Home » Posts tagged 'european union'

Tag Archives: european union

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai III: Cataclysm
Click on image to purchase

Trump Takes Italy by Storm: the Rise of Matteo Salvini and of the Italian Right

Trump Takes Italy by Storm: the Rise of Matteo Salvini and of the Italian Right

Matteo Salvini, the leader of the Italian League and Minister of the Interior since June 2018. During the past few weeks, he has gained political prominence in Italy by adopting Trump’s style and policies. Here, you see him together with the slogan “Italians First.”

During the past few weeks, we have seen a true political revolution in Italy. Matteo Salvini, leader of the Italian League, has successfully exploited his new position of Minister of the Interior to gain personal prominence. The M5s movement had won the elections, this year, but it has been emarginated to a secondary role, while Salvini acts and looks like if he were the real Prime Minister. If new elections were held now in Italy, Salvini and the League would win hands down

All politics is, after all, about blame shifting. So, political success means simply finding someone to blame. Matteo Salvini was successful by adopting the same style and content that made the political fortune of Donald Trump. Both Trump and Salvini found a good target to blame with immigrants and foreigners in general. Both used harsh language, insults, callousness, and plain racism. Both found that the more shrill and violent their utterances were, the more they were approved by the public. It took a remarkably small effort to convince a large majority of Italians that all their troubles are caused by immigrants and, in particular, by the Roma people (less than the 0.2% of the Italian population). Salvini also capitalized on demonizing the Euro and the European Union, although he can’t afford (so far) to exaggerate with insults and threats in that field. In any case, right now, it seems that 72% of Italians approve Salvini’s actions

…click on the above link to read the rest of the article…

Italy and the Repricing of European Government Debt

  • The yield spread between 10yr BTPs and Bunds widened 114bp in May
  • Populist and anti-EU politics were the catalyst for this repricing of risk
  • Spain, Portugal and Greece all saw yields increase as Bund yields declined
  • The ECB policy of OMT should help to avoid a repeat of 2011/2012

I have never been a great advocate of long-term investment in fixed income securities, not in a world of artificially low official inflation indices and fiat currencies. Given the de minimis real rate of return I regard them as trading assets. I will freely admit that this has led me to make a number of investment mistakes, although these have generally been sins of omission rather than actual investment losses. The Italian political situation and the sharp rise in Italian bond yields it precipitated, last week, is, therefore, some justification for an investor like myself, one who has not held any fixed income securities since 2010.

An excellent overview of the Italian political situation is contained in the latest essay from John Mauldin of  Mauldin Economics – From the Front Line – The Italian Trigger:-

Italy had been without a government since its March 4 election, which yielded a hung parliament with no party or coalition holding a majority. The Five Star Movement and Lega Nord finally reached a deal, to most everyone’s surprise since those two parties, while both broadly populist, have some big differences. Nonetheless, they found enough common ground to propose a cabinet to President Sergio Mattarella.

Italian presidents are generally seen as rubberstamp figureheads. They really aren’t supposed to insert themselves into the process. Yet Mattarella unexpectedly rejected the coalition’s proposed finance minister, 81-year-old economist Paolo Savona, on the grounds Savona had previously opposed Italy’s eurozone membership. This enraged Five Star and Lega Nord, who then ended their plans to form a government and threatened to impeach Mattarella.

…click on the above link to read the rest of the article…

Italy challenges the Western order

Italy challenges the Western order

The EU is under a lot of strain

With a massive influx of immigrants from across Africa and the Middle East, and growing poverty, Italy voted in a populist government representing policies which would seem to virtually overturn the postwar European order.

The austerity measures which have been imposed upon the Italian people have pushed more and more of them down into poverty, with the poverty rate doubling over the course of the past decade.

Relative to migration, Italy is one of the Southern European countries taking the brunt of the migrants who are flooding into Europe by the thousands, helped along by various NGOs which seek to alter the demographic makeup and economic and political order of Europe under the guise of humanitarianism.

