Something Worries Me About Peter Bofinger

Really I realise I have been remiss in another important sense. I have long assumed that in fact the decision to reduce deficits was taken due to the coming fiscal pressure from ageing. This certainly was the background to the discussion. However now I look at the details of the SPG this area is not mentioned (as far as I can see) and the other – the free rider and associated – is the principal consideration.

So those who criticize the bureaucratic and infexible nature of the ECB are in the right to this extent. Of course the underlying demographics *should* be part of the pact, but that is another story.

I find myself in a tricky situation, since I am deeply sceptical that the euro can work, and now after the French vote even more so, but since it has been set in motion, the best thing is obviously to try and make it work (even while doubting). So I am thinking about all this. Obviously I should try and write a longer post making this clearer.

The SGP was adopted at the Amsterdam Council 1997. A history of the implementation of the pact, and a summary of the debate over the new pact can be found here. The Stability and Growth Pact was designed as a framework to prevent inflationary processes at the national level. For this purpose it obliges national governments to follow the simple rule of a balanced budget or a slight surplus.

Now if we go back to the origins of the pact, to the communication of the European Commission on 3 September 2004, you will find the following:

“As regards the debt criterion, the revised Stability and Growth Pact could clarify the basis for assessing the “satisfactory pace” of debt reduction provided for in Article 104(2)(b) of the Treaty. In defining this “satisfactory pace”, account should be taken of the need to bring debt levels back down to prudent levels before demographic ageing has an impact on economic and social developments in Member States. Member States’ initial debt levels and their potential growth levels should also be considered. Annual assessments could be made relative to this reference pace of reduction, taking into account country-specific growth conditions.”

Now curiously I have found nothing in Bofingers argument which seems even to vaguely recognise this background.

A good starting point for this topic would be the conference “Economic and Budgetary Implications of Global Ageing held by the Commission in March 2003.

The European Council in Stockholm of March 2001
agreed that ?the Council should regularly review the
long-term sustainability of public finances, including the
expected strains caused by the demographic changes
ahead. This should be done both under the guidelines
(BEPGs) and in the context of the stability and
convergence programmes.?

This document on the history of EU thinking on ageing and sustainability is incredible.
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Bus Bomb May Have Been Intended For Tube

Brian Paddick, assistant deputy commissioner of the Metropolitan police has just explained to a press conference that the bomb which exploded on a London bus in Woburn place may have gone off early.

British police said a bomb that blew the roof off a London double-decker bus on Thursday morning may have been destined for the capital’s underground network, which was rocked by three explosions earlier.

“The fourth bomb may have been intended for an underground train,” Brian Paddick, the assistant deputy commissioner of the Metropolitan police told a press conference.

The bus blast occurred about an hour after the first underground explosion. At least 33 people were confirmed dead from the blasts in the capital.

I’m not *sure* what we can deduce from this conjecture on the part of a senior police officer, although lots of possibilities are flying round my head.

Under Wraps

The EU Observer reports on the labours of the Commission in producing a report on social models and sustainability, and the efforts they are making to try and de-politicise it. It seems our ageing societies and their implications will form the cornerstone of the report. This, at least, will mark a step forward. The October summit already bears all the hallmarks of being potentially much more interesting than the last one.

The request for the report predates the [Franco-British] argument. This is the general awareness in the commission”, one of the study’s contributors told EUobserver. “Nothing new was stimulated by this disagreement. Whether you are on one side or another, everybody wants a viable social system”.

The source added that while the US has already done a lot of research on the problems linked with an ageing population for example, the EU situation is made more difficult by the fact that “we have 25 different systems” to take into account.

The report will be put together by a wide pool of officials from various units covering financial affairs, enterprise, employment and internal markets, as well as commission president Jose Manuel Barroso’s inhouse team of economic experts, the Bureau of European Policy Advisors (BEPA).

No-Win Situation For The EU Commission?

Italy’s Finance Minister Domenico Siniscalco is in defiant mood. ?The times of creative finances are over,?, he told a parliamentary committee in Italy today. By ‘creative finances’ he means a cost-cutting exercise. He means any serious attempt to bring the Italian deficit into line this year. What he is in fact saying is that he is prepared to try bring Italy’s deficit below 3 per cent of GDP in two to three years time (there are of course elections next year and Siniscalco in all probability won’t be in office to carry this through) but that he is not prepared to ?strangle? the economy by introducing an emergency budget next month.

