Matters are worse in the banking sector. Each country's banking system is backed by its own government; if the government's ability to support the banks erodes, so will confidence in the banks. Even well-managed banking systems would face problems in an economic downturn of Greek and Spanish magnitude; with the collapse of Spain's real-estate bubble, its banks are even more at risk. In their enthusiasm for creating a "single market", European leaders did not recognise that governments provide an implicit subsidy to their banking systems. It is confidence that if trouble arises the government will support the banks that gives confidence in the banks; and, when some governments are in a much stronger position than others, the implicit subsidy is larger for those countries.
In the absence of a level playing field, why shouldn't money flee the weaker countries, going to the financial institutions in the stronger? Indeed, it is remarkable that there has not been more capital flight. Europe's leaders did not recognise this rising danger, which could easily be averted by a common guarantee, which would simultaneously correct the market distortion arising from the differential implicit subsidy. The euro was flawed from the outset, but it was clear that the consequences would become apparent only in a crisis. Politically and economically, it came with the best intentions. The single-market principle was supposed to promote the efficient allocation of capital and labor. But details matter. Tax competition means that capital may go not to where its social return is highest, but to where it can find the best deal. The implicit subsidy to banks means that German banks have an advantage over those of other countries. Workers may leave Ireland or Greece not because their productivity there is lower, but because, by leaving, they can escape the debt burden incurred by their parents. The European Central Bank's mandate is to ensure price stability, but inflation is far from Europe's most important macroeconomic problem today.
AP - The European Parliament has overwhelmingly defeated the international ACTA anti-piracy agreement, after fears that it would limit Internet freedom mobilized broad opposition across Europe.
The vote Wednesday was 39 in favor, 478 against, with 165 abstentions.
The defeat means that, as far as the EU is concerned, the treaty is dead - at least for the moment - though other countries may participate.
A spokesman for the European Commission, the EU’s executive arm, said it may try again after it obtains a court ruling on whether the agreement violates fundamental EU rights.
Supporters said ACTA - the Anti-Counterfeiting Trade Agreement - was needed to standardize international laws that protect the intellectual property rights.
Opponents feared it would lead to censorship and a loss of privacy on the Internet
AP - The European Parliament has overwhelmingly defeated the international ACTA anti-piracy agreement, after fears that it would limit Internet freedom mobilized broad opposition across Europe.
The vote Wednesday was 39 in favor, 478 against, with 165 abstentions.
The defeat means that, as far as the EU is concerned, the treaty is dead - at least for the moment - though other countries may participate.
A spokesman for the European Commission, the EU’s executive arm, said it may try again after it obtains a court ruling on whether the agreement violates fundamental EU rights.
Supporters said ACTA - the Anti-Counterfeiting Trade Agreement - was needed to standardize international laws that protect the intellectual property rights.
Opponents feared it would lead to censorship and a loss of privacy on the Internet
3 comments:
GERMANY BACKTRACKS ON LAST WEEK'S SUMMIT
"Those curious why peripheral European bond yields have once again resumed their levitation creep higher, it is because not only did yesterday the key Merkel coalition partner, CSU, threaten to leave Germany's ruling party hanging "if further euro zone states secure bailouts, saying there were limits to how far his party was prepared to go", but today we have gotten even more furious backtracking on Mario Monti's history "success" less than a week earlier, after on one hand German opposition SPD has said it opposed Direct ESM aid to banks, but more importantly, the German Finance Ministry itself said that the entire bailout timeline is now in question, saying that it "remains unclear if Eurozone finance ministers will decide on Spain's request for banking sector aid at their next monthly meeting on July 9." The ministry also added that a decision could only come once the report on Spain by the troika - the European Commission, the ECB and the IMF - had been finalized. In other words, that much maligned Troika, which Monti had supposedly exorcised from intervening in the economies of Spain and Italy, will, after all be very much present, which also means that all the media spin about last week's "gamechanging" and unconditional bailout summit resolution, has been for nothing, in line with all the skeptical expectations."
This seems a bit odd to me.
Historians will come to view the ECB's practices over the past year as one of the root causes of the inevitable Eurozone breakup. Instead of allowing market forces to dictate the winners and losers, the ECB has improvidently swooped-up junk Italian and Spanish trash bonds ... thereby allowing the Latin Losers' deep-seated fiscal problems to fester and multiply.
The ECB now attempts to conceal its infirmities by lowering interest rates ... and lowering the threshold for junk "assets" it will foist upon it's pathetic balance sheet.
Notice how things keep getting worse and worse ...
The ECB is nothing more that a garbage scow that feeds upon the weakness and frailty of the doomed Euro system ... whilst spreading the very contagion that it seeks to contain.
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