Divided Hungary marks 1956 anti-Soviet revolt

Young people march through Budapest on Monday to re-enact the protest march of Hungarian students in 1956, which ignited the revolution and war of independence against communist rule and the Soviet Union. Lajos Soos  /  EPA

NBCNews.com | Oct 23, 2012

Hungarians are feuding bitterly amongst themselves as they mark the 56th anniversary on Tuesday of the revolt in which the nation rose up to overthrow Soviet rule in a 1956 revolution.

With politicians of the ruling right and opposition left at loggerheads, Hungary will have two separate mass rallies, one for and one against Prime Minister Viktor Orban’s government, highlighting sharps divisions over his controversial reforms.

Hungary’s uprising in 1956 was the first serious blow to the Soviet bloc established after Soviet tanks drove out Nazi German troops from Central Europe at the end of World War Two. Though the uprising was crushed, its impact was lasting and it played a role in the collapse of Soviet rule three decades later.

The anniversary will give the conservative Orban, whose centralizing style and unorthodox policies alienated throngs of supporters since a 2010 election landslide, a symbolic platform to brandish his go-it-alone approach to fixing the economy.

Shunning European Union advice from Brussels, which Orban compares to Hungary’s former communist ruler Moscow, the premier has flagged higher taxes on banks and other big businesses to curb the budget deficit.

“We … will clearly signal over the next days, weeks and months that Hungary will not backtrack one iota from its stance that the West is mishandling its crisis,” Economy Minister Gyorgy Matolcsy said on state radio on Monday.

“This is their problem, but in Hungary we refuse to build our policies on flawed recipes and austerity packages,” said Matolcsy, the architect of Hungary’s unorthodox measures such as Europe’s highest bank levy and special taxes on various sectors.

Orban will address supporters from 4 p.m. local time (10 a.m. ET) outside parliament, while opposition groups will stage a rally in central Budapest from 3 p.m. local time (9 a.m. ET) featuring a speech by former Prime Minister Gordon Bajnai, Orban’s predecessor.

iPad used to draft Hungarian constitution

The far-right Jobbik party, which holds 45 of 386 parliament seats and has capitalized on widespread resentment of Hungary’s around 700,000 Roma, will hold a rally of its own from 3 p.m. local time (9 a.m. ET).

‘A very specific message’

Critics say the government’s measures and its reluctance to change its flagship flat-tax policy have prolonged a crisis in the central European country of 10 million people which is seeking an international loan to shore up its shrinking economy.

Orban’s ruling Fidesz and the main opposition Socialists both nudged higher in an October opinion poll, while more than half of eligible voters had no party preference.

Organizers of the opposition rally, which attracted about 25,000 people last year, say they want to send a strong signal that a change of government is needed at an election due in the first half of 2014.
AP, file

“We formed a political association to convey a very specific message to replace the current government of Viktor Orban,” Peter Juhasz, chairman of opposition group Milla, which is organizing the rally, told Reuters.

Some in the opposition camp, like Juhasz, hope that Bajnai, who led a government of technocrats supported by the Socialists in 2009-2010, could emerge as a credible challenger to Orban and sway millions of undecided voters.

The 44-year-old Bajnai, who implemented an International Monetary Fund program that pulled Hungary back from the brink of bankruptcy in 2008, called for an “immediate and radical” turnaround in economic policy in a speech last week.

Hungary President Pal Schmitt quits in plagiarism scandal

Organizers of the pro-government rally, which will march across central Budapest to parliament where Orban is speaking, say they want to express support for the government which they say resists outside meddling in Hungary’s affairs.

“The European Union and the European Commission have not abandoned their attack against Hungary,” political scientist Tamas Fricz, an organizer of the rally told conservative daily Magyar Nemzet in an interview on Monday.

“We need to show … that the government, which defends national sovereignty is not in a vacuum, that it has a majority.”

 

Europe moves ahead with fiscal union, deep economic integration

Germany’s Chancellor Angela Merkel addresses a news conference at the end of an European Union summit in Brussels December 9, 2011. Europe divided on Friday in a historic rift over building a closer fiscal union to preserve the euro, with an overwhelming majority of countries led by Germany and France agreeing to forge ahead with a separate treaty, leaving the EU’s third biggest economy Britain isolated. Reuters

New pact will have stricter debt rules and enforcement

Reuters | Dec 9, 2011

By Luke Baker and Mark John

BRUSSELS, Dec 9 (Reuters) – Europe secured an historic agreement to draft a new treaty for deeper economic integration in the euro zone on Friday, but Britain, the region’s third largest economy, refused to join the other 26 countries in a fiscal union and was isolated.

