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Draghi Admits “Growth May Have Peaked”; ECB To Delay QE Unwind

As we have showed repeatedly over the past month, the European economic imploding, and nowhere is this more obvious than the Citi Eurozone Economic Surprise Index why will soon hit its post financial crisis lows.

It appears that after weeks of dithering, someone at the ECB also figured out how to pull up this chart on their Bloomberg because moments ago, and one month after the ECB first admitted that things are not ok when the central bank cut its 2019 inflation forecast, arguably due to protectionism concerns…

… Mario Draghi finally admitted what we all know:

  • ECB’S DRAGHI EURO-AREA GROWTH CYCLE MAY HAVE PEAKED

To be sure, Draghi also brought up the usual spate of platitudes he mentions every time, including that: “Notwithstanding the latest economic indicators, which suggest that the growth cycle may have peaked, the growth momentum is expected to continue”, that protectionism “may have already had some negative impact on global sentiment indicators” and that “while our confidence in the inflation outlook has increased, remaining uncertainties still warrant patience, persistence and prudence with regard to monetary policy.”

His conclusion was the punchline: “An ample degree of monetary stimulus remains necessary.”

Which leads us to the second point. As Draghi was speaking, Bloomberg reported the latest ECB “trial balloon” according to which Central Bank policymakers “see scope to wait until their July meeting to announce how they’ll end their bond-buying program”, according to euro-area officials familiar with the matter.

In other words, so much for the ECB tightening, or being able to tighten, any time soon.

More details:

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

Russia’s Real Endgame

Russia’s Putin has never taken his eye off the ball. His ambition is not global hegemony or European conquest. Putin seeks what Russia has always sought: regional hegemony and a set of buffer states in eastern Europe and central Asia that can add to Russia’s strategic depth.

In Syria, Russia has the warm water port of Tartus — which is important when you consider that most Russian ports are ice-bound for months of the year.

It is strategic depth — the capacity to suffer massive invasions and still survive due to an ability to retreat to a core position and stretch enemy supply lines — that enabled Russia to defeat both Napoleon and Hitler. Putin also wants the modicum of respect that would normally accompany that geostrategic goal.

Understanding Putin is not much more complicated than that.

In the twenty-first century, a Russian sphere of influence is not achieved by conquest or subordination in the old Imperial or Communist style. It is achieved by close financial ties, direct foreign investment, free trade zones, treaties, security alliances, and a network of associations that resemble earlier versions of the EU

Russian military intervention in Crimea and eastern Ukraine is best understood not as a Russian initiative, but as a Russian reaction. It was a response to U.S. and U.K. efforts to attack Russia by pushing aggressively and prematurely for Ukraine membership in NATO. This was done by deposing a Putin ally in Kiev in early 2014.

This is not to justify Russia’s actions, merely to put them in a proper context. The time to peel off Ukraine for NATO was 1999, not 2014.

The Russian-Ukraine situation is a subset of the broader U.S.-Russian relationship. Here, the opposition comes not just from domestic opponents but from the globalist elite.

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

Is Britain sleepwalking into a food crisis?

Image: Andrew Stawarz, CC BY-ND 2.0

On May 8th the government will end its consultation period on a new agricultural policy for England. Revealingly, its policy document – called ‘Health and Harmony: The future for food, farming and the environment in a Green Brexit’– has more to say about the environment than either food or farming. The Department for Environment, Food and Rural Affairs (DEFRA) wishes to end the direct subsidies that farmers have received under European Union policies, and environmental schemes are at the heart of its proposals.  The policy seems likely to go through, with firm support from environmental groups.

But this is curious in two ways. Policy for the environmental consequences of agriculture is very important.  As we read this week, “In the past 50 years in Britain, through the intensification of agriculture, we have destroyed well over half of our biodiversity, and the populations of birds, butterflies and wild flowers that once gave the landscape such animation and thrilling life have been utterly devastated”.

The measures will be beneficial and they flow on from those of the EU’s Common Agricultural Policy (CAP), 87 per cent of which in England now goes to agri-environment schemes. However, they mainly concern indirect effects of agriculture. DEFRA has little to say about its immediate impacts on the soil itself and through emissions of methane and other greenhouse gases. The report’s 64 pages make no mention of the damage done to soils by modern industrial agriculture as such.

Soil scientists now understand the varied roles that soil microbes play in these areas and more: nutrient cycling; carbon, nitrogen and phosphorus utilisation; carbon sequestration; methane mitigation; soil fertility; and plant nutrient density. Carbon sequestration means a healthy soil will counter climate change since it absorbs carbon dioxide. This has stimulated a farming method called regenerative agriculture, which rebuilds organic matter and restores biodiversity in the soil, ‘resulting in both carbon drawdown and improving the water cycle.’ But DEFRA says nothing about that.

