Category Archives: France

more hints euro zone gdp may be stabilizing

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A couple of more hints deficits may be high enough for stability and even a bit of positive GDP growth:

German Industrial Production Increased More Than Forecast in May

By Jana Randow

July 6 (Bloomberg) — German industrial output rebounded more than economists forecast in May as construction buttressed Europe’s largest economy against the sovereign debt crisis.

Production rose 1.6 percent from April, when it dropped 2.1 percent, the Economy Ministry in Berlin said today. Economists forecast an increase of 0.2 percent, the median of 36 estimates in a Bloomberg News survey shows. Production was unchanged from a year earlier when adjusted for working days.

The European Central Bank cut interest rates to a record low yesterday as the worsening debt crisis threatens to tip the euro area, Germany’s largest export market, into recession.

While German business and investor confidence have slumped amid signs growth is slowing, record-low unemployment and demand from outside the region have helped insulate the economy. Factory orders unexpectedly rose 0.6 percent in May, the Economy Ministry said yesterday.

“German factories are still doing quite well, but we’ll see some skid marks as a result of the euro region’s debt crisis in the coming months,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “In the euro area, everything points toward recession and the global economy has slowed to an extent that it can’t compensate for the weakness in Europe.”

Manufacturing output gained 1.8 percent in May, driven by a 3.8 percent jump in production of consumer goods, today’s report showed. Investment goods production rose 1.7 percent and construction activity was up 3.1 percent.

France’s Trade Deficit Narrowed in May to 5.3 Billion Euros

July 6 (Bloomberg) — France’s trade deficit narrowed 7.7 percent in May as exports rose.

The deficit in May was 5.325 billion euros ($6.6 billion) compared with 5.77 billion euros in April, the country’s customs office said in an e-mailed statement.

Exports rose 1.3 percent from the previous month to 37.44 billion euros while imports rose 0.1 percent to 42.77 billion euros.

For the first five months of the year, the deficit narrowed 10 percent from the same period a year ago to 29.4 billion euros

Airbus exported 22 planes for 1.58 billion euros during May, compared with 28 planes for 2.23 billion euros the previous month.

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More hints deficits are high enough for stability?

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Headlines:
U.K. House Prices Rise for a Second Month in June, Halifax Says
U.K. Pay Growth Accelerates to 10-Month High, VocaLink Says
German Factory Orders Unexpectedly Rose on Euro-Area Demand
Eurozone PMI rises in June but still signals steep rate of contraction
Euro-Region Retail Sales Unexpectedly Increased in May on France
Italy First-Quarter Deficit Rises to Highest in Three Years
Italy Plans More Than 8 Billion Euros of Spending Cuts This Year

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Hollande faces budget shortfall test

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Not even a passing mainstream thought to look at currency users like France, Spain, Italy, California, and Illinois, that are facing severe market discipline via solvency/interest rate risk any differently from currency issuers like the UK, US, Japan, and Denmark where those types of market forces remain stubbornly inapplicable.

One would think something so obvious and ‘in their face’ year after year, decade after decade, might get their attention…

Hollande faces budget shortfall test

(FT) François Hollande has promised that he would take whatever measures necessary to rein in France’s heavy public debt, which is rising close to 90 per cent of gross domestic product. He knows that to win backing for his growth initiative from German chancellor Angela Merkel depends on assuring her that France will meet its obligations on its own public finances. The European Commission’s forecast projected a budget deficit next year of 4.2 per cent, compared to the target of 3 per cent set by Brussels and to which Mr Hollande is committed. That amounts to a gap of some €24bn. Mr Hollande is unlikely to give further details of his plans until he gets an independent report on the public finances at the end of June (after National Assembly elections).

Dutch austerity consensus unravels

(FT) Freedom party leader Geert Wilders brought down the country’s ruling coalition last month when he pulled out of talks over budget cuts needed to meet strict EU deficit limits, triggering elections scheduled for September 12. Mr Wilders is campaigning fiercely against what he calls the government’s “subservience” to Brussels’ demands for budget cuts. A poll released on Monday suggests voters are turning against the last-minute budget deal reached after the government fell between the ruling liberals and centre-left opposition parties. The April 26 deal pledged the Netherlands to meet an EU deadline to slash its 2013 budget deficit to below 3 per cent of gross domestic product, down from a projected 4.7 per cent.