The outcome of a two-day European Union summit left financial markets uncertain whether and when more decisive action would be taken to stem a debt crisis that began in Greece in 2009, spread to Portugal, Ireland, Italy and Spain and now threatens France and even economic powerhouse Germany.

A new treaty could take three months to negotiate and may require risky referendums in countries such as Ireland.

Two ECB sources told Reuters the European Central Bank would keep purchases of euro zone government bonds capped for now and take no extra firefighting action. Debt markets were wary. Interbank lending rates eased but Italian 10-year bond yields rose to around 6.5 percent.

Twenty-six of the 27 EU leaders agreed to pursue a tougher budget discipline regime with automatic sanctions for deficit sinners in the single currency area, but Britain said it could not accept proposed EU treaty amendments after failing to secure concessions for itself.

“This is a breakthrough to a union of stability,” German Chancellor Angela Merkel said. “We will use the crisis as a chance for a new beginning.”

After 10 hours of talks that ran into the early hours of Friday, all 17 members of the euro zone and nine of the 10 outsiders resolved to negotiate a new agreement alongside the EU treaty.

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Britain’s few allies melted away in the Brussels dawn. All the other nine non-euro states said they wanted to take part in the fiscal union process, subject to parliamentary approval.

The rift, which could widen into a permanent divide between London and the continental mainland, occurred 20 years to the day after European leaders agreed at the Maastricht summit to create the single currency, with Britain opting to stay out.

Prime Minister David Cameron insisted at a news conference that it remained in Britain’s interest to stay in the EU and take advantage of its single market.

One senior EU diplomat called Cameron’s negotiating tactics “clumsy”. Among other things, he had sought a veto on a proposed financial transaction tax, which may now be voted through by a majority over the objections of the City of London financial centre.

NO BIG BAZOOKA

ECB President Mario Draghi called the EU’s decision a step forward for the stricter budget rules he has said are necessary for the euro zone to emerge stronger from the turmoil.

“It’s going to be the basis for a good fiscal compact and more discipline in economic policy in the euro area members,” Draghi said. “We came to conclusions that will have to be fleshed out more in the coming days.”

Two ECB sources said the bank’s governing council decided on Thursday to keep bond buying limited to around 20 billion euros a week and there was no need to review the decision in the light of the summit outcome.

“You will see some further purchases but not the huge bazooka that some people in the markets and the media are awaiting,” one central banker said on condition of anonymity.

French President Nicolas Sarkozy told reporters the ECB’s move to provide unlimited three-year funds to cash-starved European banks would be more effective, by enabling them to continue buying government bonds.

“This means that each state can turn to its banks, which will have liquidity at their disposal,” he said.

Analysts said the notion that commercial banks could step up their purchases of government bonds looked optimistic given the same banks are being asked to deleverage and recapitalise if necessary.

“SEETHES, SULKS, GLOATS”

Merkel said the world would see that Europe had learned from its mistakes and avoided “lousy compromise”.

Sarkozy sounded elated at having united a big group around the euro zone as the EU’s core, long a French objective.

“This is a summit that will go down in history,” he said. “We would have preferred a reform of the treaties among 27. That wasn’t possible given the position of our British friends. And so it will be through an intergovernmental treaty of 17, but open to others.”

One EU diplomat summed up the outcome as: “Britain seethes, Germany sulks, and France gloats.”

Active ECB support will be vital in the coming days with markets doubting the strength of Europe’s financial firewalls to protect vulnerable economies such as Italy and Spain, which have to roll over hundreds of billions of euros in debt next year.

Traders said the ECB bought Italian bonds on Friday to steady markets.

The euro rallied in Europe and U.S. shares gained, but analysts said the summit had done little to convince markets that a solution to the crisis was at hand.

Asked if the euro was safe now, Polish Prime Minister Donald Tusk said: “I’m not sure.”

BRITAIN OUTSIDE?

Britain refused to allow its partners to amend the EU treaty, demanding guarantees in a protocol protecting its financial services industry, roughly one-tenth of the country’s economy. Sarkozy described Cameron’s demand as unacceptable.

Cameron hinted London may now try to prevent the others from using the executive European Commission and the European Court of Justice, saying: “Clearly the institutions of the European Union belong to the European Union, they belong to the 27.”

But European Council President Herman Van Rompuy, who chaired the summit, said the EU institutions would be fully involved in the new treaty, which would be signed in early March at the latest. The euro zone plus nine may hold a summit without Britain as early as January, diplomats said.

