. Il serait très avantageux, précise-t-il, de maintenir dans le giron des banques centrales la supervision du système financier, sujet qui fait débat dans certains pays où les banques centrales n'ont pas droit de regard direct sur les activités des banques commerciales. "Les banques centrales doivent avoir une connaissance étroite du système bancaire", a-t-il affirmé, soulignant : "Les superviseurs des banques y gagnent lorsqu'ils peuvent compléter leur vision unique des situations individuelles avec une perspective plus large sur les dynamiques financières et macro- économiques." En revanche, le gouverneur de la Banque de France n'a fait aucun commentaire sur la crise de la dette dans la zone euro. http://www.lemonde.fr/economie/article/2010/06/01/christian-noyer-juge-les-banques-centrales-trop- dependantes-des-agences-de-notation_1365839_3234.html#xtor=RSS-3234&mf_sid=182069144

362 naked capitalism Monday, May 31, 2010 The EU and the Limits of the Austerity Hairshirt As previous posts on this blog have discussed, trying simultaneously to shrink total private sector debt levels and government debt levels at the same time, absent very aggressive currency depreciation or other measures to increase net exports, is likely to result in a fall in GDP and deflation. Ironically, that means overly aggressive measures to reduce debt levels will make it even more difficult to service outstanding debt. As Rob Parenteau explained, using the example of Spain: Domestic Private Sector Financial Balance + Fiscal Balance – Current Account Balance = 0 Again, keep in mind this is an accounting identity, not a theory. If it is wrong, then five centuries of double entry book keeping must also be wrong…. We can apply the financial balances approach to make the current predicament plain. If, for example, Spain is expected to reduce its fiscal deficit from roughly 10% of GDP to 3% of GDP in three years, then the foreign and private domestic sectors must be together willing and able to reduce their financial balances by 7% of GDP. Spain is estimated to be running a 4.5% of GDP current account deficit this year. If Spain cannot improve its current account balance (because remember, it relinquished its control over its nominal exchange rate the day it joined EMU), the arithmetic of sector financial balances is clear. Spain’s households and businesses will need to spend 7% of GDP more than they earn over the duration of the next three years, thereby adding more private debt to their balance sheets. Spain already is running one of the higher private debt to GDP ratios in the region. In addition, Spain had one of the more dramatic housing busts in the region, which Spanish banks are still trying to dig themselves out from (mostly, it is alleged, by issuing new loans to keep the prior bad loans serviced, in what appears to be a Ponzi scheme fashion). It is highly unlikely Spanish businesses and households will voluntarily raise their indebtedness in an environment of 20% plus unemployment rates, combined with the prospect of rising tax rates and reduced government expenditures as fiscal retrenchment is pursued. Alternatively, if we assume Spain’s private sector will attempt to preserve its estimated 5.5% of GDP financial balance, or perhaps even attempt to run a larger net saving or surplus position so it can reduce its private debt faster, Spain’s trade balance will need to improve by more than 7% of GDP over the next three years. Barring a major surge in tradable goods demand in the rest of the world, or a rogue wave of rapid product innovation from Spanish entrepreneurs, there is only one way for Spain to accomplish such a significant reversal in its current account balance. Prices and wages in Spain’s tradable goods sector will need to fall precipitously, and labor productivity will have to surge dramatically, in order to create a large enough real depreciation for Spain that its tradable products gain market share (at, we should mention, the expense of the rest

363 of the Eurozone members). Arguably, the slack resulting from the fiscal retrenchment is just what the doctor might order to raise the odds of accomplishing such a large wage and price deflation in Spain. But how, we must wonder, will Spain’s private debt continue to be serviced during the transition as Spanish household wages and business revenues are falling under higher taxes or lower government spending? Yves here. Now there is another route, which is sufficient currency depreciation to lift all boats in the EU high enough to . Wolfgang Münchau in the Financial Times hazards what might be required: ….the euro’s exchange rate has indeed weakened, and may weaken further. But it will probably not do so sufficiently to solve southern Europe’s competitiveness problems. In Greece, for example, tourism is the main export industry. A slump of the euro against the dollar is not going to change the country’s relative competitive position against the eurozone nations of the Mediterranean Sea. It could improve competitiveness against Turkey and Croatia, for example, but only to the extent that the lira and kuna also revalue. For the euro exchange rate alone to do the heavy lifting in restoring southern European competitiveness, it would take a massive further depreciation – to about 60 or 80 US cents to the euro. Yves here. A fall of that magnitude has good odds of being more than a tad destabilizing, both from an economic and a geopolitical standpoint. It’s likely to precipitate either retaliation (selective tariffs) and/or deliberate efforts by other countries to devalue their currency versus the euro. Ambrose Evans-Pritchard at the Telegraph points out that ratings agencies and commentators in Spain are taking note of the demand-dampening impact of the austerity measures now planned: For Spain it has been a horrible week. The central bank seized CajaSur and imposed draconian write-down rules on banks to restore confidence. The Spanish Socialist and Workers Party (PSOE) of Jose Luis Zapatero then rammed a 5pc cut in public wages through the Cortes by a single vote, shattering consensus. The government cannot hope to pass a budget. Its own trade union base is planning a general strike. The sub-text of Fitch’s 32-page report shows Mr Zapatero’s self-immolation to be futile in any case. The agency has not downgraded Spain for lack of austerity. Its implicit conclusion is that the policy of 1930s wage cuts – or “internal devaluations” – being imposed on southern Europe’s humiliated states as a quid pro quo for the EU shield is itself part of the problem. Ultra-austerity will bleed the economy, shrivel tax revenues and fail to close deficit anyway. “Fitch believes the risk that economic growth will fall short of the government’s projections,” it said. El Pais spoke of a “perverse spiral” in its editorial. “The Fitch note drives home the apparently unsolvable contradiction in which the Spanish economy finds itself. To maintain debt solvency Spain must squeeze public spending: yet this policy undermines the chances of recovery which itself causes further loss of confidence.” Yves here. We are not suggesting that there are pretty or painless ways out. But the course of action underway makes shielding Eurobanks from losses one of its top priorities. Yet any program that is going to make average workers take big hits (remember, wage cuts will hit all workers, irrespective of whether they were prudent or reckless) also needs to have at least the patina of shared sacrifice. More costs need to be imposed on banks and bank investors. Equity and bond investors are risk capital, yet they are being shielded again and again from the consequences of their poor decisions. The longer that goes on, the greater the odds of political blowback that will undermine efforts to create greater stability within the eurozone.

364 More on this topic (What's this?) How to Short the Euro as it Heads for the Abyss (Investment U, 5/18/10) Ending Badly (Financial Armageddon, 5/24/10) Some U.S. Banks Are In Better Shape Than Their European Peers (Top Foreign Stocks, 6/1/10) http://www.nakedcapitalism.com/2010/05/the-eu-and-the-limits-of-the-austerity- hairshirt.html Monday, March 1, 2010 Parenteau: On Fiscal Correctness and Animal Sacrifices (Leading the PIIGS to Slaughter, Part 1) By Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of The Richebacher Letter, and a research associate of The Levy Economics Institute The question of fiscal sustainability looms large at the moment – not just in the peripheral nations of the eurozone, but also in the UK, the US, and Japan. More restrictive fiscal paths are being proposed in order to avoid rapidly rising government debt to GDP ratios, and the financing challenges that may entail, including the possibility of default for nations without sovereign currencies. However, most of the analysis and negotiation regarding the appropriate fiscal trajectory from here is occurring in something of a vacuum. The financial balance approach reveals that this way of proceeding may introduce new instabilities. Intended changes to the financial balance of one sector can only be accomplished if the remaining sectors also adjust. Pursuing fiscal sustainability along currently proposed lines is likely to increase the odds of destabilizing the private sectors in the eurozone and elsewhere – unless an offsetting increase in current account balances can be accomplished in tandem. To make the interconnectedness of sector financial balances clearer, proposed fiscal trajectories need to be considered in the context of what we call the financial balances map. Only then can tradeoffs between fiscal sustainability efforts and the issue of financial stability for the economy as a whole be made visible. Absent consideration of the interrelated nature of sector financial balances, unnecessarily damaging choices may soon be made to the detriment of citizens and firms in many nations. Navigating the Financial Balances Map For the economy as a whole, in any accounting period, total income must equal total expenditures. There are, after all, two sides to every transaction: a spender of money and a receiver of money income. Similarly, total saving out of income flows must equal total investment in tangible capital during any accounting period. For individual sectors of the economy, these equalities need not hold. The financial balance of any one sector can be in surplus, in balance, or in deficit. The only requirement is, regardless of how many sectors we choose to divide the whole economy into, the sum of the sectoral financial balances must equal zero. For example, if we divide the economy into three sectors – the domestic private (households and firms), government, and foreign sectors, the following identity must hold true:

365 Domestic Private Sector Financial Balance + Fiscal Balance + Foreign Financial Balance = 0 Note that it is impossible for all three sectors to net save – that is, to run a financial surplus – at the same time. All three sectors could run a financial balance, but they cannot all accomplish a financial surplus and accumulate financial assets at the same time – some sector has to be issuing liabilities. Since foreigners earn a surplus by selling more exports to their trading partners than they buy in imports, the last term can be replaced by the inverse of the trade or current account balance. This reveals the cunning core of the Asian neo-mercantilist strategy. If a current account surplus can be sustained, then both the private sector and the government can maintain a financial surplus as well. Domestic debt burdens, be they public or private, need not build up over time on household, business, or government balance sheets. Domestic Private Sector Financial Balance + Fiscal Balance – Current Account Balance = 0 Again, keep in mind this is an accounting identity, not a theory. If it is wrong, then five centuries of double entry book keeping must also be wrong. To make these relationships between sectors even clearer, we can visually represent this accounting identity in the following financial balances map as displayed below.

On the vertical axis we track the fiscal balance, and on the horizontal axis we track the current account balance. If we rearrange the financial balance identity as follows, we can also introduce the domestic private sector financial balance to the map: Domestic Private Sector Financial Balance = Current Account Balance – Fiscal Balance That means at every point on this map where the current account balance is equal to the fiscal balance, we know the domestic private sector financial balance must equal zero. In other words, the income of households and businesses just matches their expenditures (or alternatively, if you prefer, the saving out of income flows by the domestic private sector just matches the investment expenditures of the sector). The dotted line that passes through the origin at a 45 degree angle marks off the range of possible combinations where the domestic private sector is neither net issuing financial liabilities to other sectors, nor is it net accumulating financial assets from other sectors. Once we mark this range of combinations where the domestic private sector is in financial balance, we also have determined two distinct zones in the financial balance map. To the left

366 of the dotted line, the current account balance is less than the fiscal balance: the domestic private sector is deficit spending. To the right of the dotted line, the current account balance is greater than the fiscal balance, and the domestic private sector is running a financial surplus or net saving position. This follows from the recognition that a current account surplus presents a net inflow to the domestic private sector (as export income for the domestic private sector exceeds their import spending), while a fiscal surplus presents a net outflow for the domestic private sector (as tax payments by the private sector exceed the government spending they receive). Accordingly, the further we move up and to the left of the origin (toward the northwest corner of the map), the larger the deficit spending of households and firms as a share of GDP, and the faster the domestic private sector is either increasing its debt to income ratio, or reducing its net worth to income ratio (absent an asset bubble). Moving to the southeast corner from the origin takes us into larger domestic private surpluses. The financial balance map forces us to recognize that changes in one sector’s financial balance cannot be viewed in isolation, as is the current fashion. If a nation wishes to run a persistent fiscal surplus and thereby pay down government debt, it needs to run an even larger trade surplus, or else the domestic private sector will be left stuck in a persistent deficit spending mode. When sustained over time, this negative cash flow position for the domestic private sector will eventually increase the financial fragility of the economy, if not insure the proliferation of household and business bankruptcies. Mimicking the military planner logic of “we must bomb the village in order to save the village”, the blind pursuit of fiscal sustainability may simply induce more financial instability in the private sector. Leading the PIIGS to an (as yet) Unrecognized Slaughter The rules of the eurozone are designed to reduce the room for policy maneuver of any one member country, and thereby force private markets to act as the primary adjustment mechanism. Each country is subject to a single monetary policy set by the European Central Bank (ECB). One policy rate must fit the needs of all the member nations in the Eurozone. Each country has relinquished its own currency in favor of the euro. One exchange rate must fit the needs of all member nations in the Eurozone. The fiscal balance of member countries is also, under the provisions of the Stability and Growth Path, supposed to be limited to a deficit of 3% of GDP. The principle here is one of stabilizing or reducing government debt to GDP ratios. Assuming economies in the Eurozone have the potential to grow at 3% of GDP in nominal terms, only fiscal deficits greater than 3% of GDP will increase the public debt ratio. In other words, to join the European Monetary Union, nations have substantially diluted their policy autonomy. Markets mechanisms must achieve the necessary adjustments – policy measures cannot. Policy responses are constrained by design, and experience suggests relative price adjustments in the marketplace have a difficult time at best of automatically inducing private investment levels consistent with desired private saving at a level of full employment income. Now let’s layer on top of this structure three complicating developments of late. First, current account balances in a number of the peripheral nations have fallen, in part due to the prior strength in the euro. Second, fiscal shenanigans along with a very sharp global recession have led to very large fiscal deficits in a number of peripheral nations. Third, following the Dubai World debt restructuring, global investors have become increasingly alarmed about the sustainability of fiscal trajectories, and there is mounting pressure for governments to commit

367 to tangible plans to reduce fiscal deficits over the next three years, with Ireland and Greece facing the first wave of demands for fiscal retrenchment. We can apply the financial balances approach to make the current predicament plain. If, for example, Spain is expected to reduce it’s fiscal deficit from roughly 10% of GDP to 3% of GDP in three years time, then the foreign and private domestic sectors must be together willing and able to reduce their financial balances by 7% of GDP. Spain is estimated to be running a 4.5% of GDP current account deficit this year. If Spain cannot improve its current account balance (because remember, it relinquished its control over its nominal exchange rate the day it joined EMU), the arithmetic of sector financial balances is clear. Spain’s households and businesses will need to spend 7% of GDP more than they earn over the duration of the next three years, thereby adding more private debt to their balance sheets. Spain already is running one of the higher private debt to GDP ratios in the region. In addition, Spain had one of the more dramatic housing busts in the region, which Spanish banks are still trying to dig themselves out from (mostly, it is alleged, by issuing new loans to keep the prior bad loans serviced, in what appears to be a Ponzi scheme fashion). It is highly unlikely Spanish businesses and households will voluntarily raise their indebtedness in an environment of 20% plus unemployment rates, combined with the prospect of rising tax rates and reduced government expenditures as fiscal retrenchment is pursued. Alternatively, if we assume Spain’s private sector will attempt to preserve its estimated 5.5% of GDP financial balance, or perhaps even attempt to run a larger net saving or surplus position so it can reduce its private debt faster, Spain’s trade balance will need to improve by more than 7% of GDP over the next three years. Barring a major surge in tradable goods demand in the rest of the world, or a rogue wave of rapid product innovation from Spanish entrepreneurs, there is only one way for Spain to accomplish such a significant reversal in its current account balance. Prices and wages in Spain’s tradable goods sector will need to fall precipitously, and labor productivity will have to surge dramatically, in order to create a large enough real depreciation for Spain that its tradable products gain market share (at, we should mention, the expense of the rest of the Eurozone members). Arguably, the slack resulting from the fiscal retrenchment is just what the doctor might order to raise the odds of accomplishing such a large wage and price deflation in Spain. But how, we must wonder, will Spain’s private debt continue to be serviced during the transition as Spanish household wages and business revenues are falling under higher taxes or lower government spending? Rob Parenteau On Fiscal Correctness and Animal Sacrifices (Leading the PIIGS to Slaughter, Part 1) , March 1, 2010 http://www.nakedcapitalism.com/2010/03/parenteau-on-fiscal-correctness-and- animal-sacrifices-leading-the-piigs-to-slaughter-part-1.html Tuesday, March 2, 2010 Parenteau: Leading PIIGS to Slaughter, Part 2 By Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of The Richebacher Letter, and a research associate of The Levy Economics Institute Reader note: please see yesterday’s post for a discussion of the fiscal balances map. As evident from the financial balances map, there are a whole range of possible combinations of current account and domestic private sector financial balances which could be consistent

368 with the 7% of GDP reduction in Spain’s fiscal deficit. But the simple yet still widely unrecognized reality is as follows: both the public sector and the domestic private sector cannot deleverage at the same time unless Spain produces a nearly unimaginable trade surplus – unimaginable especially since Spain will not be the only country in Europe trying to pull this transition off. As an admittedly rough exercise, we can assume each of the peripheral nations will be constrained to achieving a fiscal deficit that does not exceed 3% of GDP in three years time. In addition, we will assume each nation finds some way to improve its current account imbalances by 2% of GDP over the same interval. What, then, are the upper limits implied for domestic private sector financial balances as a share of GDP for each nation?

Greece and Portugal appear most at risk of facing deeper private sector deficit spending under the above scenario, while Spain comes very close to joining them. But that obscures another point which is worth emphasizing. With the exception of Italy, this scenario implies declines in private sector balances as a share of GDP ranging from 3% in Portugal to nearly 9% in Ireland. Private sectors agents only tend to voluntarily target lower financial balances in the midst of asset bubbles, when, for example home prices boom and gross personal saving rates fall. Alternatively, during profit booms, firms issue debt and reinvest well in excess of their retained earnings in order take advantage of an unusually large gap between the cost of capital and the expected return on capital. We have no compelling reasons to believe either of these conditions is immediately on the horizon. The above conclusion regarding the need for a substantial trade balance swing flows in a straightforward fashion from the financial balance approach, and yet it is obviously being widely ignored, because the issue of fiscal retrenchment is being discussed as if it had no influence on the other sector financial balances. This is unmitigated nonsense. It is even more retrograde than primitive tales of “twin deficits” (fiscal deficits are nearly guaranteed to produce offsetting current account deficits) or Ricardian Equivalence stories (fiscal deficits

369 are nearly guaranteed to produce offsetting domestic private sector surpluses) mainstream economists have been force feeing us for the past three decades. Both of these stories reveal an incomplete understanding of the financial balance framework – or at best, one requiring highly restrictive (and therefore highly unrealistic) assumptions. The EMU Triangle This observation is especially relevant in the Eurozone, as the combination of the policy constraints that were designed into the EMU, plus the weak trade positions many peripheral nations have managed to achieve, have literally backed these countries into a corner. To illustrate the nature of their conundrum, consider the following application of the financial balances map. First, a constraint on fiscal deficits to 3% of GDP can be represented as a line running parallel to and below the horizontal axis. Under Stability and Growth Pact rules, we must define all combinations of sector financial balance in the region below this line as inadmissible. Second, since current account deficits as a share of GDP in the peripheral nations are running anywhere from near 2% in Ireland to over 10% in Portugal, and changes in nominal exchange rates are ruled out by virtue of the currency union, we can provisionally assume a return to current account surpluses in these nations is at best a bit of a stretch. This eliminates the financial balance combinations available in the right hand half of the map.