The present economic metrics tend to perceive the profits of multinational corporations as a gauge of the health of the economy, rather than the economic situation on the ground level, faced by the Italian citizen. All of these and more are things which this new government has a view towards radically changing.

To combat Austerity, which may be tossed out the window, the option on the table is to review treaties to which Italy is partied which impose or advise them. Rather than gutting the population for the money which the government needs in order to cover obligations to multinational financial interests, a proposal was broached of launching a universal basic income, reduction in the pension age, as well as a flat tax system.

And while the migrant policy is still evolving, it has had a view towards repatriating the migrants which are already within Italy’s borders. Italy has already flexed its will on the migrants issue over refusing a ship full of migrants port in Italy, forcing it to set sail for Spain.

…click on the above link to read the rest of the article…

“Can’t Work With That Woman Anymore”: Merkel Handed A Two-Week Ultimatum On Her “D-Day”

Adding insult to injury, one day after Germany’s historic loss to Mexico (which resulted in a man-made earthquake in USA’s southern neighbor), Europe’s most important country is facing the “Destiny Day” to a political crisis like no other in its recent history.

For almost 13 years as chancellor, Handeslblatt writes this morning, Angela Merkel managed to outmaneuver all rivals, schemers and plotters.

“But her time could finally be up.”

Two of her Christian-Democratic predecessors, Konrad Adenauer and Ludwig Erhard, fell from power not after losing the electorate, but after losing the support of their own parliamentary bloc. That may now be Merkel’s fate, too.

Today, the top brass of her party, the CDU, and its Bavarian frenemies, the CSU, are meeting separately in Berlin and Munich, to agree on a common course about the coming days and weeks, however chances of a deal appear increasingly remote: according to Handelsblatt, Horst Seehofer, the CSU’s boss, federal interior minister and perennial Merkel gadfly, told one newspaper that he “can’t work with that woman anymore.

Horst Seehofer and Angela Merkel. Photo: DPA

The issue is, as it has been since the crisis of 2015, refugees.

If Seehofer, acting as interior minister, really starts turning back asylum seekers at the border, this will count as open insubordination to Merkel. She would have to fire him. That would probably lead to a break between the CDU and CSU, which would cost their governing coalition with the Social Democrats its parliamentary majority.

Merkel would step down or be forced out.

Which is why, on Sunday Germany’s Bild said that Monday is “destiny day for Angela Merkel. For the government.

…click on the above link to read the rest of the article…

The Gently Rotting Debt-Ridden EU

The Gently Rotting Debt-Ridden EU

The EU as a political construction is in a state of terminal decay. We know this for one reason and one reason alone: its core principle is the state is superior to its people. A system of government can only work over the longer term if it recognises that it is the servant of the people, not its master. It matters not what electoral system is in place, so long as this principle is adhered to.

The EU executive in Brussels does not accept electoral primacy. It shares with Marxist communism a belief in statist primacy instead. The only difference between the two creeds is Marx planned to rule the world, while Brussels is on the way to ruling Europe.

The methods of satisfying their objectives differ. Marx advocated civil war on a global scale to destroy capitalism and the bourgeoisie, while Brussels has progressively taken on powers that marginalise national parliaments. Both creeds share a belief in an all-powerful executive. The comparison with Marxism does not flatter the EU, and suggests it has a limited life and that we may be on the verge of seeing the EU beginning to disintegrate. Despite economic evolution in the rest of the world, like Marxian communists Brussels is stuck with a failing economic and political creed.

It has no mechanism for compromise or adaptation. A rebellion from Greece was put down, the British voted for Brexit, which is proving impossible to negotiate, and now Italy thinks it can partially escape from this statist version of Hotel California. The Italians are making huge mistakes. The rebel parties forming a coalition government want to stay in the EU but are looking to exit from the euro. Putting aside the impossibility of change for a moment, they have it the wrong way around. If they are to achieve anything, they should be exiting the EU and staying in the euro. Let me explain, starting with the politics, before considering the economics.

