No Rescue, But Stimulus This Time

Greek déjá vu. Empty Portuguese highways. French reform which has never been carried out.

The topic of the third rescue package for Greece (which has been bailed out by bilateral loans in 2010 and by temporary ESFS in 2012) was stridently rejected as nonsense by several European politicians just a few weeks ago. Today everything is different and the third rescue package for Greece is going to be the topic of the day.

In fact, Greece has a budget hole of approximately 10 billion euros for the years 2014-2015 even in spite of the current rescue programmes. Everyone knows who the bean counter of Europe is, so everyone is looking at Germany. The finance minister, Schäuble, admitted that “something” is necessary to be done, but driven by the upcoming election, he still persuades the German elector that it will not be such an expensive rescue plan as those before.

The finance minister of Netherlands thinks that it is necessary to do “something” as well. Only his Austrian counterpart, Maria Fekter, says that the third package is “not under discussion” – just as if there were someone in Brussels asking these tiny countries for their opinion. Even Angela is becoming harsher in the context of the campaign: “Greece should never have been allowed into the eurozone!” The head of Eurosceptic party AfD asked the president to order the release of euro crisis development scenarios, which have been drawn up for the government. The government states that the current way of solving the crisis is the only possible one, but does not present any facts supporting this statement.

Greeks have a clear opinion on the problem. Their finance minister Yannis Stournaras already defined the package specifically. He thinks that Greece should get the money without being set conditions of any additional austerity measures, because this is not a case of a rescue package, but an economic growth support package. Roughly one third of the 10 billion should flow through EU structural funds, more accurately in the form of lower co-financing. Greece already has a co-financing rate of only 5%, which it would like to extend to the financial framework of 2014-2020 (initial rate was 30%, in Slovakia it is 27%). The Greek unemployed will thus have an opportunity to walk on cheaper euro-plazas.

The Portuguese have had an inauspicious experience with the EU funds. Similarly to the Spanish, they have begun building highways in all directions thanks to the inflow of cheap money. The length of highways per capita is 60% higher than in Germany, 100% higher compared to the EU average and 300% higher than in Britain.  There are even some places where two highways run parallel next to each other in long sections. Just through co-financing, the Portuguese have paid for this luxury 21.5 billion euros since 1986, which makes approximately 40,000 euros per four-person family. And what’s the outcome? People have no money to drive on the highways. The amount of traffic jams in the country decreased by 68% just during the initial three months. Partly thanks to the high toll charges, which are often higher than 20 euros for a 300-kilometer journey. Portuguese government, like other southern European governments, is searching for any possibilities how to obtain funds to achieve its goals. Similarly to Greece and Cyprus, they have also introduced the so called “Golden Visa”, which allows wealthy foreign real-estate investors to qualify for residency. Spain is planning a similar scheme as well.

The situation in Italy is funny as usual. Berlusconi’s party announced that it will not stay in the government in case of his expulsion from parliament (which is a part of the sentence levied on Berlusconi for tax evasions).  In order not to make it too easy, the party will do the same if Prime Minister Letta doesn’t abolish the higher housing tax. Meanwhile, Italian entrepreneurs are losing their patience. The country was thrilled by the case of electrical components factory owner who secretly moved his factory to Poland, while staff were on holiday. According to him, it was the only chance to save the company, which had been built by his grandfather half a century ago. If he had not done it in secret, allegedly his property would have been confiscated.  An Italian employee with a net salary of 1000 euros cost him 2500 euros per month in real terms. The company has reported losses since 2008. Italian court is examining the circumstances of the move.

France has a low productivity and high labor prices problem as well. In addition, it has a problem with the pension system, which is set to generate huge debts (like many others in Europe). Hollande’s magnificent reform has changed into a mockery. The retirement age hasn’t been increased by two years, but has remained on the same level for 60 years. Minimal period of contribution years will be changed from 40.5 to 41.5, but even that will be imposed gradually until the year 2015 and many professions have exceptions. The only additional measure is the levy increase by 0.3 percentage points, which won’t benefit extremely expensive manpower. More are losing their patience with the French. Commissioner Oli Rehn said that tax levels in France have reached a “fateful point” and that the budgetary discipline must come from a reduction in public spending if the country doesn’t want to destroy growth.

Iceland has definitely drawn down the EU accession application after dissolving the negotiation committee. Croats didn’t even get to warm up in EU and they already have a problem. Only three days before the accession, Croatia’s parliament adopted amendments limiting the application of the European Arrest Warrant and they are not willing to revoke it. The new law now exempts crimes allegedly committed before 2002. Some observers say that this was done to protect a former communist intelligence official who assassinated a Yugoslav defector in 1983 in Germany.

Crisis often brings tragicomic situations. Do you remember the case of the German-born man who stole the list of German bank account owners in Switzerland and sold it for 1.1 million euros to the German government? Since he committed a crime, the Swiss court sentenced him to three years in prison, but, and this is the best part of the story, the man used most of the money to pay off taxes he owed in Germany. And that’s not all. The taxes he owed were calculated according to the list that he himself handed over!

As the proverb says: the chickens have come home to roost.


Translated by Michal Kollár