The rift may increase pressure from Eurosceptics within Cameron’s Conservative party and outside it for Britain to hold a referendum on leaving the EU, which it joined in 1973. The prime minister strongly opposes such a course, which he has said would be disastrous for British interests.

Britain conducts more than half of its trade within the EU and could suffer on a broad range of financial regulation issues if the other countries decided to move forward as 26.

Van Rompuy said the summit’s key achievement was to tighten fiscal limits, including the need for countries to bring budgets close to balance.

“It means reinforcing our rules on excessive deficit procedures by making them more automatic. It also means that member states would have to submit their draft budgetary plans to the (European) Commission,” Van Rompuy said.

But a new treaty will take weeks of wrangling as countries like Finland and Slovakia oppose a Franco-German drive to take decisions on future bailouts by an 85 percent supermajority to avoid being taken hostage by a single small country.

LAST-CHANCE SALOON?

In a meeting billed by some as a last chance to save the euro, the leaders also took several decisions on the permanent bailout fund, the European Stability Mechanism, which will come into force a year early in July 2012.

The ESM’s capacity will be capped at 500 billion euros ($666 billion), less than had been suggested was possible before the summit, and the facility will not get a banking licence, as Van Rompuy originally had proposed, due to German opposition.

It also was agreed that EU countries would provide up to 200 billion euros in bilateral loans to the International Monetary Fund (IMF) to help it tackle the crisis, with 150 billion euros of the total coming from the euro zone countries.

Cameron’s decision to stay out of the treaty-change camp could spell problems for Britain. Deeper integration on the continent could involve changes to the single market and financial regulation, both of which could have a profound impact on the British economy.

“Cameron was clumsy in his manoeuvring,” a senior EU diplomat said. It may be possible that Britain will shift its position in the days ahead if it discovers that isolation really is not a viable course of action, diplomats said.

Merkel calls for Eurozone ‘fiscal union’

dw-world.de | Dec 2, 2011

German Chancellor Angela Merkel has told the Bundestag that the eurozone’s sovereign debt crisis will take years to resolve. She said the eurozone needed a new “stability union” with tighter fiscal controls.

German Chancellor Angela Merkel has warned that the eurozone’s sovereign debt crisis will not be solved “overnight.”

Speaking to the lower house of parliament, the Bundestag on Friday, Chancellor Merkel described the eurozone debt scare as “the worst crisis since the introduction of the euro,” and said that resolving it was a process that would take years to achieve.

In a speech to outline her government’s vision for securing the future of the common currency, Merkel called for a “sustained strengthening of the European economic and currency union.”

She said that the process of creating a fiscal union had already begun.

“We are not only talking about a fiscal union, we are beginning to create it,” she said, adding that the changes to European Union treaties would include sanctions against member states that fail to get their deficits under control.

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http://www.independent.co.uk/news/world/europe/the-merkel-plan-ill-save-the-euro-with-a-federal-europe-6271544.html

“Now these items are on the agenda, we are on the verge of it, there are still difficulties to be surmounted but their necessity is now widely recognized,” Merkel added.

The chancellor also reiterated her rejection of so-called “eurobonds,” saying they were no solution to the debt crisis.

Opposition criticism

Merkel likewise rejected opposition criticism that Germany was using its economic power to throw its weight around in the EU.

Green parliamentary party leader Jürgen Trittin accused Merkel’s government of moving too slowly on reforms, saying Berlin’s hesitations were threatening the survival of the eurozone and with it, German jobs.

Gregor Gysi of Germany’s Left Party meanwhile called for private banks to be turned into public institutions, saying it was the power of banks and insurance companies that had led to the financial crisis.

Full Story

Prepare for riots in euro collapse, British Foreign Office warns

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way Photo: BLOOMBERG

British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.

Telegraph | Nov 25, 2011

By James Kirkup

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.

Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.

Greece has seen several outbreaks of civil disorder as its government struggles with its huge debts. British officials think similar scenes cannot be ruled out in other nations if the euro collapses.

Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.

Fuelling the fears of financial markets for the euro, reports in Madrid yesterday suggested that the new Popular Party government could seek a bail-out from either the European Union rescue fund or the International Monetary Fund.

There are also growing fears for Italy, whose new government was forced to pay record interest rates on new bonds issued yesterday.

The yield on new six-month loans was 6.5 per cent, nearly double last month’s rate. And the yield on outstanding two-year loans was 7.8 per cent, well above the level considered unsustainable.

Italy’s new government will have to sell more than EURO 30 billion of new bonds by the end of January to refinance its debts. Analysts say there is no guarantee that investors will buy all of those bonds, which could force Italy to default.