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

Turkey Breaks with NATO, Refuses to Expel Russians

Turkey Breaks with NATO, Refuses to Expel Russians

Following the alleged March 4th alleged Russian poisoning of Sergei Skripal, an ex-double agent in the UK, several European countries and the US have begun ejecting Russian diplomats from their countries. With both the UK and US each ejecting dozens of diplomats, it stands to reason that every other NATO country would follow suit.

However, several European Union members have yet to follow London’s lead. One important NATO country isn’t bowing to western Russophobia: Turkey.

Despite calls from the UK for all of their allies to stand with them in “punishing Russia” they have failed to convince many of their fellow EU members, Israel, and Turkey to follow their suggestions. While there isn’t much London can do to their fellow European states, and obviously, they can’t criticize Israel; tension between Turkey and the EU has reached a point where it’s fashionable to demonize Ankara.

Both the US and UK often pander to Turkey due to the country’s strategic location and their control of the second largest military in NATO. This, however, has become much more difficult in recent months due to the increasingly authoritarian governance of the country leading to arrests of western employees, global kidnappings, and blatant defiance of international law.

This tense relationship between Turkey and the EU was on full display yesterday as Turkish President Recep Erdogan met with EU leaders about his nation’s prospects of joining the bloc. Predictably, no new results were achieved between Brussels and Ankara. This allows Erdogan to go back to turkey and play the victim, likely in anticipation of this announcement on Russia, which he will probably frame as ‘retaliation.’

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

Germany Approves Russia-Led Nord Stream 2 Gas Pipeline

Germany Approves Russia-Led Nord Stream 2 Gas Pipeline

Nord Stream 2

Germany approved on Tuesday the construction and operation of the Russia-led Nord Stream 2 gas pipeline in its territorial waters, thus issuing all necessary permits for the German section of the project that has torn Europe and EU member states over the implications of Russia’s gas giant Gazprom gaining even more foothold on the European gas market.

Hailing the project as necessary to cover Europe’s future supply gap and contributing to the “security of supply and competition in the EU gas market,” the pipeline company Nord Stream 2 AG said on Tuesday that the permitting procedures in the other four countries along the route – Russia, Finland, Sweden and Denmark – were proceeding as planned.

“Further permits are expected to be issued in the coming months. Accordingly, scheduled construction works are to be implemented in 2018 as planned,” the company said.

Germany is the key beneficiary of Nord Stream 2 and supports the project on the grounds that it is an economic issue.

Other EU states, however–including Poland and the Baltic states, as well as the European Union institutions–argue that the project further solidifies Russia’s grip on Europe’s gas market and undermines efforts to diversify supplies.

For Russia, Nord Stream 2 – a project to twin the existing Nord Stream pipeline between Russia and Germany via the Baltic Sea — not only boosts its gas supplies to the EU, but also bypasses the Ukrainian transit route.

With the spy poisoning scandal in the UK and the West-Russia tension high, Nord Stream 2 has taken center stage in energy policies again in recent weeks. Earlier this month, U.S. Senators urged the U.S. Administration “to utilize all of the tools at its disposal to prevent its construction.”

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

Will the Euro Survive by 2021?

The results of the Italian election is just starting to sink in. The rise of comedian Beppo Grillo to Italy’s most successful politician, who won 32.7% of the popular voted compared to Merkel winning 32.8% in the German election.  Following the election on March 4th, Grillo’s “five-star” party took by far the first place. Brussels is still in shock and trembling as its mood has changed from he is just a joke to “OMG! This threatens the very existence of the EU”.

The results of the Italian election is just starting to sink in. The rise of comedian Beppo Grillo to Italy’s most successful politician, who won 32.7% of the popular voted compared to Merkel winning 32.8% in the German election.  Following the election on March 4th, Grillo’s “five-star” party took by far the first place. Brussels is still in shock and trembling as its mood has changed from he is just a joke to “OMG! This threatens the very existence of the EU”.

Grillo’s party sharply criticizes the EU, and above all, it questions the very purpose of Euro. The skepticism in the EU’s founding country Italy where they signed the Treaty of Rome, is rather amazing that those still focused on domestic issues in the USA are clueless about the threat to the Euro.

