Germany To Exceed Deficit Limit Till 2010

The IMF has just published Chapter One of the autumn 2005 edition of the World Economic Outlook. The key section on the eurozone economies can be found between pages 25 and 29 (including the interesting Box 1.3). The Table where you can find the information on German debt projections is on page 15, and there you will see that the government deficit is projected to remain over 3% at least until 2010. In addition the level of indebtedness is projected to rise from just under 60% of GDP in 2002 to nearly 75% in 2010. (Italy incidentally is seen as quietly suffering from melt-up at 115% of GDP come 2010).

The reasons for this trend:

Unsustainable medium-term fiscal positions remain a key risk. Among the major industrial countries, fiscal deficits are expected to decline only modestly over the medium term (outside Canada, which remains in surplus), with rising
public debt ratios in Japan, Italy, and Germany of particular concern. In most countries, despite past reforms, fiscal pressures from aging populations remain a serious concern, especially for health care.

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The Italian Government Has A New Crisis

Germany isn’t the only EU country where serious ongoing economic problems are leading to political gridlock. Italy’s situation is no better, and arguably worse. This ‘worse’ aspect was pushed into the headlines yesterday by the resignation of Economy Minister Domenico Siniscalco. This is sending shock waves throughout the entire Italian political system. It still isn’t clear at the time of writing whether the Berlusconi government can survive, especially given the gravity of the underlying problem which is the need to make severe budget cuts when Italy is in a prolonged recession and elections loom sometime next spring.

Essentially Siniscalco quit because of continuing government infighting over the 2006 budget and over the administration�s failure to force the resignation of Bank of Italy Governor Antonio Fazio following the scandal produced by accusations that he showed bias against Dutch bank ABN AMRO during a takeover battle for the Italian Banca Antonveneta SpA.
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The Coalition Inside the Party

The Jamaican solution is now rapidly hurtling towards the plausibility horizon, as perhaps the most serious objection against it becomes blindingly clear. After all, the CDU-CSU is in itself a coalition of two parties. It’s usually in British politics that one speaks of a party being in itself a coalition, assuming as one does that proportional representation countries tend to make their coalitions explicit. But it remains true that political parties are rarely monolithic.

Down-blog, there’s been a discussion going about whether the CDU-CSU is really a single entity, a pair of political parties who share a parliamentary fraction, two political parties in coalition, or something else. Whatever it formally is, there are indubitably both CDU and CSU MPs. And that’s all you need for a potential inner-party politics. The CSU’s leader, Edmund Stoiber, is seriously not happy with the Jamaican option. Here, he tells the CSU faction in the Bavarian parliament (what, there are others? Who knew?) that “the contradictions between the interested parties are so great that such an alliance is not in sight”, and that the Greens “would have to reinvent themselves completely”. The Bavarian interior minister remarked that the CSU would have to swallow not just a frog but a giant toad to join such a coalition, and the minister of the economy pointed out all the policy disputes listed in my last post, and then some more. Not just the kerazy Bavarians said so – the Federal CDU’s deputy leader Christoph Böhr said that he could not imagine “throwing the heart of our manifesto into the wastepaper basket”. Damn, the metaphors are getting a hammering.

On the other hand, although Claudia Roth, one of the Greens’ multiple leaders, repeated that the FDP would have to do what Stoiber said the Greens would have to (she used exactly the same words) before they could join a traffic light coalition, her colleague and fellow-leader Reinhard Bütikofer signalled that the Greens were available for talks with both the CDU and the FDP. He also said that “his fantasy did not reach far enough” to visualise Angela Merkel becoming chancellor.

Meanwhile, on the Ampelkoalition front….

Losing the CSU would outweigh gaining the Greens, so that’s as good as a veto of the idea.
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Why Finland?

I just put up a post on the economic situation of Finland. Now I am putting another. Why the sudden interest? What is there about the Finnish economy which could be of interest to more people than the five million or so who actually live there?
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Logging-on Finland

I am trying to follow developments in the Finnish economy. This isn’t always easy since I am linguistically challenged, and the english language press doesn’t have a lot of info. One thing is clear: growth since the start of the century hasn’t been spectacular. Of course drawing any clear conclusions is difficult since the economy seems to be heavily dependent on one tech company and its lumber industry:

Finland’s gross domestic product (GDP) rose 1.7 percent month-on-month in July for an annual rise of 0.9 percent, due to increased activity in construction and services, Statistics Finland (SF) said on Tuesday.

