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Europe set for major clash with Financial markets.

topic posted Mon, May 7, 2012 - 2:38 AM by  Elo
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In a Europe so far dominated by right wing parties who have, up till now, played of game of bending to the demands of the Financial markets re debt and austerity, in some cases austerity so severe its closing many universities and hospitals down and adding millions to the unemployed, we find a very different situation emerging now.

In France a new left wing socialist president who just won a big victory announced austerity is no longer the only answer, in Greek pro Euro parties have been giving a drubbing in elections. In Germany Merkel is in trouble and elections are coming up next year, and in Britain the pro austerity Conservatives have fallen about 10 points behind in polls.

Some kind of clash with the markets seems inevitable now, but for the left its not going to be easy to challenge the interaction of the markets to sovereign debt funds and a nations growth.

This is what the head of one of the worlds biggest head funds said about the election results -

<The common message from the electorate is undeniable, reminiscent of a famous line in the 1976 movie Network: "I'm as mad as hell, and I'm not going to take this anymore!"

The first thing that Sunday's elections scream out is anti-incumbency. French president Sarkozy joined the growing list of leaders that have been thrown out of office by disgruntled citizens. In Greece, exit polls suggest that the combination of the two usually dominant parties failed to secure even 50% of the votes. And in Germany, the ruling coalition seems to have experienced another setback.

The elections also show that an unusually large number of Europeans are opting for fringe parties, some of which are yet to define their vision beyond the need to dismantle the past. In Germany, exit polls imply that the Pirate party may have secured 8% of the vote in Schleswig-Holstein, giving it a voice in a third regional parliament after similar success in Saarland and Berlin.

In Greece, both extreme left and extreme right parties are celebrating a surge in their popularity. And all this follows France's extreme right wing presidential candidate getting almost 20% of the votes in the first round a couple of weeks ago.

Simply put, this translates into more fragmented European politics, at least in the short run. A politically more disparate Europe will find it even more challenging to reach common ground on a range of important issues.


www.guardian.co.uk/business...ek-market

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a lot more information on this at that link.
posted by:
Elo
offline Elo
London
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  • and Greece may infact default over the next few months which would plunge all of Europe deep into crisis, as the financial markets would then run from Spain, Ireland, Portugal, Italy and maybe even France too.

    Of course if Europe goes its going to pull the rest of the world down too, in a similar way to the US 2008 crash pulling down the rest of the world -

    <Greek TV channels are reporting that the country's electoral earthquake has been met with "stunned silence" by officials at the International Monetary Fund in Washington. "Our sources at the fund are telling us they had no idea of the extent of the anger and anti-austerity feeling in Greece. They are amazed," said Alpha TV's Washington correspondent.

    Given the IMF's role in the two bailouts that have propped up the Greek economy since May 2010, the fund is watched closely by US-based Greek journalists now famed for putting IMF spokesmen on the spot in daily briefings. "They are insisting they want commitments to the [debt relief] programme," the correspondent said.

    A team of EU monitors, to be placed permanently in the capital is expected to arrive within the week. Greek radio channels this morning reported the inspectors would want to see "solid proof" that Athens is determined to stick to the principles of its latest €130bn financial support programme.

    The debt-stricken country faces payment of civil servants' wages and pensions in less than a month – bills worth about €1.5bn. Greece has been told, clearly, by creditors that failure to adhere to the rules – for which read austerity measures and unpopular structural reforms – will result in a freezing of funds and automatic default.

    "There are doubts whether the [rescue] loans will keep coming in," said Flash radio's economic reporter. "And they extend to whether the country will be able to tap the special account that has been set up [for the funds]."

    Prior to Sunday's election, the German finance minister Wolfgang Schäuble warned Greece that it should "expect to pay the consequences" if it did not abide by its commitments. He may now be ruing his words – the German intervention has been interpreted by analysts as one more reason for pushing Greeks to massively reject the EU-dictated belt tightening.

    Greece's conservative New Democrat leader, Antonis Samaras, is expected to be given a mandate to form a government after 1pm when, in keeping with tradition, the speaker of the Greek parliament will formally present President Carolos Papoulias with the results of the vote.

    He will have three days in which to persuade other parties to join him in a coalition – a feat that few commentators currently think possible. If that is the case, the mandate will then be given to Syriza, the coalition of radical left and green groups which emerged as the election's biggest winner, garnering 16.6% of the ballot compared to the 13.2% captured by the mainstream socialist Pasok – a vote that now makes it the second biggest party in the 300-seat parliament.

    Fears of the country plunging into protracted political instability were reflected in the continued freefall of the Athens stock exchange where banks' shares have lost up to 20% of their value this morning. Meanwhile, repeated pledges by Syriza to annul the latest rescue accord has added to the climate of uncertainty.

