Showing posts with label Rompres. Show all posts
Showing posts with label Rompres. Show all posts

Saturday, March 7, 2015

The agreement signed between Greece and the EU after three weeks of lively negotiations is a compromise reached under economic duress. Its only merit for Greece is that it has kept the Syriza government alive and able to fight another day. That day is not far off. Greece will have to negotiate a long-term financing agreement in June, and has substantial debt repayments to make in July and August. In the coming four months the government will have to get its act together to negotiate those hurdles and implement its radical programme. The European left has a stake in Greek success, if it is to beat back the forces of austerity that are currently strangling the continent.   In February the Greek negotiating team fell into a trap of two parts. The first was the reliance of Greek banks on the European Central Bank for liquidity, without which they would stop functioning. Mario Draghi, president of the European Central Bank, ratcheted up the pressure by tightening the terms of liquidity provision. Worried by developments, depositors withdrew funds; towards the end of negotiations Greek banks were losing The second was the Greek state’s need for finance to service debts and pay wages. As negotiations proceeded, funds became tighter. The EU, led by Germany, cynically waited until the pressure on Greek banks had reached fever pitch. By the evening of Friday 20 February the Syriza government had to accept a deal or face chaotic financial conditions the following week, for which it was not prepared at all.  The resulting deal has extended the loan agreement, giving Greece four months of guaranteed finance, subject to regular review by the “institutions”, ie the European Commission, the ECB and the IMF. The country was forced to declare that it will meet all obligations to its creditors “fully and timely”.   Furthermore, it will aim to achieve “appropriate” primary surpluses; desist from unilateral actions that would “negatively impact fiscal targets”; and undertake “reforms” that run counter to Syriza pledges to lower taxes, raise the minimum wage, reverse privatisations, and relieve the humanitarian crisis.   In short, the Syriza government has paid a high price to remain alive. Things will be made even harder by the parlous state of the Greek economy. Growth in 2014 was a measly 0.7%, while GDP actually contracted during the last quarter. Industrial output fell by a further 3.8% in December, and even retail sales declined by 3.7%, despite Christmas. The most worrying indication, however, is the fall in prices by 2.8% in January. This is an economy in a deflationary spiral with little or no drive left to it. Against this background, insisting on austerity and primary balances is vindictive madness.  The coming four months will be a period of constant struggle for Syriza. There is little doubt that the government will face major difficulties in passing the April review conducted by the “institutions” to secure the release of much-needed funds. Indeed, so grave is the fiscal situation that events might unravel even faster. Tax income is collapsing, partly because the economy is frozen and partly because people are withholding payment in the expectation of relief from the extraordinary tax burden imposed over the last few years. The public purse will come under considerable strain already in March, when there are sizeable debt repayments to be made.  But even assuming that the government successfully navigates these straits, in June Greece will have to re-enter negotiations with the EU for a long-term financing agreement. The February trap is still very much there, and ready to be sprung again.  What should we as Syriza do and how could the left across Europe help? The most vital step is to realise that the strategy of hoping to achieve radical change within the institutional framework of the common currency has come to an end. The strategy has given us electoral success by promising to release the Greek people from austerity without having to endure a major falling-out with the eurozone. Unfortunately, events have shown beyond doubt that this is impossible, and it is time that we acknowledged reality.   For Syriza to avoid collapse or total surrender, we must be truly radical. Our strength lies exclusively in the tremendous popular support we still enjoy. The government should rapidly implement measures relieving working people from the tremendous pressures of the last few years: forbid house foreclosures, write off domestic debt, reconnect families to the electricity network, raise the minimum wage, stop privatisations. This is the programme we were elected on. Fiscal targets and monitoring by the “institutions” should take a back seat in our calculations, if we are to maintain our popular support. At the same time, our government must approach the looming June negotiations with a very different frame of mind from February. The eurozone cannot be reformed and it will not become a “friendly” monetary union that supports working people. Greece must bring a full array of options to the table, and it must be prepared for extraordinary liquidity measures in the knowledge that all eventualities could be managed, if its people were ready. After all, the EU has already wrought disaster on the country.   Syriza could gain succour from the European left, but only if the left shakes off its own illusions and begins to propose sensible policies that might at last rid Europe of the absurdity that the common currency has become. There might then be a chance of properly lifting austerity across the continent. Time is indeed very short for all of us. ( source : The Guardian)

Monday, December 8, 2014

European stocks tumbled after Mario Draghi, head of the eurozone's central bank, failed to give a concrete sign that it would undertake sovereign quantitative easing following a highly-anticipated policy meeting.  Spain’s IBEX index fell as much as 1.5pc, the FTSE MIB dropped as much as 1.6pc and both Germany’s DAX and London’s FTSE 100 slid 0.4pc after Mr Draghi said the European Central Bank (ECB) would reassess the impact of existing economic stimulus measures “early next year” .  The euro also climbed on signs that Mr Draghi was in no hurry to inject further stimulus. It climbed as high as $1.24, having fleetingly touched a two-year low as the ECB President began to speak.  He said: “Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council remains unanimous in its commitment to using additional unconventional instruments within its mandate.”   At the same time, the ECB slashed its forecasts for Eurozone growth. The economy is now expected to grow by 0.8 pc this year, 1pc next year and 1.5pc in 2016.   As expected, the bank did not cut rates, with the main refinancing rate staying at an all-time low of 0.05pc and the deposit rate at -0.2pc. ... In order to drag the Euro Zone out of the economic mire more than 5 billion Euros of QE is required. This is never, never, never going to happen! The most likely outcome for the Euro Zone is a prolonged period of disinflation\deflation. We are going to import Euro Zone deflation, it is already here, visit your local Lidl supermarket and check out the prices.... The press conference ended with Draghi slapping down the idea that a sovereign QE program  would be illegal.  "Not to pursue our mandate would be illegal, he replies."  Hi Ho Hi Ho it's off to court we go!  Further his comments that QE did not even need a majority vote will infuriate AFD and perhaps many more in Germany.  Can't wait for the German court to rule on this after the ECJ return their answer to the German court's question.  Maybe Draghi assumes that QE is ultra vires and is just 'talking the talk' to calm things down until the legal reality come known. After all, his dubious but famous 'do what ever it takes' comment, also awaits the same determination, but no one can deny the fact that his 'talk' saved the EU (or the €) at that time.... Mario has slashed growth predictions to almost to no growth - 0.8% in 2015. The revised down numbers for 2016, 2017 barely matter.   I do not think Mario has any effective measures he can undertake. The till says 'NO SALE'.  TLTRO uptake will be risible in a few days time and in those countries where it is just a giggle, the carry trade will be used to Botox bank balance sheets and not to lend to the private sector, so no consumer demand incentive there.   ABS - is he sure there are any, or enough assets to act as collateral for the balance sheet the ECB has got to have to become a lender of last resort in a non-growth €Z.   Sovereign bonds are almost a joke, especially as, if wrong will accept correction, he has to buy in some form of national proportionality. Germany first, France second, Italy third, Spain (perhaps not too bad) fourth.  More currency. Well he'd better pick the right nations to do it to unless he wants intra-euro capital flows in the shoots of spring.   Mario seems to have no means of exciting any consumer demand left so that export items can be bought or supply chain imports purchased to unblock this incestuous, nigh protectionist, 'single market' trading circle that all 18 highly divergent economies are monolithically, irrespectively and overly locked into because of the misshapen bairn hatched out of Brusstraslux.  I suspect there is an acceptance of a long period of deflation and non-FDI, not that the imperial court in Brusstraslux could care and the only measures we will see are the arraignment of taxpayers savings, pensions and a whole plague of new taxes. 'Cypress' will be the new funding source. Hopefully the last gasp but it will be a very long one.

