Portugal on the verge of a general Strike

October 1, 2012

By LUIS MIRANDA | THE REAL AGENDA | OCTOBER 1, 2012

The people of Portugal and Greece have added their anger to that of the Spanish neighbors, putting more pressure on politicians and bureaucrats who are slowly but surely signing their countries away to the European bankers.

The mos recent call for a general strike was made by CGTP, one of the most important Portuguese unions. The reason was the same as the historic and massive rally two weeks ago: protest against cuts and extreme austerity the Portuguese government adopted and will continue to impose as it approves the budget for the rest of the year and also for 2013.

Thousands of Portuguese met yesterday in the central and emblematic Terreiro do Paco, in the heart of Lisbon, to try to pressure the government led by conservative leader Passos Coelho. After a massive demonstration on September 15, the Portuguese prime minister backed down and withdrew a controversial measure to lower wages to all Portuguese. But now, the new budget proposed by the government contain cuts and tax increases that will make life even more difficult for the Portuguese people.

Arménio Carlos, secretary general of the CGTP, told the crowd that he expected all of the attendants to help him make the government change its plan, because this time “the people will be heard” and the government will have to listen “either the good way or the hard way.” He announced that he will discuss with his union ca all for a general strike, which is more than likely to happen.

However, according to local press, the influx of people was less than two weeks ago, when they were summoned by group of civil society organizations with no political affiliation. Then, a huge crowd packed not only Lisbon but a dozen Portuguese cities in a protest that had not been seen in Lisbon since the Claveles Revolution.

But, according to Carlos — who incidentally wore a symbolic red carnation ( clavel) in his shirt — things are not going to end well. “We are ready to channel the flow of the protest. We must end this government before this government ends the country. “

Attendees included officials who recounted how their life has changed since they stopped receiving payment for overtime (now the Government will provide that starting January), due in part to the rise in VAT taxes. From the hundreds of thousands of protesters, many are unemployed in Portugal, a country that had never unemployment levels get to as high as 15%.

During the last protest, people held signs with the same messages that have been seen in every single march in Portugal for the last few weeks; with messages such as “thieves”, referring to Portuguese politicians and more directly to government officials who continue to lose popularity as fast as the days go by.

Several leaders of Portuguese left-wing groups asked the Prime Minister, Passos Coelho, to listen to the people, to change his policies. The expectation as to what will Coelho do is growing on the streets of Portugal; mainly in the capital city of Lisbon. Coelho will present next week some relevant details of the Portuguese budget for 2013, which is expected to be very tight with the intention to reduce the difference between government income and its spending. As it happened in Spain, Greece and Italy, the cuts announced by the Prime Minister will mean less investment in welfare programs.

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As the Euro zone Drowns, Countries prepare for Deeper Depression

August 15, 2012

Even the best banker forecasts warn about an imminent economic Depression

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 15, 2012

The latest outlook issued by the European Central Bank (ECB) and the International Monetary Fund (IMF) provide a clear picture that shows how the euro area will fall into an economic depression. The question then is, how will the countries deal with the Depression and whether the banks will be more powerful or have collapsed too.

The risk of recession in the eurozone, after the economy of the region shrank by two tenths of a percent between April and June, threatens to slow the progression of the only growing component of the Spanish economy, that is the export of goods to the rest of the Euro nations. Today, more than half of Spain’s exports are sold in the Euro zone, but the threat of a deeper depression may affect what those nations buy from Spain in the coming months.

According to recent data published by the European statistical office (Eurostat), both the EU and the eurozone, whose member countries are major importers of goods manufactured by Spain, saw its economy falls 0.2% in the second quarter of the year.

The calculations of the European Central Bank (ECB) and International Monetary Fund (IMF) indicate that the recession will get worse in the euro area, as both agencies forecast a contraction of between 0.1% and 0.3 %, for the rest of 2012.

In the second quarter of 2012, the Spanish economy contracted 0.4%, according to the data advanced by the National Statistics Institute (INE), a fall that was not toned down by the positive contribution of the exports sector.

The latest data from the Spanish trade balance reflects an export growth of 3% until May, mainly by increased sales to emerging countries, although these markets still account for only a small part compared to Spanish business partners in Europe.