The threat Italy poses to the Euro stems from Brussels’ refusal to aid Italy with the refugee crisis and the outrageous demands that the increased expenditure for the refugees must be deducted from other expenditures to stay within the EU demanded guidelines, This has maintained a serious deflationary atmosphere in Italy and Brussels simply ignores the economic impact of what their policies have imposed. Italy’s public debt amounts to €2.2 trillion, and the risk of this debt going into crisis undermines the entire existence of the Euro. This is the direct result of the failed structure of the Euro I have warned about from the outset. (see 1996 reports)

Brussels tries to blame the misconduct of banks and takes no responsibility for the failed design of the Euro or for EU legislators and the European Central Bank, which have also played a profound role is turning Italy against Brussels. Swapping the old debt into Euro that then doubled in value, created a massive wave of deflation that 10 years of flooding the economy with money by the central bank has produced nothing but undermined then the pension system throughout Europe.

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

Russia Vows Imminent Response: “The US Only Understands Force”

Update: RIA Novosti reports an unnamed foreign ministry official protested the decision by EU, NATO nations to expel envoys, and  confirmed that Russia will respond to each country expelling diplomats, warning that the “expulsions won’t go unanswered.”

“Unfriendly” action won’t be left unanswered.

U.K.’s allies are “blindly following” principle of Euro-Atlantic unity at the expense of common sense.

Additionally, Russia’s ambassador to Washington, Anatoly Antonov, said that, with regard to the US response, “US only understand force.”

“I mentioned in my statement in the State Department that I consider these actions counterproductive,” Antonov said.

“I said that the United States took a very bad step by cutting what very little still remains in terms of Russian-American relations.”

*  *  *

President Trump has reportedly ordered the expulsion of 60 Russians from the United States on Monday, including 12 people identified as Russian intelligence officers who have been stationed at the United Nations in New York, in response to Russia’s alleged poisoning of a former Russian spy in Britain.

As The New York Times reports, the expulsion order, announced by administration officials, also closes the Russian consulate in Seattle.

The Russians and their families have seven days to leave the United States, according to officials.

The expulsions are the toughest action taken against the Kremlin by President Trump, who has been criticized for not being firm enough with President Vladimir V. Putin of Russia.

In a call with reporters, senior White House officials said that the move was to root out Russians actively engaging in intelligence operations against the country, and to show that the United States would stand with NATO allies.

The officials said that the closure of the consulate in Seattle was ordered because of its proximity to a U.S. naval base.

Worst. Putin Puppet. Ever.

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

The euro area’s deepening political divide

The euro area’s deepening political divide

Two European elections – in Germany on 24 September 2017 and Italy on 4 March 2018 – warn that the peoples of Europe are drifting apart. Much of the recent deepening of these divisions can be traced to Europe’s single currency, the euro. This column argues that the political divide in Europe may now be hard to roll back absent a shift in focus to national priorities that pay urgent attention to the needs of those being left behind.

The University of Cambridge economist Nicholas Kaldor was first to warn that the euro would divide Europe (reprinted in Kaldor 1978). His critique came in March 1971 as a response to the Werner Commission Report, which presented the original blueprint of what would eventually be the euro area’s architecture (Werner 1970). Kaldor wrote that a single monetary policy (and the accompanying one-size-fits-all fiscal policy framework), when applied to diverse European countries, would cause their economies to diverge from one another. The logic was simple: a monetary policy that is too tight for one country can be too loose for another. The economic divergence, Kaldor said, would cause a political rift. Such warnings continued. The University of Chicago economist and Nobel laureate Milton Friedman (1997) predicted that the euro’s flawed economics would “exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues”.

European leaders dismissed such naysayers. They insisted that the single currency would bring Europeans closer into a political union (Sutherland 1997).

A permissive consensus?

The discourse on the possibility of political union in Europe was conducted mainly within a group of so-called elites. These elites – political leaders and bureaucrats – had little basis to presume that national interests could be reconciled to unify Europe. But they made the further assumption that they had a “permissive consensus” from the public to make far-reaching decisions on European matters (Mair 2013). As I argue in a forthcoming book (Mody 2018), the permissive consensus began to break down about the time the single European currency became a political reality. Following the signing of the Maastricht Treaty in February 1992, the Danish public rejected the single currency in a referendum held in June 1992. And in September 1992, the French public came within a whisker of rejecting the single currency.

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

 

The European Union Wants to Be an Even Bigger Global Bully

The European Union Wants to Be an Even Bigger Global Bully

Europe doesn’t need another empire.

Over time, the European Union has developed into more than just an economic cooperation between nations. The EU is a big and intrusive government that constantly acquires new powers. And like all superstates, its tendency to defend freedom against control is swindling. 

