Egypt Crisis Raises Fears Of 'Second Revolution'

Protesters run as they face Egyptian riot Police during clashes on Omar Makram street, off Tahrir Square, on November 28, 2012 in Cairo. Police fired tear gas into Cairo's Tahrir Square, where several hundred protesters spent the night after a mass rally to denounce President Mohamed Morsi's assumption of expanded powers. (GIANLUIGI GUERCIA/AFP/Getty Images) 

CAIRO -- Faced with an unprecedented strike by the courts and massive opposition protests, Egypt's Islamist president is not backing down in the showdown over decrees granting him near-absolute powers.

Activists warn that his actions threaten a "second revolution," but Mohammed Morsi faces a different situation than his ousted predecessor, Hosni Mubarak: He was democratically elected and enjoys the support of the nation's most powerful political movement.

Greece, markets satisfied by EU-IMF Greek debt deal

By Jan Strupczewski and Luke Baker

BRUSSELS | Tue Nov 27, 2012 4:58pm EST

 

(Reuters) - The Greek government and financial markets were cheered on Tuesday by an agreement between euro zone finance ministers and the International Monetary Fund to reduce Greece's debt, paving the way for the release of urgently needed aid loans.
The deal, clinched at the third attempt after weeks of wrangling, removes the biggest risk of a sovereign default in the euro zone for now, ensuring the near-bankrupt country will stay afloat at least until after a 2013 German general election.

Euro Ministers Take Third Swing at Clearing Greek Payment

Antonis Samaras, Greece's prime minister, center, arrives to speak at a news conference following the European Union (EU) leaders summit meeting at the European Council headquarters in Brussels, Belgium, on Friday, Nov. 23, 2012. Photograph: Jock Fistick 

Euro-area finance ministers try for the third time this month to clear an aid payment to Greece and forge a blueprint to keep the country a solvent member of the currency bloc.

Finance chiefs from the 17-member single currency return to Brussels today, less than a week after an all-night meeting failed to yield agreement and days after a European Union summit broke up without a proposed seven-year budget. At stake at the euro meeting is the continuation of a three-year mission to return Greece to financial health.

Banking Union and ambiguity: Dare to go further

Sylvester Eijffinger, Rob Nijskens, 23 November 2012

The Eurozone is moving towards a banking union, with the ECB at its centre. This column argues that there are worrying problems with the proposals, suggesting that the ECB ought to follow a principle of ‘constructive ambiguity’ if it wants to maintain and improve its credibility as a supervisor.

On September 12, the European Commission published a proposal to establish a banking union in the Eurozone¹. This proposal delegates the supervision of large cross-border banks to the ECB. The ECB will also be responsible for supervising smaller banks, in cooperation with national supervisors. The European Banking Authority (EBA) can coordinate this through the proposed Single Supervisory Mechanism.

EU Leaders Prepare for Battle Royal at Summit

By VANESSA MOCK

European Pressphoto Agency

German Chancellor Angela Merkel, left, talked to German Finance Minister Wolfgang Schaeuble during a debate in the lower house of German parliament in Berlin on Nov. 21.

BRUSSELS—European Union leaders are headed to Brussels on Thursday for a big showdown over the bloc's spending budget, in a battle that pits richer against poorer member states, the East of the continent against the West, and the U.K. against almost everyone else. 

With more than a handful of countries threatening a veto ahead of Thursday's summit, diplomats sounded pessimistic about prospects for an agreement on the European Union's spending ceilings for the coming seven years, in what are usually the thorniest of all EU negotiations.

European Leaders Fail to Agree on Greek Aid

By JAMES KANTER and NIKI KITSANTONIS

Published: November 20, 201

BRUSSELS — Euro zone finance ministers and international officials ended marathon talks on Greece’s intractable debt early Wednesday morning still at loggerheads over payment of further emergency aid. 

Euro zone mulls Greek debt buy-back up to 40 billion euros

By Robin Emmott and Annika Breidthardt | Reuters

Luxembourg's Prime Minister and Eurogroup chairman Jean-Claude Juncker (R) talks with Spain's Economy Minister Luis de Guindos (L) at a Eurogroup meeting in Brussels November 20, 2012. REUTERS/Yves Herman

EU dips into recession. Is the US next?