Sunday, June 1, 2014

The head of the International Monetary Fund has warned that a persistent violation of ethics among bankers and rising inequality pose a major threat to growth and financial stability.
Christine Lagarde told an audience in London that six years on from the deep financial crisis that engulfed the global economy, banks were resisting reform and still too focused on excessive risk taking to secure their bonuses at the expense of public trust.
She said: "The behaviour of the financial sector has not changed fundamentally in a number of dimensions since the crisis. While some changes in behaviour are taking place, these are not deep or broad enough. The industry still prizes short-term profit over long-term prudence, today's bonus over tomorrow's relationship.
"Some prominent firms have even been mired in scandals that violate the most basic ethical norms - Libor and foreign exchange rigging, money laundering, illegal foreclosure."
Lagarde warned the too-big-to-fail problem among some of the world's largest financial institutions was still unresolved and remained a major source of systematic risk, with implicit subsidies of $70bn (£42bn) in the US, and up to $300bn in the eurozone.
In a speech littered with quotations from Winston Churchill to Pope Francis and Oscar Wilde, Lagarde said international progress to reform the financial system was too slow. "The bad news is that progress is too slow, and the finish line is still too far off. Some of this arises form the sheer complexity of the task at hand. Yet, we must acknowledge that it also stems from fierce industry pushback, and from the fatigue that is bound to set in at this point in a long race." Lagarde told the inclusive capitalism conference that rising inequality was also a barrier to growth, and could undermine democracy and human rights. The issue has risen up the agenda in recent months with the publication of the French economist Thomas Piketty's book, Capital in the Twenty-First Century.
"One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy," Lagarde said.  Borrowing from Oxfam research, she noted that the world's richest 85 people, who could fit into a single London double-decker bus, control the same wealth as the poorest half of the global population of 3.5 billion people.
Options to address inequality include more progressive tax systems and greater use of property taxes, she said.
"We must recognise that reducing inequality is not easy. Redistributive policies always produce winners and losers. Yet if we want capitalism to do its job – enabling as many people as possible to participate and benefit from the economy – then it needs to be more inclusive. That means addressing extreme income disparity."
Lagarde compared the rising awareness of social responsibility tied into the financial system with the world's expanding environmental consciousness. "Just as we have a long way to go to reduce our carbon footprint, we have an even longer way to go to reduce our 'financial footprint'. Yet we must take those steps."

Friday, May 23, 2014

Hundreds of Italians took part in  protests in Rome against European media distorting reports about the situation in Ukraine. The public demonstration took place in front of the Ukrainian embassy, at the initiative of Giulietto Chiesa, an Italian public activist, prominent journalist and former member of European Parliament…. "No one in Italy knows the truth about what's happening in Ukraine. We're being fed nothing but falsehoods. We must awaken our people, and slowly but surely they are becoming more aware," Chiesa told Itar-Tass. He added that he believes that the current situation in Ukraine is not just a "regional crisis," but presents "an unparalleled threat to all." The last straw was the murder of 48 Ukrainian civilians in Odessa, and many of those who attended the rally in Rome came to voice their protest against the resurgence of fascism and Nazism in Ukraine and in Europe. "No to fascism, no to war, no to NATO in Ukraine!" chanted the participants of the peaceful protest.Hugo Moro, one of the rally's participants, said that the assembled Italians want to express their solidarity with the Ukrainians who fell "victims of conspiracy and the new Nazi government in Kiev."There were young people and older people among them, and the majority of those assembled say that do not trust the mainstream Italian media. Many of them are supporters of leftist political parties who traditionally oppose fascism, though it should be noted though that there are many right-wing Italians who support Russia's stance on Ukraine and on many other international issues.According to Chiesa, it means that adherents of both sides of the Italian political spectrum consider Russia to be "the only country capable of opposing the ever-present dictate of the US".The rally on the Roman square spread to social networks too. Many Facebook users shared pictures made by the protest's participants, so that the manifestation virtually took place in many other cities.According to Chiesa, no less than fifty such rallies took place in Italy during the last few weeks.

Monday, April 28, 2014

Brussels (in fact the 4-th Reich) tries to take over the Ukraine by stealth in the way it has taken over most of Western Europe and expects Russia to sit back and let them. Any idiot could see that there was no way the Kremlin was going to lay down and effectively let NATO take over their only sizeable Black Sea port....So Russia steps in with a counter offer based on bribing the Ukrainian government to abandon its plans to join the EU and instead strengthen its links with Russia in a not dissimilar way to the way in which Brussels was bribing Ukraine to strengthen its like with the EU...Then all hell is let loose...Now who is to blame for creating this mess?  I would like to think those in Brussels would learn from this - but they wont!  The Western powers are scrambling to bolster defenses against a halt in Russian gas supplies after the Kremlin tightened the energy noose on Ukraine, and paramilitary actions in eastern Ukraine increased the risk of a full-blown sanctions war.
The Geneva deal reached last week to defuse the crisis is close to disintegration, with the US government openly accusing Russia of carrying out covert operations across the Donbass region.
US Vice-President Joe Biden warned that Russia will pay a very high price unless the Kremlin withdraws troops massing on the Ukrainian border. “We will not allow this to become an open-ended process. Time is short,” he said in Kiev.
Two key US senators have already called for sanctions on large Russian banks, mining companies and energy groups, including the state gas monopoly Gazprom. Any such move would freeze gas deliveries to the EU, since few European banks would risk defying US regulators by handling Gazprom transactions.
Dmitry Medvedev, Russia’s premier, accused the Americans of “pure bluff”, challenging the US to show its teeth. “You can, of course, continue to expand the 'black list’: it will lead absolutely nowhere,” he told the Duma...
In case you thought that America's shale gas would ride to the rescue, then think again.
"Charif Souki, Cheniere’s chief executive, said that the idea of his company’s exports alone liberating Europe from Russia’s Gazprom was “nonsense” and that only six to eight of 20-plus proposed rival export projects were “real”."
"Asked if Cheniere’s terminal could rescue eastern European countries from their dependence on Russia, Mr Souki said: “It’s flattering to be talked about like this, but it’s all nonsense. It’s so much nonsense that I can’t believe anybody really believes it.”