If peripheral European nations wish to avoid higher private sector deficit spending – and realistically, for most of the peripheral countries, the question is whether private sectors can be induced to take on more debt anytime soon, and whether banks and other creditors will be willing to lend more to the private sector following a rash of burst housing bubbles, and a severe recession that is not quite over – then there is a very small triangle that captures the range of feasible solutions for these nations on the financial balance map. It is the height of folly to expect peripheral Eurozone nations to sail their way into the EMU triangle under even the most masterful of policy efforts or price signals. More likely, since reducing trade deficits is likely to prove very challenging (Asia is still reliant on export led growth, while US consumer spending growth is still tentative), the peripheral nations in the Eurozone will find themselves floating somewhere out to the northwest of the EMU triangle.

370 The sharper their fiscal retrenchments, the faster their private sectors will run up their debt to income ratios. Alternatively, if households and businesses in the peripheral nations stubbornly defend their current net saving positions, the attempt at fiscal retrenchment will be thwarted by a deflationary drop in nominal GDP. Demands to redouble the tax hikes and public expenditure cuts to achieve a 3% of GDP fiscal deficit target will then arise. Private debt distress will also escalate as tax hikes and government expenditure cuts the net flow of income to the private sector. Call it the paradox of public thrift. As it turns out, pursuing fiscal sustainability as it is currently defined will in all likelihood just lead many nations to further private sector debt destabilization. European economic growth will prove extremely difficult to achieve if the current fiscal “sustainability” plans are carried out. Realistically, policy makers are courting a situation in the region that will beget higher private debt defaults in the quest to reduce the risk of public debt defaults through fiscal retrenchment. European banks, which remain some of the most leveraged banks, will experience higher loan losses, and rating downgrades for banks will substitute for (or more likely accompany) rating downgrades for government debt. A fairly myopic version of fiscal sustainability will be bought at the price of a larger financial instability. Summary and Conclusions These types of tradeoffs are opaque now because the fiscal balance is being treated in isolation. Implicit choices have to be forced out into the open and coolly considered by both investors and policy makers. It is not out of the question that fiscal rectitude at this juncture could place the private sectors of a number of nations on a debt deflation path – the very outcome policy makers were frantically attempting to prevent but a year ago. There may be ways to thread the needle – Domingo Cavallo’s recent proposal to pursue a “fiscal devaluation” by switching the tax burden in Greece away from labor related costs like social security taxes to a higher VAT could be one way to effectively increase competitiveness without enforcing wage deflation. But these more comprehensive solutions, where financial stability, not just fiscal sustainability, is the primary objective, will not even be brought to light unless policy makers and investors begin to think coherently about how financial balances interact. Or to put it more bluntly, if European countries try to return to 3% fiscal deficits by 2012, as many of them are now pledging, unless the euro devalues enough, then either a) the domestic private sector will have to adopt a deficit spending trajectory, or b) nominal private income will deflate, and Irving Fisher’s paradox will apply (as in the very attempt to pay down debt leads to more indebtedness), thwarting the ability of policy makers to achieve fiscal targets. In the case of Spain, with large private debt/income ratios, this is an especially critical issue. The underlying principle flows from the financial balance approach: the domestic private sector and the government sector cannot both deleverage at the same time unless a trade surplus can be achieved and sustained. We remain hard pressed to identify which nations or regions of the remainder of the world are prepared to become consistently larger net importers of Europe’s tradable products. Pray there is life on Mars that consumes olives, red wine, and Guinness beer. http://www.nakedcapitalism.com/2010/03/parenteau-leading-piigs-to-slaughter-part-2. html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NakedCapital ism+%28naked+capitalism%29

371 ft.com/alphaville All times are London time Fitch downgrades a slew of Spanish banks Posted by Joseph Cotterill on Jun 01 13:59. Having cut Spain’s sovereign rating from AAA to AA+ on Friday, Fitch moved on Tuesday to adjust the ratings for a number Spanish financial institutions. First up, Spain’s sixth-largest bank, Banco Sabadell: Fitch Ratings has today downgraded Banco de Sabadell’s (Sabadell) Long-term Issuer Default Rating (IDR) to ‘A’ from ‘A+’ and its Individual Rating to ‘B/C’ from ‘B’… The rating actions reflect the deterioration in its asset quality indicators mainly due to the bank’s real estate development sector exposure and single-name concentration, and Spain’s weak economic environment and prospects. Fitch expects that 2010 and 2011 will remain challenging for the bank as Sabadell’s performance is highly correlated with the Spanish economy, which has suffered from a sharp downturn in the property sector. Economic difficulties also fed through to land Banco de Valencia with a BBB rating down from BBB+, reflecting what Fitch called the bank’s ‘real estate concentration, high leverage and liquidity pressures’. It’s a similar story for the two Spanish savings banks (cajas) cut by Fitch at the same time. CAM was downgraded (BBB+ from A-) on account of: high exposure to the real estate and construction sectors and a significant level of real estate foreclosed assets. While CAM’s funding profile has improved, it continues to be reliant on wholesale funding, with some refinancing concentration in 2012. While Fitch explained the ratings cut for Bancaja (BBB from BBB+) thus: Fitch believes that a recovery of the Spanish economy will be muted over the next few years. Bancaja continues to have high sector risk concentration to the real estate and construction sector, as well as a significant level of real estate foreclosed assets. The caja will also face liquidity and funding challenges due to its reliance, albeit reduced, on wholesale funds with some refinancing concentration in 2012. Do we detect a pattern there? Of course, ‘Spanish banks in trouble’ is no longer that shocking a headline, and Fitch is perhaps well behind the curve given the recent fears over the seizure of CajaSur. However, Fitch’s actions underline that the trouble isn’t expected to go away for Spain’s small to medium banks any time soon. As for the FROB, the government-guaranteed restructuring fund designed to deal with the cajas? Fitch cut that too, to AA+. http://ftalphaville.ft.com/blog/2010/06/01/248636/fitch-downgrades-a-slew-of-spanish-banks/

372 ft.com/alphaville All times are London time The Spanish waterfall Posted by Tracy Alloway on Jun 01 08:43. Along with Fitch’s Friday downgrade of Spain’s sovereign ratings, came this lesser-noted mark-down: Fitch Takes Rating Action on CDOs Guaranteed by Spain Fitch Ratings-London-28 May 2010: Fitch Ratings has today downgraded 10 classes of CDO notes and affirmed 14 classes of CDO notes following the agency’s downgrade of Spain’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘AA+’ from ‘AAA’ . . . Stop right there. The Bank of Spain guarantees CDOs, we hear you cry? Why yes, it does. In fact the Bank implicitly guarantees the following, according to Fitch (click to enlarge) :

Anyway, we find it interesting since, as Tim Backshall over at Credit Derivatives Research points out, now that two of the three major credit rating agencies have downgraded Spain (Moody’s is, in keeping with the Greek experience, the last to rate Spain triple-A), collateral might well be needed to be posted on some of these CDO positions. On a wider note, it’s a good example of the sort-of waterfall effect a sovereign crisis can have on other asset classes (CDO? waterfall? gettit?) . And what with the market turmoil of the last two years, and governments massively intervening in those markets, there are still plenty of things that still benefit from implicit or explicit sovereign support. http://ftalphaville.ft.com/blog/2010/06/01/248046/the-spanish-waterfall/

373 ft.com/alphaville All times are London time Germany’s Bank-Asset-Berg Posted by Tracy Alloway on Mar 18 08:45. The ABCP Matterhorn? Der Asset-Alps? Das Bank-Massiv? Below is the net foreign asset position of banks in Germany, France, Italy and Spain. The chart uses BIS data and was created by financial consultant Achim Dübel. Put simply, net asset positions are assets minus liabilities — so you can see that German banks’ accumulation of foreign assets (or decrease in liabilities) has been growing substantially:

Much of that is probably down to developments in Landesbanken — Germany’s public sector banks — in the first half of the last decade. In 2001, the European Commission abolished state guarantees for the Landesbanks, but the institutions were granted a four-year adjustment period. To counter, or prepare for the loss of the state guarantees, the Landesbanks went on something of a shopping spree — snapping up high-yield assets, the effect of which you can see in the chart. Here’s what Dübel says: The public Landesbanken must have issued several 100 billions in additional taxpayer debt between 2001-2005 . . . So that added to the ‘natural’ surplus by excess private sector savings an element of publicly sponsored autonomous capital investment . . . In more detail: There is ‘endogenous’ capital export stemming from foreign excess demand for German manufacturing goods and our ageing effects leading to higher savings ratios; but there has also been huge ‘autonomous’ capital export, such as the US investments of the Landesbanken with taxpayer money (estimates go to some 400bln . . . but you see the 2001-2005 issuance effect quite clearly in the net position; and there are of course follow-on effects as the ABCP consolidation took place in 2007 and 2008), such as the huge international state and commercial mortgage finance investments of mortgage banks, or ship investments of ship banks, with Pfandbriefe. Now, autonomous capital exports come back as additional excess demand for German manufacturing goods; however they clearly created a bubble . . . Both Landesbanken and mortgage banks . . . only survive with government guarantees. This . . . matches the huge German capital account surpluses on record and comes close to the implicit guarantee the German sovereign is shouldering; Shadow (banking) debt anyone? http://ftalphaville.ft.com/blog/2010/03/18/177361/germanys-bank-asset-berg/

374

06/01/2010 02:48 PM The World from Berlin Horst Köhler 'Has Acted with Extreme Negligence' Germany's president Horst Köhler threw in the towel to escape criticism. It hasn't worked. Commentators on Tuesday slammed the departing head of state for damaging his country's highest office. The criticism directed at Horst Köhler last week was harsh. During a recent visit to Afghanistan, the German president made comments which seemed to indicate he was in favor of sending Germany's military abroad to support the country's economic interests. Politicians of all stripes were critical and the media was scathing, some commentators even going so far as to say his remarks, made during an interview with German radio, were inconsistent with the German constitution. Köhler's response to his critics came on Monday. In a hastily-made announcement in Berlin, Köhler complained that the critique of his remarks was "devoid of any justification" and "lacked the necessary respect for my office." He then said he was resigning "with immediate effect." It was a short speech -- and one that triggered yet another avalanche of criticism, even more biting than the first. Criticism from the Conservatives "The Afghanistan comments by the president were not clever, but they were hardly enough to justify a resignation. The criticism wasn't enough either," Andrea Nahles, general secretary of the Social Democrats, told SPIEGEL ONLINE. Other opposition leaders likewise voiced surprise at Köhler's decision to step down. Gregor Gysi, floor leader of the far-left Left Party called it "a bit excessive." Green Party head, referring to Köhler's affiliation with Chancellor Angela Merkel's Christian Democrats (CDU), said that his departure was a "harbinger of the end" of Merkel's government. And Social Democrat leader Sigmar Gabriel said "this step can only be understood by looking at the degree to which those who appointed Köhler have withdrawn their support." But there was also criticism from Germany's conservatives. The Financial Times Deutschland on Tuesday quotes an unnamed member of the CDU's leadership committee as saying "you simply don't do something like that to your country." Merkel said she regretted the resignation "very deeply" and, according to information obtained by SPIEGEL ONLINE, even warned him against the step, saying he might plunge Germany into a crisis. Just as it did last week, however, the harshest criticism cames from the German press on Tuesday. The Financial Times Deutschland leaves no doubt where it stands with the front-page headline "Deserter." In its lead editorial, the paper writes: "If Horst Köhler hoped that his resignation would protect the office of president from further damage, he failed miserably."

375 "His decision demonstrated the same capriciousness and self-centeredness that his critics have repeatedly accused him of in the last two years. For the public, his resignation is likely incomprehensible; He was seen as an outspoken president, one who told politicians what he thought. But by leaving office without facing any notable pressure to do so, he has acted with extreme negligence." "The most important challenge facing the government now is that of limiting the damage done by Köhler's coup by choosing an uncontroversial successor. The fact that this difficult mission falls to Angela Merkel and (Vice Chancellor) Guido Westerwelle is a bitter historical irony. It was these two who, as opposition leaders in 2004, blocked the presidential candidacies of those with more strength and experience than Köhler. His resignation exposes a central element of Merkel's personnel strategy: That of never allowing anyone near her who could ever pose even a bit of danger to her power." The conservative daily Die Welt writes: "The resignation of (Horst Köhler) was imprudent. When it comes to such an important issue, the head of state has to show tact: He should have coordinated his resignation with other branches of government -- instead of giving up unilaterally like a wounded animal. He should have known that he was doing no favors to a government that has not exactly comported itself with brilliance." The center-left paper Süddeutsche Zeitung writes: "Never has anyone done such great damage to the office of German president as Horst Köhler did on Monday. Köhler's departure from this country's presidency was not a considered one -- not due to illness or serious family issues, for example. No, he threw in the towel because he feels offended. Köhler is offended because he -- a president who always wanted to play a political role -- was blasted with political criticism. Köhler, a man said to possess strong conservative values and a well-developed sense of duty, looks like a flighty political activist - - as if he were acting out of defiance. People were mean to him and now he doesn't want to play anymore. Unfortunately, we aren't talking about a game, rather about a blow to an office which is supposed to represent all Germans." The center-right daily Frankfurter Allgemeine Zeitung writes: "Never before has a German president stepped down due to criticism, from back-benchers and journalists -- criticism of comments which, despite their unclarity were, at their heart, correct." The criticism was "ludicrous. Köhler's reaction -- that of triggering a state crisis at a time full of crises -- calls into question his understanding of political responsibility. His step shows just how deeply wounded Köhler must already have felt. Did Köhler, who claimed to love Germany, really step down because of a bit of idiotic chatter? Weighing more heavily in Köhler's decision was likely the fact that few came to his defense." The mass-circulation tabloid Bild writes: "That wasn't a resignation. That was someone leaving in a huff. Just as the European Union is wobbling, the euro threatens to collapse and Germany is in a deep crisis, the German president flees his office. An employee would be considered highly irresponsible for displaying such behavior." "Now, Horst Köhler is gone and the shards, once again, lie at the feet of the chancellor. Angela Merkel will now need great strength to prevent Köhler's resignation from turning into a state crisis."

376 -- Charles Hawley URL: • Horst Köhler 'Has Acted with Extreme Negligence'06/01/2010 02:48 PM http://www.spiegel.de/international/germany/0,1518,698041,00.html RELATED SPIEGEL ONLINE LINKS: • Letter from Berlin: Merkel's Search for New German President Full of Potential Pitfalls (06/01/2010) http://www.spiegel.de/international/germany/0,1518,698030,00.html • German Head of State Quits: Why Horst Köhler Was an Unhappy President (05/31/2010) http://www.spiegel.de/international/germany/0,1518,697864,00.html • Controversy Over Afghanistan Remarks: German President Horst Köhler Resigns (05/31/2010) http://www.spiegel.de/international/germany/0,1518,697785,00.html • The World from Berlin: German President 'Betrayed the Soldiers in Afghanistan' (05/28/2010) http://www.spiegel.de/international/germany/0,1518,697302,00.html

05/31/2010 10:45 AM ECB Buying Up Greek Bonds German Central Bankers Suspect French Intrigue By Wolfgang Reuter The European Central Bank has been buying up Greek bonds by the bucketload, even though Athens is already getting money from an EU rescue fund. German central bankers suspect a French plot behind the massive buy-up -- after all, it gives French banks the perfect opportunity to get rid of their Greek assets. The senior members of the German central bank, the Bundesbank, regarded Axel Weber with a look of anticipation. What would Weber, the Bundesbank president, say about the serious crisis that had them all so worried, they wondered? And what did he intend to do about it? Weber said nothing and, as some who attended the meeting report, even his facial expression was inscrutable. The Bundesbank president remained stone-faced as he acknowledged the latest figures, which indicated that by the end of last week the European Central Bank (ECB) had already spent close to €40 billion ($50 billion) on buying up government bonds from Spain, Portugal, Ireland and, in particular, Greece. The ECB already has about €25 billion of Greece's mountain of debt on its books, and it is adding another €2 billion a day, on average. The Bundesbank, which has a 27 percent stake in the ECB, is responsible for €7 billion of the ECB's Greek government bonds. Many Bundesbank members are wondering why the ECB is buying Greek bonds in the first place, particularly on this scale, now that the euro-zone countries' €110 billion bailout package for Greece has been approved, and the first tranche of the funds has already been disbursed. The general €750 billion rescue fund for the remaining highly indebted countries has been approved but not yet set up. For this reason, it certainly makes sense to stabilize the prices of Spanish, Portuguese and Irish bonds. Nevertheless, some of the central bankers have a sneaking suspicion that there is a French conspiracy at work.

377 By buying up Greek debt, the ECB keeps the prices of the bonds artificially high. French banks, in particular, benefit from this policy because it enables them to sell their Greek bonds to the ECB, as an inexpensive way of cleaning up their balance sheets. France's banks and insurance companies have a total of about €80 billion in Greek government bonds on their books. German banks, on the other hand, are not potential sellers, because they have made a voluntary commitment to Finance Minister Wolfgang Schäuble to hold their Greek bonds until May 2013. Bailing Out French Banks

Thus, in a roundabout way, the Bundesbank, by spending €7 billion to purchase the Greek securities, has already made a substantial contribution to bailing out banks in neighboring France. It was ECB President Jean-Claude Trichet, a Frenchman, who, in an alarming and provocative speech, initiated the extensive euro rescue package that was approved on the weekend of May 8-9. And it was Trichet who yielded to massive pressure from French President Nicolas Sarkozy and, soon afterwards, violated a long-standing ECB taboo, namely that the central bank should never buy its member states' debt. This, however, was precisely what Sarkozy had demanded of his fellow European leaders, including German Chancellor Angela Merkel. Clear Signal Weber, the Bundesbank president, voted against this measure in the ECB council and criticized it the next day in an interview with the German financial newspaper Börsen-Zeitung. For a central banker, this is a very clear signal of dissatisfaction. But the Bundesbank president faces a dilemma, because he hopes to take over as ECB president when Trichet's term expires next year. The general consensus in the FROM THE MAGAZINE German government is that if he continues to fight Graphic: Make-up of the ECB's capital against the purchase of the bonds, his prospects for by country securing the top ECB post will dwindle.

But many German central bankers expect Weber to remain steadfast and not give in. For them, the purchase of government bonds is a betrayal of the principles of the once-proud institution. By deciding to do so, they say, the ECB has lost its status as an independent central bank -- and, along with it, so has the Bundesbank. And then there is the fear of the consequences of such a purchase, which many central bankers believe could jeopardize the very existence of the ECB. However, European central bankers do not know how long the ECB will continue to buy government bonds. That depends on how bond prices fluctuate in the euro-zone countries in question.