The Italian government yesterday said that in talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Prime Minister Mario Monti had agreed that an Italian collapse “would inevitably be the end of the euro.”

The EU treaties that created the euro and set its membership rules contain no provision for members to leave, meaning any break-up would be disorderly and potentially chaotic.

If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse.

Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit.

The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency.

Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment.

Analysts at UBS, an investment bank earlier this year warned that the most extreme consequences of a break-up include risks to basic property rights and the threat of civil disorder.

“When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences,” UBS said.

Merkel wants ‘permanent’ supervision of Greece, warns of war

‘Nobody should take peace for granted,’ says Merkel

euobserver.com | Oct 26, 2011

By Valentina Pop

Brussels – Peace should not be taken for granted if the euro fails, German chancellor Merkel told MPs Wednesday (26 October) ahead of the eurozone summit where an increase of the bail-out fund firepower may lead to Germany’s own state assets being taken as collateral.

In a dark blue jacket reflecting the mood in and about the eurozone, Merkel abandoned her usual cautious rhetoric warned outright of a war.

“Nobody should take for granted another 50 years of peace and prosperity in Europe. They are not for granted. That’s why I say: If the euro fails, Europe fails,” Merkel said, followed by a long applause from all political groups.

“We have a historical obligation: To protect by all means Europe’s unification process begun by our forefathers after centuries of hatred and blood spill. None of us can foresee what the consequences would be if we were to fail.”

“It cannot be that sometime in the future they say the political generation responsible for Europe in the second decade of the 21 century has failed in the face of history,” the chancellor continued.

She was asking for the parliament’s “political” green light on a negotiation mandate for the EU summit, beginning later today in Brussels. The summit is seeking to increase the firepower of the €440 billion-strong European Financial Stability Facility (EFSF) to stop the sovereign debt crisis spreading to countries like Italy and ultimately, France.

The Bundestag approved the measure by a large majority, with 503 members in favour, 89 opposing and four abstaining.
German ‘risks’

While stressing that Germany’s contribution to the EFSF loan guarantees would continue to be capped at €211 billion, she said she could not exclude there may be “risks” for Germany linked to the EFSF increase of firepower. Her own party colleagues had demanded that she clearly excludes German state assets, such as the central bank’s gold reserves, to be put as collateral for the EFSF lending power.

“Nobody can clearly estimate if there will be such risks. What I can say is that we cannot exclude it,” she said, insisting that the current situation is pushing European leaders into “uncharted territories”.

“Not to take these risks would be irresponsible. There is no better and more sensible alternative. Europe and the world are looking at Germany,” the chancellor said.

Looking ahead to the summit, the chancellor repeated her long-standing stance that “there is no silver bullet, no simple solutions. We will still deal with these topics for years from now.”

She repeated her insistence that the EU treaty had to be changed, in the medium term, to be more strict on countries breaching the euro deficit rules.

“Where does it say that any treaty change has to take 10 years or that there should be no more changes after the Lisbon Treaty,” she asked.

EU leaders last Sunday agreed to have an evaluation presented to them in December by council chief Herman Van Rompuy about the possibility for a “limited” treaty change.
‘Permanent supervision’ for Greece

On the three euro-countries currently propped by EU-IMF loans, Merkel said Ireland was on “the right path”, Portugal showed it could implement the promised reforms, while Greece was still “at the beginning of a long road.”

For the first time, as opposition MPs noted later on in the debate, Merkel had words of praise for the ordinary Greek citizens feeling the brunt of the austerity measures demanded by international lenders. “People in Greece have to stomach a lot of sacrifices. They deserve our respect and also a sustainable growth perspective in the eurozone.”

According to the latest report of the so-called troika, consisting of experts sent from the European Commission, the European Central Bank and the International Monetary Fund, Greece will need even higher debt restructuring and losses for private lenders compared to what EU leaders had agreed upon on 21 July.

“But debt restructuring alone does not solve the problem. Painful structural reforms have to be made, otherwise even after debt restructuring we’re back to where we are today,” Merkel warned.

That’s why, she said, Greece would have to be “assisted” for quite some time. “It’s not enough that the troika comes and goes every three months. It would be desirable to have a permanent supervision in Greece,” she said, adding that this issue would be brought up at the summit.

In return for what seems to be an unprecedented sovereignty loss in an old EU member state, Merkel promised German investments and mentioned a meeting of local representatives from Germany and Greece in the coming weeks.

German tax levy on Belgian Nazi slave labourers provokes fury

A decision by Germany to levy a tax on pensions received by Belgians who were slave labourers for the Nazi regime during the Second World War has provoked fury among survivors.