Public Debt to GDP %  and  External Debt to GDP %
france .........................94% ....................243%
Italy ..........................137%.....................157%

Thursday, April 3, 2014

The US has moved a step closer to becoming a global gas exporting power with the approval of a major liquefied natural gas (LNG) export terminal on the west coast that will send a warning signal to the Kremlin. The Department of Energy authorized a permit on Monday for the Jordan Cove LNG project in Oregon to export 800m cubic feet per day (cfpd) of gas for the next 20 years to countries that don't have a free-trade agreement with the US.
The approval comes amid concern that Russia will use its vast gas and oil resources as political leverage in its dispute with the West over the future of Ukraine and Crimea. The US recently released 5m barrels of oil for sale from its Strategic Petroleum Reserve in a move that was interpreted at the time by some analysts as a warning to Moscow not to use energy as a weapon. 
If Putin gets even more annoyed, he will do a massive deal with China (he's going there in May) to flog Russia's oil using a commodity-backed reserve currency that bypasses the petrodollar.
That might well further crash both the US economy and ours.
Is this deliberate neocon policy?
“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear.”

US lawmakers are pushing the Department of Energy to speed up approvals of gas export projects to add to international pressure already building on Vladimir Putin after the White House and the European Union hit Russia with sanctions. 
“Given the situation in Ukraine, this licence sends a positive signal to our allies and to energy markets that the United States is ready to join the growing global gas trade,” said Senator Lisa Murkowski, who sits on the influential US Senate Committee on Energy and Natural Resources in a statement following the gas export approval. LNG, shipped by boat, could be cheaper than Russian gas transported by pipeline over thousands of miles. Always useful to have an alternative source of supply to keep the prices on a level. Russia has played the shut off game before and is relying on it now ( it may well succeed in the short term - I would place bets on Russia retaining the Crimea ) Remember OPEC in the 70s ? That promoted alternative supplies of oil....I think people are missing the main point here... Russia can't be dealt with in the same way Irak and Lybia were... and if they start selling oil and gas in ANY currency the dollar will have no support.. the days of the petro-dollar are now numbered and the logic of tripling the money supply will soon arrive, i.e. the dollar will drop like a Ukrainian soldier gun... watch inflation shooting up in the US and GDP dropping also, which will bring about a reduction in the budget and overall power of the US to the level of a major power but no longer super-power... those days are gone, so let's all thank the EUSSR for bringing something good to the table for the first time in my rusty memory...

Sunday, February 2, 2014

Marisel hydropower plant - (Romania)

Underground hydroCeausescu hidden in the womb Apuseni underground hydro, arranged in a cavity hollowed in the rock. Nicolae Ceausescu One of the foundations is a hydroelectric secret, built in the Apuseni Mountains. Mărişel Hydropower is the second largest in the interior rivers in Romania and has a power capable of supporting the power supply to factories in Transylvania, which had been involved in a hypothetical war, who feared Communist dictator. The power plant is housed in an artificial cave, hollow rock in the heart of the mountains. Because it can withstand even the toughest aerial bombardment, central Mărişel was declared strategic goal, and public access is prohibited. For the first time in decades, Free Romanian journalists received permission to photograph inside hydropower authorities and talk to its employees.

10 Energy as steel mills
Hydropower Mărişel is hidden under a mountain greenery. On the road leading to the skiing resort of Cluj there are several power transformers and well locked gate, resembling in appearance to the entrance to a mine. The gate is large enough to allow entry of vans, but discreet enough not to attract the attention of tourists who go to the resort Mărişel.

Underground power plant is able to generate 220 megawatts of power using three groups of 73.5 megawatts. The amount of electricity produced by hydroelectric dug into the mountain would be sufficient to supply at the same time, 10 steel plants, such as the Plain Turda. Or, in other words, the electricity could be illuminated Mărişel smoothly all cities in Northern Transylvania. Central Mărişel uses the accumulated water in the lake at Belis. Through an underground channel, carved into the rock, the water reaches the turbine. Here, the cavity that houses the power plant is as high as a 10 story building. Access to the power plant is very difficult. Visitors who pass the gate guarded by the mountain, you have to walk a mile long tunnel. Usually, this tunnel is crossed with leadership hydroelectric cars allowed. Those who are not employees of hydropower must receive special approval to be received into the plant at Marisel.
Procedures are complicated precisely because underground hydropower has the status of a strategic objective. Among those who visited the power plant include the head of the Environmental Guard in Cluj County, Viorel Pleşa. "I was twice in hydropower. It is absolutely impressive. Beyond the enormous cost, power is doubly important to Transylvania. The first time it produces a huge amount of clean energy, and secondly because it was designed exclusively plant engineers and Romanian workers and only materials and equipment produced in Romania, "he said. In turn, Mayor Marisel Traian Mariş says that the power plant could become one of the most important tourist attractions, provided it is open to the public. Yet he does not think this will happen very soon. "On the one hand, it is understandable that people would like to be able to visit such an engineering marvel. Moreover, the risks are huge. imagine what would happen if a madman with a bomb come, "said Mayor Traian Mariş.
A journey of discovery
So power plant employees, they get many visitors, shall, involuntarily, an attitude similar to that of the initiates of ancient cults. Chief John Varvari are among the plant employees Marisel the "old guard". "Mărişel Central is a basic unit of the national energy system. Why do I say this? For, since the rivers are More hydroelectric largest Lotru them, three hundred and something megawatts, and the second Mărişel, with 220 megawatts. still have one of 220 megawatts, Arges, but not working at maximum capacity, "says John Varvari. Hydropower Mărişel was set 34 years ago by Romanian engineers at the request of former communist dictator Nicolae Ceausescu. He wanted to have an underground power plant capable of supplying electricity to the steel plants in Transylvania. In the event of war, such as steel mills quickly followed to convert weapons factories. Precisely secrecy in planning plant in Marisel were involved only Romanian engineers. All materials and equipment used in hydropower planning were also produced in Romania. The desire to boost jobs, Nicolae Ceausescu personally inspected several times, the site of Apuseni Mountains. John Varvari remembers that before the visits "Comrade", hydroelectric and its surroundings were full of Securitate.
The plant sells energy communist capitalist
20 years after the overthrow of Nicolae Ceauşescu, former communist pearl energy system, central Mărişel produce electricity supplied to the European common market. "We are obliged to press the button, take care to be 70 megawatts and maintain plant" describes John Varvari monotonous ritual of a working day. Plant uses electricity from energy production Marisel gathered water reservoirs of at Belis.