The “United State of Europe”

When Euroscepticism became a part of the political landscape of the European Union, fears of the creation of a “United States of Europe” were widespread among circles opposed to this political project. In those days, this fear was widely regarded as cliché. However, clichés become clichés for a reason.   

Much like those skeptical of the Brussels bureaucracy predicted, the union has concentrated power within its structures. Now that the United Kingdom has become the first country to leave the EU, you might think that there would be a re-evaluation of this large centralization effort. But to the contrary, the European Union is increasingly moving towards the centralization of two key aspects: foreign policy and defense. 

Foreign Policy 

Ever since the EU’s last institutional reform in 2009, the European Commission, which is the executive branch, has appointed a High Commissioner for Foreign Relations. The position, currently held by the Italian politician Federica Mogherini, has been mocked for essentially being useless since the EU doesn’t have a common foreign policy. This would be similar to appointing a secretary to a department that has been granted no powers by the government whatsoever. However, this hasn’t prevented Mogherini from making policy statements in an effort to unite European member states behind a common position.  

A notable example of this was when Mogherini condemned the United States for moving the embassy in Israel from Tel Aviv to Jerusalem, but the Czech Republic blocked any attempt to have a common position. Czech president Miloš Zeman consecutively promised to follow the American lead and move its embassy as well. 

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

 

Things Must Be Serious, Everyone’s Lying

Things Must Be Serious, Everyone’s Lying

European Commission President Jean-Claude Juncker had a moment of clarity once.  He famously said, “When things get serious, you have to lie.”

Given the state of affairs in his beloved European Union right now Mr. Juncker and company are doing a lot of lying.

It is rare in politics to get that kind of honesty from a politician, especially one currently in office.  But, Juncker’s statement shouldn’t be a surprise to anyone who is even a semi-serious political observer.

It’s why I find it funny that the Democrats and Antifa-Left get so bent out of shape when Donald Trump exaggerates or outright lies.  To him lying’s a tactic.  Catching Donald Trump in a falsehood is like trying to ladle water with a sieve.

So, by the Juncker Maxim, things must be getting very serious because the amount and type of lies being thrown around by people who are supposed to know better have been staggering.

To the point that Russian Foreign Minister Sergei Lavrov said, “I simply don’t have any normal terms left to describe all this.”

Lavrov has been the world’s most effective diplomat over the past few years, talking to and cutting deals with people who should hate him and Russia’s policies.  What it highlights is that Lavrov and his boss, Vladimir Putin, have been so effective simply because they make a deal and keep to it.

They are the opposite of Mr. Juncker.  When things get serious they become honest, speaking with one voice.

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

Albert Edwards: “Trump Will Soon Turn His Protectionist Fire On Germany. That Will Be Messy”

We were wondering how long before one of our favorite “perma-skeptics”, Socgen’s Albert Edwards, would chime in on the global trade war that broke out in the past few weeks, especially since trade protectionism, tariffs and subsidies are the opposite side of the same “strategic” coin of currency devaluation which we have observed for the past decade, and both of which have one purpose: to make one nation’s goods and service (and stocks) cheaper to the outside world (curiously, in recent years, it has emerged that “soft” protectionism i.e. currency devaluation, is far more acceptable to the establishment than direct or targeted trade intervention via tariffs and trade protectionism).

We got the answer today when in a note, what else, warning what comes next, Edwards writes that whereas “a trade war and competitive currency devaluation was always going to be the end game in our Ice Age thesis as a global deflationary bust destroyed wealth, profits and jobs” and it now looks that this endgame “might be arriving  sooner than we had anticipated.”

The reason: central banks. The catalyst: Donald Trump.

As Edwards explains, while the world is all too quick to point the finger at Trump for daring to expose that the trading emperor is naked, the real culprit behind massive trade imbalances is elsewhere, usually inside a central bank building:

Increasing trade tensions are an inevitable consequence of the side-effects of QE pursued by central banks – especially the ECB. In the near term, there are a couple of trade issues rankling the US Administration far more than steel and aluminium that could easily trigger a full-scale trade war. More immediate is the impending result of a US probe into China’s alleged theft of intellectual property. And boiling away in the background are Germany’s, and now too the eurozone’s, outsized trade surpluses.”

Edwards begins his analysis by pointing out something trivial: politicians lie.

In this context, Edwards claims that President Trump “is a most unusual politician. Like him or loath him, he seems to be doing something politicians seldom ever do: namely, attempting to fulfill his election promises. This is most unusual!”

