A Summer Of Discontent?

• July 31st, 2012
• Posted by EUEditor

The search for holiday enjoyment goes determinedly on, this European Summer, off-set by cloudy days for the global economy.

EVACUATION

The approach of August, traditionally peak season, time for the evacuation of towns for relaxation out of town, especially at the beach; saw persistent cloudy weather in Northern parts – dark shadows of thunderstorms providing a reminder of the economic dark clouds hanging over the continent.

Experiences differ from place to place.

NOT QUITE GETTING-AWAY-FROM-IT-ALL IN FRANCE

In France the beach resorts and camping grounds were reporting strong business, partly attributed to more people heading South to get away from the variable weather.

The new Socialist Party government had entered the holiday season with some embarrassments in parliament. Even neutral or friendly elements in the mass media were decrying a certain bumbling-around, and internal divisions in the government’s attempts at reform of public finances.

One side issue in the program of aggressive measures to push productivity and jobs, was the declaration by government that it would require a repatriation of computer centres located off-shore in recent years.

In the case of call centre workers in Morocco, many undoubtedly with family links in France, the Paris newspaper Liberation estimated 8000 jobs at stake. Repatriating such jobs to France would be “hardly realistic”, it said, as over time, the particular sector had become no longer portable. More immediately worrying to a public jaded by nagging joblessness: over 10000 jobs were being scrapped in the car-making industry. That was attributed mainly to a short-fall in the usual number of orders from debt-plagued countries, and vehicle markets, in Southern Europe.

France’s Defence Minister, Jean-Yves Le Drian, was catching sunshine, the hard light of Afghanistan; there to discuss with military leaders and the Afghan authorities, logistics of the government’s early pull-out of troops (15-16.7.12), (See EUAustralia Online, “Torrid times …”, 28.5.12).

TURNING UP THE HEAT IN SPAIN

  Just across the border in Spain, bad times in the economy were being matched by bad times with the climate; a chain of wildfires left scorched earth across the dried out country behind the Costa Brava, (pictures; near Figueras).

Foreign guests are welcome along the seashores, and were arriving, but it is hard to get into holiday mode when the immediate problem is getting bread onto the table.

Unemployment calculated at 24% is bound to strike at most families. Fiscal policies of a conservative orientated government, to rein in spending in support of a credible response to debt, have a counter-effect in holding back any recovery.

Spain and Greece were once again under hawks’ eyes from the financial services community and their public commentariat.

Would Spain, after the reprieve provided by a European summit in June, (see EUAustralia Online, “EU summit …”, 30.6.12), (providing access for its banks to guarantee funds previously set aside strictly for government exchequers), still need direct aid for the government itself?

TAXES AND TROUBLES IN GREECE

As for Greece, would it really be able to meet its next round of deadlines for debt settlement and new loans, as the Summer comes to an end?

The so-called troika  — European Commission, European Central Bank, and the International Monetary Fund – appeared to have mixed feelings on Greece’s progress towards stabilising its finances; but were agreed on a need for still more monitoring in detail, and on a hard line against anything much in the way of concessions.

The bad-fit coalition Athens government, old adversaries of the centre-left and centre-right put in together, has a plan, including privatisations and a new tax set low enough to attract investment, but promising to bring in good revenue. Their problem is time; getting results quickly enough that might turn around the downward spiral in the economy.

  The vital tourist industry has seen a slow-down, perhaps reflecting concern about disorderly protests widely expected to return in the later months of the year, with the approach on Winter. Yet the sector has been helping out well; the slow-down is not death, around the monuments, islands, beaches and the shops.

BALKANS CRISIS FOR THIS SUMMER

The actual point-of-crisis of the Balkans region for this Summer has shifted to Romania where the parliament moved to remove the President from office, following elections in May.

Another odd-fit coalition, socialists and right-of-centre liberals, revived a long-standing campaign against President Traian Basescu, 59, in office since 2004; on charges going back to accusations of corruption in 2005.

A referendum that failed to oust him, but failed also to resolve the issue, took place on Sunday, 29.7.12; see EUAustralia Online, “Romania vote: trouble still to come … ”, (31.7.12).

CONFIDENCE SPOILER FOR GERMANY?

In Germany, in the Summer of 2012, none of this, nor financial pressure, would interrupt plans for loading up the BMW and making for the Black Sea, or any other parts where some R and R might be had.

Even so, threatening noises from an American credit agency, Moody’s, that it might reduce the AAA German credit rating, until now a mainstay of European confidence and economic strength, have cast their clouds over the proceedings.

IN BRITAIN, OLYMPICS, AND OTHER GAMES

In the United Kingdom, the diversion of the season was the Olympic Games, opened on Friday with due elegance in the blue ringed arena (27.7.12).