    Syriza leader, Alexis Tsipras, told Greeks late on Sunday: "We have won the war but not the battle." That, he said, would come when the "cruel bailout measures" were cancelled once and for all. "The parties that signed up to them are now in a minority," he said.

    Speaking on the eve of the poll, the 38-year-old politician reassured me that he believed in the euro "but not the policies pursued in its name". Along with the annulment of the controversial loan agreement he said his party's priority would be to create a "protective shield" around the poor, who had been worst-hit by repeated rounds of austerity. "It could start with the rich paying taxes. They have to do this. There is too much tax evasion by Greeks who have money," he told me.

    www.guardian.co.uk/business...ek-market

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      • Sachs lays emphasis though that its not so much if your spend or not, or growth vs austerity, but whether your investing in the right long term economic builders, science, education, technology, and making the right structural changes to banking and other sectors, that over the medium to long term are going to create real sustainable growth and a healthy economy -

        <High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. blogs.ft.com/the-a-list/...xzz1uHkRVdcF

        We must move beyond growth versus austerity

        French and Greek voters have rejected Europe’s current macroeconomic framework. The headlines cry that voters demand growth rather than austerity. Yet growth is not a policy but an outcome. A vote rejecting the incumbents does not define the policy alternatives.
        There are four main schools of macroeconomic thought. Keynesians focus on boosting aggregate demand through temporary budget deficits followed by a gradual return to budget balance as the economy returns to full employment. Free-marketers (confusingly called “liberals” in Europe and “conservatives” in the US) advocate business deregulation plus cuts in government spending and taxes to spur private sector hiring and investment. Deficit hawks emphasize budget cuts to eliminate the deficit and restore the government’s creditworthiness. Structuralists call for increased public spending paid for with tax increases rather than deficits, to increase the role of government in education, jobs, and banking recapitalisation.

        To put some names to these categories, Paul Krugman and Ed Miliband are Keynesians. Martin Feldstein and Mitt Romney are US free-marketers, joined by various Thatcherites and Hayekians on the continent. Deficit hawks include George Osborne, Angela Merkel, and Mario Draghi. I count myself among the structuralists, and perhaps Francois Hollande will turn out to be as well. President Barack Obama has dallied with three of the four schools, all but the free-marketers, at different times calling for budget stimulus, deficit cutting, and public investments.

        The Keynesians are mistaken, I believe, on four counts. First, aggregate demand in practice is not a stable function of budget deficits as in the textbooks. Temporary tax cuts and increased transfer payments to individuals and local governments are often saved rather than spent; deficits undermine financial-market confidence. For both reasons, multipliers are erratic and can be close to zero.

        Second, Europe’s double-dip recession has less to do with aggregate demand than with its zombie banks, a credit squeeze, and the still-poorly defined role of the European Central Bank. Europe’s banks continue to deleverage, making the survival of Europe’s small-and-medium enterprises very difficult. Europe needs a bolder recapitalisation of its banking sector, but this requires more public financing and has been rejected by the budget wary politicians.

        Third, the disappearance of manufacturing jobs also results from inadequate skills of much of today’s young people making them uncompetitive with low-wage Asia. The US and much of Europe (especially southern Europe) need a scaled-up program of public investments in pre-school; education; job training; and active labor market policies. This is the essence of northern Europe’s path: train young people well so that they can compete internationally.

        Fourth, the rising burden of public debt as a share of national income matters more than Keynesians acknowledge. Debt servicing is mounting, and thereby squeezes out other vital spending by government. Capital markets know this as well, and foresee the fiscal train wreck ahead following a “temporary” stimulus.

        The free-marketers and deficit hawks also turn their back on our increasingly unequal societies. Children in poor households in the US and Europe can’t make it without public support. In the US, social mobility has collapsed: affluent households get their kids through college; working class and poor households do not. The budget and tax cutters also deny the vital role of public spending on science, technology, and competitiveness.

        Macroeconomic debates are mostly ideological rather than empirical. This is a shame. The diverse experiences across the OECD economies can clarify a lot about the various schools of thought. Of all the high-income countries, it is the northern European countries, including social democratic Scandinavia and the Netherlands, and social-market Germany, that have the most favorable combination of low budget deficits, high employment, and global competitiveness. Of course the specific challenges and current conditions differ by country, and so too will the best packages.

        Northern Europe, including Germany itself, rejects the swingeing budget cuts that Chancellor Merkel has advocated for the rest of Europe. The northern European countries balance their budgets through high taxation, not low government spending. They use ample public outlays to ensure universal access to education, job training, and modern infrastructure. They insist on environmental standards, not environmental deregulation.