This now becomes a very serious problem for the EU commission. After the defeat of the constitution in the recent polls, the Commission is badly in need of some credibility. After the ‘locura’ of recent days, the euro is badly in need of some credibility. Sticking to the Stability and Growth Pact would help to give credibility. But sticking to the SGP would also send Italy further into recession. This is known as double bind. Mr Siniscalco has Mr Almunia with his back to the wall. Of course the recent threat of a referendum is all about this.

According to the FT:

“Sandro Bondi, national co-ordinator of Mr Berlusconi’s Forza Italia party, complained on Tuesday about the European Commission’s ?bureaucratic attitude? to Italy’s public finances, and said it risked ?transforming Italy from a champion of a united Europe into a country pervaded with anti-European feeling?.”

I think this has a name, it’s called blackmail. Either you let us do what we want to, or we’ll make you pay for your efforts. I always thought we should have acted much, much earlier against Berlusconi. I hope we all don’t really regret being so tardy in waking up. To be continued.

This Is An Interesting One

From Malta Today:

The European Commission is asking the Maltese government to explain its policy of banning journalists from immigrants? detention centres in response to a petition signed by 100 journalists and editors last February.
European Commissioner for Justice, Freedom and Security Franco Frattini told the European Parliament that the Commission was demanding information from the Maltese government about the total media ban imposed by Home Affairs Minister Tonio Borg.

Replying to parliamentary questions made by Labour MEP Joseph Muscat and H?l?ne Flautre (Greens), Frattini said he was aware of the journalists? petition and of Borg?s media ban and that he was seeking information from the government. The Commission is also aware of the conditions in immigrants? detention centres which have been the subject of much criticism from international human rights agencies and organisations.

The Week Ahead

This week promises to be another ‘busy’ one. Today the EU finance ministers (Ecofin) are meeting in Luxembourg, to discuss the condition of the common currency after last week’s ‘battering’ in the press and in the financial markets. Also headed for Luxembourg is EU Economics Commissioner Joaquim Almunia. Amongst other items he will have one in particulr which is high on his agenda: a meeting with Italian Ecomy Minister Domenico Siniscalco. Almunia is due to present a report on Italy’s deficit situation to the Commission tomorrow, and will almost certainly recommend the initiation of an excess deficit procedure under the revised terms of the stability and growth pact.
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Clueless In and Out of Brussels

We’re still all waiting really. Waiting to know what the next move really in the saga is going to be (Iceland isn’t in the community yet, if I remember correctly). Staring into the tea-leaves and casting a wary eye over towards Brussels, looking desperately for clues.

What this continuing lack of definition really does is make matters worse., compound the problem. It re-inforces exactly that feeling of being ‘left out of things’ that probably produced the ‘no’ votes in the first place. This isn’t very promising if you were hoping that at least the rejection of the constitution at the ballot box would act as a kind of ‘shock therapy’, now is it?

However, according to the rumours:
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In The Interest of Fairness and Balance

Looking forwards rather than backwards, I can’t help trying to imagine what the world will look like on Monday. (We may all be in for a surprise, but the latest poll seems to put the ‘no’ at 55%, which is quite a large margin of error if it’s wrong, *and* Le Monde today makes the point that as the ‘no’ rises and rises in the polls, the number of undecided voters continues to reduce).

Well, ironically I think one of the consequences will be an attempt to enforce the Stability and Growth Pact. This is why I mention being fair and balanced, since in the past I may have been a little too cynical about this: although not without reason.

I now think The Pact Mark II may have considerably more bite, here’s why:
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Venice Commission on Bosnia-Herzegovina

Teekay was looking forward to the Venice Commission’s report on Bosnia-Herzegovina last week. (The Venice Commission, for those of you who don’t lie awake at nights in excited anticipation of its next publication, is the constitutional reform advisory body of the Council of Europe, which in turn is not to be condused with the European Council.)

Well, the report’s out – not yet on their website but they’ve sent me a copy. It’s not as radical as some in Bosnia-Herzegovina might have liked, but given the Venice Commission’s normally relatively anodyne pronouncements it’s pretty strong stuff.
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Ukraine, developing…

Update: (Nick – 1730CET) The official announcement has been made, declaring Yanukovich the victor. More ASAP when I’ve rounded up the reactions.