…click on the above link to read the rest of the article…

What The “Doomsday Brexit Plan” Document Says Should Frighten Us All

This is the first paragraph of The Times article (paywall) regarding Britain’s now famous Doomsday Brexit plan.

Britain would be hit with shortages of medicine, fuel and food within a fortnight if the UK tries to leave the European Union without a deal, according to a Doomsday Brexit scenario drawn up by senior civil servants for David Davis.

The Times confirms that the port of Dover will collapse “on day one” if Britain crashes out of the EU, leading to critical shortages of supplies. This was the middle of three scenarios put forward by senior advisors. A type of best guestimate if you like. You simply do not want to know the outcome of the worst of those three scenarios. Indeed, we have been spared from such details.

The article states that the RAF would have to be deployed to ferry supplies around Britain. And yes, we’re still on the middle scenario here. You would have to medevac medicine into Britain, and at the end of week two we would be running out of petrol as well,” a contributing source said.

The report continues to describe matters such as cross-channel disruption for heavy goods vehicles, which would also be catastrophic.Massive carparks will be required.

A senior official said in the ‘Doomsday’ Brexit plan:

We are entirely dependent on Europe reciprocating our posture that we will do nothing to impede the flow of goods into the UK. If for whatever reason, Europe decides to slow that supply down, then we’re screwed.

Let’s not worry about the fact that French borders are often left in chaos due to the all too familiar strikes that appear almost monthly during holiday season for one reason or another.

Home secretary Sajid Javid makes an unconvincing comment stating he’s ‘confident’ a deal will be done. That’s hardly the type of assurance we need is it?

…click on the above link to read the rest of the article…

US Treasury Dept Warns Allies Against Accidentally Trading With Iran

US Treasury Dept Warns Allies Against Accidentally Trading With Iran

Companies ‘face substantial risks’ if they’re caught trading with Iran

The US Treasury Department on Tuesday issued a statement directed at allied governments, and private companies operating out of allied countries, warning them against any trade with Iran, warning they “face substantial risks” if they are caught.

Undersecretary of the Treasury Sigal Mandelker says that the world must “harden your financial networks,” and make sure they have “airtight” procedures in place to prevent even accidental business ties to Iran. He added that nations must make sure “Iran and its proxies are not exploiting your companies to support their nefarious activities.”

Though presented as a warning about being tricked by Iran, the warning is likely primarily directed at EU nations, as the EU has already decided to prohibit its companies complying with US sanctions on Iran. The EU is planning to try to block the US from punishing those companies, but many of the major businesses are being very cautious about new deals with Iran, fearing the US will go after them anyhow.

US sanctions against Iran’s nuclear program are expected to ratchet up in the next several months, after President Trump withdrew the US from the nuclear deal. Yet the deal remains in place, and many nations may not be willing to follow the US in this crackdown so long as Iran remains compliant.

The Pension Crisis Will Break Up the EU

The German public broadcast agency ARD is proposing structural changes. Due to the low-interest rates, the ECB has placed the agency in hard times with its pensions. Karola Wille, the director, has called for structural reform to reduce costs. The proposal centers on technological change to increase efficiency in the performance of its mandate. They are also looking at developing cross-media applications to modernize the agency.  The ARD is non-profit so the German government has to fund it. As the low-interest rates have undermined pensions throughout Europe, the governments will have to step up and bail them out. This is going to put tremendous pressure on the entire EU budget and austerity policy embedded within the single currency.

We are looking at the same story being painted throughout Europe. The low-interest rate policy for nearly 10 years has not merely destroyed the bond market in Europe, it has undermined the pension system both privately and publicly. Indeed, adding to this crisis is the mandate that all pension funds hold some or the majority of their investments into government debt. The combination of these policies clashes with the ECB and the nightmare on the horizon and why Draghi can’t leave fast enough to avoid personal blame.