378 Managing the Crisis Every morning, the so-called Market Operations Committee (MOC) of the ECB analyzes the situation. The committee, whose members the ECB does not identify, supports the central bank in its monetary policy affairs, foreign currency transactions and the management of currency reserves. But the MOC has also become the bridge from which the central bankers are managing the euro crisis. The Bundesbank's representative on the MOC is Joachim Nagel, head of the central bank's markets department. In closed-door sessions, he and his fellow committee members determine when and for what amounts the ECB and the euro-zone central banks, in concerted actions, buy up the government bonds of highly indebted euro countries to support their prices and thus maintain yields at a tolerable level. The central bankers have informally agreed on what constitutes this tolerable level. The MOC's goal is to manipulate the markets in such a way that bond prices level off at the values that were in place on April 9, before investors, fearing that the governments could default on their bonds, launched into a massive sell-off of the securities. The Euro Zone's Bad Bank Bonds worth about €3 billion are now being purchased on every trading day, with €2 billion of the bonds coming from Athens. At the moment, there is no improvement of the situation in sight. "The ECB and the national central banks operating on its behalf are currently the only buyers to speak of," says one market insider. This policy effectively makes the ECB a so-called "bad bank" (a bank that buys up toxic assets as a means of helping out other institutions), all protestations of its president to the contrary. The pile of junk bonds on the ECB's balance sheet continues to grow. The fact that the ECB is keeping prices artificially high is downright encouraging banks to unload their risky assets onto the central bank. Thorstein Polleit, the chief economist of Barclays Capital Deutschland, puts it this way: "The ECB is creating excess supply by buying at overinflated prices." In other words, many creditors are more inclined to sell their risky assets to the central bank under these terms. "It's a free lunch," says a top Frankfurt banker. "Anyone who doesn't take advantage of this opportunity to get rid of his securities now only has himself to blame." But in pursuing the policy, the ECB has backed itself into a corner. What will happen if it stops supporting the market? Will the prices of the bonds of highly indebted countries then hit rock bottom? Time for a Haircut? To make matters worse, very few financial experts believe that the governments in question, particularly in the case of Greece, will get a handle on the debt crisis. Deutsche Bank CEO Josef Ackermann recently voiced such doubts, saying that such a failure would result in a so- called "haircut" -- that is, a debt waiver on the part of creditors. If that happened, Ackermann said, the ECB itself could be in jeopardy. The central bank's capital, currently about €70 billion, most of which is invested in the national central banks, would be severely affected or even completely exhausted, depending on how much longer the central bank continues to buy Greek bonds. The member states would also have to inject new capital into the ECB, a particularly difficult undertaking for highly indebted countries.

379 Another option for the ECB would be to issue its own bonds to recapitalize itself. But this too creates a problem: At what interest rate would investors lend money to the central bank under these circumstances? The only remaining solution would be one that has always led to inflation in the past, namely firing up the printing presses. Good Money for Bad Debt Although that scenario is unlikely to materialize, those who have always believed that a few days of robust ECB market intervention would be enough to reassure market players and bring yields back to a normal level were mistaken. At first glance, the ECB's efforts to support the bonds of highly indebted countries would seem to have a neutral effect on its balance sheet, because it reflects a value for the bonds corresponding to their price. But the truth is that good money is being paid for bad debt. The German finance minister, in particular, will feel the effects of this policy. The Bundesbank normally transfers its profits to the federal government at the end of each year -- in euros, not Greek bonds. But paying for the bonds ties up available funds, thereby reducing profits, presumably for years to come. This too has a seriously adverse effect on the self-confidence of the central bankers. Things could get worse. If creditors were in fact forced to forego a portion of their claims, this flow of payments could even be reversed. Under that scenario, the federal government would have to transfer money to the Bundesbank to offset its losses. Translated from the German by Christopher Sultan

URL: • Wolfgang Reuter German Central Bankers Suspect French Intrigue05/31/2010 10:45 AM http://www.spiegel.de/international/europe/0,1518,697680,00.html FORUM: • Europe in Crisis http://forum-international.spiegel.de/showthread.php?t=771&goto=newpost

RELATED SPIEGEL ONLINE LINKS: • Geithner in Europe: US and EU Oceans Apart on Fiscal Policy (05/27/2010) http://www.spiegel.de/international/business/0,1518,697132,00.html • Resurrection of the Euro: European Austerity the First Step to Recovery (05/27/2010) http://www.spiegel.de/international/business/0,1518,697030,00.html • Plans for Sweeping Cuts: Germany Tries to Plug Gaping Hole in Its Budget (05/26/2010) http://www.spiegel.de/international/germany/0,1518,696760,00.html • Dealing with the Euro Crisis: The Monster Is Still Alive (05/24/2010) http://www.spiegel.de/international/europe/0,1518,696437,00.html • SPIEGEL 360: The Euro Crisis http://www.spiegel.de/international/europe/0,1518,k-7612,00.html

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Despite U.S. deficit concerns, investors still pour money into Treasury bonds By Neil Irwin Washington Post Staff Writer Tuesday, June 1, 2010; A01 The U.S. government debt is rising inexorably, according to the conventional wisdom in Washington, and the political system is too paralyzed to take unpopular actions to rein it in. Privately, many policymakers take it as a given that the situation will change only when the nation faces a Greek-style fiscal crisis. But apparently nobody told the people who lend the U.S. government money. On Friday, they were willing to hand over their cash to the Treasury for 10 years for 3.3 percent interest, a level so low it implies they consider the United States among the safest investments in the world. Collectively, those investors -- think mutual funds, pension funds and foreign central banks -- could lose hundreds of billions of dollars if they're mistaken and the United States has a debt crisis. It is the Beltway vs. the bond market, and they can't both be right. Perceptions inside the Beltway rest on this idea: Although the current large budget deficit is caused mainly by the weak economy and a short-term economic stimulus that will soon expire, in the longer run the government faces a vast unfunded burden, particularly tied to Medicare and Medicaid. The mix of spending cuts and tax increases that could close the gap are wildly unpopular. With the threat of a filibuster in the Senate hanging over anything remotely controversial, a bipartisan budget accord seems unlikely. And many Republicans have declared they will not vote for a package that includes a tax increase under any circumstance. This situation led Moody's, the debt-rating firm, to state in March that the U.S. government is nearer to being at risk of losing its Aaa credit rating and that maintaining the rating might require adjustments to tax and spending policy "of a magnitude that, in some cases, will test social cohesion." Given those realities, the widespread view in Washington is that serious efforts at reducing the deficit will come only when a crisis moment, such as steeply higher borrowing rates, forces the issue. "You can talk about the deficit until you're blue in the face, but we'll only get political traction on meaningful deficit reduction when there is economic pain being caused by the deficit in the form of inflation or high interest rates or both," said Bruce Bartlett, a Treasury Department official in the George H.W. Bush administration who recently wrote an article predicting that the U.S. government will be downgraded in less than a decade. In effect, lending money to the U.S. government is like lending to a couple that is spending way beyond its means, and in which the wife refuses to take a second job to increase income and the husband refuses to spend less. No responsible banker in the world would make that loan, but banks and other global investors feel rather differently about U.S. Treasury bonds.

381 Among economic commentators, there have been rumblings that the debt crisis that started in Greece and increasingly affects such other Western European countries as Spain and Ireland could eventually spread into a crisis of confidence in United States government debt. So far, the opposite has happened. The financial crisis and recession drove Treasury borrowing rates to all-time lows -- and in recent weeks, the European debt crisis, rather than make investors fear for the safety of their Treasury bonds, has instead led to an influx of money into the United States, driving rates down further. On Wednesday, for example, the government borrowed $42 billion in five-year debt for 2.13 percent. During the 1990s, that rate averaged 6.3 percent. So what are bond market investors thinking? They are looking around the world in search of a safe place to park cash, and the United States seems like the safest -- or perhaps the least unsafe. Western Europe has weaker economies than the United States, more lavish social welfare benefits, a fragmented political system and a currency union that might not make it out of the current crisis intact. Japan has an older and slower-growing population, and its economy has been stagnant for most of the past two decades. (It also has very low borrowing rates, reflecting in part high rates of savings among its citizens.) Beacons of stability such as Australia, Canada and Switzerland are too small to handle the trillions of dollars in global savings that investors are looking to park. In the United States, meanwhile, the economy is beginning to grow. There are few signs of inflation, and the Federal Reserve is likely to keep the short-term rates it targets very low for some time. While long-term interest rates are low by historical standards, they are much higher than short-term borrowing rates, which are essentially zero, a phenomenon known as a steep yield curve. That means that investors feel well-compensated for tying their money up for years. Moreover, the dollar and Treasury bonds have a status as the safe port in the storm whenever the global economy or financial system looks shaky. Bond investors assume that relationship continues. And many global investors' returns are measured in dollars, so they have extra incentive to have exposures to U.S.-based debt. And fundamentally, bond buyers discount the risk of a catastrophic fiscal calamity in the United States, noting that the U.S. government has proved able to make hard-but-necessary decisions when it must, such as the passage of the $700 billion bank bailout in 2008 and a deficit-reduction package in 1990. "It may take longer than anyone likes, but we have a history of getting the message," said Dan Shackelford, who manages the New Income Fund, a bond mutual fund, at T. Rowe Price. "We have come close to hitting the crisis point before, but somehow the government has been able to respond." In other words, we might not know how, or when, but eventually the U.S. political system is sufficiently strong to make the hard, necessary choices. But market sentiment can turn on a dime, as the Greek government and former Lehman Brothers executives can attest, so the big question remains whether major action on the budget deficit will come before Treasury bond rates rise significantly. "There is a tendency for markets to ignore certain things for long periods of time, then suddenly notice them all of a sudden," Bartlett said.

382 Obama administration officials are aware of the risk of an abrupt change in perception among bond investors. A spike in Treasury borrowing rates could slow or stop the economic recovery and make the deficit problem even worse by increasing the government's costs to roll over its debt. Thus, the administration has attempted to signal to the bond market that it is attuned to reining in the budget deficit in the years ahead, even as it argues for higher spending in the near term to support the economy. The president's proposal this year to freeze non-defense discretionary spending for three years is one such signal. And it is uncertain exactly how growing concern about U.S. government debt would be reflected in financial markets. Before the impact of high budget deficits shows up in interest rates on Treasury bonds, it might show up in the form of a lower stock market and higher borrowing costs for private enterprises. "Markets never price big surprises," said Robert H. Dugger, managing partner of Hanover Investment Group in Alexandria. "That's why they're big surprises." Neil Irwin Despite U.S. deficit concerns, investors still pour money into Treasury bonds June 1, 2010; A01 http://www.washingtonpost.com/wp- dyn/content/article/2010/05/31/AR2010053103456.html?wpisrc=nl_headline

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Today's other Mises Dailies: Spain's Dropout Generation by Jaime Levy Moreno on June 1, 2010 The People Who Borrow by Sir Ernest Benn In the last two decades in Mediterranean Europe, and especially in Spain, a new social group has emerged, called jovenes (youngsters). Members of this Prosperity vs. Peace by group exhibit several specific characteristics. First, jovenes are usually male, Michael A. Heilperin aged 25–35, although some members are in their 40s. Second, they are in a perpetual state between graduation and their first job. Third, they usually live with their parents to save money, allowing them to go out at least three times a week. Fourth, they occasionally work a part-time job — if only due to the pressure imposed by their parents. Last, and most important, they receive unemployment benefit credits and renew their membership on the "unemployment list" from time to time, so that the state subsidies don't run out during their "temporary" hibernation. It would be very unfair to put all the blame on them for their lack of initiative. They play a vital part in what is called the "Atlas generation." They have the weight of the world on their shoulders, and they are going to be the ones in charge of paying for the economic sins of their parents. It is important to analyze the reasons why this social group has appeared, what the situation is like today, and what the consequences will be of this phenomenon in the future. For the last ten years, and especially since the recent financial crisis started, Spanish unemployment has risen astronomically, reaching a record of around 20 percent. This, of course, does not count the thousands of illegal immigrants, who don't appear in the official state statistics. Aside from the vast number of unemployed, another significant group of people work in part-time jobs with "garbage contracts" or very low salaries. Members of this group are called mileuristas (those who earn only €1,000/month). This group appears above the jovenes in the social pyramid. Mileuristas normally live at home and dream of becoming economically sufficient eventually, or they live in cheap rented apartments funded by state money, which comes directly from taxpayers' pockets. Finally, we find a smaller group at the top of the pyramid. This group is formed by either a lucky few, or in some cases, hardworking and generally outstanding young people. This group has very decent jobs (normally around €2,000/month starting salary) and are the sons and daughters of wealthy families that normally receive a more- or-less high-quality private education. They end up employed in the family business or in some firm where their parents or family members have contacts. Outside of this pyramid we will also find a group of people that decide to study for an "oposición" (state exam) in order to work for the government. Depending on the complexity of their education, and their success on the exam, they will end up working for the first time between the ages of 26 and 35 and will be decently, or even very well paid, for the rest of their lives. It is also very important to give special attention to the number of years that people are called "students" in Spain. The quality of a university graduate has been devalued in recent years to the point where an employer will no longer be impressed at all by an undergraduate degree in a job interview. Consequently, at least a master's degree or some kind of postcollege specialization accompanied by proficiency in at least three languages is demanded. This, of course, means more years spent as a student and, for the most privileged ones, a year or two living and exploring foreign languages abroad. "The quality of a university graduate has been devalued in recent years to the point where an employer will no longer be impressed at all by an undergraduate degree." Not so long ago in Spain, it was an honor to have a college degree and even more prestigious to hold a graduate degree, which only a few people could achieve due to the expense and hard work that it involved. Now it is almost free to study in a Spanish public university. This is viewed as a great accomplishment that gives opportunities to people from lower classes, who will sometimes end up forming part of the group of "hard working and outstanding young people." But, to be honest, this group is quite small. The effort to make it easier to be a student is largely a way for the government to lower the unemployment rate. In order to explain why it is so hard for recent graduates to obtain a decent job in Spain, it is important to know that labor costs are very high for employers — a consequence of strict laws that protect workers. Four weeks'

384 vacation a year is the mandatory minimum. An artificially high minimum wage places a floor under the supply of workers and the demand for jobs, creating a devastating imbalance. This means there is a huge demand for jobs and little desire on the part of employers to fulfill it. Additional reasons for the lack of job offers in Spain include the excessive finiquito, the final pay a worker is entitled to under Spanish law when fired: 45 days of salary for each year worked at the company. Furthermore, taxes on employers are very high — at least a 50 percent of each worker's annual salary, which means that if someone is paid €20,000 a year, it costs their employer at least €30,000 a year to hire them. All this makes an employer very reluctant to hire an employee, which creates a high rate of unemployment and a huge number of "garbage contracts." These taxes also promote black-market activity, which either sidesteps the established rules or ignores them altogether. The taxes on employee wages are very high as well, which brings us back to the mileurista social status. These taxes create a substitution effect: firms have become desperate for new technologies to reduce labor inputs. One recent example in Spain is McDonald's move to start substituting workers with new machines that take the order for the customer, reducing the number of workers. The goal is to leave only two sets of employees — the ones in the kitchen and ones that hand the food to you at the counter. Spain's misfortunes have been complicated since joining the eurozone. The ability to obtain very low interest rates to borrow money — the same interest rates as in more powerful and savings-oriented economies like Germany — worked as an incentive for companies to borrow money for infrastructure and housing construction. Around 800,000 houses have been built each year in Spain, more than France, Germany, and England combined. This meant a surge in the supply of jobs in construction industries. Unfortunately, this demand for labor was met mostly by immigrants who now find themselves unemployed with few possibilities. Huge loans to finance this housing boom, especially from the Spanish "cajas" (saving banks) now cannot be paid back and have resulted in a huge government bailout. As a result, the Spanish government has undertaken an increasingly large debt, financed by the continual issuance of new bonds. This borrowing has strained Spain's public finances, lowered its bond rating, and reduced the demand investors have to continue funding this deficit spending. At the same time, the bust has caused a severe decline in tax receipts, especially in taxes like the IVA (value- added tax). Consequently the state has received less income and in response is now increasing consumption taxes to cover the shortfall (effective next month). These increased taxes will, in the end, translate to less spending and more constrained profits for all producers. They will also make Spain a very unattractive place for companies worldwide to start or continue their business. "The final pay a worker is entitled to under Spanish law when fired is a full 45 days of salary for each year worked at the company." All these effects will ultimately mean more unemployment, which takes us back to the young "Atlas generation." Ironically, many members of this generation have complete faith in the government to take care of all these issues for them. They choose to stay at home until they are middle-aged and delay getting married and creating a family until their mid-to-late 30s. They also have an increasingly huge debt issue, which they will eventually have to take care of. If current trends continue, within a few short years in Spain each employee will have to pay for one pensioner on social security. Only 40 years ago, ten employees took care of one pensioner through their social-security contributions. The Atlas generation, by putting off marriage and children, has worsened this worker-pensioner imbalance. The yearly rate of births per fertile woman in Spain is only 1.2, one of the lowest in the world, and it will likely decline in coming years. The only way to solve this problem would be to lower taxes, especially employment taxes, dramatically. Doing so would encourage employers to offer more jobs and employees to have larger families. Unfortunately, this option isn't of much interest for the politicians in Spain, who prefer to maintain the socialist status quo regardless of which political party is in power. Jaime Levy Moreno is a student at St. Louis University's Madrid campus, in Spain. Send him mail. See Jaime Levy Moreno's article archives.

http://mises.org/daily/4430

385 Eurointelligence Daily Morning Newsbriefing

01.06.2010 Axel Weber blames stimulus for crisis, criticises ECB decision to buy bonds, and rejects common bond Axel Weber says the European Commission shares responsibility for the crisis because of its call for a large stimulus package; he reiterated his criticism of the ECB’s decision to buy bonds, which he voted against, by saying this was a risky course of action at the current time; Jean Quatremer says the German is peddling the tale that the whole exercise was intended to allow French banks to dump their Greek bonds onto the ECB, while the German banks agreed to hang on to their Greek bond holdings until 2013; in its financial stability review, the ECB warns of a negative feedback loops between the sovereign debt crises and financial stability; the ECB also rejects the Volcker rule – forbidding banks to transact on their own account – as this would impede the internal market for financial services; Another Spanish labour market reform deadline passes without action, as negotiations between the social partners continue; having set deadline of end-April and end-May, Salgado now talks about end-June; Christobal Montoro says labour market reform must go beyond the change of wage contracts; the EU Commission’s economic sentiment indicator slumps in June, and shows large divergences; there is increasing hostility towards Angela Merkel outside Germany, as evidence by a sharp change in the tone of editorials in international newspapers; the European Commission is not happy with Germany’s proposal for a financial transactions tax; in Germany, meanwhile, a man of no importance has disappeared without trace.

We expected that this argument would come up eventually, but it took a while for the erstwhile critics of the stimulus plans to articulate it publically. And it was Axel Weber who did it, when he attacked the European Commission for its call in November 2008 to spend 1.2% on discretionary stimulus programmes, which has led to an increase in the deficit. (But just do the math: The projected increases in the debt trajectory of members states - Spain from 40 to 80, but also in Germany from 70 to 80% - are mostly due to the sudden drop in tax revenues, which would have been worse without those stimulus programmes, whose own says is relatively small.) FT Deutschland writes that he also rejected proposals for a common European bond. Do the Germans believe in a French conspiracy?