Tuesday, January 28, 2014

EOS is a Brussels-based non-profit outfit that represents the business interest of some of the EU’s most powerful and largest security and defence companies.
BAE Systems, EADS, Finmeccanica, G4S, Thales and 38 other companies are listed as members. Collectively, they employ some 2 million people and have cornered around 65 percent of the European security systems market, which they want to increase by exerting pressure on EU legislators.
To some extent, they have already succeeded in influencing EU legislative files and policy initiatives when it comes to EU defence and security strategies.
In 2008, EOS approached the European Commission’s directorate-general for enterprise on setting up an EU industrial security policy. Four years later it became a reality.
It piloted a so-called end-to-end approach to ensure research leads to market development.
The approach is now in the process of being adopted within the commission’s directorate-generals, EOS says.
It also refined the EU's comprehensive approach for maritime surveillance in 2009, initially proposed in 2005, which is now part of the European external border surveillance system, Eurosur.
EOS has had input on the multi-billion euro Internal Security Fund (ISF), currently under discussion among member states, which is designed to help implement EU programmes on internal security and external borders.
They participate in EU-funded research projects on security with the support of departments inside the European Commission.
For instance, they have a leading role in the "Archimedes" project on “innovative security management” and recently began EU co-funded projects on cyber security.

Monday, January 27, 2014

The European Commission is laying the groundwork for a legal challenge to Malta’s passport sale scheme despite red lines on national sovereignty. The EU treaty says decisions on granting citizenship are the prerogative of member states.
But lawyers for justice commissioner Viviane Reding are looking to file potential infringement proceedings on the basis of article 4.3 of the EU treaty, which also says member states must act “pursuant to the principle of sincere co-operation.”
The logic is that if Malta sells nationality to, say, a Russian oligarch, they are, in fact, selling the right to live in all 28 EU countries, putting fellow member states at risk if Maltese due diligence fails to weed out criminals.
EU officials have dug up two files - the Micheletti case of 1990 and the Rottman case of 2008 - in which the EU court in Luxembourg ruled that citizenship decisions must be made with due regard to wider EU law. They note that the commission cited article 4.3 in recent infringement proceedings on tax reform in Hungary, in which Hungary backed down instead of going to court.
They also note that a ruling by the International Court of Justice in The Hague - the Nottebohm case of 1955 - says that citizenship should only be granted to people who can demonstrate a real bond with their new country, for instance, by living there for a few years before they get their papers.
But Malta is to sell the EU passports after a vetting process of just six months, with no obligation to ever live on the group of Mediterranean islands.
A Reding spokeswoman told EUobserver on Wednesday (22 January) the commission is currently in talks with Malta to settle the dispute in a friendly way.
“She’s not asking to extend the legal power of the commission on who grants citizenship to whom,” the spokeswoman said.

Thursday, December 26, 2013

The Eurozone was doomed from the start. The sooner it is disbanded the better. The EU itself should be reformed, with trade agreements being the main objective. No more idiotic EU rules and regulations. No more open borders, just a common market.

Rarely has the "economic gulf" that separates the English-speaking world and continental Europe looked quite as wide as it does today. While much of the eurozone remains mired in an economic funk, Britain and America are recovering fast, with rising demand and near record levels of private-sector job creation.
As if the last, crisis-ridden three years haven’t already given Europe’s policy elite enough to think about, this juxtaposition in fortunes must surely have awoken them to the truth: monetary union isn’t working. Unfortunately, the reality is that euroland continues to stumble blindly from one botched response to another, neither able to reconfigure the single currency in a more sustainable form nor enact the sort of measures that might give it a credible future. This week’s blueprint for a banking union is only the latest example. Even in Brussels, they struggled to call it a job well done; this was meant to be the most significant leap forward for European integration since the launch of the euro itself, but in the event it was just another messy compromise.
Overly complicated and chronically underfunded, it fails some of the most basic tests for any credible banking union. Decisions on whether to wind up failing banks remain subject to national veto; more crucially still, there is no agreement on collective responsibility for the costs. At some stage in the future, these things are meant to fall into place, but Europe really doesn’t have the luxury of time. Even major economies such as France, Italy and Spain are right on the edge of social and political fracture. The euro offers no plausible path back to growth, yet they cannot or will not give up on it.
Not that these failings should be cause for triumph in Britain and America. Europe’s tragedy is Britain’s misfortune, forcing the UK artificially to support demand via the palliative of extreme forms of monetary stimulus to avoid the same fate. This can work for a while, but eventually Britain needs to rebalance its economy away from consumption to trade and investment.
European leaders tend to console themselves with the thought that the UK’s economic recovery is therefore just a conjuring trick, which cannot last. Even so, they can no longer ignore the contrast. Their own forced march to ever closer union seems to have resulted only in policy paralysis and economic ruin. By pursuing their own solutions outside the madhouse of eurozone integration, Britain and America seem to have kickstarted growth. Europe needs monetary stimulus but thanks to a dysfunctional single currency cannot have it; it needs labour market reform, but outside Germany and its satellites, is unwilling to enact it; and it needs burden-sharing, but its nations are still too fiscally sovereign to contemplate it. European leaders naively seem to assume that recovery is just around the corner. The truth is that they have made themselves hostage to the storm even as America and Britain navigate their way out...It was always going to be the case that a feeble currency union could only work with political union. That is why if the Euro is to survive, the Eurozone must become a single country. This new country will include all the current Eurozone Members. Whatever name they chose to call it, in reality, it will ruled by Germany. The plan seems to be working...It was always going to be the case that a feeble currency union could only work with political union. That is why if the Euro is to survive, the Eurozone must become a single country. This new country will include all the current Eurozone Members. Whatever name they chose to call it, in reality, it will ruled by Germany. The plan seems to be working...  