SF also revised the June year-on-year GDP figure to a decline of 3.2 percent versus a previous 3.3-percent decline.

The country’s paper industry was still affected in July by production lost during plant start-ups after mills in the key export sector were shut for 7 weeks from mid-May.
Source: NTC research

You can find the Statistics Finland data here.

The French Differential

As I keep indicating the French economy – although not a spectacular success – continues to outperform the German one. This is interesting, since the French political system has been much more laggard than the German one in implementing reforms. That is why I place emphasis on the demographic differential.
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German Election Political Crisis Roundup

In the maelstrom, one thing is clear: SPD General Secretary Franz Müntefering, he of the Kapitalismusdebatte, is staying in his post after the parliamentary party voted by a 93% majority to keep him. In other news: Earth continues to orbit Sun, Pope Benedict says committed to Catholicism, bear sighted shitting in woods. His talents in the smoke-filled backroom will be needed, as SPD-CDU, SPD-Green, and CDU-FDP negotiations were announced today. No word on Green-FDP conversations…and nobody wants to play with Oskar and Gregor in the naughty corner.

Angela Merkel may fall prey to the CDU’s Old Grey Man tendency as early as this afternoon, when she presents herself for re-election as parliamentary party leader. There are no other candidates, this being something of a ritual in German and Austrian politics, but if the OGMs are sufficiently angry about their campaign’s spectacular train crash, she could be on her way to join Joschka Fischer and Paul Kirchhof in obscurity by tonight…actually, hold that, she has been re-elected by 98.6% of the vote. Which is actually better than she got before the disastrous election campaign – work that out.

Here, we learn that the CSU has been thrown into a horridly intense introspection nightmare, as Dr. Gonzo might have put it, by the fact that they polled less than 50% for only the second time in their history. 49.6% doesn’t sound at all bad, until you remember that they don’t really have democracy in Bavaria, they have the CSU and its VERY long-lasting leaders, who play on Bavarian local patriotism and Catholic conservatism to claim a monster powerbase. The other parties’ comparative success may have the unintended consequence of saving Angela Merkel, because the CSU can hardly say “Told you so, we should have gone with a real man like Stoiber” if they buggered up their own campaign. Interestingly, it was none other than Edmund Stoiber who formally nominated Merkel as fraction leader – presumably signalling loyalty?

The old crook Wolfgang Schäuble, whose political career mysteriously continues to survive his disgrace in the Helmut Kohl party funding scandal, spoke out for a Jamaica coalition. He says it’s “our duty as democrats” and that a government without Merkel is “unthinkable”. Do not believe a word this man says. The Süddeutsche Zeitung‘s interviewer describes the grand coalition as the Elefantenhochzeit or elephants’ wedding – can we start using that?

In other dishonesty-related news, Franz Müntefering is trying to make out that the SPD is really the biggest single party and hence entitled to form a government on the grounds that the CDU and CSU are two separate entities. Jeer at the absurd sophistry!

Renate Künast is to take over Fischer’s duties pro tempore, reports the Austrian newspaper whose website uses frames. Check out the conspiracy madness in the forums; apparently Fischer is plotting to put Künast in so as to achieve a Jamaica coalition, because he’s a warmonger. Sometimes Der Standard’s forums make me glad I don’t live in Vienna any more and don’t have to listen to this infantile nonsense.

The appalling tabloid Bild Zeitung, who I refuse to link to, claims Schröder will drop his demand for the Chancellery if the CDU pick someone other than Merkel. Given 98.6% of them just voted for her, I take it that statement is no longer operative.

Breaking: Fischer Resigns, and a Green Light

Handelsblatt reports that Joschka Fischer, one of the Greens’ two co-leaders and the Red-Green government’s foreign minister and deputy chancellor, has announced his resignation from both his party and state offices. He will, however, take up his seat in the Bundestag. Apparently he thinks the Greens need “a new formation” (eine Neuaufstellung) and that “clarity must reign”. Further, the party needs to be led by younger people.

Perhaps more importantly, he also said that it could be “realistically expected” that the Greens would not be represented in the next government. That can only realistically mean that he expects a grand coalition – an SPD/FDP/Left or CDU/SPD/Left coalition can be ruled out with some confidence, and a CDU/FDP/Left coalition with absolute certainty. The Greens will now have to elect two new parliamentary leaders.

Which brings me to another point..
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