386 Jean Quatremer has an interesting entry, quoting Axel Weber yesterday publicly criticising the decision by the ECB to purchase bonds, saying it was a risky path for monetary policy to take at a time like this. He also reports on German conspiracy theories that the whole bond purchasing programme was intended to allow French banks to dump their Greek bonds, while German banks have promised to hold on to their Greek bonds until 2013. He ends his column asking whether the EU could seriously consider a man at the head of the ECB, who takes such an inflexible German position. (We think this is part of his strategy to get the job. And it is probably going to work. By disagreeing so publicly with Trichet, Weber actually increases his chances of becoming ECB president, because in doing so he turns the Weber vs. Draghi debate from a debate on the most qualified candidate, which he would invariably lose, into a debate about the degree of central bank independence. The European Council will end up accepting Weber on the grounds that a rejection might drive Germany over the cliff.) ECB fears banking sector contagion In its financial stability review, the European Central Bank predicted €195bn in bank writedowns in 2010 and 2011, and warns of dangerous financial contagion as a direct result of the sovereign debt crisis. Specifically, the ECB warned about “a number of hazardous contagion channels and adverse feed-back loops between financial systems and public finances.” The FT writes that the ECB’s gloominess could contribute to concerns over the euro area’s weak growth prospects. ECB rejects Volker rule In its stability review, the ECB also rejects the Volker rule, which bars banks from dealing on its own account. The ECB says the EU should not accept this proposal, which is now likely to become law in the US, because it would impede Europe’s internal market for financial transactions, and would be problematic to implement for the universal banks that are commonplace in the EU. The ECB prefers higher capital ratios, or equity warrants – bond that convert to equity once the capital ratios fall below a specified minimum. Another Spanish labour market reform deadline is passing El Pais has a good insight article of what is going on in Spain behind the scenes on labour market reform. The deadline for an agreement by the social partners, which was supposedly today, has been effectively extended as both said they would continue to meeting in the coming days, and as finance minister Elena Salgado is now speaking of an agreement at the end of June. The article also has a nice table, listing the timeline of broken promises on labour market reform. Both sides have complained that the government has said very little of what it wants to do (assuming it wants to do anything), except to say that a government decree would including the reduction of dismissal costs from 45 to 33 days per year of employment – as a result of which the cost of dismissal would still be the most expensive in the EU. Christobal Montoro on Spanish labour market reform Christobal Montoro, the economics spokesman of the opposition Popular Party, writes that the whole thrust of labour market reform has to be reduction in the country’s intolerable level of unemployment, current 4.6m, or 20% of the workforce. He said the labour market reforms should not be limited to the modification of wage contracts. It is also important to modify the system of wage bargaining, and working conditions, as the present provisions do not adapt quickly enough to changes in business conditions. He also said that labour markets reforms have to be embedded into a large number of other reforms to have the desired effects.

387 A man of no importance has disappeared without trace Horst Kohler decision to quit the German presidency, on what appears to be a trumped-up reason (public criticism of something he said about the Bundeswehr’s mandate in Afghanistan) has rattled Germany. It puts pressure on Angela Merkel’s coalition at a bad moment, as she now has to find a successor, who commands respect. The news media where particularly critical of the way Kohler quit. He read out a short statement, and left the presidential palace like a fugitive. This is a difficult for Merkel, as it requires some leadership, in the absence of an obvious candidate. One of the names mentioned yesterday was Wolfgang Schauble, the finance minister. Sentiment indicator slumps in May? The eurozone economic sentiment indicator fell in May from 100.6 to 98.4, but this is a reflection of the crisis, rather than an underlying phenomenon. (We always assumed that the only information a sentiment indicator provides is the tone of the most recent newspaper headlines. So we are not very concerned about the deep meaning of this total number) There are strong divergences. The indicators are higher, and still rising, in Germany and the Netherlands, weaker in Portugal, and terrible in Greece. Does this tell us anything? Our explanation is that companies (or headline writers) are beginning to factor in the years, perhaps decades, of adjustment that lies ahead. EU Commission not enthusiastic about Germany’s financial transaction tax proposal FT Deutschland has an interview with EU tax commissioner Algirdas Semeta, who said a financial transactions tax was problematic. He mentioned the lack of international support as a particular problem, and so far only a few countries have declared their readiness to go it alone. Semeta and the Commission prefer an EU wide CO2 tax that would harmonise the various ecological taxes introduced over all the EU. About Merkel Peter Ehrlich did the job of collecting international press clippings about Angela Merkel and finds that never before has a post-war German chancellor been so unpopular abroad. He quotes the New York Times as saying that Germany is pursuing a nationalistic course, but also the Guardian and many other newspapers. Merkel’s inept crisis management (on obsession of ours for quite some time) is now widely criticised. He finishes with a quote from Alexander Graf Lambsdorff MEP, who said: “the longer this crisis lasts, the fewer are with us.” Axel Weber blames stimulus for crisis, criticises ECB decision to buy bonds, and rejects common bond01.06.2010 Eurointelligence Daily Morning Newsbriefing http://www.eurointelligence.com/Eurointelligence.901.0.html

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PRESS RELEASE 31 May 2010 - Financial Stability Review June 2010 Many euro area large and complex banking groups (LCBGs) returned to modest profitability in 2009, and their financial performances strengthened further in the first quarter of 2010. These developments, together with a bolstering of their capital buffers to well above pre-crisis levels, suggest that most of these institutions have made important progress on the road to financial recovery. The broad-based enhancement of shock-absorption capacities during 2009 meant that systemic risks for the financial system dissipated to some extent and risks within the financial sector became more institution-specific in character. Indeed, the dependence of the financial system, especially of large institutions, on government support and the enhanced credit support measures of the Eurosystem tended to wane. That said, the profitability performances of some large financial institutions in receipt of government support remained relatively weak. Outside the financial system, the progressive intensification of market concerns about sovereign credit risk among the industrialised economies in the early months of 2010 opened up a number of hazardous contagion channels and adverse feed back loops between financial systems and public finances, in particular in the euro area. By early May, adverse market dynamics had taken hold across a range of asset markets in an environment of diminishing market liquidity. Ultimately, the functioning of some markets became so impaired that, for the euro area, it was hampering the monetary policy transmission mechanism and thereby the effective conduct of a monetary policy oriented towards price stability over the medium term. To help restore a normal transmission of monetary policy, the Governing Council of the ECB decided on 9 May 2010 on several remedial measures. Taking into account that these decisions have not only a European but also a global outreach, the G7 and G20 welcomed the ECB’s action in their communiqués. In parallel, the EU Council adopted a regulation establishing a European Financial Stabilisation Mechanism. Subject to strong conditionality, this back-stop device will have funds of up to €500 billion at its disposal. Following the implementation of these measures, market volatility was significantly contained. Considering the financial stability outlook, although the profile of ECB estimates of the potential write-downs on loans confronting the euro area banking system displays a peak in 2010, it is probable that loan losses will remain considerable in 2011 as well. This prospect, combined with continued market and supervisory authority pressure on banks to keep leverage under tight control, suggests that banking sector profitability is likely to remain moderate in the medium term.

389 Overall, although the main risks to euro area financial stability essentially remain the same as those to which attention was drawn in the last issue of the FSR, their relative importance has changed significantly over the past six months. The main risks for the euro area financial system include the possibility of: • concerns about the sustainability of public finances persisting or even increasing with an associated crowding-out of private investment; and • adverse feedback between the financial sector and public finances continuing. Other, albeit less material, risks identified outside the euro area financial system include the possibility of: • vulnerabilities being revealed in euro area non-financial corporations’ balance sheets, because of high leverage, low profitability and tight financing conditions; and • greater-than-expected euro area household sector credit losses if unemployment rises by more than expected. Within the euro area financial system, important risks include the possibility of: • a setback to the recent recovery of the profitability of large and complex banking groups and of adverse feedback with the provision of credit to the economy; • vulnerabilities of financial institutions associated with concentrations of lending exposures to commercial property markets and to central and eastern European countries; and • heightened financial market volatility if macroeconomic outcomes fail to live up to expectations. A key concern is that many of the vulnerabilities highlighted in this FSR could be unearthed by a scenario involving weaker-than-expected economic growth. The measures taken by the ECB to stabilise markets and restore their functioning as well as the establishment of the European Financial Stabilisation Mechanism have considerably lowered tail and contagion risks. However, sizeable fiscal imbalances remain, and the responsibility rests on governments to frontload and accelerate fiscal consolidation so as to ensure the sustainability of public finances, not least to avoid the risk of a crowding-out of private investment while establishing conditions conducive to durable economic growth. With pressure on governments to consolidate their balance sheets, disengagement from financial sector intervention means that banks will need to be especially mindful of the risks that lie ahead. In particular, they should ensure that they have adequate capital and liquidity buffers in place to cushion the risks should they materialise. Against this background, the problems of those financial institutions that remain overly reliant on enhanced credit measures and government support will have to be tackled decisively. At the same time, fundamental restructuring will be needed when long-term viability is likely to be threatened by the taking away of state support. This could involve the shrinking of balance sheets through the shedding of unviable businesses with a view to enhancing profit-generating capacities. http://www.ecb.int/press/pr/date/2010/html/pr100531.en.html

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ECB warns of ‘hazardous contagion’ By Ralph Atkins in Frankfurt Published: May 31 2010 18:27 | Last updated: May 31 2010 18:27 The eurozone’s financial sector and economy are facing “hazardous contagion” effects from the region’s debt crisis, according to the European Central Bank, which has also forecast another €195bn in bank writedowns this year and next. Soaring government deficits risked driving up general borrowing costs, hitting economic growth prospects, the ECB said in its latest report on the eurozone’s financial stability. Gloomy consumers hit eurozone sentiment - May-31 Analysis: State of the eurozone - May-31 Draghi urges Italy to accept reform - May-31 Video: Martin Wolf and Richard Haass - May-31 Opinion: Solutions for crisis - May-31 ECB reveals €16.5bn bond purchases - May-17 The ECB’s gloomy tone could fuel further concern about the eurozone’s weak growth prospects, which were already threatened by stricter fiscal austerity measures planned by governments. “The risk that we highlight is that this adverse feedback may persist longer than currently envisaged,” said Lucas Papademos, the ECB’s vice-president But Mr Papademos said that fiscal discipline could also bring benefits by boosting confidence and longer-term growth prospects. “I don’t think we should be too pessimistic about the impact on the performance of the economy,” he cautioned. As the eurozone debt crisis escalated in early May, the ECB broke previous pledges by intervening in government bond markets. Purchases reached €35bn at the end of last week. Highlighting concern within the ECB at the risks it has taken, an ending of the programme at the earliest possible moment was demanded on Monday by Axel Weber, Germany’s Bundesbank president, and Mario Draghi, Italy’s central bank governor – both rivals to succeed Jean-Claude Trichet as ECB president next year. The programme should be “tightly limited”, Mr Weber added in a speech in Mainz. The ECB said eurozone banks were expected to suffer writedowns totalling €515bn in the period from 2007 to 2010. That marked a downward revision from the €553bn it estimated in December. Expected writedowns on securities were lower than previously forecast – but expected losses on loans were higher. Taking into account writedowns already reported and loan loss provisions, some €90bn of writedowns have yet to feed through, it said. For 2011, it expected banks would have to make additional loan-loss provisions of about €105bn In its financial stability review the ECB noted “important progress on the road to financial recovery” but said financial market concerns about eurozone government indebtedness since earlier this year had “opened up a number of hazardous contagion channels and adverse feedback loops between financial systems and public finances”. One significant risk was that high government borrowing would “crowd out” private sector financing. Rises in long-term real eurozone interest rates in recent weeks to levels not seen for

391 at least a year pointed to an increased likelihood “of it impinging on the nascent economic recovery”, the report said. Corporate borrowing costs were also linked to government bond yields and could be hit by credit rating downgrades, it added. Such factors could “reinforce negative feedback loops between the financial and real sectors, with an adverse impact on economic growth and the stability of financial systems”. The ECB expected the bank sector to absorb the expected writedowns without “major problems” but eurozone banks should prepare for the withdrawal of emergency support offered during the crisis – including the ECB’s unlimited provision of liquidity. In a clear warning to banks, it said: “The problems of those financial institutions that remain overly reliant on enhanced credit and government support will have to be tackled decisively.” Ralph Atkins ECB warns of ‘hazardous contagion’ May 31 2010 18:27 http://www.ft.com/cms/s/0/6e4b63c2-6cd2-11df-91c8-00144feab49a.html

La prima de riesgo de España marca un nuevo máximo desde la entrada en el euro La desconfianza sobre la deuda de España aumenta por la división en el BCE.- El Ibex amplía las pérdidas en un día en rojo en toda Europa EL PAÍS - Madrid - 01/06/2010 La desconfianza de los inversores sobre la deuda pública española ha llevado a la prima de riesgo del país a marcar un nuevo máximo histórico a primera hora de la mañana en 170 puntos básicos. Tampoco están yendo bien las cosas en las Bolsas y en la cotización del euro, que ha marcado un nuevo mínimo en los últimos cuatro años en torno a los 1,21 dólares. Hasta hoy, el nivel más alto que ha alcanzado la prima de riesgo, que mide el diferencial entre los intereses que debe pagar España por su deuda a 10 años con los bonos alemanes, de referencia, se alcanzó a principios de mayo, cuando tocó los 164 puntos básicos justo antes de la aprobación del multimillonario fondo de emergencia de hasta 750.000 millones para ayudar a los países del euro con problemas de déficit y la entrada en liza del Banco Central Europeo con la compra de bonos. Sin embargo, la rebaja de la nota de calidad de España anunciada el viernes por Fitch en un peldaño hasta AA+, que llegó cuando las Bolsas ya estaban cerradas pero con los mercados secundarios de deuda en marcha, ha reavivado con fuerza la presión sobre los bonos españoles. En apenas tres jornadas, este indicador, que tiene una relación directamente proporcional a las condiciones de financiación de las administraciones, ha aumentado en 20 puntos básicos. Así, mientras a España los inversores le exigen una rentabilidad del 4,29% por sus títulos a 10 años, a Alemania le piden un bajo 2,5%. La diferencia también se ha visto ampliada en esta jornada por el aumento de la demanda de los bund alemanes ya que su condición de valor seguro le hace muy atractivo en los actuales tiempos de volatilidad y dudas sobre la marcha de la economía. La razón, la división de opiniones en el seno del BCE sobre la política de compra de bonos. El Instituto emisor ha destinado ya un total de 35.000 millones de euros a la

392 adquisición de deuda pública de los países miembros de la zona euro, según informó ayer la entidad. Y sin embargo, las compras se han desacelerado y varios miembros del consejo aseguraron ayer que el eurobanco "debe dejar de adquirir deuda pública lo más rápidamente posible", explicaron Mario Draghi y Axel Weber, precisamente los dos máximos candidatos a suceder a Jean-Claude Trichet en la presidencia del BCE. De hecho, hoy, los malos datos del sector manufacturero en Asia y Europa se han sumado a las perennes incertidumbres sobre la crisis fiscal de la eurozona para tirar hacia abajo de las principales Bolsas internacionales. Cualquier noticia negativa es razón suficiente para alejar a los inversores hacia valores menos volátiles u optar por ponerse en corto para intentar sacar algo de provecho al pesimismo generalizado de los mercados. Entre los parqués europeos y tras recuperar la referencia de Wall Street tras cerrar ayer por festivo, de nuevo el español era la que más se dejaba y a las 10.50 ampliaba su descenso al 3,36%. El impacto de la crisis en la banca Con todos sus valores en rojo, el selectivo español Ibex 35 ponía de nuevo a prueba el nivel de resistencia de los 9.000 puntos con el sector financiero al frente de las pérdidas tras el informe del BCE. Este documento conocido ayer calcula en 195.000 millones de euros el coste para las entidades españolas del recrudecimiento de la crisis fiscal. Ante este panorama, Santander y BBVA cedían un 3,5% y un 4,3%. También está condicionando al conjunto del índice el descenso de Telefónica, que a las 11.00 cedía más de un 2,8%. En lo que va de año, el Ibex 35 ha perdido un 21%. Es decir, más de un quinto del valor que acumulaba en enero por el desbordamiento de los problemas de deuda en Grecia y su extensión a los países del euro con más déficit, especialmente a Portugal y España. Ayer, los coletazos en el mercado de la rebaja de Fitch dio la puntilla a la Bolsa española para que mayo se vaya con una caída del 10,8%, el peor registro desde la caída de Lehman en otoño de 2008. El sentimiento negativo sobre España obedece al elevado endeudamiento, a las incertidumbres relacionadas con el sector bancario y a los niveles de paro, pero sobre todo a las dudas que despierta el horizonte de crecimiento a medio plazo de la economía española, condenada -al menos por los inversores- a un largo periodo de estancamiento. Y esas dudas se trasladan al conjunto de la eurozona: a diferencia de Grecia y Portugal, los países más señalados por la crisis fiscal, el tamaño de la economía española aumenta el peligro sobre el conjunto de Europa. "La situación de España, que mantiene una nota muy alta, es diferente de la de Grecia, cuya calificación es mucho más baja, lo que refleja también diferencias en la magnitud y naturaleza de su problema fiscal", dijo ayer el vicepresidente, Lucas Papademos. "La economía española reúne casi todos los requisitos posibles como para que los mercados la penalicen", resume Pablo Guijarro, de AFI. http://www.elpais.com/articulo/economia/prima/riesgo/Espana/marca/nuevo/maximo/entrada/ euro/elpepueco/20100601elpepueco_1/Tes

393 Coulisses de Bruxelles, UE

Jean Quatremer lundi 31 mai 2010 Axel Weber en guerre ouverte contre Jean- Claude Trichet

Depuis le 10 mai, le président de la Bundesbank, la banque centrale allemande, ne décolère pas contre le président de la Banque centrale européenne (BCE). Il lui reproche d’avoir décidé de racheter des emprunts grecs, espagnols, portugais ou encore italiens afin de soutenir leurs cours et donc de faire baisser les taux d’intérêt réclamés par les marchés. Pour Axel Weber, c’était là un casus belli, car la BCE a brisé l’un des tabous de la politique monétaire allemande et donc européenne : car il s’agit d’une monétisation indirecte de la dette publique, puisque la BCE ne souscrit pas directement des emprunts auprès des États, mais rachète les bons d’État sur le marché secondaire (la revente). Or, une telle monétisation accroit la masse monétaire ce qui créé de l’inflation. Surtout, la BCE se rend dépendante des États qui auront ainsi la certitude que leurs excès seront épongés… Dès le 11 mai, le patron de la Buba a pris publiquement ses distances avec ce bouleversement qu’il refuse d’assumer. Aujourd’hui, il en a remis une couche dans un discours prononcé à Mayence : « la politique monétaire a pris de nouveaux chemins pour combattre la crise que je continue à considérer de façon critique étant donné les risques » qui y sont liés, en particulier pour l’indépendance de la Banque centrale.