        Ironically, Germany lives according to the norms of the social market but has preached rampant budget cutting instead. One reason is this: German politicians have refused to acknowledge the role of the unregulated German banks in creating Europe’s boom and bust. If they acknowledged the role of the German banks in this mess, the politicians would be under more pressure to recapitalize the banks.
        Northern Europe shows that social democratic (or social market) structuralism – an active government that is socially oriented, environmentally friendly, and skill promoting — works best. Scandinavia was also exemplary a generation ago when it decisively cleaned up its bank sector after an ill-fated cycle of liberalisation, boom and bust. Today’s tired debates between Keynesians and free-marketers greatly oversimplify the real options, especially now that banking reform, job training, and inequality are the key issues. Perhaps Francois Hollande will facilitate a new growth orientation based on structural changes rather than a doomed flirtation with fiscal profligacy.



        blogs.ft.com/the-a-list/...xzz1uHcRLz9L

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        • you guys should check this out, Greece and the Euro look like there giong to explode in the next few weeks now.
          • Europe is fucked. We're all fucked.
            • Europe can boast of tremendous human potential. Why would it go down?

              Germany has the 3rd highest Jewish population in the world (and growing)! Doesn't that say something? Clearly a superior option than the Zionist gutter!
              • < We're all fucked.>

                in the short term, over the next couple of years, i think your right, though America might do a bit better than Europe, but over the medium to long term, the next 5-15 years, i think this is exactly what we need to finally bring enough incentive to change the way the Financial markets and economics works.
                • What's going to happen is that Greece will default, which will harm the fuck out of Europe, which will then threaten Europe's shaky economies, which will then turn them into the direction that Greece is at, which will then sink the rest of Europe.

                  And, yeah - we'll do better. For a while. But, it's a world economy. The problem is not really how banking works (in this context), but how markets work. We buy some made in X, they buy our shit here and there, we invest in their country...let's put this in a big circle...the rich are getting richer. Me too! Hurrah!
                  • This is the maximum depth. Additional responses will not be threaded.
                    > what's going to happen is that Greece will default

                    It'll be alright. Only greedy bankers (Talmudic or otherwise) would go around looking for someone's head to bite off.
                    • This post was deleted by Gerbil
                  • This is the maximum depth. Additional responses will not be threaded.
                    <...the rich are getting richer.>

                    When this second crash happens people will think much more seriously than they are presently about building a new kind of economy that serve the majority of people, rather than people who have to serve a top heavy economy -

                    econ4.org/

                    inequality is growing in a way that is unsustainable and does not lead to happy populations but a rat race and obsession with materialism, and if you study the stats in the most unequal countries its even leading to mental breakdown on a mass level, 25% of Americans are classified as permanently mentally ill, and 50% get mentally ill at one point in time, this has grown hugely compared to just 40 years ago. .

                    Of course all of Europe is going to crash, and of course Europe will drag the global economy down too, just like the American 2008 crash dragged down the world, the GDP of Europe collectively is actually bigger than America so you can imagine what affect this is going to have on the world. There remain questions about how intense its going to be, nobody knows for sure, but its likely to be just as bad as 2008 if not worse.

                    With a second global crash that were almost certainly about to enter over the next month, thats essentially based in the same thing, the dysfunction of a top heavy economy that has enormous amounts of capital at the top, capital that is often not even used to harness better production, capital that has grown completely out of control, and certainly often not to create real jobs for ordinary people, the building of the global economy is going to fall. With a second crash in just four years, this time around people are going to seriously want to rebuild.

                    There IS a problem with capital markets right now as they there working VERY dysfunctionally in terms of whether they are serving and helping the majority of people, as opposed to just the 1%. Much of the capital is not being harnessed in a constructive way to build equitable economies, and its sucking the life out of some economies. Of course there are also huge issues with stability. There is also a problem with governance however in there willingness to clock up big debt cycles in order to make it to the next election cycle.

                    I believe there is also a problem in the world with an overemphasis on materialism and not enough value put on the commodity of time, personal time is a very underrated commodity in the modern world for most.

                    Whether you are personally doing well or not Andrew is irrelevant, global economics are about keeping 6 billion happy, your just 1 of that 6 billion, and its whether the majority are happy with the current system or not that is relevant. There are a lot of dissatisfied people around at the moment, and there growing, and will grow much more with this second crash. Expect the occupy movement to grow much bigger after this second crash.



            • for more reasons than one:
              www.amazon.com/Eaarth-Mak.../0805090568
              • and of course Gerbil is right that an even more pressing case for the need to completely rebuild the way global economics work is they way we are destroying our planet.

                This is why i welcome this second crash, even though its consequences will be even worse than the 2008 in the short term, and very painful for many in the short term, because it will be the straw that completely breaks the camels back.

                However if we rebuild our economy there are many signs we can have a fantastic future in the longer term, over the next 20-30 years, with the right kind of investment, and technology can especially be a vital part of that mix, if its used in the right way.