Brussels sees darker times for Spain and Europe

By LUIS MIRANDA | THE REAL AGENDA | NOVEMBER 6, 2012

Brussels sees no green grass across the fence when it comes to an economic recovery. The economic forecasts for 2013, which will be made public on Friday, will describe a dark and rainy future for Spain and most likely the rest of Europe.

Forecasts are just that, good or bad omens based on leading indicators. But it remains to be seen whether or not they are right. But if the predictions issued by Brussels become reality, that reality will mean serious trouble for Spain and the rest of Europe. The European Commission anticipates that the GDP falls 1.6% this year and 1.5% in 2013.

Spanish government forecasts were more hopeful before the statement from the EU with phrases such as “We emerge from the crisis” and “there are hopeful signs”. These phrases were issued by the Minister for Employment, Fatima Banez, who had said that Spain would see a contraction of 1.5% for this year and a decrease of 0, 5% for 2013.

Next to the real exit from the crisis, the troubling data made public by Brussels is the government’s deficit. The massive austerity measures adopted by Spain only helped reduce the deficit by a meager 0.2 %. The painful measures that combined tax increases with deep cuts in expenses related to social programs did not work; just as it was intended to. The deficit will end the year at 8%, according to the Commission, but this number does not take into account the effect of recapitalization of banks. Expect the Spanish deficit to be much larger.

For 2013, the fiscal gap is 6%, and 5.8% by 2014. These numbers again do not include the bailouts of the banking system and the possible bailout of Spain as a whole. As predicted months ago, Spain will not be able to lower its deficit to 3 % of the GDP, which is the target requested by Brussels. That leaves three possibilities. The first is to extend the deadlines to meet targets, which has been demanded by the International Monetary Fund (IMF) in Brussels. This alternative is now getting stronger and is supported by several countries that are hanging from the debt cliff.

The second is to ask Spain for additional efforts. That is, more austerity and spending cuts, which as it has been seen in Greece, would result in no solution whatsoever. Most economists expect that agreements reached during future meetings will include a combination of both austerity and an extension for Spain and the other countries to reach their deficit goals.

Spain’s Economy Minister Luis de Guindos, expected a deficit of 7.3% this year, 4.5% next year and 2.8% in 2014, far below the projections made by analysts and official data from both Brussels as the International Monetary Fund (IMF) for next year and the next.

The Commission did not comment yesterday on the data. Clearly on all forecasts, Brussels and the Spanish government, weigh several unknowns, especially those relating to the effect of the increase in VAT (a real social experiment, with the country in recession) and the tax amnesty.

However, the Vice President and Competition Commissioner Joaquin Almunia, gave some clues in Madrid yesterday about the situation: government budgets for 2013 and associated economic forecasts show the efforts being made by both sides — income and expenses — but the accompanying macroeconomic picture is “far from the consensus.”

Almunia also hinted that Brussels has the feeling that Spain has denied the complete evidence, the depth of the crisis and the need to act thoroughly. “The delayed reaction is too often associated with Spain,” he said. Speaking at the New Economy Forum, he called “giving in to defeatism” and explained that the crisis “has a solution, tha will be overcome and is beginning to be overcome.”

“Trees should not impede us all to see the forest,” said Almunia. But the trees are just too tall. Brussels projections that approximate the most to those of the Spanish government are related to public debt. And even in that section the figures speak for themselves: the debt will end this year at 83.7%, the next at 89.5% and will be at 93.9% of GDP by 2014.

One thing is for sure: there is no sign that shows when the debt will stop growing. Meanwhile, Europe continues to advance an agenda that keeps on using the same old recipe of more austerity, while government expenses continue to grow. As we have explained here in multiple occasions, both Spain and Europe are — intentionally — going through a vicious cycle that will not result in the reduction of the deficit or the rescue of the economies that are heavily burdened by debt.

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UK Austerity to cut 10 billion pounds in Social Benefits

By LUIS MIRANDA | THE REAL AGENDA | OCTOBER 9, 2012

The British Minister of Economy, George Osborne, said Monday that he intends to cut another 10,000 million pounds in spending by cutting the expenses on social benefits by 2016-17. Osborne said the goal is to reduce the deficit.

While speaking to a crowd of Tories, Osborne said that he wants to eliminate aid to large families and housing subsidies for people who are under 25 years of age.

These cuts would be in addition to the reduction of 18,000 million pounds taken from government obligations through the approval of a bill announced in 2010, which affected pensions and subsidies and has involved hundreds of thousands of layoffs in the public sector.