C’est la première fois qu’un gouverneur critique ainsi une décision de la BCE : jusqu’à présent chacun assumait la politique décidée en commun, même s’il avait mis en minorité. Car, toute la politique monétaire est votée à la majorité simple par le conseil des gouverneurs de banque centrale de la zone euro, chacun disposant d’une voix quelle que soit la taille de

394 son pays. Le rachat de la dette souveraine sur le marché secondaire a ainsi été voté « à une écrasante majorité », comme le rappelle aujourd’hui Trichet dans un entretien au Monde. Dans un ensemble composé d’États souverains, la BCE a jugé depuis l’origine qu’il valait mieux garder le secret des délibérations afin d’éviter qu’un pays ait l’impression d’être mis en minorité, systématiquement ou non. Organe fédéral, l’Institut de Francfort est censé décider pour le bien de tous. Pour dénoncer la rupture d’un tabou monétariste, Axel Weber rompt donc à son tour un autre tabou, celui de la confidentialité. Le refus de Weber de soutenir le rachat de la dette souveraine des États en difficulté budgétaire, même si ses interrogations sont légitimes (mais en interne !) (1), montre à quel point la Bundesbank a du mal à accepter de jouer collectif et continue à faire prévaloir les intérêts allemands. Pour la Buba, l’euro doit fonctionner comme le mark et elle prête à fragiliser la seule institution de la zone euro en qui les marchés ont encore confiance pour défendre ses dogmes. Cela rappelle étrangement la façon dont la Chancelière a géré la crise grecque depuis janvier dernier, ses hésitations ayant conduit la zone euro au bord du gouffre. Elle aussi a fait prévaloir les intérêts allemands – et la politique intérieure allemande - sur le collectif. Les effets des sorties de Weber ne se sont pas fait attendre. Le très francophobe Der Spiegel affirme ainsi, cette semaine, que si la BCE rachète des obligations d’État, c’est pour permettre aux banques françaises de se débarrasser à bon prix de leurs emprunts grecs alors que les banques allemandes, elles aussi très exposées, ont promis de les garder jusqu’en 2013… De là à parler d’un complot français, il n’y a qu’un pas que l’hebdomadaire s’est empressé de franchir en oubliant de préciser que Trichet ne décide pas seul même si lui reçoit, selon le très subtil Spiegel, ses ordres de l'Elysée… Reste que Weber, qui veut succéder à Trichet fin 2011, obère sérieusement ses chances en menant une telle campagne qui rappelle les heures les plus sombres du monétarisme allemand (la période de l’unification). Les chefs d’État et de gouvernement de la zone euro pourront légitimement s’interroger : la BCE peut-elle avoir à sa tête un homme qui fait preuve d’une telle rigidité ? Car la mesure décidée par Francfort est temporaire et n’est destinée qu’à stopper la panique sur les marchés. Sans cela, la crise aurait sans doute rebondi. Bref, Weber n’est manifestement pas l’homme qu’il faut pour gérer la sortie de crise. Mais, en même temps, il faut reconnaître que sa nomination rassurera pour longtemps des Allemands qui ont dû avaler beaucoup de couleuvres ces derniers temps. Et Weber découvrira qu’il n’a qu’une voix au sein du directoire et du Conseil des gouverneurs… Osera-t-il assumer d’avoir été mis en minorité ? On peut en douter. (1) Rappelons quand même que la BCE stérilise ses opérations et donc ne fait pas marcher la planche à billets : tant qu'elle paie un "prix juste" pour les actifs qu'elle rachète cela ne crée pas d'inflation Jean Quatremer Axel Weber en guerre ouverte contre Jean-Claude Trichet 31 mai 2010 http://bruxelles.blogs.liberation.fr/coulisses/2010/05/axel-weber-en-guerre-ouverte-contre- jeanclaude-trichet.html

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01.06.2010 GFC to GSC – Part 1: The Year of Wishful Thinking By: Satyajit Das

A year of wishful thinking … The period from March 2009 was the year of wishful thinking. Central banks cut interest rates and governments opened their cheque books providing a flood of cheap money that gave the illusion of recovery and a normal functioning economy. By pouring a lot of water into a bucket with a large hole, the world sustained the impression that the receptacle was almost full. As Norman Cousins, an American political journalist, noted: "Hope is independent of the apparatus of logic." Cognitive dissonance ensured that excessive debt levels and the unsustainable nature of debt fuelled growth was ignored. Governments merely transferred the debt from private sector balances sheets onto public balance sheets. The Global Financial Crisis ("GFC") has morphed into a Global Sovereign Crisis ("GSC") as sovereign governments now face difficulty in raising money. Stock markets and asset prices have tumbled. Credit markets are exhibiting an anxiety not seen since late 2008/ early 2009. The year of wishful thinking has run its course. Cradle of debt… If sub-prime was the Patient Zero of the GFC, then Greece, the cradle of Western civilisation, was the equivalent of the GSC. As historian Arnold Toynbee observed: "An autopsy of history would show that all great nations commit suicide." Greece’s significance is not its economic size (around 0.5% of global Gross Domestic Product ("GDP")) but its significant debts. Greece currently has around Euro 270 billion (113% of GDP), projected to rise by 2014 to around Euro 340 billion (150% of GDP)). In addition, Greece’s budget deficit was around 12-13%, at least that was the best guess. Profligate public spending, a large public sector, generous welfare systems particularly for public servants, low productivity, an inadequate tax base, rampant corruption and successive poor governments were responsible for the parlous state of public finances. Several events focused attention on the problems. Greece needed to borrow around Euro 50 billion in 2010 to refinance maturing debt and fund its budget deficit. There were damaging disclosures that Greece, like many other European countries, had used derivatives to manipulate its debt figures. Greece bungled attempts to mask its increasing difficulties in

396 refinancing maturing debt, including statements about a large purchase by China of its debt which was denied by the supposed buyer. The revelations focused attention on underlying problems setting off alarm bells. Markets smelt blood in the water and began shorting Greece, pushing up the cost of Greek debt, both in the physical and derivative (credit default swaps ("CDS") or credit insurance) markets. The Greek stock market fell sharply by around 30%. Gradually, the ability of the country, as well as Greek banks and companies, to raise money ground to a halt. Greece was also the "canary in the coal mine", highlighting similar problems in the PIGS (Portugal, Ireland, Greece and Spain) as well as some Eastern European countries. These countries alone have around Euro 2 trillion of debt outstanding. Larger countries - the FIBS (France, Italy, Britain and the ‘States) – also have similar problems. The problem is the large amount of public debt, unsustainable budget deficits and (in most cases) unfavourable current account deficits (both in absolute terms and relative to GDP). The deterioration in public finances was structural (pre-existing the GFC) and also the result of initiatives to cushion the economies from the worst effects of the GFC. This does not take into account the long term massive problems of ageing populations and unfunded social welfare schemes (pensions and health systems). Going Nuclear … Will Durant, an American historian, advised that: "One of the lessons of history is that nothing is often a good thing to do and always a clever thing to say." Initially, European politicians and bureaucrats, who suffer from delusions of adequacy, did nothing, but wouldn’t shut up about it. The oft repeated battle cry was "no default, no bail-out, no exit". Germany remained especially hostile to any financial "bailout". Repeated invocations of the no "bailout" clause underlying the Euro-zone drew attention to the risks of Greece’s debt. The major problem was "contagion" - the consequences if Greece was to unable to raise money from commercial sources. Much of Greece’s debt is owed to investors outside the country, mainly banks and investors in other European countries. As at June 2009, Greece owed US$276 billion to international banks, of which around US$254 billion was owed to European banks with French, Swiss and German banks having significant exposures. If Greece defaulted on this debt, then the resulting losses would have serious consequences for the affected banks and banking systems. Countries, such as Portugal, Spain and Ireland, with similar economic problems would inevitably be scrutinised and targeted. If a sovereign experienced funding problems, then banks and other borrowers in that country would also be affected. For example, Greek banks were increasingly unable to fund themselves in international markets, relying on the Greek and European Central Bank ("ECB"). The Euro had become increasingly volatile and had started to fall in value. There were concerns that the financial problems would affect the real economy – growth, jobs, investment etc. What happened in Athens was unlikely to stay in Greece. By February 2010, the need for co-ordinated action by the Euro-zone countries and the European Union ("EU") was evident. While pledging eternal support, the EU postponed action, waiting for Greece to agree to an austerity program to remedy its finances. The cause of European unity was not served by attacks by George Papandreou, the Greek Prime Minister, that the EU was creating a "psychology of looming collapse" and making Greece "a laboratory animal in the battle between Europe and the markets". In April 2010, as the market for Greek debt worsened (the additional interest rate that Greece

397 had to pay reached 8.00% p.a. over that paid by Germany), the EU proposed a highly conditional Euro 30 billion rescue package, after considerable prevarication. The Haiku writing, Belgian Herman Van Rompuy, President of the European Council, hoped "it will reassure all the holders of Greek bonds that the Euro-zone will never let Greece fail … If there were any danger, the other members of the Euro-zone would intervene." Markets considered the proposal to be inadequate and unlikely to avoid a Greek default. Increasingly desperate as circumstances began to rapidly spiral out of control, the EU increased the package in early May 2010 to Euro 110 billion, including a Euro 30 billion contribution from the International Monetary Fund ("IMF") who would supervise the package and the implementation of the "cure." About a week later, continued market scepticism and increasing pressure on Portugal, Spain and Ireland forced the EU to "go nuclear". After months of slow and tortured discussions, the EU acted with surprising speed announcing a "stabilisation fund" to the value of Euro 750 billion to support Euro-zone countries, including an IMF contribution of (up to) Euro 250 billion. The actions were designed in no particular order to salvage the EU, the Euro and over indebted Euro-zone participants by stopping contagion and further spread of the crisis. Journalists struggling for a telling phrase, resorted to financial "shock and awe". A single word – panic – probably better summed up the actions. All constitutional doubts and concerns about the legality of any bailout were jettisoned. The new consensus was that the actions had always been possible under the "exceptional circumstances provision" (Article 122) to counter a systemic threat. Details of the "plan" remain sketchy. The entire package conveys the impression that the EU and ECB are hopeful that the announcement will suffice to bring stability to markets and the facilities won’t ever have to be used.. Initially, stock markets rose sharply, especially shares of banks exposed to Greece who would benefit from the rescue. The interest rates on Greek, Irish, Italian, Portuguese and Spanish bonds fell sharply. As the announcement over the weekend caught traders unawares, the rally was driven largely by covering of short positions. "Shock and awe" quickly proved more shocking and less awe inspiring than the EU had hoped. Wiser commentators mused that if Euro 750 billion wasn’t going to do the trick, then what was? Nicolas Sarkozy, the French President, turned the Euro zone’s sovereign-debt crisis into a personal triumph. The proposal, he let it be known, was 95% French, though no proof was offered. Le Figaro led the cheerleaders reporting Sarkozy’s comment that "in Greece they call me ‘the saviour’." Solvency Not Liquidity, Stupid… A problem of too much debt was being solved with even more debt. Deeply troubled members of the Euro-zone were trying to bail out each other. Given that all have significant levels of existing debt, the ability to borrow additional amounts and finance the bailout remains uncertain. The need for governments to raise the required amount risks "crowding out" other borrowers as well as increasing the cost of funding. In order to avoid the risk of inflation, the ECB proposes to sterilise payments by issuing bonds to soak up the additional liquidity created. The entire plan appears to be a money shuffling exercise between European sovereigns. The reality is that Germany, with its large pool of domestic savings, must be the corner

398 stone of the rescue effort. Predictably, German credit risk margins have increased while the peripheral countries credit margins have fallen. The effect of the stabilisation fund is that stronger countries balance sheets are being contaminated by the bailout. Like sharing dirty needles, the risk of infection for all has drastically increased. Karl Dunninger, a trader, writing at www.seekingalpha.com captured the madness: "The most-amusing part of this is that nations seriously in debt and without a pot to piss in will be "contributing" some of the money to fund the debt. Spain, for instance, has pledged to do so. Where is Spain going to get the money from? Will they sell bonds at 8% to fund a loan at 5%? That's a very nice idea.... let's see, we lose 3% on those deals. That ought to help Spain's fiscal situation, don't you think?" At best, the plan provides temporary liquidity to cover immediate financing needs. The event that crystallised Greece’s problem was its need to repay maturing debt and also issue bonds to finance its deficit. In a striking parallel to the early stages of the GFC, the reality that it is a "solvency" problem not a "liquidity" problem remains unacknowledged. Most of the countries in the firing line have unsustainable levels of debt. For example, beyond 2010, Greece needs to re-finance borrowings of around 7%-12% of its GDP (around Euro 16 billion to Euro 28 billion) each year till 2014. There are significant maturing borrowings in 2011 and 2012. In addition, Greece is currently running a budget deficit of over 12% that must be financed. Greece’s total borrowing, currently around Euro 270 billion (113% of GDP), is forecast to increase to around Euro 340 billion (over 150% of GDP) by 2014. The IMF’s publicly available economic analysis that its plan assumes that Greece is able to refinance long-term debt by early 2012 an short term debt even earlier. Given that Greece is expected to have a total debt burden of 145 percent of GDP and total interest payment of 7.5% of GDP, the ability to raise funds and the assumed 5% cost of refinancing may be optimistic. The IMF plan calls for a program of fiscal austerity and major structural reform. This would entail a sharp reduction in the budget deficit to less than 3% of GDP and public debt under 60% of GDP. It is unlikely that Greece, despite heroic speeches from politicians, will be able to meet these targets. Temporary emergency funding to meet immediate liquidity needs will not solve fundamental problems of excessive debt and a weak economy. Government expenditure will need to be slashed and taxes raised to reduce its debt. But the government is too large a part of the economy and the suggested austerity measures will most likely put the economy into a severe recession. In turn, this will drain tax revenues and increase expenditures making it difficult to reduce the budget deficit and funding needs. Greece has limited opportunity to grow or inflate itself out of the problem. Without the ability to devalue the currency, Greece cannot address its fundamental lack of competitiveness quickly. The narrow economic base, primarily agriculture, tourism and construction, further limits options. The cure may not be feasible or will not help make it easier to meet future debt obligations. Ireland has already implemented austerity measures. The government debt as a percentage of GDP has increased to 64% from 44%. The budget deficit as a percentage of GDP has doubled to 14% from 7%. The nominal GDP of the country has fallen by 18%. Given many of the affected countries have low growth, high unemployment (Spain’s unemployment rate of is 20%), the likely social and political consequences are extremely

399 severe. The plan may make further liquidity problems inevitable. Markets are using the bailout package as an opportunity to exit their holdings of Greek and other PIGS’ securities. Instead of allowing Greece to raise funds normally, the bailout package is assisting investors to reduce exposure via repayment of maturing debt and the sale of illiquid longer-term securities. The package also risks forcing other vulnerable countries to rely on the stabilisation fund. Investors are selling rather than purchasing Spanish, Portuguese and Irish debt to also lower exposure. The effect of the bailout package is that Greek bond holders are subordinate to the IMF and the Euro-zone. This means that if the bailout fails, then the bond holders will be paid out after the IMF and the Euro-zone creating a disincentive for either holding existing debt or providing new debt. This affects not only Greece but any country considered vulnerable and likely to access the bailout. Recent lack of support for Spanish debt issues may be evidence of the problem. Sovereign debt problems have also affected the ability of European banks to raise money in wholesale markets. These problems will increase the cost of debt for all affected countries. The increasing cost of market debt makes the cost of the bailout funding more attractive encouraging resort to the facility. If this pattern continues, then other countries may be forced to access the package and the Euro 750 billion will quickly be insufficient to meet the total liquidity needs. As Woody Allen once observed: "More than any other time in history, mankind faces a cross-roads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly." © 2010 Satyajit Das All Rights reserved. Satyajit Das is the author of the just released Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2010) http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2806&tx_ttnews[ba ckPid]=901&cHash=0949fcaf86#

400 Opinion

May 31, 2010 Our Epic Foolishness By BOB HERBERT If a bank is too big to fail, it’s way too big to exist. If an oil well is too far beneath the sea to be plugged when something goes wrong, it’s too deep to be drilled in the first place. When are we going to stop behaving so stupidly? We nearly wrecked the economy and we’re all but buried in debt. But we can’t break up the biggest banks, and we can’t raise taxes. Now we’re fouling the magnificent Gulf of Mexico and ruining entire communities along the southern Louisiana Coast. And, by the way, we’re still fighting a futile war in Afghanistan that we’ve been fighting with nonstop futility for nearly a decade. (I’m sure the troops saddled with this thankless task were thrilled to see fans and teams demonstrating their undying support for their efforts by wearing fancy baseball caps on Memorial Day.) For a nation that can’t stop bragging about how great and powerful it is, we’ve become shockingly helpless in the face of the many challenges confronting us. Our can-do spirit was put on hold many moons ago, and here we are now unable to defeat the Taliban, or rein in the likes of BP and the biggest banks, or stop the oil gushing furiously from the bowels of earth like a warning from Hades about the hubris and ignorance that is threatening to destroy us. BP and the Obama administration have been equally clueless about halting the millions of gallons of oil that have flowed into the gulf since the Deepwater Horizon explosion more than a month ago. President Obama’s top adviser on energy policy, Carol Browner, unintentionally underscored the monumental futility of the response in a comment she made on NBC’s “Meet the Press” on Sunday. “This is obviously a difficult situation,” said Ms. Browner, “but it’s important for people to understand that from the beginning, the government has been in charge.” Got that? No one has been able to bring the crisis under control, and no one expects it to be brought under control soon, but the important thing for us to know is that the government has been in charge of this epic failure all along. However and whenever the well gets capped, what we really need is leadership that calls on the American public to begin coping in a serious and sustained way with an energy crisis that we’ve been warned about for decades. If the worst environmental disaster in the country’s history is not enough to bring about a reversal of our epic foolishness on the energy front, then nothing will. The first thing we can do is conserve more. That’s the low-hanging fruit in any clean-energy strategy. It’s fast, cheap and easy. It’s something that all Americans, young and old, can be asked to participate in immediately. In that sense, it’s a way of combating the pervasive feelings of helplessness that have become so demoralizing and so destructive to our long-term interests. People have talked about energy conservation for the longest time. But we have dawdled on making vehicles more fuel-efficient and weatherizing our homes and insisting that commercial

401 buildings be more energy efficient, and so on. Turn those thermostats down a couple of degrees in the winter and up in the summer. Figure out ways to have a little fun while doing it. We also need a carbon tax. The current crisis is the perfect opportunity for our political leaders to explain to the public why this is so important and what benefits would come from it. Above all, I’d like to see the creation of a second Manhattan Project that would lead us in a few years to an environment in which alternative fuels are abundant, effective and affordable. We are a pathetically weak player in that game right now. Instead of staring mesmerized at the tragedy in the gulf, like spectators at a train wreck, we should be trying to regain that innovative can-do spirit that made America the greatest of nations. All around us is the wreckage of our failure to master the challenges confronting us. We see it in the many millions of Americans who remain out of work and whose hopes are not rising despite all the talk of economic recovery. We see it in the schools where teachers are walking the plank by the scores of thousands because of state and local budget problems. We see it in the shrinking middle class and in the black community where depressionlike conditions are fostering not just a sense of helplessness, but despair. What’s needed is dynamic leadership (it doesn’t have to come from the top) to reinvigorate the spirit of America and turn that sense of helplessness around. http://www.nytimes.com/2010/06/01/opinion/01herbert.html?th&emc=th

402

Bernanke says global recovery depends on emerging markets, central banks By Tomoeh Murakami Tse Washington Post Staff Writer Tuesday, June 1, 2010; A08 The global economy will depend increasingly on emerging markets to foster strong growth, Federal Reserve Chairman Ben S. Bernanke said, adding that central banks worldwide must carefully weigh the timing of their withdrawals from various economic stimulus programs put in place during the financial crisis. "The Federal Reserve and many other central banks . . . will have to manage its exit from accommodative policies," evaluating the risks of a premature exit against the ramifications of leaving them in place for too long, said Bernanke, addressing a conference sponsored by the Bank of Korea in Seoul by video Sunday. "Because economic conditions vary, the appropriate timing of the exit is likely to differ across countries. To guide these important decisions, each central bank will have to carefully monitor economic developments in its own jurisdiction." The Fed chief, however, gave no new insight into when his central bank might start tightening credit. Up until recently, many analysts were predicting that the central bank late this year would start raising a key interest rate that has been held near zero since December 2008. But now, with rising concerns about the impact of Europe's debt crisis on the recovering U.S. economy, more economists are expecting the Fed to sit tight until at least 2011. Speaking on the sidelines of the Seoul conference Monday, two Fed officials gave upbeat views of the U.S. economy, saying the eurozone crisis, while clouding the outlook, is so far not big enough to throw off the U.S. recovery or impact Fed policy, according to news wire reports. "The situation in financial markets in Europe does add uncertainty, but at the moment I look for the recovery in the U.S. to continue to improve and I don't see any changes in my outlook," said Charles Evans, president of the Federal Reserve Bank of Chicago, according to Reuters. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said he did not see any developments in Europe as significant enough to force the central bank to change its policy, according to Reuters. "I don't anticipate at this point that the United States in particular will see a double dip" into recession, he said, "but obviously the financial turmoil in Europe raises some clouds." Neither Evans nor Plosser has voting rights on the Fed's interest rate-setting panel, the Federal Open Market Committee. In its latest statement on April 28, the panel said it would hold rates at the extremely low level for an "extended period." In his remarks, Bernanke said that emerging economies have become increasingly important to the financial system and global trading, and that they "also have a key role to play in the important efforts to reduce global imbalances in trade and capital flows." European Central Bank President Jean-Claude Trichet echoed that sentiment in his own video address to the South Korean audience. Emerging countries were severely affected by the financial crisis, but "as a group remained a source of strength for the world economy," he said. http://www.washingtonpost.com/wp- dyn/content/article/2010/05/31/AR2010053103148_pf.html

403

Austrian Light on the History of Bubbles Mises Daily: Monday, May 31, 2010 by Andy Duncan [This review was originally published by the Cobden Centre.]

