Ups and Downs

Ireland is out of the game. French farmers against taxes. Greek drones above our heads.

Ireland becomes the first country to exit the programme of financial support and has enough confidence to acquire funds on financial markets. The unemployment rate has tripled. Public debt per head has increased to triple its former value and a four-member Irish family now owes approximately 180,000 euros. But the important thing is that Irish banks are still alive.

Spain is going to make a similar move. It’s no wonder, because the market has no need to worry as the ECB guarantees the demand for the member countries’ government bonds through the OMT bond purchase programme. But the ECB is also acting as if there was still some trouble waiting for us. After a fresh cut of the interest rates, it is considering to cut them even further – to negative figures. Policy makers want the measure to prompt banks to lend cash to companies and households, instead of holding it on the ECB accounts. But virtual safe cases of the ECB can still be the safest place to store money, even in spite of a negative interest rate. After all, real interest rates (inflation adjusted) have already been negative for some time.

Economic growth of the eurozone has fallen to a negligible 0.1%, and France has a negative growth of 0.1%. It’s getting hot in the country. The policy of raising taxes and imposing new ones provoked anger of farmers who decided to block routes to Paris. They are bothered by higher value added tax rates and the new ecotax. Jean-Marc Ayrault, the Prime Minister, thinks that the tax system is too complicated and people don’t understand it. Therefore, they consider „the amount of money they have to pay as not fair.

The Commission has published the first assessment of the national budgets for 2014. Only Germany and Estonia made the budget prospects flawless and deserve praise. Slovakia ended up in the third group. The budget plan is good, but it’s likely that it will not be fulfilled.

Countries like Slovakia would particularly be considered in a proposed special programme (yes, another one…), which would encourage countries to make economic reforms in exchange for loans at below-market rates. According to the first ideas, it would have a capacity of 20 billion euros. But the problem of greedy government budgets is linked with the European banking system where other serious issues are hidden.

Strict stress-tests of banks are alleged to take place next year. Banks have quickened repayment of LTRO loans to the ECB and they are getting rid of some assets more intensively. However, such sanitation endangers the still weak economic growth. But bigger problems might occur with the results of such a test. How to treat a bank which doesn’t pass it? Germany has refused to use European bailout fund to strengthen such banks, although the Social Democratic Party has conceded that they would support the idea – but only in exchange for supporting the financial transaction tax. And the fact that these two measures have absolutely nothing in common does not matter.

According to a newly leaked document, a resolution fund for the continent’s banks set up within the banking union can hold 150 billion euros. Slovenian banks will need it even before it is set up. Meanwhile, they have inclined to the Cyprus solution. So far, they have planned to spend 1.5 billion euros from the government budget and 0.5 billion euros through junior debt holders’ participation. The fact is that the estimated costs of the aid come up to 4.6 billion euros.

We are bound to hear a lot about Spanish banks as well. The ratio of non-performing loans climbed to a record high of 12.6% in September. But there was also some good news. A “bad” bank, SAREB, has started to sell foreclosed properties. It has managed to sell only 4,000 houses instead of the planned 7,500, but the revenue has reached 1.6 billion euros against less than its one-billion-euro prediction. There are 2 to 3 million empty houses in Spain.

Scuffles over the “excessive” German export have continued too. Germans are irritated and don’t understand why the German economic engine should be a problem. Energy Commissioner Guenther Oettinger said it is „unthinkable that Germany’s high trade surplus would lead to a fine.” In addition, he got supported by Le Figaro: „As if Berlin were harming Greece by exporting olive oil to China. It shows that Brusselian technocracy has no difficulties in shifting from cynicism to demagogy.”

Meanwhile, Brussels’ technocrats have raised their wages by 240 euros per month; of course, not directly. They have lowered their social security contributions, and thus increased their disposable income. Jobs in public administration, even in the most crisis-hit countries, are more comfy than a warm bath. For instance, salaries of civil servants in Greece, which is austere as much as possible, are 30% to 58% higher than those of private employees with similar education levels.

Proving that they take austerity measures seriously, they have decided to join a club of six countries to produce European Medium Altitude Long Endurance craft, or the so-called drone. It’s still not clear whether it will be used to bomb Eurosceptics, German exporters or tobacco users.

Mercedes has won one battle. The carmaker has refused to use the new air conditioning coolant ordered by the Brusselian directive. Therefore, French authorities began denying authorization to Mercedes vehicles in France. Now, the ban has been suspended by France’s highest administrative court. Some say that using the new coolant protects polar bears against the threat of the global warming, while others think that it just protects the monopoly of two chemical corporations against the threat of global competition.

A determined Commissioner, Viviane Reding, has won a battle as well. Her efforts to push forward legal quotas for women in the boardroom have moved a step further. Thus, not only the brain, but also another body part will affect careers. And I am still waiting for someone who will put forward the idea of compulsory quotas for metal-heads in executive positions.

Life in the EU is not a pop song!


Translated by Michal Kollár