Tuesday, December 3, 2013

Ukrainian President Viktor Yanukovych has defended his move to put on hold a historic deal with the EU, amid continuing mass protest rallies.  He said he was forced by economic necessity and the desire to protect those "most vulnerable".  The EU has accused Russia of exerting heavy economic pressure on Ukraine. Clashes between protesters and police continued on Monday. Meanwhile, jailed opposition leader Yulia Tymoshenko announced an indefinite hunger strike.  'No alternative'  Mr Yanukovych was speaking publicly for the first time since the announcement on Thursday that his government was halting preparations to sign the association and free trade agreements with the EU.  More confrontations between protesters and police early Monday morning in front of Ukraine's government building indicate that the situation remains very volatile.  In an echo of the Orange Revolution nine years ago, protesters set up a tent camp in front of the main demonstration's stage.  Ukrainian opposition leaders say political actions will continue through the week until the Vilnius summit, where Ukrainian officials were supposed to sign the free trade agreement with the EU. Many demonstrators say that they believe President Yanukovych will succumb to the pressure of the rallies and complete another about-turn - and sign the agreement.   This of course depends on whether the protesters can maintain their own momentum over the coming days.  The decision triggered mass protests in Kiev and a number of other cities across Ukraine.  "I want peace and calm in our big Ukrainian family," Mr Yanukovych said in a video statement, describing himself as a "father".  He stressed that his government had not given up attempts to bring closer ties between Ukraine and the EU.  "I would like to underline this: there is no alternative to the creation of a society of European standards in Ukraine and my policies on this path always have been, and will continue to be, consistent.  "But I would be dishonest and unfair if I had not taken care of the most disadvantaged and vulnerable, who may carry the brunt during a transitional period."  Mr Yanukovych's government last week said it was halting preparations for signing the treaties, amid concern for possible mass job losses in the short-run.  Opponents are accusing the president of keeping talks with the EU alive while never intending to sign the deal at an EU summit in Vilnius, Lithuania, on 28-29 November. They also say he has bowed to growing pressure from Russian President Vladimir Putin, who wants Kiev to join the Moscow-led Customs Union. The grouping also includes Belarus and Kazakhstan.  Mr Putin denies the claims, instead accusing the EU of trying to force Kiev into singing the agreements. European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso said on Monday the door was still open for Ukraine to sign the agreements at the summit in Vilnius.

Monday, December 2, 2013

Germany's conservatives and left-leaning Social Democrats reached an agreement this week to create the next federal government after weeks of negotiations following the Sept. 22 election. With Chancellor Angela Merkel of the conservative Christian Democratic Union (CDU) at its helm, the coalition government has agreed to a number of joint policy initiatives that will see the establishment of Germany's first-ever legally mandated minimum wage and generous changes to the country's pension system, including the option of retirement at 63. At the same time, the CDU, its Bavarian sister party, the Christian Social Union (CSU) and the center-left Social Democratic Party (SPD) are pledging to deliver these gifts without raising taxes.  Christoph Schmidt, the head of the German Council of Economic Experts, which advises the German government, said he doesn't believe the government has the funding for all the gifts being given to voters. "It may be possible to finance the planned extra spending until 2017 without raising taxes or fresh borrowing, but it won't be possible after that," he told the newspaper Die Welt. Schmidt said the plans for allowing retirement at 63 instead of the current 67, along with additional benefits for women who left work to raise children and other pension perks would create lasting additional expenditures. Ultimately, he warned, the money would have to come from either higher individual pension contributions, higher taxes or through a general reduction of pension benefits.
Meanwhile, Clemens Fuest, director of the European Center for Economic Research (ZEW), warned of both the pension changes and the new minimum wage. "The biggest problem is the combination of stricter labor market regulations, the sinking of the retirement age and the introduction of new retirement benefits," he said. "That's going to drive up social security contributions and reduce employment at a time when we actually need more jobs."
German Finance Minister Wolfgang Schäuble of Merkel's CDU has defended the proposals, saying everything has been calculated solidly. He told a German public broadcaster there would be €23.06 billion in additional spending between 2014 and 2017 and there is plenty of room for maneuver in the current budget. He said his ministry is already anticipating budget surpluses of €15 billion a year during that period.
The coalition agreement dominates the coverage of German newspapers, where editorialists at many papers criticize the planned new spending, which they believe sends a bad message in times of European austerity. Others praise the new worker protections planned by the future government.
The conservative Die Welt writes: "The coalition contract reflects the spirit of regulation-loving statism. The very policies set in motion by former Chancellor Gerhard Schröder through his reforms of social and labor laws that created the breathing room needed for the economy to flourish and for unemployment to fall are now being systematically dismantled. In the case of the SPD, this is the result of shame over the success of Schröder's Agenda 2010 (which cut worker protection and benefits for the long-term unemployed and also cost the party votes). In the case of the conservatives, it's attributable to 'Merkelism' -- e.g. a chancellor who has transformed her CDU into the first postmodern political party in Europe, one in which the idea that 'anything goes' is now an actual party value."
"The message this sends to the rest of Europe is disastrous. We preach austerity to the debt crisis countries and yet we continue to fatten Germany's already plump social system instead of putting it on a diet. Germany can no longer be considered a role model for Europe." The conservative Frankfurter Allgemeine Zeitung writes: "Grand coalitions are by their nature generous. That's one of the reasons they are more popular with people than smaller coalitions. And it doesn't appear that the third grand coalition government in postwar German history will disappoint, either. Because each of the three parties in the new government is showing a big heart for the little man, and each wants to make sure that its handwriting is recognizable on the coalition contract. The result is a cornucopia of good deeds courtesy of the social system that are now to be distributed across the country. Be it a national minimum wage (the first in Germany), pension increases for women who have raised children or dual citizenship for children of immigrants born in the country, there is something in here for everyone. And the parties want the wealthy to be grateful that the government won't be resorting to tax increases to pay for it -- at least not in the beginning. Still, many Germans will eventually learn the hidden costs of this blessing -- namely the next generation. But none of the three party leaders is going to allow that to overshadow this very generous alliance."
The leftist Die Tageszeitung writes: "Some are saying that this grand coalition has no vision, but that's not true. The coalition contract isn't just the sum of individual interests that somehow had to be brought in sync. There is a threat that runs through it. The spirit of the contract is the cautious re-establishment of corporatism at the federal level. It is no coincidence that the unions are backing this coalition in a way that they didn't the last time there was a grand coalition in 2005."
"Among the positive aspects are improved conditions for the working poor. Starting in 2017, the country will have a minimum wage of €8.50. Precarious jobs will also be better regulated. Some things are still murky, but the direction is clear: Those with jobs will no longer be able to be exploited the same way they were. It also an open question whether a left-leaning government could have achieved more in terms of labor policy against strong resistance from industry. That's why it is both probable and logical that the SPD party members will vote yes on this coalition agreement."
The left-leaning Berliner Zeitung writes:
"When two wish lists are added together to become a coalition agreement, it comes with a high price. What weighs more heavily than the money, however, is that this coalition will not push through forward-looking structural reforms. Nor is it clear how it will effectively address the problem of demographic change. We have the oldest population in Europe. The problems that creates aren't just restricted to areas like long-term care, health care provisions and family policies. It also has consequences for the ability to innovate, training and families. What are we going to do?"
"Merkel has said that this grand coalition will be one to address big challenges, but it is really just a government that unites two large political parties. Neither the SPD nor the conservatives will have to pay the price - instead it will be the country that does so in the long run. We shouldn't expect much from it. … It is the coalition of a country that lives in prosperity. The rich will stay rich, the poor will be a bit better off. But there will be no real redistribution of wealth or structural reforms." The center-left Süddeutsche Zeitung writes: "The coalition package contains enough packing material so that the sensitivities of this and that for the coalition partners can be protected. But that's also the case with most coalition agreements. Still, if you remove the packing material, some remarkable things are left over: Minimum wage, dual citizenship, pension increases, road tolls. There's a lot for the SPD and for the CDU. The surprise factor in all this is low, given that these points have been at the core of talks for weeks now. One still cannot disregard the fact that a minimum wage, dual citizenship and pension promises are systematically important things -- projects with social pacification force."