You know you have crossed into the Austrian light when you wake up one morning and everything has become clear. From that point forward, for the rest of your life, you realize that almost every societal problem you encounter, no matter how simple nor how complex, is usually something to do with involuntary coercion, threatened violence, or some other failure of state interference in the free market. No matter how well the dead hand of government has camouflaged itself, the underlying coercive cause of the problem usually presents itself in short order, whether to explain a failing health system, a rogue schools system, or even a perennial shortage of your favorite vitamin in a local health-food store. Doug French, the current President of the Mises Institute, and a former Las Vegas banker, is one such clarity-seeking Austrian. His journey reached a conclusion when he decided to study for a master's degree in economics at the University of Nevada, where, unbeknownst to him, he would fall under the tutelage of Professor Murray Rothbard, and where his master's work would be examined by Professor Hans-Hermann Hoppe sitting upon his thesis committee. Rothbard, the acknowledged (Misesian) Dean of the Austrian School, subsequently opened up an efficient banker's eyes to the world of real human economics, where both sides of a voluntary transaction always profit, as opposed to blinding these eyes in the egalitarian

404 mathematical maze of the Keynesians. However, a circular problem emerged that needed to be squared off. The problem Mr. French perceived, in his eventual master's thesis, was the unknown causal factor behind Tulipmania, a huge bubble that took place in the 1630s in the Netherlands, with derivative futures in tulip bulbs being swapped for fantastical prices until a terrible price collapse in February, 1637, allegedly caused by a sailor mistakenly eating a hugely-priced tulip bulb after confusing it with an onion. French believes he solved this problem with his thesis, which the Mises Institute later adapted into book form; Early Speculative Bubbles and Increases in the Supply of Money is now freely available online as a beautifully formatted PDF. The problem's core centered on the Bank of Amsterdam, which dominated the Dutch financial system in the 17th century, and which possessed one of the hardest monetary systems of all time, with 100-percent reserves of gold and silver specie supposedly backing all of its monetary promises. So how did Tulipmania get started under such a granite-hard monetary system? Orthodox Austrian business-cycle theory (ABCT) generally blames fractional paper reserves for expanding bubbles and collapsing bursts, with these bubbles formed upon a state backbone of coercive market intrusions, including central banking, legal-tender laws, and legal-counterfeit money printing; but how does a bubble expand against a 100-percent physical precious metals store held by a nominally independent bank, just as Cobden and Bright themselves might have ordained had they been asked by God Himself to create the perfect monetary system in fiduciary heaven? (Gringotts Wizarding Bank, in the Harry Potter novels, is the only other bank I can think of that even comes close to the Bank of Amsterdam in its demands for specie purity and 100- percent reserve requirements.) "Do we want this boom and bust cycle to continue? If we do, we need merely continue with our current state-enforced system." Did this apparent failure of theory mean that Austrianism was fundamentally wrong in its monetary beliefs? Did this mean that the Chicagoans and the Keynesians were right to suggest that a medium-of-exchange system based upon gold (or any other physical commodity) was just a barbarous, wasteful relic? If you can get boom and bust with 100-percent metal reserves, why not just use paper instead and save yourself all of the mining, storage, and insurance costs? The gun was smoking, but where was the powder? For a brief primer on the standard ABCT, you might want to try the following pair of short works: • The Austrian Theory of Money (Rothbard) • The Austrian Theory of the Trade Cycle (Mises, Haberler, Rothbard, Hayek) Getting back to our smoking gun, if we could somehow understand this first modern financial bubble and how it was related to later major paper collapses, such as the Mississippi Bubble and the South Sea Bubble, and if we could align all three bubbles to Austrian business-cycle theory, then we would have a great chance to both understand how we got into our current economic mess and how we can break free from its strangulating and all-enmeshing grip, as the Internet bubble, the housing bubble, and the government bond bubble all twist and spin

405 before us in a three-part symphony of hyperinflation, hyperdepression, or hyperstagflation, the next slippery step dependent upon which way the head of the hydra turns next. And this is where Mr. French helps us with his superb book, making it essential reading for all those who wish to understand the causes and the solutions of our 21st century global financial meltdown. He begins with a thorough examination of the actual tulip-bulb market and why it was so peculiar; this peculiarity arose from the strange nature of the most desirable tulip color and from petal patterns being transmitted through bulbs via a mosaic virus, rather than through uncontaminated seeds. French also explains the cyclical nature of the bulb market, which left it a natural candidate for an annual futures market rather than a commodity spot market. Once the mechanics are explained, Mr. French then moves straight into the heart of the question: where did all the money come from to fuel Tulipmania? An earlier historian of bubbles and busts, Charles P. Kindleberger, avoided discussing Tulipmania because he refused to believe that the money supply had dramatically bubbled, because of the hard money policy of the Bank of Amsterdam. However, was Tulipmania just a unique bout of insanity, never to be repeated? Did a rogue mosaic virus invade the minds of men as well as bulbs of tulips to make a whole raft of Dutch traders behave in this strange one-off way? Or was this "mania" actually more of a "rational" bubble, with a sane explanation, in the same fashion as all subsequent bubbles, where many intelligent men succumbed quite rationally to the same mass financial error of propping up a particular asset class (such as Internet stocks, housing bonds, or government bonds), in a calm though mistaken belief that this would make them all rich? French believes he has found the sane, rational explanation behind Tulipmania, which falls strictly within the explainable paradigm of the Austrian business-cycle theory, rather than being within the inexplicable paradigm of the madness of crowds. However, Austrian bubbles need some sort of expansion in the money supply, by definition. To provide this, French works through several threads in far more detail than this review provides, to gear the underpinnings of a necessary money supply growth: • Following the regular gold debasements of the previous century instigated by Charles V, the Holy Roman Emperor who ruled over the Netherlands, the Dutch revolt of the late 1560s instituted a policy of "free coinage", whereby any amount of precious metal brought to the Dutch republican state would be minted "free" of charge and returned as the same weight of precious metal in the form of coins. (This "free coinage" policy came to the Netherlands by way of the Dutch East Indies, via the Portuguese and the Moslem governments of India.) • This anti-imperial policy encouraged a rising flow of specie to the port of Amsterdam, especially from the Spanish silver mines in South America and from as far afield as Japan. This was especially true after the mercury amalgamation process was invented in the middle of the 16th century, which boosted the production of silver, particularly with the opening of the Peruvian Huancavelica mercury mine in 1572 and the discovery of the Potosi silver mine in Bolivia, a single source which produced 45,000 tons of pure silver between 1556 to 1783. • Due to various complications of Dutch legal-tender laws, the Bank of Amsterdam was founded in 1609 and given a state monopoly on the trading of all specie.

406 Thus, we see already that three government interventions were settled into place before Tulipmania began; "free coinage" of money (i.e., Dutch taxpayers forced to subsidize minting, thereby sucking in specie from all over Europe), legal-tender laws (ripped apart by Gresham's law, which created a flood of debased and clipped overvalued money to push out newly minted undervalued money), and an imposed monopoly via the Bank of Amsterdam to counteract the two previous interventions (as often happens with government interventions in the free market, where one wrong-headed intervention generates a chain-reaction of further wrong-headed interventions). So much for a "free market" then. But French has more to add before he is finished; his colorful brushstrokes lay down two more Vermeerian layers of light and shade before the ultimate dénouement: • The city of Amsterdam, released from the strictures of the Holy Roman Empire, became a center for world free trade, thus sucking in even more specie. (Hurrah!) • The Dutch state naval fleet, one of the most effective in the world at the time, often seized huge volumes of gold bullion from the Portuguese eastern empire and silver bullion from the Spanish western empire. (Boo!) Thus we have a fourth violent state intervention, though tempered by the more noble causative factor of free trade, boosting the supply of currency to the Dutch homeland. And so the varnished picture is ready for a gilt frame: • Kings around Europe regularly debased and clipped their nation's coins, thus many people sent their bullion to the Netherlands, which practiced a republican policy of "honest" money, to protect their wealth from royal avarice. • The Dutch state policy of providing "free coinage" meant that more bullion was turned into coin than a free market would otherwise have produced. Thus, the scene was pregnantly ripe for speculation and malinvestment in the usual bubble pattern of a typical boom and bust, which manifested itself in something quaintly Dutch; the buying and selling of tulip bulb futures. French explains all of this clearly and easily, providing lots of delightful historical anecdotes along the way to frame this fascinatingly baroque period of European history; this type of embellishment always marks a true student of Murray Rothbard. "This type of embellishment always marks a true student of Murray Rothbard." However, Mr. French goes far beyond Tulipmania, because the rest of the book then explains the extraordinary career of Scotsman John Law, perhaps the first real Keynesian, and a man inspired by Tulipmania to create the Mississippi Bubble in France, which itself was the inspiration for those who created the similar South Sea Bubble in England, a story itself intimately connected with the early formation of the Bank of England. These secondary episodes, however, are easily explained by Austrian business-cycle theory, involving as they do the creation of paper money, the instigation of legal-tender laws and central banks, the forced confiscation of specie and fractional reserves, plus all the usual modus operandi stigmata associated with our more modern booms and busts. To conclude, all three popped bubbles involved a government-sanctioned bank, large increases in the money supply created by these banks, and the now-familiar pattern of (1) boom, (2) speculation, (3) crash, and (4) financial pain — as currently witnessed on the angry streets of Athens.

407 In the final section of his book, French summarizes the Austrian business-cycle theory and poses the question, Do we want this boom and bust cycle to continue? If we do, we need merely continue with our current state-enforced system of central banking, legal-tender laws, bailouts with money from thin air, nationalized money production, fiat-paper currency, and fractional-reserve banking. (The next logical move is a global fiat-paper currency, though it will do no good — the depressions will merely get even deeper and even longer, perhaps even becoming a permanent feature of all economies subscribing to this new global soviet currency.) "Essential reading for all who wish to understand the causes of our 21st century global financial meltdown." In the hard Misesian view, if we privatized money production, then all of these things would disappear overnight to be replaced by 100-percent gold-reserve free banking. But would boom and bust also disappear, as promised to us in Britain by Gordon Brown in 1997? This is a question that I'll leave you to answer to your own satisfaction, but books such as Doug French's Early Speculative Bubbles and Increases in the Supply of Money may help you work out a suitable conclusion. To my mind the first third of his book, describing Tulipmania, pays the entrance fee by explaining a state-instigated boom and bust cycle without a need for paper money. However, the final two thirds of the book are also worth a thorough read to complete the story. And seeing as the entrance price is free, with the entire book available at the click of a mouse as a print-ready PDF, just what are you waiting for? http://mises.org/daily/4341

408

Did Hoover Really Slash Spending? Mises Daily: Monday, May 31, 2010 by Robert P. Murphy

In a recent piece in the New York Review of Books, Paul Krugman and Robin Wells discuss two IMF publications and Reinhart and Rogoff's This Time Is Different: Eight Centuries of Financial Folly. Along the way, our reviewers repeat the myth that Herbert Hoover slashed spending, while the Federal Reserve implemented tight policies, and that this contributed to the severity of the Great Depression. I have pointed out repeatedly in prior articles that this simply isn't true, but since the Keynesians keep saying the falsehood, I feel compelled to keep pointing out that they're wrong. Krugman's Bogus History To make sure I'm doing justice to Krugman and Wells, let's quote liberally from their book review: History can offer some evidence on the extent to which Keynesian policies work as advertised. As we've noted, Reinhart-Rogoff don't address that question, but others have.… There has been … suggestive work from the economic historians Barry Eichengreen of Berkeley and Kevin O'Rourke of Trinity College in Dublin, who have coauthored two hugely influential papers exploiting the similarities between the current slump and the Great Depression. In the first of these papers, they showed that from a global point of view the first year of this slump was every bit as bad as the Depression: world industrial production fell

409 as steeply, world financial markets were if anything more disrupted, and so on. All this suggests that the shock to the system was just as big this time around. In successive updates, however, they have shown current events increasingly diverging from the historical record, with the world experiencing a recovery that may be disappointing, but is far better than the continuing downward spiral between 1929 and 1933. The obvious difference is policy: rather than emulating the grim austerity of policymakers three generations ago, who slashed spending in an effort to balance budgets and raised interest rates in an effort to preserve the gold standard, today's leaders have been willing to run deficits and pump funds into the economy. The result, arguably, has been a much smaller disaster. An even better test comes from comparing experiences during the 1930s. At the time, nobody was following Keynesian policies in any deliberate way — contrary to legend, the New Deal was deeply cautious about deficit spending until the coming of World War II. (emphasis added) Now here Krugman has painted himself into a corner. Although elsewhere I have pointed out that Keynesians such as Christina Romer discuss the 1930s in misleading but technically truthful ways, in the above quotation Krugman (and Wells) are stating outright falsehoods. In the United States, policymakers certainly didn't "slash spending" or "hike interest rates" in the immediate wake of the 1929 stock-market crash, and so the difference in our recoveries (two years into the two crises) can't be attributed to fiscal austerity versus prodigality. Moreover, under no sensible definition of the term — certainly not when juxtaposed with Krugman's wailing against the Bush years — can the New Deal be described as "deeply cautious about deficit spending." Hoover and the Fed, After the 1929 Crash According to the NBER, the so-called Great Recession started in December 2007. Although the timid NBER wonks have yet to date the official trough, most analysts (including Krugman) would say that the economy officially entered a recovery in the summer of 2009. Incidentally, I am not endorsing these conventional dating methods or definitions, but I'm just trying to show that Krugman's chronology — and consequent praise for Keynesian policies — doesn't fit the historical facts. Follow me here, because this is an important point: In the long block quotation above, Krugman and Wells argue that the reason we went into a Great Depression in the 1930s, whereas we merely suffered a Great Recession in our own times, is that the fool politicians back then slashed government spending while the fool central bankers hiked interest rates. In contrast, our enlightened politicians (at least the Democratic ones) and Ben Bernanke had the wisdom to run massive budget deficits and to slash interest rates. That's why unemployment zoomed to 25% in the 1930s but has yet to break 10% in our time. Now for this story to make any sense, it must be the case that Hoover "slashed spending," while the Fed hiked interest rates, within the first 20 months of the Great Depression. Do you see why? In our time — the so-called Great Recession — the slump began in December 2007, and was over (according to the conventional framework shared by Krugman) by August 2009. So when we're trying to see what Hoover and the early-1930s Fed did wrong, and why they didn't experience a painful but not catastrophic downturn such as the one we just went through, it had better be the case that their alleged mistakes occurred within the first 20 months after the stock market crash.

410 Recall that the great crash occurred in late October 1929. For fairness, call it November 1929. That means Hoover and the Fed must have implemented their boneheaded austerity measures — based on the special case of full employment in classical economic models, rather than Keynes's more general General Theory — sometime during the period before July 1931. Okay, so let's graph three different items from 1929 through 1931:[1] 1. the absolute size of the federal budget, 2. the size of the federal budget deficit as a share of GDP, and 3. the New York Fed's discount rate. Let's see if we can spot the fiscal and monetary tightness, which allegedly turned a nasty financial crash into the worst depression the world has ever seen:

411

Some Comments on the Above Charts Notice that federal spending went up throughout the period in question. It's true, in fiscal year (FY) 1933, Hoover had cut the federal budget by $63 million (1.3%) from the previous year. But fiscal year 1933 didn't start until July 1, 1932, which was two-and-a-half years into the Great Depression. Up until then, Hoover had steadily increased federal spending, just like Krugman would have recommended. As far as deficits, the federal government actually continued the surpluses it had inherited from the Coolidge years through fiscal year 1930. However, the slight uptick in the surplus as a share of the economy (in FY 1930) is misleading; the actual surplus was about the same in both years (around $730 million), but the economy had shrunk from 1929 to 1930 and so the surplus was a bigger share. In any event, by the summer after the stock-market crash Hoover's spending — combined with plunging tax receipts — had moved the Coolidge surpluses into Hoover deficits, and by the following year the deficit was 4% of GDP. For comparison, note that in his first term — when he "cut taxes on the rich and started a war" — George Bush's deficits were a maximum of 3.6% of GDP. But I've saved my favorite for last. Look at what the New York Fed did with its discount rate. Immediately following the late October 1929 crash, the NY Fed began slashing rates. It kept periodically cutting until it got to 1.5%, which was the lowest rate in Fed history to that point. "When an economy is on the ropes, the last thing in the world it needs is for politicians to squander more resources and for the central bank to print up more green pieces of paper." Now it's true, in October 1931 the NY Fed abruptly changed course, because the Bank of England the month before had severed the pound's link to gold, and worldwide investors were fearful of a similar move by the US authorities. In order to stem the outflow of gold, the Federal Reserve did indeed find its hand forced and it had to jack up its rates. But the point is that the Fed had implemented record "easy" policies from November 1929 through September 1931, some 22 months after the onset of the Great Depression. That is too

412 long for Krugman's historical narrative to make any sense. As we explained in the beginning of this article, at best Krugman has a 20-month window to work with, since our present-day Keynesian and loose-money policies allegedly nipped the Depression in the bud in that timeframe. To tie up one potential loose end that might trouble the fair-minded reader — is it possible that the Great Depression wasn't so bad in the early years, and only turned into the horrible slump after Hoover cut spending and the Fed raised rates? Well, it's true that things continued getting worse after October 1931, but they had gotten pretty bad leading up to that point too. The monthly statistics of those days are a bit speculative, but the average annual unemployment rate for calendar year 1930 was 8.9%, while for 1931 it was 15.9%. That means it was very likely the case that unemployment had already broken our current levels by the end of 1930 (in order to make the average for the whole year 8.9%). When we turn from unemployment figures to output statistics, the comparison isn't even close. From 1929 to 1930, real GNP fell 8.6%. Then from 1930 to 1931, it fell another 6.6%, for a total two-year drop of 14.7%. (In contrast, US real GNP was actually higher in 2008 than in 2007, according to the official figures, and it only dropped 2.7% from 2008 to 2009.) So it is clear that the awful Great Depression was in high gear even during the period of rising budget deficits and easy Fed policy; Krugman can't say that the real pain only set in after Hoover cut spending and the Fed raised rates. New Dealers Afraid of Deficits? Finally, let's deal with Krugman and Wells's claim that the New Dealers were "deeply cautious about deficit spending." Here is a table of the federal budget deficit, as a share of GDP, from the inauguration of Roosevelt till just before Pearl Harbor. And for kicks, I've included the eight years of the Reagan Administration side-by-side with it: Surplus/Deficit as Share of GDP FDR's Fiscal Years FDR Reagan Reagan's Fiscal Years 7/1/1933–6/30/1934 −5.9% −4.0% 10/1/1981–9/30/1982 7/1/1934–6/30/1935 −4.0% −6.0% 10/1/1982–9/30/1983 7/1/1935–6/30/1936 −5.5% −4.8% 10/1/1983–9/30/1984 7/1/1936–6/30/1937 −2.5% −5.1% 10/1/1984–9/30/1985 7/1/1937–6/30/1938 −0.1% −5.0% 10/1/1985–9/30/1986 7/1/1938–6/30/1939 −3.2% −3.2% 10/1/1986–9/30/1987 7/1/1939–6/30/1940 −3.0% −3.1% 10/1/1987–9/30/1988 7/1/1940–6/30/1941 −4.3% −2.8% 10/1/1988–9/30/1989 Now it's true, under any metric Reagan's budget deficits were bigger. Yet if we throw out the one year in which Roosevelt basically balanced the books, the two periods are pretty comparable. At the very least, if Roosevelt's prewar spending record illustrated "deep caution" about deficit spending, then Ronald Reagan's surely must have exhibited at least shallow caution. Yet somehow I think that if we combed Krugman's archives to find him describing Reagan as a deficit-phobe, we would search in vain.