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

EU Preparing To Unleash First-Ever Regulations Targeting Search Engines

Roughly nine months after Google’s parent company Alphabet was slapped with a 2.4 billion euro fine for “abusing its dominance in search,” Brussels bureaucrats are reportedly preparing to take things a step further and unleash Europe-wide regulations for search engines and other online platforms and apps. According to the Financial Times, which broke the story, the regulations are meant to protect companies that rely on Google, Apple or Amazon to sell their services or products.

European policymakers have been exploring ways to target “harmful” trade practices as many small firms in the region have complained that tech behemoths like Google have skewed search results to favor its own services over the services of its competitors. The issue has so far been left for members states to deal with. Of the largest European states, France has distinguished itself as among the most aggressive in trying to push back against the US-domiciled tech giants and their allegedly anti-competitive tendencies.

The regulations are also notable in that they represent the most stringent rules governing search engines’ behavior by a developed Western power.

Case in point: Earlier today, the French government warned that it could take legal action against Google and Apple over their “abusive” business practices.

“I believe in an economy based on justice and I will take Google and Apple before the Paris Commercial Court for abusive business practices” against French start-ups, said French Finance Minister Bruno Le Maire on a local radio program.

“I consider that Google and Apple, as powerful as they are, shouldn’t treat our start-ups and our developers in the way they do today,” said Le Maire, calling the situation “unacceptable”.

The news didn’t have much of an impact on shares of Google, Apple or their megacap-tech brethren.

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

EU: More Censorship to “Protect” You

Toxic Debt Still Plagues Spanish Banks (and Taxpayers Will End Up Paying for It)

Toxic Debt Still Plagues Spanish Banks (and Taxpayers Will End Up Paying for It)

Years after Crisis Was “Solved.”

Europe’s banking authorities are finally beginning to pile pressure on poorly performing banks to clean up their books, something that should have happened a long, long time ago. But as is often the case with European banking regulation, there’s an elevated risk of unintended consequences.

If a bank with a deeply compromised balance sheet is forced to report its loans that have gone bad — the hidden piles of toxic “assets” — at prices that reflect their real value (rather than the illusory prices the bank arrived at with its mark-to-model formula), that bank could suddenly find that its capital has gone up in smoke.

This is more or less what happened with Banco Popular, the mid-sized Spanish bank that went under in June last year. No matter how creative the rescue plans its management came up with — including spinning off a bad bank called “Sunrise” — Popular simply couldn’t find a viable way of disposing of its nonperforming loans without crippling its financial health.

A similar thing appears to be happening with Spain’s fifth largest bank, Banco Sabadell, the Spanish bank that has grown the most in relative terms since the crisis. It has more than doubled in size in the last ten years (from €78.7 billion in assets in 2008 to €173.2 billion in 2017), following the acquisitions of Banco Gallego, Banco Guipuzcoano, Caixa Penedès, and the bankrupt savings bank Caja de Ahorros del Mediterráneo (CAM).

Now it has immense difficulty ridding itself of the impaired assets it acquired when it took over CAM in 2012. But unlike Popular, Sabadell is getting a massive helping hand from Spain’s government.

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

How the Euro Will Be Killed by Politicians

The man who is killing the Euro as a viable currency is none other than Donald Franciszek Tusk who is a Polish politician who has been the President of the European Council since 2014. He is the living example why politicians MUST be prohibited from making any decisions whatsoever regarding economics and finance. These people have ZERO qualifications in the field yet rise to the top of politics and then assume positions based entirely upon politics – not economics.

The crisis that is pending for the Euro is all about political control. The desire of British banks to achieve free access to the European Single Market even after Brexit and this was rejected by the EU. Council President Tusk spoke out against maintaining the British-European financial center in London after Brexit. He fails to comprehend that NEITHER the French nor the Germans possess the infrastructure no less the expertise to maintain global markets in the Euro.

Tusk claims that Britain is trying to be like Norway which has free access but pays dues as a member of the EU for free access. On the other hand, Tusk characterizes British desires and trying to blend the Canadian position, which only has a free trade agreement, with full access like Norway but pays no dues like Canada. Meanwhile, France is taking the position that they want to fill the shoes of the London financial markets who have never been able to create deep markets.

This hardline position against the financial markets of Britain remaining as the core trading center for the Euro is extremely dangerous. The Euro holds a minimal position among the reserves of central banks. The exact composition of the foreign-exchange reserves of China is a state secret. Nevertheless, based upon reliable sources, about two-thirds of Chinese foreign-exchange reserves are held in U.S. Dollars.

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

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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