In fact, the primary client is still the European Union, which purchases 65% of Spanish exports, although sales to Spanish business partners remained stagnant in the first five months of the year. The euro zone receives more than half of Spanish goods, that is why the slow down of 1.1% in sales to these countries during the first five months of the year following the crisis have raised awareness about the difficult times ahead.

The economic developments in the euro countries has been mixed, with Germany so far resisting the crisis and, according to government numbers, growing by 0.3% in the second quarter, while France has not completely collapsed, but is experiencing a crippled economy. Both countries are major markets for Spain, with France buying some 17.4% of Spanish exports and Germany, the second most important partner getting 10.8%.

The best selling goods to these countries belong to sectors such as industrial technology and mechanical auxiliary industry and construction, chemicals, horticultural and fashion.

However, while the Germany has continued to increase the purchase of Spanish goods (6.5%), France has begun to cut its imports, which has resulted in a fall of 0.4% in sales to the neighboring country.

In the case of Germany it is important to mention the fact that the country is a major commercial creditor of Spain, although in the first five months the trade deficit has been shortened in half with Angela Merkel’s country. This has been the result of Spain not importing as many goods from Germany as it did previous to the crisis, for example.

The balance both the euro area and with the twenty seven EU countries is positive, since in both cases Spain sells more than it buys. However, the Spanish foreign balance with the rest of the world is in deficit, which is due to high energy costs arising from oil imports mainly, but also gas, coal and electricity.

The main creditors of Spain as far as energy is concerned are Russia and Nigeria, while the third is China, a country which buys mainly textiles from the Spanish manufacturing industry.

Meanwhile, Greece is trying to meet its commitments to investors. August 20 represented a key date, as it marked the date when the country had to pay off the  debt of 3,200 million euros in the hands of the European Central Bank. The mathematical impossibility to pay such debt, as it was explained in previous articles, obligated Greece to issue even more debt to finance the money owed to the ECB. With this, this country will continue the well known death cycle which in most cases concludes with the complete collapse of debtor nations.

Greece has now placed 4.063 million euros in treasury bills with maturities of three months at an interest rate of 4.43%, slightly above the 4.28% offered in July, as reported by the Greek Authority Management Public Debt (PDMA). The Greek government attempts to achieve a deferral of repayment of that debt or an advance of a new loan of 31,000 million from the second rescue package, which has been rejected by their European partners.

The disbursement of bailout money will be transferred only once the troika submits its report on the progress of the country and gives the approval for the new cuts for 2013 and 2014. Most buyers of the monthly auctions are Greek state banks themselves, which means that the entire financial system is in a downhill fall of self-financing in which the government issues securities to finance the maturities of bonds held by banks in the country, which, in turn, buy debt from the State to use it as proof of liquidity. Do you see the insanity here?

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Spain’s Economy Slows Further and Runs out of Options, says Central Bank

July 24, 2012

REUTERS | JULY 24, 2012

Spain’s economy sank deeper into recession in the second quarter, its central bank said on Monday, as investors spooked by a funding crisis in its regions pushed the country ever closer to a full bailout.

Economic output shrank by 0.4 percent in the three months from April to June having slumped by 0.3 percent in the first quarter, the Bank of Spain said in its monthly report.

Economy Minister Luis de Guindos ruled out a full-scale financial rescue on top of the 100 billion euros already earmarked for the country’s banks, but Spain’s sovereign bond yields stayed mired in the danger zone.

In contrast to de Guindos, who told lawmakers there was little else Spain could do to ease the tensions after launching a 65-billion-euro austerity package last week, the central bank’s deputy governor said more belt-tightening was needed.

“(Current market tensions) reflect problems in Spain as well as the euro zone,” Fernando Restoy said after a conference in Madrid.

“We need to continue further along the same line. We need more cuts, more reforms which will restore market confidence and mechanisms which will strengthen the monetary union.”

Earlier, media reports suggested half a dozen regional authorities were ready to follow Valencia in seeking financial support from Madrid.

Prohibitively high refinancing costs have virtually shut all of the 17 regional governments out of international debt markets, forcing the worst hit to seek loans from the central government to meet bond redemptions.

