Does Europe remain focused on austerity and structural changes as its preferred strategy to deal with crisis? Most likely not. Why? On Wednesday, the European Union statistics office noted that 9 of 17 euro-zone member states are now in recession, France being the newest significant member of that club. The only country with growth is Germany, which could not save the whole euro area because it grew by a meager 0.1 percent in the past three months. And recession means fewer funds for social programs and welfare states, which is definitely not popular with politicians driven by the voice of hungry public. So anti-austerity voices intensified by the ECB’s ability to buy any toxic asset and bond within the Eurozone are getting stronger. And who exactly is in recession?
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In the meantime, the European Commission wants to tighten tax loopholes on savings of the EU citizens who hold accounts in Switzerland, Andorra, San Marino, Monaco and Lichtenstein. A united approach against any tax havens is very important according to the Commission. It means that the EU will foster legislation which enables cross-border exchange of information for tax authorities.
The economic crisis has also hit rural areas of Spain. The farmers in Albelda region have gotten so worried about thieves that they have taken to patrolling their fields at night. Elsewhere in Spain the situation is similar. For example, in coastal regions, like Valencia, villagers are organizing themselves into patrols, too. The police say that the criminals belong to two categories: local people who are out of work and more organized bands of Romanians and Moroccans who once worked in these areas and know them well.
German Chancellor Angela Merkel allegedly got furious. A new party, the Alternative for Germany – anti-European party – is gaining attention also among her conservatives, who claim that it is time to change strategy towards the EU, as they are concerned about the election outcome. Their worries are understandable. The Alternative for Germany has quickly grown and just a few weeks after its official founding has more than 10,000 members and it has attracted widespread interest among German electorate.
The British Conservative Party has suggested legislation that would guarantee the EU in/out referendum before the end of 2017. The bill, prposed on Tuesday (14th May), will not be tabled as a government bill because of the coalition agreement with the pro-European Liberal Democrats. The question to appear on the ballot papers is “Do you think that the United Kingdom should remain a member of the European Union?” You can start to guess the outcome.
Premier Li Keqiang stated that China has limited room to use government spending and policy stimulus to boost its economy. This was a reaction to unpleasant economic data which showed some problems to the world’s No. 2 economy. And you can be more than sure that China is manipulating its economic data. So the picture is much worse. Why? China’s monthly power consumption growth (the most accurate proxy for underlying economic strength) slowed from 5.5% YoY in the period from January to February 2013 to 1.9% YoY in March, the slowest growth rate since May 2009. The data also showed that growth in factory output and investment was more modest than expected last month.
The Dow Jones Industrial closed Tuesday at a new all-time high. Yes, once again within a few last weeks. It’s the 18th straight Tuesday that the industrials have finished the day higher than they began. Do you know why? No? Do not worry. Investors have the same problem; for example, Bespoke’s co-founder Paul Hickey had this refreshingly candid response: “I have no idea why Tuesdays have been so strong. It’s pretty crazy.” Does the US Government begin BitCoin crackdown? It is not possible to crackdown on Bitcoin, but only to make its life more difficult. BitCoin starts to be considered as “online form of money laundering” in the U.S and federal agencies took action against Mt. Gox, the world’s leading Bitcoin exchange. Government agencies had frozen Mt. Gox’s account at payment system Dwolla. It’s the first federal action against the currency. And do not forget – debt ceiling is back in the US. What will happen then? Because of politics – most probably – nothing till July. It is presupposed that the Treasury will be able to use the same extraordinary measures as last time, which means halting some investments in government worker retiree funds and drawing down some accounts. Actual federal debt of the US is $ 16.734 trillion and rising.