Sunday, December 1, 2013

Yes, let's be honest, the de facto leadership of all things in Europe is exercised by Germany. The problem is that unless or until we all accept and formalize that a German politician (former STASI officer - merkel) captains the European Union and that Germany calls all of the shots, then it's the same as if there was nobody in charge.
Everybody was sure that somebody would do it. Anybody could have done it, but nobody did it. Somebody got angry about that because it was everybody’s job. Everybody thought that anybody could do it, but nobody realized that everybody wouldn’t do it. It ended up that everybody blamed somebody when nobody did what anybody could have done.My dual military related and commercial career to date has led me to hold a few golden rules dear to my heart.
One of my golden rules is this. When one enters a situation where there is clearly a crisis playing out, the first question to be asked is, "Who is in charge here?" The answer can tell you a lot about why the crisis might have arisen in the first place, and can give some indication of the chances of the crisis being controlled and resolved.  If the person questioned can't answer straight away, confidently that "So-and-so is in charge", then you already have some understanding of why the organization is in a crisis. If the person questioned answers along the lines of "I think Blogs is in charge but, err, then again it could be Smith in charge. Err, or is it Jones in charge? Not sure really. One of them, is in charge anyway ... I think."...And there you have it. Nobody's quite sure who's really in charge at the ECB. Indeed, nobody's really sure who's in charge at the ECB; or in charge of the Euro Monetary Union; or in charge of the European Union. These are all just monstrous, dysfunctional European institutions which can neither jointly nor severally take 400 million European citizens to the economic and social paradise of a super state (which is what the European Union is supposed to be about). This is as much because the structures for governance of these organizations are a shambles, as it is because the underlying concept itself - of slamming sovereign nations together into a super state without democratic consent and without a single, clearly identified leader at the helm - is a monstrous deceit.  And now we have the particular situation explained by AEP above where the best the nascent European superstore's bank can do is to slam the continent into deflation. That's terrific, just terrific. A dysfunctional monetary union, tucked inside a dysfunctional economic and political union with, sitting behind it all, a dysfunctional central bank. An organization in crisis if ever there was one.

Saturday, November 30, 2013

Since 1976, the US dollar's role as an international currency has been slowly waning. International use of the dollar to hold foreign-exchange reserves, denominate financial transactions, invoice trade, and as a vehicle in currency markets is below its level during the heyday of the Bretton Woods era, from 1945 to 1971. But most people would be surprised by what the most recent numbers show.
There is an abundance of explanations for the downward trend. Since the Vietnam war, US budget deficits, money creation and current-account deficits have often been high. Presumably as a result, the dollar has lost value relative to other major currencies or in terms of purchasing power. Meanwhile, the US share of global output has declined. And, most recently, the disturbing willingness of some members of the US Congress to pursue a strategy that would cause the Treasury to default on legal obligations has undermined global confidence in the dollar's privileged status.
Moreover, some emerging-market currencies are joining the club of international currencies for the first time. Indeed, some analysts have suggested that the Chinese yuan may rival the dollar as the leading international currency by the end of the decade.
But the dollar's status as an international currency has not fallen uniformly. Interestingly, the periods when the public is most concerned about the issue do not coincide with the periods when the dollar's share in international transactions is in fact falling.
By the criteria of international use as a reserve currency among central banks and as a vehicle in foreign-exchange markets, the most rapid declines took place from 1978 to 1991 and from 2001 to 2010. Between these two intervals, from 1992 to 2000, there was a clear reversal of the trend, notwithstanding a popular orgy of dollar declinism around the middle of that decade. Central banks held only an estimated 46% of their foreign-exchange reserves in dollars in 1992, but that share rebounded to almost 70% by 2000.

Subsequently, the long-term downward trend resumed. According to one estimate, the dollar's share in central-banks' foreign reserves declined from about 70% in 2001 to barely 60% in 2010. During the same decade, its share in the foreign-exchange market also declined: the dollar constituted one side or the other in 90% of foreign-exchange trades in 2001, but only 85% in 2010.

