Tag Archives: Brian Parkin

German budget squeeze, the noose tightens

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More likely to be higher than expected as the economy deteriorates and credit markets remain problematic.

German Budget Squeezed as Crisis Hurts Revenue, Forces Outlays

By Brian Parkin

German Chancellor Angela Merkel’s government faces revenue shortfalls this year and will have to expand net borrowing in 2009 as the worst economic recession in at least 12 years takes its toll on the budget. Lawmakers meeting in Berlin overnight authorized next year’s net federal borrowing to rise to 18.5 bln euros ($23 bln) from the 10.5 bln euros forecast mid-year, the first increase since Merkel came to office exactly three years ago. The Finance Ministry also said today that the government may raise less money than planned from asset sales this year. “This is very clearly to do with the global financial situation,” Carsten Schneider, budget spokesman for the Social Democrats, coalition partners to Merkel’s Christian Democratic Union, said at a press conference in Berlin. “We are in very difficult economic times.” The government has tried to stem debt growth as the budget expands to pay for emergency programs ranging from tax relief on new low-emission cars to bigger subsidies for energy efficient buildings. Some economists have said that net borrowing may increase further as the recession deepens. “All signs point to a hard economic year for Germany, and this plays out on the budget,” Stefan Bielmeier, an economist with Deutsche Bank AG in Frankfurt, said in a Nov. 19 interview. Even so, Germany “may be getting off relatively lightly if it can keep the deficit that low.”


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Bloomberg: Russian control of energy to Eurozone

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Medvedev May Seek to Assure Merkel on Russian Energy Supplies

by Lyubov Pronina and Brian Parkin

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(Bloomberg) Russian President Dmitry Medvedev may seek to assure Europe of Russia’s reliability as an energy supplier and allay German Chancellor Angela Merkel‘s human- rights concerns in a one-day visit to Berlin today.

Medvedev will meet Merkel and President Horst Kohler and address about 1,000 business executives and lawmakers in his first trip to Western Europe as Russia’s leader.

“Energy will be at the forefront of talks and they won’t be easy,” Yevgeny Volk, a Moscow-based analyst for the Heritage Foundation, a U.S. research group, said in a telephone interview. “Russia wants to increase its energy influence in Europe, while Western countries would like to get more guarantees from Russia that deliveries will not fail.”

Note there is no discussion about price. The euro negotiators want to ensure deliveries with an agreement that is necessarily unenforceable in any case. Russia does have 25,000 nuclear weapons, for example.

Russia, which supplies 25 percent of Europe’s energy, has clashed with Europe over concerns that it abuses its role as Europe’s main energy source to further its political agenda. It opposes further eastward expansion of the North Atlantic Treaty Organization, U.S. plans for a missile-defense shield in Europe and Kosovo’s secession from Serbia.

Looks to me that Russia is in full control, and is using its position to enhance its real terms of trade, something never even mentioned by the Eurozone.

Germany and the European Union have pressed for guarantees that Russia will follow a uniform policy for supplying oil and gas across the bloc, weakening its capacity to wield energy policy as an arm of diplomacy. Russia briefly cut off gas to Ukraine in 2006 in a pricing dispute.

As if quantity ‘guarantees’ would ‘weaken’ anything. Apart from being unenforceable, it all misses the point of price and relative value.

Good luck to the Eurozone!!!

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