Telegraph | Nov 21, 2011

By Bruno Waterfield, Brussels

Last week demands for hundreds of euros from tax authorities in the German state of Brandenburg began to land on the doormats of surviving “dwangarbeiders” or their widows.

“It hits me not only financially but emotionally,” Simone De Vos, 84, the widow of a forced labourer told the Gazet Van Antwerpen.

“My late husband had anxiety attacks for decades after his time in Germany. It is outrageous that the Germans now want money back.”

According to media reports in Belgium, the German authorities last year passed a law stating that pensions for former slave labourers would be taxed at the rate of 17 per cent.

The tax has been applied retroactively from 2005 meaning those Belgian survivors of Nazism or their widows awarded pensions by Germany as a form compensation now face large bills.

Tony Vandersteen, the ombudsman of the Belgian pension department, confirmed that dozens of former forced labourers or their widows have complained.

He has advised the pensioners that “there is not a lot he can do” and recommended that people “contact the German authorities in order to try to obtain a discount”.

In late 1942 the Nazis launched a programme of forced labour in the occupied countries in order to keep the German war industry going. Millions of people were forced to work in Germany, including 200,000 Belgians, in slave labour conditions.

It is not known if French, Dutch, Italian, Polish or other survivors will face tax bills on their pensions.

Ahmed Laaouej, a Belgian senator, has demanded that Didier Reynders, Belgium’s finance minister, registers a protest over the “unacceptable” tax demands with Germany.

“The minister must immediately contact the German authorities. And I would also like to know if the Belgian government has been informed in advance of the decision,” he said.

Germany’s secret plans to derail a British referendum on the EU

Germany has drawn up secret plans to prevent a British referendum on the overhaul of the European Union amid concerns it could derail the eurozone rescue package, leaked documents obtained by The Daily Telegraph disclose.

Telegraph | Nov 18, 2011

By Bruno Waterfield, in Brussels

Angela Merkel, the German chancellor, is today expected to tell David Cameron that Britain does not need a referendum on EU treaty changes, despite demands from senior Conservatives for more powers to be repatriated to Britain

Angela Merkel, the German chancellor, is today expected to tell David Cameron that Britain does not need a referendum on EU treaty changes, despite demands from senior Conservatives for more powers to be repatriated to Britain.

The leaked memo, written by the German foreign office, discloses radical plans for an intrusive new European body that will be able to take over the economies of beleaguered eurozone countries.

It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European “super state” with its own tax and spending plans set in Brussels.

Britain would be relegated to a new outer group of EU members who are not in the single currency. Mr Cameron will today travel to Brussels and Berlin for tense negotiations with Mrs Merkel amid growing disagreement between the leaders over how to deal with the eurozone.

The Prime Minister is increasingly exasperated that Germany refuses to provide more financial help for Italy and other struggling countries amid concerns that the crisis is having a “chilling effect” on the British economy. Mrs Merkel yesterday said she expected Mr Cameron to “examine a stronger involvement with other countries” once the eurozone crisis had been resolved.

She said: “We’ve seen a sovereign debt crisis evolve in some states and particularly those in the eurozone find themselves in the international focus.

“It was right of David Cameron to concern himself with the UK’s debt issues when he became Prime Minister — that’s my firm conviction, and once the negative focus has moved away from Europe, he will examine a stronger involvement with other countries.”

The eurozone contagion is threatening to spread to Spain and France. Yesterday, the price of Spanish government borrowing reached the “brink” of crisis point.

The Spanish government sold 10-year bonds at a 6.975 per cent yield — just below the seven per cent level which has triggered international assistance elsewhere.

Amid protests in Milan and Turin, Mario Monti, Italy’s unelected “technocrat” prime minister unveiled sweeping austerity reforms. Mr Monti warned that a break-up of the single currency would take eurozone economies “back to the 1950s” in terms of wealth.

The six-page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.

The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled The future of the EU: required integration policy improvements for the creation of a Stability Union, declares that the treaty changes are a first stage “in which the EU will develop into a political union”. “The debate on the way towards a political union must begin as soon as the course toward stability union is charted,” it concludes.

The negotiating document also explicitly examines ways to limit treaty changes to speed up the reforms. It indicates that Mrs Merkel will tell Mr Cameron to rule out a popular EU vote in Britain.

“Limiting the effect of the treaty changes to the eurozone states would make ratification easier, which would nevertheless be required by all EU member states (thereby less referenda could be necessary, which could also affect the UK),” read the paper.

Senior government officials confirmed that they had dropped a previous demand that EU powers should be “repatriated” to Britain in return for the treaty changes requested by Germany, a move that will anger Conservative MPs.