Spain’s sovereign debt yields rose above 7.5 percent on 10-year paper on Monday, well above the 7 percent level that triggered the spiral in borrowing costs that led to bailouts for other euro zone states.

GERMANY STIRS

In a sign of a growing awareness among the euro zone’s heavy hitters of the need to protect Spain, Economy Minister De Guindos will travel to Berlin on Tuesday to meet with his German counterpart Wolfgang Schaeuble.

“We believe that the reforms already begun by Spain will help calm the markets,” Schaeuble’s spokeswoman Marianne Kothe said in Berlin, adding that the regions’ funding problems had “nothing to do with” the European rescue deal for the country’s banks.

Germany knew of no plans for a broader Spanish bailout request, she said.

Asked about that option on the sidelines of a parliamentary hearing on the bank aid, De Guindos said: “Absolutely not.”

The mounting unease was reflected in financial markets.

Spanish two-year bond yields were up almost 90 basis points at 6.64 percent and the cost of insuring Spanish debt against default rose to a record high.

With the blue-chip stock market index Ibex hitting its lowest level since 2003, Spain reintroduced a temporary ban on short selling on Monday to discourage speculative trading.

But the ban, matching a restriction imposed on Monday in Italy, stoked fears that Spain’s sovereign debt and banking crisis may be more widespread than expected, sending European shares to new intraday lows. They later recovered in Spain and Madrid stock market fell 1.1 percent on the day.

Spain slipped into recession for the second time since 2009 in the first quarter of this year, its economy crippled by a bank sector weighed down by soured assets from a collapsed property bubble and unemployment rates that have risen close to 25 percent.

The government said on Friday it expected the economy to continue to shrink well into next year, fuelling market and massive protests.

For the 12th day running, government employees demonstrated against the cuts programme in the main cities of the country on Monday, blocking roads and stopping traffic.

TIME FOR THE ECB?

In his comments to parliament, de Guindos hinted the European Central Bank – hitherto unwilling to relaunch stalled stimulus programmes that might offer relief to Spain and other states at the sharp end of the euro zone debt crisis – should now step in.

Asked whether ECB intervention was needed, De Guindos said: “I repeat that in this situation of uncertainty and excessive volatility… the only way to act goes well beyond the capacity of governments.”

There was however little sign that the Frankfurt-based institution would move any time soon and Ireland’s Prime Minister Enda Kenny warned the Spanish situation was getting very serious.

“They’re effectively locked out of the long term markets. Obviously it’s an economy with huge figures and from that point of view it’s one of a number of countries now which face very challenging positions,” Kenny told national broadcaster RTE.

Meanwhile, Spain’s central bank said an accelerated programme of structural reforms could offset the impact of the deep austerity programme, aimed at shrinking one of the highest public deficits in the euro zone.

It called for great sector liberalisation to improve competitiveness, the reduction of administrative red tape and the improvement of transparency in good and services markets.

“This should offset the negative short-term effect of the higher fiscal restrictions and, above all, will determine the economy’s medium- and long-term growth potential and productivity,” the bank said in its monthly bulletin.

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“They want to ruin Spain – and we have to stop them!”

July 19, 2012

TOUCH STONE | JULY 19, 2012

Ignacio Fernandez Toxo, Secretary General of one of the two main Spanish trade union confederations, explains why the CCOO and UGT have called another day of action against austerity in Spain on Thursday 19 July.

The new austerity plan presented on 11 July by the Spanish Prime Minister, Mariano Rajoy, is an unprecedented blow to workers’ rights, to the unemployed and to civil servants, to the founding principles of our constitution and to democracy itself. The measures will have an impact on society, on the economy and on the labour force, but the government is playing with fire.