The EU is in a recession, according to new data from EuroStat. Will the US follow suit or buck the trend?

By SoldAtTheTop, Guest blogger / November 16, 2012  

This graph compares EU and US quarterly GDP change since 1996. The graph illustrates the similar trends between the two economic areas.

SoldAtTheTop

Yesterday, EuroStat, the European Union’s statistics office, released their Q3 2012 read on the 17-nation combine GDP showing a quarter-to-quarter decline of 0.1%, tipping the group squarely (though possibly temporarily due to future revisions) into recession, as economic conditions worsened and continued from the prior quarter’s -0.2% reading.

While recession for Europe is no surprise, given all the attention that has been directed to the crisis economies of Greece, Spain, Italy, and Portugal and the broader weakness elsewhere in the European Union, it should also be clear that the U.S. faces nearly identical prospects as the burdens of government overreach take their toll on macroeconomic conditions.

Further, while the U.S. generally prides itself on having more robust economic conditions than Europe, comparing the quarterly growth rates, one can easily see that for over a decade now, our economic conditions have, more or less, trended together.

So this begs the question, how long can the U.S. expect to buck the trend?

Unless you expect notable improvement in future quarters, it would appear that the European Union’s poor conditions are just another harbinger of larger global underperformance that could crush the U.S.’s tepid recovery.

Source

Eurozone back in recession

Millions of Europeans took industrial action on Wednesday

The eurozone is back in its second recession since 2009. Double dip is here.

Both France and Germany managed modest growth in the third quarter, but their economies are slowing. The eurozone's strongest economies cannot escape the ill winds blowing elsewhere.

Spain is now in the second year of recession. Its economy has been shrinking for 15 months. The economy which saw the biggest fall in the last quarter was the Netherlands - it shrank by 1.1%. Both northern and southern Europe are hurting.

The charge levelled at Germany and the European Commission is that they under-estimated the effects of austerity on output. There are signs that the Commission is backtracking. Spain is the latest country to be allowed to miss targets for reducing its deficit and to be granted a reprieve. Portugal and Greece have also been granted more time.

The eurozone is in a bind. Its policy is to reduce deficits and to adopt structural reforms, such as greater flexibility in the labour market. The heart of the problem, however, is the lack of competitiveness of many southern countries in relation to Germany. The gap cannot be narrowed by devaluation in a monetary union. The only option is to slash wages and pensions and to reduce unit labour costs. That, of course, weakens demand and pushes countries further into recession.

That is what is driving the massive protests - the sense that countries face years of hardship. The single currency is not seen as delivering higher living standards, but pain. And next year the European Commission sees growth of 0.1% at best.

There are some green shoots: Spain and Portugal's exports are doing well, but it is doubtful that exports alone will return these countries to growth. What they may indicate is that over time some of the reforms will bring benefits, but Europe does not have time.

It was noticeable last night in Madrid that when Chancellor Angela Merkel's name was mentioned the boos echoed around the crowd. One of the leaders of the union which organised the protests said today "nothing is getting better. The situation is getting worse". The size of the crowds on the streets last night - maybe 300,000, maybe more - should serve as a warning that Europe's people will not be patient for ever.

The President of the European Central Bank, Mario Draghi, has spoken of "a slow, gradual, but also solid recovery". It does not feel that way and Europe's officials have a poor record in judging this crisis.

Today's figures and the street protests are likely to strengthen the hands of those who say the current policy is damaging Europe's economy. 

In graphics: Eurozone crisis

Spain and Ireland, which enjoyed property booms and rapid debt-fuelled growth before 2008, have failed to recover. Latest data shows them back in recession this year.

Notice that while Portugal and Italy did not experience huge dips in 2009, their GDP growth was very weak for much of the previous decade.

For Portugal, this made the big infrastructure projects it was pursuing difficult to afford, while for Italy it made the government's enormous debtload harder to bear.

Lastly, look at Greece, whose economy seems to have been driven into freefall by the government's austerity measures and the collapse in confidence in the country's future.

The chart shows data for all of the countries that officially use the euro as well as the UK, which is included to allow for comparisons.