Maidan are reporting preparations for a state of emergency are being made at Yanukovich headquarters. Victor reports official results are 49.5% to Yanukovich, 45.5% to Yeschenko, though he already has reports of fraud. At the moment, I’m crossing fingers and everything else and hoping. Kwasniewkski and a Dutch representative (I don’t know who) are still reported to be on their way to Kiev.

The IHT reports the Ukrainian defence minister telling the Army to ‘remain calm’. Two members of the Election Commission refused to endorse the result. The Periscope’s latest update includes details of actions being considered by the European Commission and Parliament and Schroeder has talked with Putin urging that the situation be resolved lawfully (translated out of diplomatese, that would seem to mean ‘don’t do anything with your troops, Vladimir’)

Neeka has a new post on the Elections Commission meeting.

Update: (David.)

Hopeful news (for real)

NYT reports:

Shortly after his rival’s offer, Yanukovich also hinted at compromise by saying that he was not interested in a “fictitious” victory and that “no position of authority, no matter how important, is worth a single human life.”

Yushchenko’s comments provided outgoing President Leonid Kuchma with a way to defuse a crisis that has convulsed the ex-Soviet state of 47 million after it became obvious early on Monday that Yanukovich would be declared the winner.

Update: (David.) I just made a highly embarrasing goof. I thought a ten days old report was new. Ignore my last (deleted) post.

Update: (Nick) I don’t want to draw too many conclusions, as I’ve not quite sure the evidence supports them, but the Kyiv Post reports that Yuschenko has called on soldiers and police to defy orders to take action against the people and Maidan – who earlier reported that Ukrainian special forces were willing to intervene on the side of the protestors – are reporting that the Commander-in-Chief of the Ukrainian Marine Forces has acknowledged Yuschenko as President. Pure conjecture here, but I have a feeling that the reports of Russian troops being deployed within Ukraine has backfired and driven the armed forces into the opposition camp, as they don’t want to end up in a position where they’re firing on their own people.

5 pm CET:

Maidan claims that Today the President of Poland Kwasnewski arrives as representative of EU to Ukraine. and that Maidan receives more and more confirmation about presence of Russian troops in Ukraine.

Russia refuses to confirm or deny its troops’ presence.

Europe stepped up pressure on Ukraine officials Wednesday to review the results of the disputed presidential poll, following a similar statement of support from the White House. Meanwhile, Russian authorities continued to support Ukraine officials.

Still nothing from the electoral commisssion, which was supposed to announce the final results two hours ago.

Update:

Nov. 24 (Bloomberg) — Ukraine’s Viktor Yushchenko, who accuses the government of rigging the Nov. 21 presidential elections, said he would agree to holding another second-round vote if the government is willing.

(Original post starts here)

There have been reports (Maidan, Scott Clark, Periscope commenters) that Russian Spetnaz are in Ukraine. Now, via Nosemonkey Maidan says: Ukranian special police will defend the people if Russian troops attack

Worst case scenario is dire indeed.

Prelude to crackdown? Postmodernclog.com wrrote two hour ago:

Authorities have begun violent action against peaceful protesters near the Presidential Admin building. 2 buses of special ops police units drove up and have moved on the demonstrators.

The periscope commenters reports

According to Korrespondent.net, Lviv Regional Council dismissed its Head and elected an Executive Committee, headed by the opposition MP Petro Oliynyk. Oliynyk sworn the oath to the People’s President Yuschenko.
This has been the third Oblast Council to acknowledge Yuchenko’s victory, along with Volyn and Ivano-Frankivsk oblasts.
A number of city councils also either expressed support for Yuschenko or claimed the results of the second round of elections invalid, among them Kyiv, Lviv, Ivano-Frankivsk, Vinnytsya, Ternopil, Stryi, Sambor, Khmelnytsk, Lutsk, Chernivtsi, Zhytomyr.
Some of the Eastern oblasts, on the other hand, issued statements claiming Yanukovich the elected President: Kharkiv (despite numerous pro-Yuschenko demonstrations), Odessa and Donetsk.

They also have a transcript of Yushchenko’s speech in Independence Square.

Blogs reporting from the ground: Scott Clark, Neeka, Victor Katolyk (in comments), Postmodern Clog.

Other blogs covering Ukraine: Europhobia, Voldmyr Campaign, Tulip Girl

Ukrainian news sites: Brama, Maidan, the Pora campaign..