“I don’t think that anyone is seriously proposing going down that route,” a senior government source said.

Open Europe, a think tank, last night called for Mr Cameron to demand something in return from Mrs Merkel for her “far-reaching plan”, which requires the unanimous consent of all 27 EU countries, giving Britain a veto.

“It would be the first step towards a vision of ‘political union’ that would have major consequences for the future of the entire EU, and therefore the UK’s place within it,” said Stephen Booth, the think tank’s research director.

“Merkel is daring Cameron to call her bluff, but if the UK is serious about taking a leadership role in shaping the EU, Cameron will have to take a stand sooner rather than later.”

Bill Cash, chairman of the Commons European scrutiny committee, accused the Coalition of standing by in “no–man’s land” while Germany shaped the EU to suit its own interests.

“We are going to get nothing significant in return for agreeing to this,” he said.

Mr Cameron is today also expected to pressurise Mrs Merkel into lifting German opposition to the use of the European Central Bank to rescue the euro.

However, last night, Mrs Merkel said: “If politicians think the ECB can resolve the problem of the euro’s weaknesses, then I think they are persuading themselves of something that won’t happen.

Britain ‘will join euro before long’, says German finance minister

Wolfgang Schäuble believes that Britain will have to adopt the euro Photo: REUTERS

Britain will have to abandon the pound and join the single currency “faster than people think”, Germany’s finance minister has said.

Telegraph | Nov 18, 2011

By Bruno Waterfield, in Brussels and Christopher Hope in Berlin

Wolfgang Schäuble said that, despite the current crisis in the eurozone, the euro will ultimately emerge as the common currency of the entire European Union. He said he “respects” Britain’s decision to keep the pound, but insisted that the survival and eventual stabilisation of the euro will convince non-members to join the currency club. “This may happen more quickly than some people in the British Isles currently believe,” he added.

Mr Schäuble also said Germany will stand firm on its call for a financial transaction tax that Britain believes would badly harm the City of London.

Fears over the eurozone crisis saw stock markets fall again yesterday. The FTSE 100 closed down 1.1 per cent. French and German shares also fell.

Meanwhile, a leaked document seen by The Daily Telegraph yesterday showed Berlin has drawn up radical plans for an intrusive new European body which will be able to intervene directly in beleaguered countries.

Sir John Major, the former prime minister, warned last night that the growing integration of the eurozone nations threatens democracy in those countries. He told Al Jazeera television that richer euro members led by Germany and France will “insist on moving towards what we call fiscal union. By that I mean common control over budgets and fiscal deficits”.

Sir John, who advises David Cameron on foreign policy issues, also described the banking transaction tax as “a heat-seeking missile proposed in continental Europe, aimed at the City of London”.

 

 

Goldman Sachs conquers Europe

While ordinary people fret about austerity and jobs, the eurozone’s corridors of power have been undergoing a remarkable transformation

What price the new democracy? Goldman Sachs conquers Europe

Independent | Nov 18, 2011

by Stephen Foley

The ascension of Mario Monti to the Italian prime ministership is remarkable for more reasons than it is possible to count. By replacing the scandal-surfing Silvio Berlusconi, Italy has dislodged the undislodgeable. By imposing rule by unelected technocrats, it has suspended the normal rules of democracy, and maybe democracy itself. And by putting a senior adviser at Goldman Sachs in charge of a Western nation, it has taken to new heights the political power of an investment bank that you might have thought was prohibitively politically toxic.

This is the most remarkable thing of all: a giant leap forward for, or perhaps even the successful culmination of, the Goldman Sachs Project.

It is not just Mr Monti. The European Central Bank, another crucial player in the sovereign debt drama, is under ex-Goldman management, and the investment bank’s alumni hold sway in the corridors of power in almost every European nation, as they have done in the US throughout the financial crisis. Until Wednesday, the International Monetary Fund’s European division was also run by a Goldman man, Antonio Borges, who just resigned for personal reasons.

Even before the upheaval in Italy, there was no sign of Goldman Sachs living down its nickname as “the Vampire Squid”, and now that its tentacles reach to the top of the eurozone, sceptical voices are raising questions over its influence. The political decisions taken in the coming weeks will determine if the eurozone can and will pay its debts – and Goldman’s interests are intricately tied up with the answer to that question.

Simon Johnson, the former International Monetary Fund economist, in his book 13 Bankers, argued that Goldman Sachs and the other large banks had become so close to government in the run-up to the financial crisis that the US was effectively an oligarchy. At least European politicians aren’t “bought and paid for” by corporations, as in the US, he says. “Instead what you have in Europe is a shared world-view among the policy elite and the bankers, a shared set of goals and mutual reinforcement of illusions.”

