Time Machine Discovered in Brussels

Austria on the edge. Italian plans. Higher salaries for officers. Successful elections.

Black sheep are growing in numbers. Austrian Central bank governor Ewald Nowotny admitted that his country might not meet the 3% deficit rule as well. He blames the additional costs of the bankrupt and nationalized bank Hypo Alpe-Adria. The costs should increase to about 3.6 billion euros, which together with taking over bad assets will kick the state’s national debt from the current 74.4% of GDP to somewhere in the region of 80% of Austrian GDP. Although the number is not official yet, the opinion of the head of the central bank cannot be ignored. Dreamers and utopia believers can further reflect on the respect for common rules, thanks to which the Eurozone will one day work. However, we ask: when will Slovakia also give up?

Deutsch: Ewald Nowotny bei einem Vortrag an der Johannes Kepler Universität, Linz, Österreich

On the other hand, the one who does not want to let go is Italy. Former Finance Minister Fabrizio Saccomanni felt offended when the Commission warned his country of macroeconomic imbalances. According to Saccomanni, “the debt increased because the state had to pay debts to suppliers of goods and services.” But what he forgot to state was why this should not count. He was outraged by the fact that the Commission did not take into account Italian share in rescuing other countries, which increased the Italian debt by 50 billion euros. However, he might have forgotten about the rescue of his own country two years ago, when the ECB bought Italian bonds for tens of billions of euros (not to mention other gigantic loans for the Italian banking sector).

However, the current PM is of a different kind. At least he seems to be. He reaffirmed his intention to reform the labour market, and introduced planned tax cuts. As for personal income tax, 10 million employees with the lowest income should save 10 billion euros on their taxes per year. But let’s not celebrate prematurely. Initially, lower taxes were to be balanced by cuts in spending, but now it is low interest rates and a new debt that are supposed to do the balancing. In the country with a more than 130% debt level already, this cannot be a good idea. At least, the Italian economy finally grew by 0.1% of GDP after two and a quarter years.

In Spain, the government-established expert group recommended a reduction of the corporate tax by 10%. On the other hand, Portuguese policemen’s protests resulted in a fight because of pay cuts. As one protester said: “I only work and sleep. And at the end of the day, my salary is no longer enough even to pay the taxes.”

The news from Greece is that it finally found itself in the position of the scolding one and Germany – the one that takes the scolding. During the visit of the German President, damages caused by German occupants were on the agenda once again. Gauck accepted the moral responsibility and promised to create a fund to raise German awareness about this historic event. Greeks would rather have got some juicy compensation, but this was not the case. Negotiations about the disbursement of the next April tranche for Greece continued. After five years, Greek banks are planning to get capital on the market which could reduce the pressure on the recapitalization of public finances.

While one country after another is announcing a breach of the 3% deficit, Germans have a balanced budget. The first balanced budget after 45 years should be in 2015 and is predicted to stay so until 2018 – that is the scope of the planning. For the current year, the plan also envisages a deficit of 6.5 billion euros in a 300 billion budget (Slovakia has a planned deficit of more than 3 billion with 17 billion budget). But promises are promises, so let’s wait and see.

German politicians have had a rough time at the European level too, where they are among the leading forces behind the creation of the common resolution mechanism. With the help of the common fund, this should bail out the European banks in trouble. Negotiations did not really move on, although Germans had already started considering an eight-year-long scenario of building the resolution fund instead of the originally required ten. Impatience is slowly rising as this problem blocks the creation of the banking union.

An unexpected challenge was presented by the former Dutch finance minister, according to whom the membership in the Euro area should be decided by citizens in a referendum. A possible negative answer should be taken seriously, even if it means leaving the Eurozone.

EU officials got fed up with austerity measures and increased their salaries, which previously had been frozen. And as only smart people work in Brussels, they increased the remuneration retroactively – they will get 0.8% more for what they earned in 2012. 2011 stays the same; 2013 has not been the subject of the discussion yet. And that is how the freezing becomes just a farce. Officials freeze their salaries, but two years later the loss is recovered by an increase, so no freezing actually happens. And yet, some still say that time machine does not exist!

Similar fads contribute to rising euroscepticism across the Union which, of course, disturbs the officials – their chairs (or rather leather armchairs) are at stake. In the issue before the last one, we informed you about officials’ paid trips to their former schools in order to lecture students about the achievements of the EU. But that is not enough for some. Therefore, mandatory classes on the EU policies are in consideration now. The right view needs to be hammered home.

Slovakia is buzzing with the upcoming presidential elections. Even in North Korea National Assembly elections took place a few days ago. The Supreme Leader (not an irony that this is the official title) Kim Jong-un is also running. He got 100% of votes with a 100% participation in his district. With such a result, he outrun even his father, who in 2009 got 100% votes too, but only with 99.98% participation (I wouldn’t like to have been in shoes of that unfortunate individual who was absent).

Translated by Stanislava Dovhunová