This crisis all stems from the structural design of the EU. They tried to be half pregnant with only a single currency and dictatorial control over member state budgets. The refusal to consolidate the debt emphasized the problem of the great disparities in cultures and the prevailing prejudices that exist through Europe between member states as well as within member states such as Bavaria v northern Germany or Spain v Catalonia, Scotland v Britain, Italy v Sicily, etc.. This prevailing prejudice is also why the bail-in policy was adopted.

…click on the above link to read the rest of the article…

One Word: Contagion

One Word: Contagion

Terrible news, I’m afraid.

The trainwreck that is Italian politics has always been a hoot to watch. But this time around the implications to what happens in Rome are, as Trump would say, yuuuge.

You’ve probably seen the news-flow out of Europe.

Tasked with finding a suitable candidate to head a coalition between Luigi Di Maio’s Five Star Movement and the far-right League headed by Matteo Salvini, a coalition, which I might add has to be scaring the living isht out of Brussels, has not been an easy task.

Firstly, they went and chose someone nobody has ever heard about.

Why?

Well, Italy has many “colourful characters” in politics, and that is what scares Brussels more than anything else. Draghi’s worst nightmare must be sitting across the table from this guy discussing Italy’s bill to Germany.

In case you’re not up to speed on what these gents stand for here’s a sampling from Matteo Salvini.

Slaves of the European Union? No, thanks!

I can’t wait for Italy, with our government, to regain its sovereignty to defend the national interest in any way possible. Unacceptable intrusion from a European bureaucrat in Italy’s elections. The immigration policies and economic sacrifices imposed by the European Union have been a disaster and will be rejected by the free vote of Italians.

European bureaucrats calm down. League will always defend our fisheries and the agriculture of Italy. Enough with the European standards that slaughter our businesses and our territory!

No! What this coalition needed was someone entirely vanilla, very unlike their own leaders, a nobody, a perfectly useful idiot.

And so they picked Giuseppe Conte.

Who, I hear you say?

Precisely.

But poor Giuseppe didn’t last very long. Heck, he was tasked with what was one helluva job — sugarcoating this…

…click on the above link to read the rest of the article…

“Just Days Left” To Avoid Trade War France Says, As G-7 Condemn Trump

With Trump refusing to back down and slapping Section 232 tariffs on steel and aluminum imports from the EU, Canada and Mexico, which were enacted at midnight on June 1, the G-7 meeting taking place in Whistler, also known as Canada’s Davos, ended up being one big “bash America” show, with French finance minister Bruno Le Maire saying that “it has been a tense and tough G-7. I would say it has been far more a G-6 plus one than a G-7” pointing at the US, which on Friday he said was “alone against everyone and running the risk of economic destabilization.”
Morneau, third left, and fellow finances chiefs gather in Canada

Seemingly unable to grasp that Trump would dare break with decades of politically correct tradition and turn his back on allies who continue to impose tariffs on US exports yet balk when the US retaliates in kind, Le Maire said on Saturday that Washington has just a few days to take urgent measures if it wants to avoid unleashing a full-scale trade war with its European allies.

“We still have a few days to avoid an escalation. We still have a few days to take the necessary steps to avoid a trade war between the EU and the US, and to avoid a trade war among G7 members,”  Le Maire told journalists after the conclusion of the G-7 meeting, according to Reuters.

French Finance Minister Bruno Le Maire

He added that it is up to the US to make the first move:

“The ball is in the camp of the United States, it is up to the American administration to take the right decisions to smooth the situation and to alleviate the difficulties.”

…click on the above link to read the rest of the article…

Germany Accuses Italy of “Debt Blackmail”: Hello EU, Time for Reform Expired

For 10 years, the EU and EMU promised reform. None was delivered. Time is Up. Populists have taken control of Italy.

Merkel’s CDU/CSU coalition is in a state of panic regarding Italy. The German parties went on the attack accusing Italy of “debt blackmail”

Eurointelligence Snips

This was the day when people who were left speechless by the political events in Italy started to talk. In Germany it was the now cancelled request for a monetary financing of Italy’s debt that triggered a collective nervous breakdown.