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UK would lose AAA status if it enters triple-dip recession, says ratings agency

Moody's warning to George Osborne follows decision by Bank of England to halve growth forecast for 2013 to 1%.
Larry Elliott, economics editor,guardian.co.uk, Thursday 15 November 2012 00.40 GM

Moody's has warned the chancellor of the exchequer, George Osborne, that it will be carefully monitoring how he manages the difficult balancing act between growth and deficit reduction over the coming months. Photograph: Olivia Harris/Reuters.

George Osborne was warned by one of the world's three biggest rating agencies on Wednesday night that the UK will lose its prized AAA credit status if the UK sinks into a triple-dip recession this winter.
In its annual health check on Britain, Moody's served notice to the chancellor that it would be carefully monitoring how he managed the difficult balancing act between growth and deficit reduction over the coming months.
The ratings firm said it had not yet decided whether to cut Britain's credit rating but said it could act in the new year either if growth prospects worsened or if Osborne failed to stick to a demanding timetable for reducing national debt.
The move came on the day that the Bank of England said the boost that accompanied the Olympics in the summer would be a one-off and halved its growth forecast for 2013 to 1%.
Moody's said: "The UK government's most significant policy challenge is balancing the need for fiscal consolidation against the need for economic stimulus."
The rating agency added that it would consider whether the UK should lose its AAA status in the new year once it had assessed how Osborne coped with its growth-deficit reduction dilemma in the Autumn Statement.
It said the coalition's attempts to reduce Britain's record peacetime budget deficit were being hampered by "weaker economic prospects as well as by the risks posed by the ongoing euro area sovereign debt crisis."
Moody's put the UK on negative watch – the threat of a downgrade in February this year.
It said last night three factors would govern its assessment: the likely speed of deficit reduction, the growth outlook and – most importantly – the likelihood that debt as a share of national income would not stabilise and start to come down over the next 3-4 years.
Speculation has been mounting in recent weeks that the independent Office for Budget Responsibility will force Osborne to admit in his Autumn Statement that slow growth will mean he can no longer meet his original aim of bringing down the debt to GDP ratio by 2015-16 without further austerity measures that would cut the economy's already sluggish growth rate.

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UK risks triple-dip recession, Mervyn King warns

Persistently low growth will last until the next election, Bank of England governor warns as he cuts 2013 growth forecast to 1%
Josephine Moulds, guardian.co.uk, Wednesday 14 November 2012 13.46 GM

The UK economy risks suffering from a triple-dip recession amid a period of persistently low growth that will last until the next election, the governor of the Bank of England has warned.

Sir Mervyn King cut Britain's growth forecast to 1% next year and warned that output was more likely than not to remain below pre-crisis levels over the next three years. "There seems a greater risk that the UK economy may be in a period of persistent low growth," he said on Wednesday.

The UK economy emerged from a double-dip recession in the third quarter of this year, when the economy grew by 1%, but King warned that this was driven by one-off factors. "Continuing the recent zig-zag pattern, output growth is likely to fall back sharply in the fourth quarter as the boost from the Olympics in the summer is reversed – indeed output may shrink a little this quarter," he said. If that period of contraction continues into 2013, the UK could drop into a triple-dip recession.

At the same time, the Bank significantly raised its inflation forecasts. Inflation is now is expected to reach around 3% in the near-term and not fall back significantly until the second half of 2013, later than previously thought.

UK inflation jumped to a surprise five-month high of 2.7% last month, driven by rises in tuition fees and dearer food bills. Energy price rises over the next few months are likely to drive it even higher.

King said the outlook for inflation was the main reason why the monetary policy committee decided not to expand the quantitative easing (QE) programme in November. He said there were limits to what monetary policy could do to boost an economy undergoing far-reaching adjustments in the wake of the financial crisis and amid severe headwinds from the eurozone debt crisis.

But economists said the bank may still engage in more QE in the future. Howard Archer of IHS Global Insight said: "With economic recovery currently looking feeble, fragile and far from guaranteed, we believe that the Bank of England will ultimately decide to give the economy a further helping hand with a final £50bn of QE. This seems most likely to occur in the first quarter of 2013."

Labour said this gloomy outlook proved the coalition government's economic plans were not working. The shadow chancellor, Ed Balls, said: "This sobering report shows why David Cameron and George Osborne's deeply complacent approach to the economy is so misplaced. Their failing policies have seen two years of almost no growth and the Bank of England is now forecasting lower growth and higher inflation than just a few months ago."

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