The International Monetary Fund's most recent statistics suggest, unexpectedly, another pause in the dollar's long-term decline. According to the IMF, the dollar's share in foreign-exchange reserves stopped falling in 2010 and has been flat since then. If anything, the share is up slightly thus far in 2013. Similarly, the Bank for International Settlements (BIS) reported in its recent triennial survey that the dollar's share in the world's foreign-exchange trades rose from 85% in 2010 to 87% in 2013.
 Given dysfunctional US fiscal policy, the dollar's resilience is surprising. Or maybe we should no longer be surprised. After all, when the global financial crisis erupted in 2008 from the bowels of the American sub-prime mortgage market, global investors responded by fleeing to the US, not from it. They obviously still regard US Treasury bills as a safe haven and the dollar as the top international currency, especially given the absence of good alternatives. In particular, the euro has its own all-too-obvious problems. Indeed, the euro's share in reserve holdings and foreign-exchange transactions have both declined by several percentage points in the most recent statistics. At the same time, the IMF's data indicate that the vaunted yuan is not yet among the top seven currencies in terms of central-bank reserve holdings. And, according to the BIS, while the yuan has finally broken into the top 10 currencies in foreign-exchange markets, it still accounts for only 2.2% of all transactions, just behind the Mexican peso's 2.5% share. Despite recent moves by the Chinese government, the yuan still has a long way to go. To try to explain the recent stabilisation of the dollar's status, one might note something that the last three years have in common with the previous period of temporary reversal from 1992 to 2000: striking improvements in the US budget deficit. By the end of the 1990s, the record deficits of the 1980s had been transformed into record surpluses; today, the federal deficit is less than half its 2010 level.  Perhaps the fiscal observation is a coincidence. After all, it would be foolish to read too much into two historical data points. It would be even more foolish to believe that just because American politicians have failed to dislodge the US dollar from its paramount status over the last 40 years, they could not accomplish the job with another few decades of effort. It is not an eternal law of nature that the dollar shall always be number one. The pound sterling had the top spot in the 19th century, only to be surpassed by the dollar in the first half of the 20th century. The day may come when the dollar, too, succumbs to a rival. But today is not that day

Friday, November 29, 2013

Beware of the Anglo-Saxons barbarians - how they destroyed a Christian civilization - they will distroy today's Europe just the same

See also :
WASHINGTON — Two long-range American bombers have conducted what Pentagon officials described Tuesday as a routine training mission through international air space recently claimed by China as its “air defense identification zone.” The Chinese government said Saturday that it has the right to identify, monitor and possibly take military action against aircraft that enter the area, which includes sea and islands also claimed by Japan. The claim threatens to escalate an already tense dispute over some of the maritime territory.   American officials said the pair of B-52s carried out a mission that had been planned long in advance of the Chinese announcement this past weekend, and that the United States military would continue to assert its right to fly through what it regards as international air space.   Pentagon officials said the two bombers made a round-trip flight from Guam, passing through a zone that covers sea and islands that are the subject of a sovereignty dispute between Japan and China.   Officials said there had been no Chinese response to the bomber run.   Within hours of the Chinese announcement this weekend that it had declared what Beijing termed an “East China Sea Air Defense Identification Zone,” Defense Secretary Chuck Hagel issued a statement expressing deep concern over the action.  “We view this development as a destabilizing attempt to alter the status quo in the region,” Mr. Hagel said. “This unilateral action increases the risk of misunderstanding and miscalculations.”   Mr. Hagel noted that “this announcement by the People’s Republic of China will not in any way change how the United States conducts military operations in the region.”  Pentagon officials said the training sortie by the two B-52s could be seen as underscoring that commitment to preserving traditional rules of international air space.   Mr. Hagel’s statement said the United States had conveyed “concerns to China through diplomatic and military channels, and we are in close consultation with our allies and partners in the region, including Japan.”  His statement concluded by noting the United States is “steadfast in our commitments to our allies and partners. The United States reaffirms its longstanding policy that Article V of the U.S.-Japan Mutual Defense Treaty applies to the Senkaku Islands.”   The move by China appeared to be another step in its efforts to intensify pressure on Japan over the Japanese-controlled islands in the East China Sea that are at the heart of the dispute.  The declaration, from a Ministry of National Defense spokesman, Col. Yang Yujun, accompanied the ministry’s release of a map, geographic coordinates and rules in Chinese and English that said “China’s armed forces will take defensive emergency measures to respond to aircraft that do not cooperate in identification or refuse to follow orders.”  “The objective is to defend national sovereignty and territorial and air security, as well as to maintain orderly aviation,” Colonel Yang said in comments issued on the ministry’s website.

Wednesday, November 27, 2013

Investing in Federal Bonds a Losing Proposition - Some €900 billion of monetary assets consist of deposits, which can be withdrawn immediately and earn an average of about 0.42 percent in annual interest. At an estimated inflation rate of 1.6 percent this year, these assets will see a 1.18-percent decline in value, or about €11 billion. The situation is slightly more favorable for savings deposits or fixed deposits with terms of up to two years, but even here the real rate of interest is often negative. Investing in federal bonds is also a losing proposition for Germans. In the case of five-year bonds, for example, interest rates have also fallen below inflation. This also affects many insurance companies and pension plans, which together account for more than €1.8 trillion of German monetary assets. They, too, invest most of their money in government bonds, which means that the returns on life insurance policies are declining from one year to the next. Guaranteed interest rates, which were at 4 percent in 2000, had dropped to 1.75 percent by 2012. "Savers still benefit from the fact that their policies are backed by previously acquired bonds with higher fixed-interest coupons," Kater explains. "But the longer the low-interest-rate phase lasts, the more fixed interest rates will expire, and the bigger the losses will become from year to year." If the structure of monetary assets doesn't change and the low interest-rate policy continues for another 10 years, the total loss to savers could grow to €60 billion. "In Germany today, people can no longer provide for their retirement by saving," says Walter Krämer. A statistics professor in the western city of Dortmund, Krämer initiated a call for protest by 282 German economists against the euro bailout policy last year, and this summer he followed up with a letter of complaint titled "Cold Expropriation." Krämer assigns the blame to the ECB. "Savers pay the price for the fact that the ECB is determined to rescue comatose banks," he says. According to Krämer, banks are being charged too little to gain access to ECB funds, so that they have no incentive to offer more to savers.