The CDU’s economic council warned about a eurozone endgame, and said that Angela Merkel’s policy of kicking the can down the road had led to a situation where the debtors are now in a position to blackmail the creditors. Its general secretary was quoted by FAZ as saying: why should German households pay for rich Italians? The head of the CSU in the Bundestag, Alexander Dobrindt, also demanded that under no circumstances Germany should pay for Italy’s debt programme. His colleague in the European Parliament, Manfred Weber, says Italy was playing with fire, and was risking another eurozone crisis.

Eurozone Reform Officially Dead

French President Emanuel Macron has a vision for Europe. Germany did not agree with it.

Heck, Germany did not agree with any Eurozone reforms for over a decade. Chancellor Angela Merkel blew with the wind in a perpetual can-kicking exercise, accomplishing nothing.

Now, it’s too late. The new Italian government will kill any proposal that Germany and France may agree on.

And of course one of the major Eurozone flaws is that every country must agree to change the pact.

One Day

​This is what I said at the time regarding Italian complacency.

…click on the above link to read the rest of the article…

MAY DAY

“Japan was the dress rehearsal; the rest of the world will be the main event.”

  • Investor in Japanese stocks, known to this correspondent, circa 2001.

“Twitter has taught me a couple of things. 1: there are some incredibly brilliant people in the world. 2: they are vastly outnumbered.”

  • Tweet by @jrsalzman.

There are weeks when decades happen, and this past week feels like one of them. While US inflation expectations touched a four-year high and 10-year US Treasury yields reached seven-year highs, the voters of Italy – or rather its anti-establishment Five Star Movement and its far-right League – delivered a resounding raspberry to the EU and any lingering hopes for faster and smoother European integration. Two years ago, in this commentary, we were conveying our relief that the UK had finally elected to sever its political ties with a failing totalitarian socialist economic bloc. Now, displaying – if possible – even more political incoherence, the Italians are having a go. You can see below, courtesy of the Daily Telegraph, why they might have a point:

What follows is what we wrote in the giddy days of June 2016:

The euro zone is a latter-day gold standard. Because its member countries have no control over their own monetary policy, they must accept a one-size-fits-all model. But what is appropriate today for an economy like Germany’s is unlikely to be appropriate for an economy like that of Greece. (Which should never have been allowed to join in the first place – but then institutionalised corruption is another of the euro zone’s fatal flaws. Are the EU’s accounts and payments “free from material error” ? On this basis they haven’t been signed off by the EU’s own Court of Auditors for over 20 years.)

…click on the above link to read the rest of the article…

7 Reasons Why European Banks Are in Trouble

7 Reasons Why European Banks Are in Trouble

europe_1.PNG

While the euro crisis seems far away as all Eurozone countries ran government deficits below 3 percent of GDP, there is one problem for the euro that quietly keeps growing: the unresolved banking crisis. And this is not a small problem. The Eurosystems´and euro banks´ balance sheets totaled €30 trillion in January 2018, that is about 291 percent of GDP.

European banks are in trouble for several reasons.

First, banking regulation has become tighter after the financial crisis. As a consequence regulatory and compliance costs have rise substantially. Today banks have to fulfill demands by national authorities, the European Banking Authority, the Single Supervisory Mechanism, the European Securities and Markets Authority and the national central banks. Being at a staggering 4% of total revenue currently, compliance costs are expected to rise to 10% of total revenue until 2022.

Second, there are risks hidden in banks´ balance sheets. That there is something fishy in European banks´assets can quickly be detected when comparing banks market capitalization with their book value. Most European banks have price-to-book ratios below 1. German Commerzbank´s price-to-book ratio stands at 0.49, Deutsche Bank´s is at 0.36, Italian UniCredit´s at 0.23, Greek Piraeus Bank at 0.14, and Greek Alpha Bank at 0.34.

With a price-to-book ratio below 1, buying a bank at the current prices and liquidating its assets at book value, an investor could make profits. Why are investors not doing that? Simply, because they do not believe in the book value of the banks´assets. Assets are too optimistically valued in the eyes of market participants. Considering that the equity ratio (equity divided by balance sheet total) of the Euro banking sector is at only 8.3%, a down valuation of assets could quickly evaporate equity.