413 Conclusion Today's Keynesians love to point to history to "prove" the efficacy of their remedies. In particular, they adore Hoover's budget cuts of 1932, and the Fed's rate hikes of October 1931, as proof positive that ignorant conservatism caused the Great Depression. But prior to these turnarounds in policy, the federal government and central bank operated in a Keynesian fashion, though perhaps too timidly for Krugman's liking. Krugman's basic story doesn't make sense. If the Keynesians were right, the economy should have been in a tepid recovery by mid-1931, and yet it was in fact still freefalling. In total contrast, in the depression of 1920–1921, the federal government and Federal Reserve really did implement the harsh measures that Krugman et al. erroneously attribute to Hoover and company. And yet, as its name suggests, this earlier depression was over quite quickly, and paved the way for the Roaring Twenties. On their face, the Keynesian prescriptions make no sense. When an economy is on the ropes, the last thing in the world it needs is for politicians to squander more resources and for the central bank to print up more green pieces of paper. Yet even if we set aside economic logic and just "look at the facts," we see that the Keynesian narrative doesn't add up. Robert Murphy is an adjunct scholar of the Mises Institute, where he will be teaching "Principles of Economics" at the Mises Academy this fall. He runs the blog Free Advice and is the author of The Politically Incorrect Guide to Capitalism, the Study Guide to Man, Economy, and State with Power and Market, the Human Action Study Guide, and The Politically Incorrect Guide to the Great Depression and the New Deal. Send him mail. See Robert P. Murphy's article archives. Comment on the blog. You can subscribe to future articles by Robert P. Murphy via this RSS feed. Notes [1] Throughout this article, I rely on the following sources: Federal Budget Receipts and Outlays: T. Roosevelt — G.W. Bush; the Census Bureau's Historical Statistics of the United States, Colonial Times to 1970 Part 2, Chapter Y, p. 38; my book on the Great Depression; and a list of Federal Reserve bank-discount rates that I acquired from Bill Barnett but is apparently no longer accessible online. http://mises.org/daily/4350

414 COLUMNISTS The false trail of austerity and a weak euro By Wolfgang Münchau Published: May 30 2010 20:02 | Last updated: May 30 2010 20:02 Want to hear the optimists’ case for the eurozone’s future? Austerity programmes coupled with a weak euro might just save it. The argument is that fiscal indiscipline has caused the crisis. Austerity must therefore solve it. A weak euro and a global recovery would cushion the impact of austerity. In addition, the financial guarantees and the bans on short sales would see off the speculators. End of crisis. The optimists have not had a good crisis so far. This will not change. Here is why. First, fiscal adjustment programmes will be necessary eventually but European governments are currently repeating their age-old mistake of cutting spending and raising taxes well before the economy has recovered. In the US there is a debate about another stimulus package to ensure the recovery does not prematurely run of out steam. The Europeans are choking off the recovery before it has even started. The premature austerity programmes will ultimately impede debt reduction, as nominal growth remains very weak. Furthermore, Italy and Spain will both need to accompany fiscal adjustment with structural reforms. There are no such reforms on the horizon in Italy. Spain is about to decide a labour reform package. But it will almost certainly not deal with the fundamental problem of a divided and extremely inflexible labour market. Even in Germany, where domestic spending remains anaemic, the government coalition is discussing a tax increase. Second, the euro’s exchange rate has indeed weakened, and may weaken further. But it will probably not do so sufficiently to solve southern Europe’s competitiveness problems. In Greece, for example, tourism is the main export industry. A slump of the euro against the dollar is not going to change the country’s relative competitive position against the eurozone nations of the Mediterranean Sea. It could improve competitiveness against Turkey and Croatia, for example, but only to the extent that the lira and kuna also revalue. For the euro exchange rate alone to do the heavy lifting in restoring southern European competitiveness, it would take a massive further depreciation – to about 60 or 80 US cents to the euro. Assume this were to happen, and then consider the overall effects. The Organisation for Economic Co-operation and Development last week forecast that Germany’s current account surplus, which fell to 5 per cent of gross domestic product in 2009, would rise again to 7.2 per cent in 2011. That forecast is based on current exchange rates. An extreme further fall in the euro would have two effects: it would increase Germany’s surplus even further, probably to well over 10 per cent of GDP, and thus increase internal imbalances within the eurozone. It would also contribute to a deterioration of global imbalances, as the eurozone as a whole would turn a small current account deficit into a large surplus. Relying on the exchange rate would be the ultimate beggar-thy-neighbour policy. Third, lingering doubts remain about the €750bn financial rescue package to help weaker eurozone countries. The German constitutional court has still to rule on the package and, while its rulings are difficult to predict, there are some legitimate reasons for concern.

415 I am not sure the court will accept the force majeure argument invoked by the European Council in deciding to permit the rescue package. The Council invoked Article 122 of the treaty on the functioning of the European Union, under which financial assistance is allowed “where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control”, but I think there are legitimate doubts about whether the multiple policy failures that led to this crisis constitute an event beyond one’s control. I also fear the German justices will express misgivings about the European Central Bank’s decision this month to buy bonds. Fourth, the assumption that the crisis was caused, or triggered, by speculation, is not just legally dubious. It may also deflect from the overriding need to reform the eurozone’s governance framework. If you blame speculators, it may be an obvious policy response to ban short sales and penalise hedge funds rather than reform the framework. I therefore expect little substantive reform. At most there will be a souped-up stability pact, to be announced in another pompous press conference at the next European summit in June. Governments are already watering down the European Commission’s sensible, though not very ambitious, proposals. This means European governments are very likely to miss the opportunity to fix the problems in the long run. What the eurozone really needs is a consolidation strategy based on growth and a credible fiscal adjustment plan. It needs to encourage domestic demand in northern Europe to facilitate the adjustment in the south. And it needs a new and functioning system of economic governance. But instead, governments have chosen to chase speculators and to impress each other with austerity packages. They are thus contributing further to the eurozone’s increasingly probable though still distant disintegration. Wolfgang Münchau The false trail of austerity and a weak euro May 30 2010 20:02 http://www.ft.com/cms/s/0/878d7a94-6c16-11df-86c5-00144feab49a.html

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5/27/2010 03:33 PM The World from Berlin 'Europe Will Save Its Way into the Next Recession' Euro-zone governments have introduced one belt-tightening program after another, but the future of the single currency remains shaky. German editorialists on Thursday ask whether the bloc is doing enough to quell the crisis. A few weeks ago, European leaders signed up to an unprecedented 750 billion euro ($920 billion) rescue package for Europe's hard-hit currency. But, as hindsight shows, it has not been enough to stablize the euro. Instead, the European single currency has continued its dramatic fall, recently hitting a four-year low against the dollar. As politicians try to convince markets that they are serious about supporting the euro, belt- tightening has gotten into gear across the continent. Debt-laden Greece led the way, quickly followed by Portugal and Spain. Then, on Tuesday, Italy's government approved a €24 billion ($30 billion) austerity package, marking a blatant u-turn for Prime Minister Silvio Berlusconi. Italy's cutbacks are aimed at trimming its budget deficit -- which last year stood at 5.3 percent of its gross domestic product -- to within the euro-zone limit of 3 percent by 2012. Germany is poised to follow suit and German Chancellor Angela Merkel has her work cut out. The government urgently needs to cut costs in order to comply with the country's new debt ceiling rule, and the German chancellor also wants to set an example for Europe on how best to cut costs. 'Euro Success Story' Merkel, who has been criticized for a lack of decisiveness during the crisis, has repeatedly spoken out in defense of the euro. During her whistle-stop tour of the Gulf this week, she insisted the currency would regain its stability. "Let me tell you that the euro as a common currency has been, and will continue to be, a success story," she said in a speech in Qatar. But her confidence was not echoed by US Treasury Secretary Timothy Geithner, who traveled to Berlin for talks with German Finance Minister Wolfgang Schäuble to discuss the debt crisis on Thursday. Speaking on Wednesday in London, he warned that, while the European Union has a good plan to address the crisis, it needs to move soon. The euro staged a slight rebound against the dollar on Thursday but markets remained jittery over the question of whether European governments will manage to back up vows of support for the euro with concrete action. German editorialists on Thursday asked whether the continent's savings plans would be enough to save the common currency and Europe's struggling economies. The left-leaning Berliner Zeitung writes: "Unfortunately there does not seem to be a coordinated approach to dealing with the mountains of debt, especially not within Europe. Spain is cutting civil servants' wages, freezing pensions and limiting public investment. Portugal is raising value-added tax, while the new British government is kicking off with an ad-hoc savings program. Greece, meanwhile, is cutting back in every imaginable direction. Even in Germany, the finance

417 minister announced that he would save more than any of his predecessors. Together, they will save their way into the next recession." "In this financial crisis, governments must quickly react to a number of completely new threats. A new and unprecedented experiment is underway. Never before have states moved to abruptly slow demand like this. The signs are that the economies will not withstand this pressure. Decisiveness is needed to rescue the euro, but also a certain amount of patience." The center-left Süddeutsche Zeitung writes: "The past 10 days were the most risky since the start of the euro crisis. Global investors fled from the euro, putting their money into US bonds instead. European banks had to suddenly pay a high price for the extra risk; share prices slumped. It was almost like the worst moments of the financial crisis. Now the situation has calmed down -- but the panic can return at any time." "One country is to blame for this escalation: Germany. The Bundestag did admittedly pass the Greek rescue package last week, which should have calmed the markets. But instead markets were shocked by new measures designed to cull alleged speculation. These were new rules that no one outside Germany had expected and that (almost) nobody understood. The shock was not inspired by the contents of this package… but rather the fact that the German government was pushed into senseless decisions by popular opinion and the opposition and the feeling they wouldn't have managed to get the Greek rescue package passed without these extra measures. Even worse, no one beyond Berlin had been informed about the plan. From the outside it looked as if Germany simply didn't know what to do (...). Under these circumstances, how can a crisis be solved?" "At the end of the day, the crisis can not be tamed without economic growth. Cutting spending is an important part of the solution, but it is not the solution itself. Many neighboring countries are worried that if Germany economizes without making other reforms, it could push the whole continent into deflation. Angela Merkel should take these concerns very seriously." The Financial Times Detschland writes: "In Italy, tax dodging is almost a part of business etiquette. Small and large business deals are paid in cash to avoid the tax authorities. In its battle to shrink its national debt, Berlusconi's government is right to go after tax fraudsters by only permitting big money transfers to be completed electronically or by tracking illegal building activities using aerial photographs. If the government sticks to its plan, it could solve its biggest financial problems. But it would also be unpopular and could dampen the economy." "At present, only a small amount of Italy's €24 billion savings package will be recouped in the battle against tax evaders. But the fact that the center-right government is daring to move in this direction is by no means due to Prime Minister Silvio Berlusconi. To the contrary, when his predecessor Romano Prodi began to close in on tax dodgers, the populist Berlusconi complained that it was 'robbery'. Now he has to move in the same direction. Thanks to Finance Minister Giulio Tremonti he has no choice. The finance and economy minister is one of the few Italian politicians who inspires trust abroad." The conservative Frankfurter Allgemeine Zeitung writes: "Maybe, hopefully, the EU commission president is right: Sometimes crises can be for the best. We needed a euro crisis and painfully high interest rates to bring some, or all, European governments to their senses. Running budget deficits of 12 or 13 percent of GDP and more in

418 order to pad out the social system, and national debts of over 100 percent of GDP, should have sounded alarm bells from Athens to Lisbon." "Now Italy's center-right government is embarking on a savings program.... It can only be hoped that Berlusconi has garnered enough support that he doesn't fall at the first hurdle -- and that Italy's opposition does not begin a dangerous and foolhardy game like their counterparts in Madrid and Athens." -- Jess Smee

URL: http://www.spiegel.de/international/europe/0,1518,697098,00.html RELATED SPIEGEL ONLINE LINKS: Resurrection of the Euro: European Austerity the First Step to Recovery (05/27/2010) http://www.spiegel.de/international/business/0,1518,697030,00.html Plans for Sweeping Cuts: Germany Tries to Plug Gaping Hole in Its Budget (05/26/2010) http://www.spiegel.de/international/germany/0,1518,696760,00.html 24 Billion Euro Austerity Package: Italy Joins Europe's Wave of Belt-Tightening (05/26/2010) http://www.spiegel.de/international/europe/0,1518,696848,00.html Interview With Former Foreign Minister: Merkel 'Botched' Her Duties in Euro Crisis, Says Joschka Fischer (05/24/2010) http://www.spiegel.de/international/europe/0,1518,696420,00.html Europe vs. the Financial Markets: How Serious Is the EU about Regulation? (05/19/2010) http://www.spiegel.de/international/europe/0,1518,695546,00.html 'We Only Have One Shot': How the Euro Rescue Package Came Together (05/17/2010) http://www.spiegel.de/international/europe/0,1518,695110,00.html SPIEGEL 360: The Euro Crisis http://www.spiegel.de/international/europe/0,1518,k-7612,00.html

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Greek Lessons for the World Economy Dani Rodrik 2010-05-11

CAMBRIDGE – El plan de ayuda de 140.000 millones de dólares que el Gobierno griego ha recibido al final de sus socios de la Unión Europea y del Fondo Monetario Internacional le da el respiro necesario para emprender la difícil tarea de poner en orden sus finanzas. El plan puede o no prevenir que España y Portugal acaben tan gravemente afectados o incluso evitar, de hecho, una posible quiebra griega. Sea cual fuere el resultado, está claro que el desastre griego ha dejado un ojo morado a la UE. En el sentido más profundo, la crisis es otra manifestación de lo que yo llamo “el trilema de la economía mundial”; la mundialización económica, la democracia política y el Estado- nación son mutuamente irreconciliables. Podemos tener, como máximo, dos a la vez. La democracia es compatible con la soberanía nacional sólo si limitamos la mundialización. Si intensificamos la mundialización, al tiempo que conservamos el Estado-nación, debemos abandonar la democracia y, si queremos democracia junto con la mundialización, debemos dejar de lado el Estado-nación y luchar por un mayor gobierno internacional. La historia de la economía mundial muestra el trilema en pleno desarrollo. La primera era de la mundialización, que duró hasta 1914, fue un éxito mientras las políticas económicas y monetarias permanecieron aisladas de las presiones políticas internas. Entonces dichas políticas podían estar enteramente sometidas a las exigencias del patrón-oro y la libre movilidad de los capitales, pero, una vez que aumentó el derecho de voto, la clase obrera se organizó y la política de masas pasó a ser la norma, los objetivos económicos nacionales empezaron a competir con las normas y limitaciones exteriores y a arrollarlas. El caso clásico es el del corto regreso de Gran Bretaña al patrón oro en el período de entreguerras. El intento de reconstituir el modelo de la mundialización anterior a la primera guerra mundial se desplomó en 1931, cuando las políticas interiores obligaron al Gobierno británico a elegir la reflación interior frente al patrón-oro. Los arquitectos del régimen de Bretton Woods tuvieron presente esa enseñanza cuando prepararon una nueva concepción del sistema monetario en 1944. Entendieron que los países democráticos necesitarían margen para aplicar políticas monetarias y fiscales independientes.