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Goldman Sachs rules the world

This is The Goldman Sachs Project. Put simply, it is to hug governments close. Every business wants to advance its interests with the regulators that can stymie them and the politicians who can give them a tax break, but this is no mere lobbying effort. Goldman is there to provide advice for governments and to provide financing, to send its people into public service and to dangle lucrative jobs in front of people coming out of government. The Project is to create such a deep exchange of people and ideas and money that it is impossible to tell the difference between the public interest and the Goldman Sachs interest.

Mr Monti is one of Italy’s most eminent economists, and he spent most of his career in academia and thinktankery, but it was when Mr Berlusconi appointed him to the European Commission in 1995 that Goldman Sachs started to get interested in him. First as commissioner for the internal market, and then especially as commissioner for competition, he has made decisions that could make or break the takeover and merger deals that Goldman’s bankers were working on or providing the funding for. Mr Monti also later chaired the Italian Treasury’s committee on the banking and financial system, which set the country’s financial policies.

With these connections, it was natural for Goldman to invite him to join its board of international advisers. The bank’s two dozen-strong international advisers act as informal lobbyists for its interests with the politicians that regulate its work. Other advisers include Otmar Issing who, as a board member of the German Bundesbank and then the European Central Bank, was one of the architects of the euro.

Perhaps the most prominent ex-politician inside the bank is Peter Sutherland, Attorney General of Ireland in the 1980s and another former EU Competition Commissioner. He is now non-executive chairman of Goldman’s UK-based broker-dealer arm, Goldman Sachs International, and until its collapse and nationalisation he was also a non-executive director of Royal Bank of Scotland. He has been a prominent voice within Ireland on its bailout by the EU, arguing that the terms of emergency loans should be eased, so as not to exacerbate the country’s financial woes. The EU agreed to cut Ireland’s interest rate this summer.

Picking up well-connected policymakers on their way out of government is only one half of the Project, sending Goldman alumni into government is the other half. Like Mr Monti, Mario Draghi, who took over as President of the ECB on 1 November, has been in and out of government and in and out of Goldman. He was a member of the World Bank and managing director of the Italian Treasury before spending three years as managing director of Goldman Sachs International between 2002 and 2005 – only to return to government as president of the Italian central bank.

Mr Draghi has been dogged by controversy over the accounting tricks conducted by Italy and other nations on the eurozone periphery as they tried to squeeze into the single currency a decade ago. By using complex derivatives, Italy and Greece were able to slim down the apparent size of their government debt, which euro rules mandated shouldn’t be above 60 per cent of the size of the economy. And the brains behind several of those derivatives were the men and women of Goldman Sachs.

The bank’s traders created a number of financial deals that allowed Greece to raise money to cut its budget deficit immediately, in return for repayments over time. In one deal, Goldman channelled $1bn of funding to the Greek government in 2002 in a transaction called a cross-currency swap. On the other side of the deal, working in the National Bank of Greece, was Petros Christodoulou, who had begun his career at Goldman, and who has been promoted now to head the office managing government Greek debt. Lucas Papademos, now installed as Prime Minister in Greece’s unity government, was a technocrat running the Central Bank of Greece at the time.

Goldman says that the debt reduction achieved by the swaps was negligible in relation to euro rules, but it expressed some regrets over the deals. Gerald Corrigan, a Goldman partner who came to the bank after running the New York branch of the US Federal Reserve, told a UK parliamentary hearing last year: “It is clear with hindsight that the standards of transparency could have been and probably should have been higher.”

When the issue was raised at confirmation hearings in the European Parliament for his job at the ECB, Mr Draghi says he wasn’t involved in the swaps deals either at the Treasury or at Goldman.

It has proved impossible to hold the line on Greece, which under the latest EU proposals is effectively going to default on its debt by asking creditors to take a “voluntary” haircut of 50 per cent on its bonds, but the current consensus in the eurozone is that the creditors of bigger nations like Italy and Spain must be paid in full. These creditors, of course, are the continent’s big banks, and it is their health that is the primary concern of policymakers. The combination of austerity measures imposed by the new technocratic governments in Athens and Rome and the leaders of other eurozone countries, such as Ireland, and rescue funds from the IMF and the largely German-backed European Financial Stability Facility, can all be traced to this consensus.

“My former colleagues at the IMF are running around trying to justify bailouts of €1.5trn-€4trn, but what does that mean?” says Simon Johnson. “It means bailing out the creditors 100 per cent. It is another bank bailout, like in 2008: The mechanism is different, in that this is happening at the sovereign level not the bank level, but the rationale is the same.”