The path chosen by Rajoy is one of endless conflicts, the dismantling of the State and public policies, alongside a permanent discourse of excuse for the cuts. He says: “my main priority is the millions of people who are unemployed”. But we find ourselves in a downward spiral of cuts and aggression:

  • the government is again attacking the civil servants: they have now lost their extra Christmas pay, on top of the cuts to their salaries approved in 2011;
  • the unemployed will receive less benefits when they need them most, which will make many of them join the ranks of the poor and the socially excluded;
  • there will be immediate cuts in the public pension system, which will force the retired to pay for medicines that used to be completely free of charge. Moreover, social benefits for taking care of dependant relatives will be reduced as well;
  • VAT will rise (from 18 to 20% in general terms, and from 8 to 10% where it was reduced), which will entail a drop in consumption and which will hinder economic recovery; and
  • state-owned companies will be privatised and the cost of energy will rise again.

All these measures have one aim: to dismantle the welfare state. From the first day, the government has continuously been decreeing cuts, has despised collective bargaining, consensus building and social dialogue. These disgraceful measures add to a labour reform which harms our collective bargaining agreement, reduces rights and makes firing even easier, increasing the unemployment rate. With these measures, the economy will stagnate even further, and unemployment will reach six million by the end of 2012.

The last set of cuts took their toll especially on the mining sector, reducing public subsidies by 64%. This resulted in the ‘black march’, with hundreds of miners walking more than 500km until reaching Madrid last week in order to claim for justice. If the banks were rescued; if the rich, who caused this crisis, are not contributing to solve it; it is unfair that it must be the workers who have to once again pay the price of a recovery which is not even taking place.

This situation requires a quick, massive and overwhelming trade union answer. The dismantling of the state and of public policies will not be left unanswered. The two major Spanish trade unions, CCOO and UGT, have called for a day of action on 19 July in every provincial capital in order to show the people’s rejection of the government’s cuts. This mobilisation is also supported by other trade unions and civil society organisations. This action day will not be a single landmark: from September onwards, the unions will continue to work on this wave of actions which will grow steadily.

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Europe’s Unemployment Hits a new High

July 2, 2012

By PAN PYLAS | AP | JULY 2, 2012

Unemployment in the 17-country euro currency bloc hit another record in May as the continent teetered on the edge of recession because of its crippling financial crisis, official figures showed Monday.

Eurostat, the EU’s statistics office, said unemployment rose to 11.1 percent in May from 11 percent the previous month. May’s rate was the highest since the euro was launched in 1999 and adds further urgency to the eurozone countries’ plan to create economic growth and cut excessive government debt.

At a summit last Friday, eurozone leaders agreed a set of short- and long-term measures to shore up the euro and unveiled a limited economic growth package. Markets have responded positively with a stock market rally which, if sustained, should help buoy economic confidence in the eurozone – a key step to easing the crisis.

May’s unemployment rate compares badly with an unemployment rate of 8.2 percent in the United States and only 4.4 percent in Japan, and is expected to rise further in the coming months as the eurozone economy teeters on the edge of recession.

“With the eurozone likely having suffered appreciable GDP contraction in the second quarter and in grave danger of contracting again in the third, and with eurozone business confidence generally low and fragile, the likelihood is that the eurozone unemployment rate will move significantly higher over the coming months,” said Howard Archer, chief European economist at IHS Global Insight.

In total, 17.6 million people were out of work in the eurozone in May, 1.8 million higher than a year earlier.

Unemployment has been edging higher for over a year as concerns over the debt crisis and the future of the euro currency have weighed on economic activity. Businesses have been cutting jobs or delaying hiring as confidence in the economy waned, while many governments have pursued austerity programs, including big job reductions in the public sector.

There are huge disparities across the eurozone, however.

The labor markets of those countries at the front line of the debt crisis, such as Greece and Spain, are suffering most due to their governments’ stringent austerity measures and deep recessions. The highest unemployment rate across the eurozone was recorded in Spain, where 24.6 percent of people were out of work in May. Even more dramatically, 52.1 percent of the country’s youth were unemployed.

Other countries in the eurozone, particularly those in the north, are faring better. Germany’s unemployment rate stood at only 5.6 percent. However, a raft of economic indicators in recent weeks have shown that Europe’s biggest economy is not immune to the problems in the rest of the region. Germany’s exports to other countries in the eurozone are under pressure and business confidence is waning.

Across the wider 27-country European Union, which includes non-euro countries such as Britain and Poland, unemployment edged up to 10.3 percent in May from 10.2 percent the month before.

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