420 Por eso, sólo previeron una “ligera” mundialización, con corrientes de capital limitadas en gran medida a préstamos y endeudamiento a largo plazo. John Maynard Keynes, quien formuló las normas junto con Harry Dexter White, no consideraba los controles de capitales un expediente temporal, sino un rasgo permanente de la economía mundial. El régimen de Bretton Woods se desplomó en el decenio de 1970 a consecuencia de la incapacidad o la renuencia –no está claro de cuál de ellas se trató– de los gobiernos principales a gestionar la oleada en aumento de corrientes de capital. La tercera vía revelada por el trilema es la de la supresión completa de la soberanía nacional. En ese caso, la integración económica puede ir acompañada de la democracia mediante la unión política de Estados. Entonces, la pérdida de la soberanía nacional queda compensada por la “internacionalización” de la política democrática. Se debe considerarla una versión mundial del federalismo. Los Estados Unidos, por ejemplo, crearon un mercado nacional unificado, una vez que su gobierno federal arrebató el suficiente control político a los estados individuales. No fue un proceso fácil precisamente, como lo demuestra más que de sobra la guerra civil americana. Las dificultades de la UE se deben a que la crisis financiera mundial afectó a Europa a mitad de camino en un proceso similar. Los dirigentes europeos siempre han entendido que la unión económica debía tener una pata política para sostenerse. Aun cuando algunos, como, por ejemplo, Gran Bretaña, deseaban conceder a la Unión el menor poder posible, la fuerza de la argumentación correspondió a quienes propugnaron la integración política junto con la económica. Aun así, el proyecto político europeo adquirió una amplitud política mucho menor que la económica. Grecia se benefició de una moneda común, mercados unificados de capitales y libre cambio con los demás Estados miembros, pero no tiene un acceso automático a un prestador europeo como último recurso. Sus ciudadanos no reciben subsidio de desempleo de Bruselas del mismo modo, por ejemplo, que los californianos lo reciben de Washington, D. C., cuando California padece una recesión. Como tampoco, dadas las barreras lingüísticas y culturales, pueden los desempleados griegos cruzar las fronteras y trasladarse con la misma facilidad a un Estado europeo más próspero y, si los mercados advierten que su gobierno es insolvente, los bancos y las empresas griegos pierden solvencia, junto con él. Por su parte, los gobiernos francés y alemán no han tenido voz y voto respecto de las políticas presupuestarias de Grecia. No pudieron impedir que el Gobierno griego tomara préstamos (indirectos) del Banco Central Europeo, mientras las agencias de calificación crediticia consideraron solvente la deuda griega. Si Grecia opta por quebrar, no pueden aplicar las reclamaciones de sus bancos a los prestatarios griegos ni incautarse de activos griegos. Como tampoco pueden impedir a Grecia abandonar la zona del euro. Lo que todo eso significa es que la crisis financiera ha resultado ser mucho más profunda y su resolución considerablemente más complicada de lo necesario. Los gobiernos francés y alemán han acabado preparando a regañadientes un importante plan de préstamo, pero con un retraso considerable y con el apoyo del FMI. El BCE ha reducido el umbral de solvencia que los valores griegos deben cumplir para permitir la continuación del endeudamiento griego. El éxito del rescate dista de estar asegurado, en vista de la magnitud de la reducción de gasto que exige y la hostilidad que ha inspirado a los trabajadores griegos. En última instancia, la política interior puede más que los acreedores extranjeros. La crisis ha revelado hasta qué punto son exigentes las condiciones políticas previas de la mundialización. Revela hasta qué punto deben evolucionar las instituciones europeas para

421 sostener un mercado único sólido. La alternativa que afronta la UE es la misma en otras partes del mundo: o integrarse políticamente o reducir la unificación económica. Antes de la crisis, Europa parecía el candidato más probable a hacer una transición lograda hasta el primer equilibrio: una mayor unificación política. Ahora su proyecto económico está hecho trizas, mientras que la capacidad de dirección necesaria para reavivar la integración política brilla por su ausencia. Lo mejor que se puede decir es que Europa no podrá seguir aplazando la elección de una de las dos opciones de la alternativa que el caso griego ha dejado al descubierto. Desde una posición optimista, se podría concluir que, por esa razón, Europa acabará fortalecida en última instancia. Copyright: Project Syndicate, 2010. www.project-syndicate.org Traducido del inglés por Carlos Manzano En este enlace puede encontrar un podcast de este artículo: http://media.blubrry.com/ps/media.libsyn.com/media/ps/rodrik.43.mp3 http://www.project-syndicate.org/commentary/rodrik43/Spanish

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Monday April 26, 2010 Cover Story May 27, 2010, 5:00PM EST Chuck Schwab Is Worried About Small Investors. Should We Worry Too? "People are still in a state of fear," says the father of individual investing. "And with good reason." Schwab believes it is crucial for the little guy to stay invested. And his business depends on it In 12 years as a retail financial consultant for Charles Schwab (SCH), George Pennock thought he had seen every kind of market. Then, on May 6, he and his 250 clients lived through something new. Pennock was in Schwab's office in Englewood, Colo., just outside of Denver, talking by phone with a retiree who moved his money to Schwab last year because he says he felt suckered by his old broker. While they spoke, Pennock kept an eye on his computer screen and saw the Dow drop 250 points, bounce sideways, then go into free fall— 300, 400, 900 points down. His client was watching the same thing on CNBC. "What's going on, George?" the retiree asked. "Do you have any explanation for this?" Pennock didn't. He was thinking he should end the call and contact clients who had pulled out of equities after getting clobbered in 2008 and 2009. Some left at the bottom, then sat on the sidelines while the market raced up 80 percent. Maybe they would see this as a buying opportunity. He never got the chance. In minutes, the market anomaly was over and the Dow was heading back up. It wasn't until the next day that Pennock, 37, began to appreciate its impact on investor psychology. He arrived at his office the morning after to find 22 phone messages. By day's end he had 50—one-fifth of his client base. "A lot of the calls were nervous," he recalls. "It was, 'George, this is testing my risk tolerance.' They have deep-seated concerns that [the correction] will go on for a while and nobody knows how long or how bad it will be." It took Pennock two weeks to catch up on all the calls. "These conversations are lengthy," he says. "They take a lot of hand-holding." Some clients wanted to retreat; he reminded them why they had made financial plans in the first place. A retired airline pilot wanted to know if the 30 percent of his assets invested in equities was too high. (Pennock assured him it wasn't.) Another investor, who had waited five months to get back into the market, worried he had missed his chance. Most simply wanted reassurance. The May 6 crash may have been a freak occurrence, but it felt like one more sign that the deck was stacked against the little guy. "They got burned very badly before," Pennock says, "and they don't ever want to be in that situation again." Many small investors had only begun to tiptoe back into equities when the May 6 crash and the European credit crisis rocked the markets, completing a particularly cruel cycle. In the year prior—while the S&P 500 was rebounding 69 percent from its Mar. 9, 2009, bottom— individual investors withdrew a total of $11.5 billion from U.S. equity mutual funds and poured $506 billion into lower-yielding bond funds, according to TrimTabs Investment Research. By late spring, they had just begun to reverse course, venturing back into equities by channelling $13.9 billion into domestic mutual and ETF funds in March and $6.9 billion in April. By the third week of May, they'd withdrawn $29.3 million from U.S. equity mutual funds and poured an additional $8.2 billion into bonds. An American Association of

423 Individual Investors survey taken the week of the May crash showed investor sentiment jumped to 36 percent "bearish," from 28 percent the week before. As of May 10, according to the Federal Reserve, money on the sidelines in bank and money market accounts had reached $9.36 trillion, compared to $7.44 trillion in May 2007. The period since early 2008 "is the worst time since I began the company," says Charles Schwab, the father of the modern American individual investor. "These are the most violent markets. Most people are still in a state of fear. I'd say 98 percent are still very concerned. And for a lot of good reasons. Look at the headlines. You've got these scoundrels doing all this stuff. People wonder, 'Who can I trust?' " Schwab is sitting in his San Francisco office—which has always been spare but these days seems downright spartan—looking out the window at the Bay Bridge and mulling the tortured psychology of the American investor. "Where are they?" he asks, then pauses and lets out a sigh. "This is the most violent period I've ever seen," he says finally. "It was the end of capitalism as we knew it. The whole definition of safety and soundness—what does it really mean any more?" As chairman of the $4.2 billion company he founded in 1975, Schwab has reason to be worried about his customers. The success of his company depends in some measure on his financial advisers' ability to keep their clients engaged in the markets. Last year, almost a quarter of the company's revenue came from trading commissions; another 45 percent came from asset management fees. That's the tension at the heart of Schwab's enterprise. He has become the de facto therapist to the individual investor, but he is not a disinterested observer. His job—like Pennock and his other 6,868 licensed brokers—is to keep America invested. Schwab says that staying broadly diversified and firmly in the game remains the key to long- term financial security. Given what's going on in the world, should anyone believe him? Schwab, now 72, and Vanguard Funds founder Jack Bogle are the old lions of the retail investment industry. Both played key roles in launching the golden age of individual investing—the period between August 1982 and March 2000 when the S&P 500 climbed from 102 to 1,527 and buy-and-hold seemed the surest path to security. Bogle was the pioneer of mutual funds and Schwab opened the door to equity trades for small investors. When Congress deregulated brokerage fees in 1975, some brokerage houses responded by raising fees; Schwab slashed his, making investing affordable for the middle class and becoming broker to the masses. His company's revenues grew from $387 million in 1990 to $5.8 billion in 2000. By then, it was offering round-the-clock trading, sophisticated investment analysis, and a mutual fund supermarket. Long before Starbucks (SBUX), Schwab's branches were gathering places for market enthusiasts—office workers, day traders, and loiterers who stopped by to check stock quotes, mull their next move, brag about their big scores, and indulge in a group fantasy about a spectacular new way to get rich. As individual investing became a way of life, Schwab inevitably drew competitors—rival discount brokers (and, later, discount online brokers) such as Ameritrade (AMTD) and E*Trade (ETFC), and full-service houses such as Fidelity. Schwab's company rode the late- 1990s tech boom but was battered by the steep drop in trading following the 2000 crash. Schwab himself moved out of the top job in 2003, only to move back in a year later, renewing the company's commitment to the small investor. (Today the chief executive officer is Walt Bettinger.) During the financial panic of 2008, Schwab attracted investors fleeing Merrill Lynch, Wachovia, E*Trade, and other battered firms. That new business helped boost Schwab's assets under management 25 percent to $1.4 trillion last year from the prior year (compared with $1.5 trillion at Fidelity, $350 billion at TD Ameritrade, and $162 billion at

424 E*Trade) but Schwab's revenue fell 19 percent under pressure from low interest rates. The company's stock was trading around $16 last week, down $3 from one month before. Since 1986, Schwab has written four books on investing. He is an optimist by nature, one who has always preached asset allocation, diversification, and investing for the long term. By empowering individual investors at the start of the bull market, he and Bogle and Fidelity's marquee investor Peter Lynch inadvertently created a monster. As playing the market became a national pastime, investing turned into a synonym for stockpicking. Equities were thought of as savings. Today, legions of investors are torn between a newfound desire for safety and the allure of old, bad habits. Worse, as Americans became do-it-yourselfers and sometimes day traders, their success— especially during the inflating of the dot-com and real estate bubbles—masked a profound shift in the balance of power. Wealth was migrating to institutions, hedge funds, and investment banks like Goldman Sachs (GS), which had created proprietary desks to trade ever more esoteric instruments for their own accounts. Institutional investors now own about 70 percent of American corporations, up from 35 percent in 1975, according to Bogle. As trading algorithms grew more complex and computers sped up, every advantage went to the big guys. The Yale School of Management has conducted a "buy on dips" survey since 1989, a confidence index that measures investors' willingness to buy after market drops of 3 percent or more. Institutional and individual investor sentiment tracked closely until 2007. At the height of the Dow Jones industrial average, in October 2007, 61 percent of each group said they would buy on dips. Since then they have diverged. By March 2010, 71.6 percent of institutional investors were willing to buy on dips compared to only 57.5 percent of individuals. In other words, small investors need more help than ever. "Before, nobody needed advice— most just called me up to place their trades," says Robinson Martin, a financial consultant in Schwab's Cobb County (Ga.) office, on the outskirts of Atlanta. Now Martin and others are no longer cheerleaders and trade executors; they are psychologists, trauma experts, counselors, empathizers. It's a delicate balance. In pre-crash days, the company's clients were mostly avid investors. Rarely did Schwab have to coax them into the market. But that's what the company has to do now to prop up the assets it oversees. It's what it has to do to juice its own adviser business. It's what Charles Schwab has preached from the beginning—asset allocation over time. And it's what he does, as well. In August 2007, near the very top, he invested the more than $10 million he'd received from the company's sale of its U.S. Trust unit in a portfolio divided between 50 asset classes. Then he left it. After losing about 30 percent of its value at its lowest point, it is now down about 12 percent, he says. "I follow my own advice," he says. "I'm not running for the hills. Yes, those investments might be somewhat down from '07, but they will be at higher values next year or the year after. I don't know exactly when, but I believe it because of my confidence in the American economic system. If you don't have that confidence, then you definitely should not be a client of Schwab." Atlanta is a buy-and-hold town, loyal to local favorites Coke, (KO) SunTrust Bank (STI), Delta Air Lines (DAL), and Home Depot (HD), says Martin, 38, as he prepares to conduct a client seminar on a sunny weekday at Schwab's Cobb branch. THe old rules don't work any more, he says. You can't buy and hold anything with confidence, and that's rattling even those who didn't follow the rules during the bull market. Martin's conference room, inside a tall, glass-and-steel building in a suburban office park, feels like a relic of more prosperous times as a dozen strangers unwrap turkey and ham sandwiches and start talking about the markets. Most are retirees; three are doctors, one a former restaurant owner. They have come to get a market outlook that turns out to be

425 cautiously optimistic. No matter. For nearly two hours, the conversation ricochets from one fear to another—mostly about what could blindside them next. Fannie and Freddie? Inflation? Government spending debasing currencies? "I look at what's happening in Greece, and I see us. I think that could happen here," says James Wood, an Atlanta neurosurgeon. No one at the conference table knows what to believe anymore, and with good reason. "I had absolutely no idea how deeply the subprime mortgages had penetrated into the financial markets." says Dyckman Poland, a retired engineer. How are investors supposed to make informed decisions when they can't trust what's printed on corporate balance sheets, asks Dr. Wood. How much of the market is ruled by computer-generated trading anyway, another asks, "while you and I are just putting in our dribs and drabs? How do we individuals fit into all this?" Bob Bonacci, the vice-president of a business-services firm in nearby Kennesaw, looks around the table. "I think the majority of us are at or near retirement," he says. "We've taken a hit once, and now it looks like we're on the brink of another situation where it could all be taken away from us. For us, these mistakes are really going to count." As the stock market fell toward the bottom in March 2009, Schwab distributed videos to its clients in which the founder tried to strike a reassuring tone. Just hang on, he urged. "We told them," Schwab says, "the world was not coming to an end." Yet just as they had after every market crash since 1987, investors fled to safety at the wrong moment, trading equities for cash and fixed income. "It is too darned bad," Schwab says. "So many people held on and held on and held on through 2008, and finally, by early 2009, they'd had enough. Then just at the wrong moment, they got to the pitch of emotion and they said, 'I've had enough.' And chucked it in and sold. Fear took over in the most extreme way." To steady their nerves, the company puts out books, seminars, articles, and the famous "Talk to Chuck" ads. "One of our chief roles is to try to help people through this thing," he says. "But we can't help people overcome the power of fear. Or the power of greed. Those are too much a part of human instinct. We are not psychiatrists." Now, Schwab says, his biggest worry is that investors will miss out again. They have $2.98 trillion stashed in money market funds, according to TrimTabs, and lots more in CDs and savings accounts. "If you're not an investor, you get no return on your savings and you have this very difficult situation coming up in the next three to five years of inflation that will just take away whatever you might get in some kind of yield. My fear is that inflation will come back and people will throw up their hands and say: 'Jeez, I wish I'd done something to protect myself.' " That may sound self-serving. Except that, barring a return to a raging bull market, Schwab stands to benefit more, at least in the short-term, if its clients stay paralyzed. If interest rates take off, as the company expects they will by next year, its earnings will soar. That's because Schwab began to change its business mix a decade ago. Foreseeing an end to the bull market and with it, a decline in trading volume, it reduced its dependence on trading to 24 percent of total revenue last year from about 40 percent in 2000. It increased its asset management business and added the Charles Schwab Bank, offering retail banking and mortgage services—thus turning itself into more of a discount investor-services firm than a mere brokerage. It derives much more of its revenue from fees for managing and administering assets (45 percent last year, vs. 27 percent in 2000) and net interest revenue from the cash in its bank and money market funds (29 percent last year, vs. 22 percent in 2000). If Schwab had not waived the fees it charged on money market funds last year—a move Schwab ordered because their interest yield was so low—trading would have accounted for just 20 percent of last year's revenue and interest would have accounted for 32 percent. And if interest rates do head higher, a report by JPMorgan Chase (JPM) analyst Kenneth B.

426 Worthington said this month, Schwab's earnings will react like a "coiled spring." As rates rise from 2010 to 2012, he predicts, Schwab's net income will more than double. "We make little bits of money on everything, for the most part," says Schwab. "We are completely neutral about what you do. We would probably make more money on money that sits in a money market fund than on a stock you buy and hold. But we don't have an agenda. We really don't." Yet the Schwab brand is not about making a killing by collecting interest on the money that clients have sitting in their accounts. The brand lives and dies by "Ask Chuck," as a place where befuddled investors go to not get screwed. And Schwab can't continue to be the "Trusted Advisor" if the client assets of its advisory business aren't growing. It's got to show that it's helping investors, and that means guiding them into vehicles that show growth, not stagnation. "Individual investors must understand asset allocation," says Schwab. "With just a few thousand dollars, you can get a little slice of this and a little slice of that—large caps, small caps, emerging markets, and then build on it," he says. The point is not to get in on the ground floor of the next Google (GOOG) and ride a juggernaut. "You're going to get maybe 5 to 10 percent per annum over 5 to 20 years—maybe 30. That's still pretty good." The day after the Schwab seminar in Atlanta, one of its attendees, Gene Perkins, 66, returned to Robinson Martin's office. Though he has done his own investing since he sold his restaurant business three years ago, Perkins is now enlisting SChwab so he doesn't get burned, as he did in the 2008 crash when his investments lost 28 percent of their value. He and Martin are working on an asset allocation plan, and it's pretty tough going. Perkins' approach to investing is practically bipolar. At first, he presses Martin about the safest assets. "So what if you just buy treasuries and CDs?" Perkins asks. "Would it kill me to lose a little ground [to inflation] if it lets me sleep at night? It's all relative." Within minutes, Perkins is trying to elicit a little stockpicking from Martin. That hybrid approach was a big winner during the long bull market. Even disciplined investors could dip in now and then, roll the dice and maybe make a windfall. "You're going to be mad at me for bringing this up," Perkins says. "But if the market tanks, there's going to be some good buys....Let's say the market closes down 80...I may be wrong, dead wrong, and I hope I am. But I got eight or nine stocks here...." He gestures to a hand-scrawled list: McDonald's (MCD), BP (BP), Altria (MO), Citi (C). He's got good arguments for each. "McDonald's is at $68—that's my business. If I can get it at $65, that's a good deal. And Citi...I can wait it out. If Citi is still at $4 a share four years from today, well then I deserve to lose money on that account." Martin listens patiently and then shakes his head. "Gene, that's too much risk," he says. What will Perkins do with the gains? "Keep it in cash?" Perkins ventures. "Or wait till the market tanks again and buy some more deals?" Responds Martin: "Gene, that's head fakes. When the market tanks again, you will pull everything out. You are playing Vegas odds." Perkins slumps back in his chair. "I just have a lot to make up. I can't afford to take another hit." Martin continues calmly: "You said McDonald's and Citi, Gene, and that may well be. But what you're missing is a hedge. Asset allocation is your hedge. You started this conversation with capital preservation, and what capital preservation has to be is a balance between risk and growth. Ultimately what we're trying to do is get out of the guessing game." Martin keeps trying, his bedside manner patient but firm. Once Perkins has a plan in place, his assets will be invested broadly across asset classes to mitigate his risk. What he has to decide is the balance between risk and reward. With a financial plan working for him, "it's all math at

427 that point," explains Martin. The hard part for so many investors is having to constantly recalibrate the portfolio to keep the asset classes in line with each other. That means scaling back on—not rushing into—sectors that are growing fast. To individual investors who came of age in a bull market, it's all painfully counterintuitive. Perkins has heard it all before. "Asset allocation is the opposite of market timing, I do understand that," he sighs. "You all have made that crystal clear." And then he gets to the heart of the matter, the reason these investing decisions are causing him so much agony. He has no heirs. He will begin drawing on his retirement funds at 70. "If I live to be 90...if I start drawing at 70, will there be enough?" The subprime crash was a huge setback, and now he doesn't know. "I don't need to have anything left over. I'd like to be broke when I'm dead. I don't even need a casket. As long as I have enough. I just don't want to run out before I die." Morris is a Bloomberg Businessweek contributor. http://www.businessweek.com/magazine/content/10_23/b4181058561674.htm?campaign_id= mag_May27&link_position=link22

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