So certain is the financial elite that the banks will be bailed out, that some are placing bet-the-company wagers on just such an outcome. Jon Corzine, a former chief executive of Goldman Sachs, returned to Wall Street last year after almost a decade in politics and took control of a historic firm called MF Global. He placed a $6bn bet with the firm’s money that Italian government bonds will not default.

When the bet was revealed last month, clients and trading partners decided it was too risky to do business with MF Global and the firm collapsed within days. It was one of the ten biggest bankruptcies in US history.

The grave danger is that, if Italy stops paying its debts, creditor banks could be made insolvent.  Goldman Sachs, which has written over $2trn of insurance, including an undisclosed amount on eurozone countries’ debt, would not escape unharmed, especially if some of the $2trn of insurance it has purchased on that insurance turns out to be with a bank that has gone under. No bank – and especially not the Vampire Squid – can easily untangle its tentacles from the tentacles of its peers. This is the rationale for the bailouts and the austerity, the reason we are getting more Goldman, not less. The alternative is a second financial crisis, a second economic collapse.

Shared illusions, perhaps? Who would dare test it?

EU bans claim that water can prevent dehydration

NHS health guidelines state clearly that drinking water helps avoid dehydration, and that Britons should drink at least 1.2 litres per day Photo: ALAMY

Brussels bureaucrats were ridiculed yesterday after banning drink manufacturers from claiming that water can prevent dehydration.

Telegraph | Nov 18, 2011

By Victoria Ward and Nick Collins

EU officials concluded that, following a three-year investigation, there was no evidence to prove the previously undisputed fact.

Producers of bottled water are now forbidden by law from making the claim and will face a two-year jail sentence if they defy the edict, which comes into force in the UK next month.

Last night, critics claimed the EU was at odds with both science and common sense. Conservative MEP Roger Helmer said: “This is stupidity writ large.

“The euro is burning, the EU is falling apart and yet here they are: highly-paid, highly-pensioned officials worrying about the obvious qualities of water and trying to deny us the right to say what is patently true.

“If ever there were an episode which demonstrates the folly of the great European project then this is it.”

NHS health guidelines state clearly that drinking water helps avoid dehydration, and that Britons should drink at least 1.2 litres per day.

The Department for Health disputed the wisdom of the new law. A spokesman said: “Of course water hydrates. While we support the EU in preventing false claims about products, we need to exercise common sense as far as possible.”

German professors Dr Andreas Hahn and Dr Moritz Hagenmeyer, who advise food manufacturers on how to advertise their products, asked the European Commission if the claim could be made on labels.

They compiled what they assumed was an uncontroversial statement in order to test new laws which allow products to claim they can reduce the risk of disease, subject to EU approval.

They applied for the right to state that “regular consumption of significant amounts of water can reduce the risk of development of dehydration” as well as preventing a decrease in performance.

However, last February, the European Food Standards Authority (EFSA) refused to approve the statement.

A meeting of 21 scientists in Parma, Italy, concluded that reduced water content in the body was a symptom of dehydration and not something that drinking water could subsequently control.

Now the EFSA verdict has been turned into an EU directive which was issued on Wednesday.

Ukip MEP Paul Nuttall said the ruling made the “bendy banana law” look “positively sane”.

He said: “I had to read this four or five times before I believed it. It is a perfect example of what Brussels does best. Spend three years, with 20 separate pieces of correspondence before summoning 21 professors to Parma where they decide with great solemnity that drinking water cannot be sold as a way to combat dehydration.

“Then they make this judgment law and make it clear that if anybody dares sell water claiming that it is effective against dehydration they could get into serious legal bother.

EU regulations, which aim to uphold food standards across member states, are frequently criticised.

Rules banning bent bananas and curved cucumbers were scrapped in 2008 after causing international ridicule.

Prof Hahn, from the Institute for Food Science and Human Nutrition at Hanover Leibniz University, said the European Commission had made another mistake with its latest ruling.

“What is our reaction to the outcome? Let us put it this way: We are neither surprised nor delighted.

“The European Commission is wrong; it should have authorised the claim. That should be more than clear to anyone who has consumed water in the past, and who has not? We fear there is something wrong in the state of Europe.”

Prof Brian Ratcliffe, spokesman for the Nutrition Society, said dehydration was usually caused by a clinical condition and that one could remain adequately hydrated without drinking water.

He said: “The EU is saying that this does not reduce the risk of dehydration and that is correct.

“This claim is trying to imply that there is something special about bottled water which is not a reasonable claim.”