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61% Believe Europe Needs to Cut Government Spending to Save Economy

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In case you thought US voters were any different than their euro counterparts:

61% Believe Europe Needs to Cut Government Spending to Save Economy

May 9 (Bloomberg) — Newly elected leaders in France and Greece have signaled that austerity efforts in their countries may be coming to an end, but as far as Americans are concerned, that’s a move in the wrong direction. A new Rasmussen Reports national telephone survey finds that 61% of American Adults believe cuts in government spending would do more to improve the economic and financial situation in France and Greece than increases in that spending. Just 20% think more government spending is the better way to go. Eighteen percent (18%) are not sure. (To see survey question wording, click here.)

The survey of 1,000 Americans nationwide was conducted on May 7-8, 2012 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.

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Euro zone news headlines

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Typical day for euro zone news.
Slow motion train wreck continues.

Headlines:

EU Finance Ministers to Face Off Over Rules to Implement Basel Ill Standards
France’s Hollande Says He Hasn’t Had Parallel Talks With Merkel
Weidmann Says Reforms Are Best Basis for Growth, Zeit Reports
European Unemployment Rate Rises to Highest in Almost 15 Years
Euro-Region Manufacturing Contracts for a Ninth Month
German Unemployment Unexpectedly Rose in April Amid Crisis
Spain Can Finance Itself, Even If Expensive, Fekter Says

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Osborne Says Moody’s Warning on Debt Shows U.K. Can’t Waver on Austerity

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One more for the scrap book.
This stuff is now way beyond comment.

Osborne Says Moody’s Warning on Debt Shows U.K. Can’t Waver on Austerity

By Robert Hutton and Gonzalo Vina

February 14 (Bloomberg) — Chancellor of the Exchequer George Osborne fended off accusations that he’s not doing enough to boost growth and said a warning by Moody’s Investors Service that Britain may lose its Aaa credit ratingshowed he’s right to focus on reducing borrowing.

“For me it was a reality check,” Osborne told BBC Radio 4’s “Today” show this morning. “It’s yet another reminder that Britain doesn’t have an easy way out of its economic problems. Of course the weaker growth prospects of Britain and just about every other economy is a challenge. People have a choice about where to put their money. If they don’t see Britain dealing with its problems, they will take their money elsewhere.”

The driver behind the change to a “negative outlook” for Britain’s Aaa rated debt is a “weaker macroeconomic environment,” Moody’s said in a statement in London late yesterday. Shocks from the euro area’s sovereign debt crisis are also weighing on the U.K., it said.

Osborne rejected criticism from the opposition Labour Party that he’s too focused on retaining Britain’s top-grade credit rating, arguing that keeping borrowing costs low is the best way to deliver growth. Ed Balls, Labour’s Treasury spokesman, said today that Osborne’s austerity program is getting in the way of economic expansion and risks tipping the U.K. into its second recession in less than three years.

‘Waking Up’

“I fear the world is making the 1930s mistake, and the ratings agencies are partners in this,” Balls told the BBC. “Today is the first evidence that even the ratings agencies are waking up.”

U.K. 10-year gilt yields were little changed at 2.12 percent at 9:41 a.m. in London after inflationslowed to the least in 14 months in January. The pound fell 0.3 percent to $1.5724, after earlier declining to $1.5686, a two-week low.

“The U.K.’s outstanding debt places it amongst the most heavily indebted of its Aaa rated peers, alongside the United States and France, whose Aaa ratings also carry a negative outlook,” Moody’s said.

Spending cuts that helped the U.K. preserve its top credit rating last year and bolstered the pound are now weighing on the currency as investors lose confidence. Sterling had its worst January since 2008 against a basket of nine developed-market peers, falling 0.6 percent, after a 3.1 percent advance in the second half of 2011, according to data compiled by Bloomberg. Gilts are lagging behind lower-rated Treasuries, after world- beating gains of almost 17 percent last year.

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French pro growth formula

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This is their idea of pro growth:

In a speech given in Paris on January 3rd, the President of France Nicolas Sarkozy confirmed that the country will soon see an increase to the national rate of value added tax and a reduction to the mandatory social security contributions paid by employers.

http://www.taxationinfonews.com/2012/01/president-confirms-tax-hike-in-france/

This is on top of the increase in the reduced rate of VAT in France (from 5.5% to 7%) that was announced earlier.

An increase in standard VAT rate (19.6%) in France (even though still under consideration), could have quite a significant impact on EU HICP and FR CPIx

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France, Germany to Propose New EU Treaty

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They seriously believe that the crisis is all about deficits being too high,
and it all will be and can only be remedied by bringing deficits down.

Therefore they see ECB funding as not solving anything if it doesn’t serve the further purpose of deficit reduction.

Good luck to them, and good luck to us as we’re trying to do the same thing.