However recession there is official, and there is the ongoing trouble with the degraded mass media.

Three days before the circus of the games, came a stark reminder of the media circus that has seen the gross loss of honour of the dominant chain, Rupert Murdoch’s News International –  and  the hounding of it on all sides, with a determination worthy of the most-driven of tabloid hacks. See EUAustralia Online, “Commons committee’s harsh finding on Murdoch”, 2.5.12).

Cautious and not hysterical, though, the police (no doubt mindful of some of their own compromised in the affair), came up with a group of sensational arrests on the Tuesday. Eight now face criminal trials, to do with the phone hacking scandal and the closure of the biggest selling newspaper, the News of the World. Those arrested included Andy Coulson, a senior editor who later went to work for the Prime Minister, David Cameron, and Rebecca Brooks, former chief executive of News International.

FINANCE SECTOR’S PLACE-IN-THE-SUN

Much has been done to keep the sun shining in the financial sector over this period of balmy long days.

A declaration of faith in late July by the French and German governments, that support for the Euro currency was well in hand; was followed by some firming up on stock markets, and was accompanied by affirmations of Mario Draghi, head of the European Central Bank (in Le Monde, 22-23.7.12), that the sixteen member countries of the Eurozone would be able to act successfully to preserve the currency, notwithstanding economic recession. It was an extension of the position that countries do not abandon their currencies because of recession (though unlike national currencies, this currency cannot, likewise, be permitted to blow out to inflated values). “The Euro is irreversible”, he said.

Interest continues to mount in proposals for reform, to set up bounds for a finance industry perceived as turning feral, or falling into the hands of the smart-but-unintelligent; during the decades since electronic data processing began to fuel and facilitate a taste for deregulation on the part of governments.

Sentiment shifted mightily with the resignation of the heads of Barclay’s Bank, over manipulative behaviour in the setting of base interest rates; See EUAustralia Online, “Managing Europe: banks playing up ….”, 5.7.12).

In July, one commentary from New York, called into question the selective release of information from financial analysts to hedge funds; another, from Washington, outlined nervousness in government about a high prospect of leakage of new economic data, “turning milliseconds into millions” — occasioning a review and tightening of procedures.

It contributes to evidence of disaffection with a financial system free enough to be grossly manipulated; and if manipulated, the argument goes, why not legally regulated by the democratic state?

Ire directed at merchant banking, key target for such sentiments, is expressed in commentary such as a recent article from Will Hutton in The Guardian (6.7.12), calling the Barclay’s case a “defining moment”:-

“Investment banking is an organised scam masquerading as a business. It is defined by endemic conflicts of interest, systemic amoral behaviour and extreme avarice.  Many of its senior figures should be serving prison sentences or disgraced – and would have been if British regulators had been weaned off the doctrine of ‘light touch’ regulation earlier and the Serious Fraud Office’s budget had not been emasculated by George Osborne [current finance minister]. It is a tax on wealth generation and an enemy of honest endeavour – the beast that is devouring British capitalism…

“As far as possible, the underlying causes of the over-inflated size of finance should be addressed. If there were less exchange and interest rate volatility, there would be less underlying demand for instruments to protect against it. This is, of course, the case for a system of managed exchange rates and a European single currency …”

Times are changing; one way or another, things are on the move; not just the shifting weather, or the exodus to the beach.

Reference

John F Burns and Ravi Somaiya, “Ex-editors charged in hacking scandal”, International Herald Tribune, Paris, 25.7.12, p 1.

Gretchen Morgenson and John H Cushman Jr, “Gaming of markets draws new scrutiny”, International Herald Tribune, Paris, 17.7.12, p 1.

Will Hutton, “Rotten culture rewards rogues”, The Guardian Weekly, Manchester, 6.7.12, p 19.

Le Monde, Paris: “La France finalise son plan d’evacuation d’Afghanistan” (France finalising its plan for evacuation from Afghanistan), 18.7.12, p 5; “Le PS se prend les pieds dans les ‘heures sup’” (Socialist Party’s poor footwork on the ‘supplementary hours’ issue”, 18.7.12, p 7;  “Mario Draghi: ‘l’Euro est irreversible’”, 22-23.7.12, p 1; “L’Allemagne pourait perdre son triple A” (Germany might lose its triple-A rating), 25.7.12, p1; “En Roumanie, campagne de la derniere chance pour le president suspend” (In Romania, last-chance campaign for the suspended president), 25.7.12, p 5.

Liberation, Paris, “Relocaliser les call-centres, un calcul a fair” (Relocalising call centres: costs need adding-up), 28-29.7.12, p 3.

Pictures Greece: Laura Ludwig; Spain: Gwen Amankwah-Toa;  camping-europe.net

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