Tuesday, November 26, 2013

Twenty years after the collapse of the Soviet Union, Ukraine is slipping back under Kremlin control. Ukraine’s shock decision to opt for Vladimir Putin’s Russia and pull out of EU talks on the eve of an historic deal is a dramatic upset to the European balance of power.  It is the first major defeat for the EU in its eastward march since the fall of Communism. While the region’s geo-politics remain fluid, the upset may prove as fateful as the move by the Kossack chief Bohdan Khmelnytsky to turn his back on the West and accept Tsarist suzerainty in the 1640s.  “Ukraine’s government suddenly bowed deeply to the Kremlin. The politics of brutal pressure evidently work,” said Sweden’s foreign minister Karl Bildt. Ukraine’s prime minister, Mykola Azarov, told Ukraine’s parliament that the country has been forced to cancel its trade and pre-accession deal with the EU because Russian sanctions are strangling the economy, “pushing Ukraine to the brink of a huge social crisis.”  The accord was due to be signed at the EU’s Vilnius summit next week. The volte-face stunned EU officials, torn between fury over Ukraine’s conduct and deep alarm over what has happened. Kiev said it acted in the “national security interest”. It has emerged that President Viktor Yanukovych flew secretly to Moscow two weeks ago to see Mr Putin....The pro-Kremlin outlet Russia Today said Ukraine had wisely stepped back from the EU “horror show” and accepted the real worth of Russian ties rather than hot air from Brussels. Ukraine had dodged a “death spiral” by protecting its eastern trade flows.
Mr Putin has been tightening the screws for months, blocking shipments of goods and targeting heavy industry in the eastern region that depends on the Russian market.
A freeze on imports of railway carriages has hit 80pc of Ukraine’s carriage output. Another victim is Roshen chocolate, owned by Petro Poroshenko, a champion of the EU cause in Ukraine’s parliament. Roshen sales in Russia have been banned for “toxic impurities”.
The guerrilla warfare tactics have pushed Ukraine to the brink of financial collapse. Foreign reserves have fallen by 30pc this year to $20.6bn (£12.7bn).
This is just 2.3 months of imports, far below the “safe” cover level of six months. The economy contracted 1.5pc in the third quarter, pushing bad loans in the banking system have to 30pc. Total foreign debt has reached 77pc of GDP.
The country has to roll over or repay $10.8bn in foreign debt by the end of 2014, an almost impossible task given that capital markets are effectively closed.
The government has been trying to play off Russia against the EU and International Monetary Fund, but the strategy has blown up in their faces. The IMF suspended a $15bn stand-by credit in 2011 for non-compliance, and has continued to demand radical reforms before any more money is released.
Mr Azarov said the “straw that broke the camel’s back” on the EU deal was a fresh list of harsh demands by the IMF this week, including a 40pc rise in gas bills, a salary freeze, big budget cuts, and lower energy subsidies. “All they were willing to lend us is enough to pay them back again,” he said.
An IMF spokesman said Ukraine needs “deep-reaching structural reforms” and exchange rate flexibility, IMF code for a devaluation.
Liza Ermolenko from Capital Economics said the rupture with the EU is a grave blow to Ukraine’s long-term hopes, but averts an immediate crisis. “It might have been dangerous for them to sign the deal because Russia would have retaliated. That threat has been lifted,” she said.
Ukraine’s bizarre predicament was captured by Moody’s when it cut the country’s debt rating to C grade in September because of the forthcoming EU deal. “While Moody’s views this agreement as credit positive in the medium-term, given that it will support Ukraine’s institutions, the short-term impact of a negative reaction by Russia outweighs these benefits,” it said.
Russia’s Mr Putin has offered a three-way dialogue with the EU and Ukraine, hoping to repeat the diplomatic feat he pulled of with the West over Syria’s chemical weapons. “We are ready to participate in such talks. This is the test of how serious our European partners are,” he said. Mats Persson from Open Europe said the collapse of talks is a major defeat for EU strategy. “The lesson is that EU’s soft-power diplomacy has hit its limits. Playing carrot and stick doesn’t work when you come up against a real hard power like Russia. This is a highly significant moment,” he said. The problem is intractable because Ukraine has reneged on countless promises. The EU has accused the government of “selective justice” against opposition leaders, including former premier Yulia Tymoshenko, who is still languishing in prison after a hunger strike last year.  Germany has demanded her release as condition for any EU deal, but she is still viewed as a major political threat by President Viktor Yanukovych. The EU says the door is “still open” for Ukraine but opinion is split. One official told the EU Observer that Mr Yanukovych should be left to stew in his own juice.  “We should make clear that Ukraine is not welcome. There should be no more phone calls. No more offers. Six months down the line, when left alone to deal with Russian pressure, he will come to us on his knees,” he said. Yet for all the fury with Ukraine in Brussels, there is no disguising the damage done to EU prestige and power. It is an astonishing that this pivotal nation of 46m people should be returning to Russia’s orbit 22 years after breaking free from the Kremlin. 
European statesman Jacques Delors once likened the EU to a bicycle that must keep rolling forward to stay upright. It has just toppled over.

Thursday, November 21, 2013

Berlin - A new bargaining chip has emerged in the ongoing German coalition talks: the idea of holding referendums on major EU decisions - be it bailouts, enlargement or more transfers of sovereignty to Brussels.
The idea was formulated in a joint working paper drafted by Hans-Peter Friedrich, a member of Angela Merkel's Bavarian sister party (CSU) and currently the country's interior minister, and Thomas Oppermann, a member of the opposition Social Democrats (SPD).
A grand coalition would be a unique opportunity for "modernizing our democracy," they wrote.
More referendums - which currently can be held only on constitutional matters or if the country's borders are changed - would give voters the chance to "influence political decisions also in-between elections," they added.
In their leaked paper, the two politicians argue for a "careful transition to direct democracy," for instance when 1 million people gather signatures on a matter or if the parliament wants to consult the population on a specific law.
The paper also argues that referendums should be held on EU matters of "great significance" - such as EU enlargement, transfer of powers to Brussels or another eurozone bailout.
Merkel's Christian Democrat party (CDU) was quick to dismiss such wide-ranging plebiscites, saying there was a risk of them being hijacked by populist campaigns.
"There are still serious doubts about the introduction of referendums at national level," said Guenter Krings, the deputy leader of the CDU in the Bundestag.
The chairman of the EU affairs committee in the parliament, Guenther Krichbaum, said such a change would bring about the "advent of populism" in Germany.
The Social Democrats have also distanced themselves from referendums on EU matters.
They say plebiscites should be held on internal matters and formulated in a way that would not give a platform for anti-European campaigns.
"One can leave out certain questions that touch on the core principles of the EU," said SPD secretary general Andrea Nahles.
The issue will form part of coalition talks on Wednesday.
The negotiations are expected to last at least until the end of the month, with a final round expected on 27-28 November. The new government should be in place by mid-December.