:(

France, Germany to Propose New EU Treaty

Published: Monday, 5 Dec 2011 | 10:55 AM ET
By: Reuters with CNBC.com

 
France and Germany have agreed on a series of reforms to address the euro zone sovereign debt crisis that will be presented to EU President Herman Van Rompuy on Wednesday, French President Nicolas Sarkozy said after a meeting with German Chancellor Angela Merkel on Monday.

 
“Things cannot continue as they have done up until today. Our preference is for a treaty among the 27 (EU members), so that nobody feels excluded, but we are open to a treaty among the 17 (euro members), open to any state that wants to join us,” Sarkozy told a press conference following the meeting.

 
“This treaty would contain the following things: We want automatic sanctions in the event of a breach of the rule on deficits below 3 percent (of GDP),” he said.

 
“We want a golden rule that is reinforced and harmonized on the European level so that the budgets of all 17 (euro zone states) have a constitutional rule to ensure that national budgets move toward a return to equilibrium,” Sarkozy added.

 
The French President said the Franco-German agreement would be written up in a letter and presented to (European Council President) Herman Van Rompuy on Wednesday.

 
“We want to make sure that the imbalances which led to the situation in the euro zone today cannot happen again,” he said.

 
Angela Merkel stressed the leaders wanted structural changes which go beyond agreements.

 
“We need binding debt brakes, which can be verified by the European court of Justice … in order for the Stability and Growth Pact to hold,” she said.

 
The Stability and Growth pact lays out the budgetary rules that member states must follow.

 
Berlin and Paris are under unprecedented pressure to see eye to eye in a crisis that has split them on issues such as the role of the European Central Bank in lending to troubled states and on whether the bloc should issue joint euro bonds.

 
“Regarding what we have said about the ECB, nothing has changed. We reject the idea of euro bonds,” Merkel said.

“This package shows that we are absolutely determined to keep the euro as a stable currency and as an important contributor to European stability.”
Top ECB policymakers have been reluctant to buy up debt from distressed euro zone states, as this would take the pressure off governments to get their financial houses in order.

 
But ECB chief Mario Draghi has signaled that a “fiscal compact” produced by the euro zone governments could nudge the bank to act more decisively on the crisis.

 
The hope is that private bondholders will be assured that they are not being singled out by European policymakers for losses, bolstering their confidence in buying euro zone bonds.

 
On Monday, an ECB policymaker described a plan for holders of Greek government debt to take heavy losses had led to a big rise in borrowing costs for other euro zone countries.

 
“It was a terrible mistake,” said ECB Governing Council member Athanasios Orphanides, who is also the Cyprus central bank chief.

 
Cyprus banks are big holders of Greek government debt, the value of which is due to be halved under a new 130 billion euro bailout deal for Athens.

 
In Dublin, Ireland’s government will unveil what it hopes will be the toughest budget of its five-year term, but as it tries to keep the public onside economists are warning that a global downturn means the worst may be yet to come.

 
On Tuesday, the Greek parliament is due to give final approval to a draconian 2012 austerity budget that is a condition for a second bailout package still under negotiation with private creditors, euro zone governments and the IMF.

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Osborne Vows More Austerity as Slump Hits U.K. Deficit Plan

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Says it all, sadly.

France and Germany also announce agreement to target 0 deficits for all euro members which
takes the steam out of any relief rally as they solve the solvency issue.

Not much upside for the world economy when it all thinks and acts like this:

Osborne Vows More Austerity as Slump Hits U.K. Deficit Plan

By Gonzalo Vina

Nov 30 (Bloomberg) — Chancellor of the Exchequer George Osborne said Britain faces two extra years of austerity as he sought to shore up his deficit-reduction plans, intensifying a conflict with unions that are staging a mass walkout today.

Osborne used his end-of-year economic statement to Parliament yesterday to announce 23 billion pounds ($36 billion) of additional spending cuts after the Office for Budget Responsibility slashed its forecasts for economic growth. The fiscal watchdog predicted Osborne will need to borrow an extra 112 billion pounds by 2016 and said more than 700,000 public- sector workers will lose their jobs over the next six years.

“Osborne acknowledges that the consolidation program is behind schedule and aims to make up for lost ground with an even longer period of fiscal austerity,” Michael Saunders, chief European economist at Citigroup in London, said in an interview. “The government has no alternative. If they slide, the markets will put the U.K. from Category A to Category B.”

Unions say as many as 2 million public-sector workers will join today’s 24-hour strike over plans to make them contribute more toward their pensions and retire later. Osborne is extending his spending cuts beyond 2015, when they were due to end, risking a backlash from voters in the election due in May of that year.

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