Third, low interest rates have contributed to increasing asset prices. Stocks and bond prices have increased due to the monetary policy of the ECB, thereby leading to accounting profits for banks.

…click on the above link to read the rest of the article…

DOLLAR COLLAPSE COMING: EU To DITCH The US Dollar In Payments For Iranian Oil

DOLLAR COLLAPSE COMING: EU To DITCH The US Dollar In Payments For Iranian Oil

The dollar’s collapse is nearing.  The European Union is planning to switch its payments to the Euro for its oil purchases from Iran, eliminating United States dollar transactions.

Just one more nail to the US dollar’s coffin.  Its collapse is all but imminent at this point. The EU has successfully found a way to scoff at potential future sanctions on Iran by openly defying the US; and as an “added bonus,” they’ve helped seal the dollar’s fate.  According to RT, a diplomatic source with the EU has told a news outlet of the decision.  “I’m privy to the information that the EU is going to shift from dollar to euro to pay for crude from Iran,” said the diplomatic source. 

Brussels has been at odds with Washington over the US’s decision to withdrawal from the Iran nuclear deal, which was reached during the administration of Barack Obama. President Donald Trump has pledged to re-impose sanctions against the Islamic Republic as soon as he is able to do so. The Trump administration also has had plans to topple the current regime in Iran, according to leaked documents, and it looks like they’ve just given themselves the go-ahead:

The Washington Free Beacon has obtained a three-page white paper being circulated among National Security Council officials with drafted plans tospark regime change in Iran, following the US exit from the Obama-era nuclear deal and the re-imposition of tough sanctions aimed at toppling the Iranian regime.

The plan, authored by the Security Studies Group, or SSG, a national security think-tank that has close ties to senior White House national security officials, including – who else – National Security Adviser John Bolton, seeks to reshape longstanding American foreign policy toward Iran by emphasizing an explicit policy of regime change, something the Obama administration opposed when popular protests gripped Iran in 2009, writes the Free Beacon, which obtained a leaked copy of the circulating plans. –Zerohedge

…click on the above link to read the rest of the article…

It’s Now Clear: Five Star Lega Deal is a Commitment to Leave the Eurozone

There was some confusion Tuesday over the exact wording of an Italian coalition agreement. The agreement is now clear.

Italy Coalition Agrees to Leave the Eurozone

I typically do not agree with Eurointelligence regarding views on what “should” happen. However, I nearly always agree with them on what “is” happening.

Eurointelligence is pro-big-Europe, I am not. Tonight Eurointelligence lays it on the line:

“And By the Way: We are Leaving the Eurozone”

The Huffington Post Italia had an extraordinary scoop last night when it got ahold of a 39-page draft document setting out a coalition agreement between Lega and Five Star. It is unbelievably extreme – right out of the 1930s. The copy of the contract is dated 14 May at 9.30am. It precedes Monday’s discussions between the party leaders and President Sergio Mattarella, and the parties have already said that it is out of date. It may be, but the document gives a good reflection of the sheer radicalness of two parties.

The parallel governance is probably the single most important, and hitherto unknown, proposal. We translate its name as a Reconciliation Committee, and its role is to adjudicate when there is a conflict between the two parties inside the government. Since such a committee is not foreseen in the Italian constitution, it would only have an informal role. But, as Huffington Post Italia rightly points out, the creation of such a committee would undoubtedly give rise to inter-institutional conflict, and possibly even to a constitutional crisis. The committee would take formal decisions in areas such as international crises, natural disasters, law and order, and public health. It would comes together whenever any of the parties requested it. Its members would be the prime minister, the presidents of Five Star and Lega, the political leaders of the chamber of deputies and the Senate, and any ministers relevant to a particular decision.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
Click on image to purchase

Olduvai
Click on image to purchase

Olduvai II: Exodus
Click on image to purchase

Olduvai III: Cataclysm
Click on image to purchase