The Caravan Moves On

Europe got over the German election. Indebted countries economize only ostensibly. There are never enough subsidies.

Sunday’s election has significantly strengthened the position of Merkel’s CDU. However, the party missed the absolute majority and lost its coalition partner, the liberal FDP.

As for the country’s politics, Germany isn’t expected to change very much in the near future. Merkel will probably have to build a coalition with her regular opponent, the SPD which has already announced that it expects lowering the pressure on the imposition of austerity measures – the imposition which has not even started yet. According to Eurostat, all member countries had higher government spending to GDP ratio during the last year than in 2007. Therefore, politicians will make fake promises and Germany will reward them with debt patching support again.

In spite of the election results, Eurosceptic tendencies are growing in Germany. The anti-euro party, AfD, almost exceeded the 5% threshold to enter the parliament. Also the German Foundation for Family Business has called for the reinforcement of the subsidiarity principle: European where necessary, national where possible. But even such a simple principle has been changed under the pressure of EU officials in Brussels.

The Italian transport minister said that the country will decide how to respect the 3% ceiling on the deficit itself as a response to the European Commission’s requirements of more measures, which would help fulfil the commitments. The dogs bark but the caravan moves on.

A new methodology developed with the intention of calculating the structural deficits of the member countries has been declined despite the Commission’s recommendation. It would have shown how a lot of austerity measures the governments need to undertake. Well, it’s much easier to pretend making budget cuts than to actually implement them.

EU funds are one form of financial transfers from the wealthier countries to the poorer ones in Europe. It is estimated that the annual theft of the funds is around half a billion euros. The head of the Commission’s justice directorate said that the real figure „is closer to billions than to millions”. He might be right, because irregularities worth 258 million euros have been found by the Slovak procurement office only in the last 6 months.

Also tobacco farmers call for more subsidies. More specifically, 9 countries were lobbying for their interests. It indicates success of the common EU policy and lower tobacco consumption, so we should be happy about it, shouldn’t we?

There’s a general consensus among European politicians that the rescue of the euro is necessary to ensure European unity. Not everybody is of the same opinion. The central bank of Poland has expressed quite a different one. Its analysis warns that the single currency constitutes a serious threat to the European Union and proposes a controlled dismantlement of the Eurozone. The ECB has a different opinion on that as do many experts who help keep the eurozone together. That might be one of the reasons for hiring Oliver Wyman – a management consulting firm, which famously said the Anglo Irish Bank was the best bank in the world; the same bank which had to be nationalised and almost made the Irish state bankrupt only three years later. Oliver Wyman also undervalued the funding needs of Spanish banks. Well, experts might make mistakes too, but the health of the banking sector should be rated by someone who only makes conclusions at the end of the process.

The ECB president Draghi reaffirmed his commitment to keep interest rates low as long as necessary. Only central bankers are able to name money printing in so many terms comprehensible to nobody.

Draghi also expressed his belief in sustainability of the Greek debt. Optimism is still highly valued, lunacy not that much. Greek public debt exceeded 160% of GDP this year, but a positive report has come from the troika representatives too: forecast for this year’s economic contraction is 4% against the previous estimate of 4.2% of GDP. It means that the Greek economy has shrunk for the sixth year straight. The Commission expects the crisis to end in one or two years. The problem is that they have made the same prognosis for the fifth year in a row.

Viktor Orban shows the Hungarian style of making reforms. With the intention of decreasing the energy prices, the government is going to buy back seven formerly privatized companies. Maybe he got inspired by the ovations given to our Prime Minister for the SPP buyback agreement. Hungary, as well as Slovakia, should think about the expenses of such a policy. Agreements are made by the government, but expenditures are paid by taxpayers.

Some Non-European countries are one step ahead in the fight against profit-seeking companies. Venezuela is one of them. The government has taken over a toilet paper factory due to shortages. Private owners warn that strong regulation of the economy and prices is the problem. But the government sees a conspiracy of the companies swimming in tissues of toilet paper which they are not willing to hand over to the nation.

Our government might take this threat seriously and build some minimal reserves in the future. Until that time, let’s manifest our citizen awareness by keeping some minimal reserves at home.

Translated by Michal Kollár