In his speech to the militants “Tories” who met during the annual Conservative Party gathering, the Minister of Economy insisted on saying that while the wealthiest people should bear the  brunt of the crisis, it is also “fair” that the cuts are distributed throughout the whole population, including citizens who are dependent on state-sponsored programs. Osborne refused in multiple occasions to impose higher taxes on the richest people in the UK.

He promised however, to limit the income of citizens receiving social benefits, as well as aid given to the unemployed, the young, single mothers, disabled and low-income families; so that these people do not receive anymore help than those who go out looking for work.

Osborne announcement of the reduction of social benefits was immediately received with criticism dependent groups, while the minister said he will rule out raising taxes on high incomes. How is it that the wealthiest will bear their brunt of the crisis then?

He also dismissed the idea of ​​a new tax on mansions of more than two million pounds (2.47 billion euros), an idea first introduced by the Liberal Democrats, partners in the coalition government.

The minister warned the people that he would combat tax evasion in order to increase revenues. He said that he would fight “mercilessly” tax evasion and penalize those who attempt to evade payment by way of accounting maneuvers.

“We will finish what we started,” Osborne said to his fellow party allies, as he reminded the crowd about the government’s plan to reduce the deficit and debt which he associated with cutting help to the neediest people, while the size of government remains the same.

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France to subsidize jobs for young people

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 21, 2012

The government led by Francois Hollande will offer subsidized employment to young people for periods that will vary between one and three years.

The French Minister of Labour, Michel Sapin, has indicated that the French government will launch the program called “future jobs” for young unemployed and will subsidize those jobs from the state budget.

The program consists of temporary job positions for anyone who is unemployed with the objective to “further their training and integration,” said Sapin in an interview with the radio station ‘Europe 1’.

The minister has defended the initiative, despite its cost to public finances because “is one of the priorities for 2013” and also despite the government ‘s alleged commitment to reduce the deficit, specifically limiting it to 3 % of Gross Domestic Product (GDP) next year. Such a goal is seen as far fetched since France is not giving any signs of economic growth or significant recover. In fact, France together with Italy and Spain are countries which are seriously struggling to make their sovereign debt payments.

In that regard, Sapin has emphasized that markets have confidence in France as it shows that those who lend money “are even willing to lose some money.” France has echoed petitions by other European nations to get some kind of deficit amnesty in order to keep afloat due to their lack of capacity to meet their obligations.

Sapin believes that the latest French debt auction helps support his vision, because some of the purchases of short-and mid-term bonds were awarded negative interest rates. He has emphasized that the problems of unemployment — 4.3 million unemployed — can not be resolved quickly, and that it is a problem his government inherited from the previous administration.

With this move, France intends to avoid the unemployment debacle seen in other countries such as Greece and Spain, where the number of people without a job has pushed the rates over 24 percent for the young. In the case of Spain, people are calling the current generation of young, educated men and women as the “lost generation” whose member are unable to find work despite their academic achievement or experience.

With the start of the subsidized employment program, France to keep at least part of its population from starting popular protests to the austerity measures adopted by the government. “It is not enough to change the president or Congress” said Sapin before recognizing that France needs to adopt emergency measures such as “futures contracts” and proposed “deep reforms”.

The measures announced by Sapin include seeking funding for social programs “that does not penalize the companies competitiveness,” he added. It is important to remember that France recently passed a 75 percent increase in taxes for people earning just over $1 million a year as part of the policies to collect more money to finance the state’s increasing expenses.

Spanish People Take it to the Streets of Madrid

Citizens protesting against harsh austerity measures were met with violence from the police.

AFP | JULY 20, 2012

Spanish police fired rubber bullets and charged protestors in central Madrid early Friday at the end of a huge demonstration against economic crisis measures.

The protest was one of over 80 demonstrations called by unions across the county against civil servant pay cuts and tax hikes which drew tens of thousands of people, including police and firefighters wearing their helmets.

“Hands up, this is a robbery!” protesters bellowed as they marched through the streets of the Spanish capital.

At the end of the peaceful protest dozens of protestors lingered at the Puerta del Sol, a large square in the heart of Madrid where the demonstration wound up late on Thursday.

Some threw bottles at police and set up barriers made up of plastic bins and cardboard boxes in the middle of side streets leading to the square and set them on fire, sending plumes of thick smoke into the air.

Riot police then charged some of the protestors, striking them with batons when they tried to reach the heavily-guarded parliament building.

The approach of the riot police sent protestors running through the streets of the Spanish capital as tourists sitting on outdoor patios looked on.

A police official told AFP that officers arrested seven people while six people were injured.

The protests held Thursday were the latest and biggest in an almost daily series of demonstrations that erupted last week when Prime Minister Mariano Rajoy announced measures to save 65 billion euros ($80 billion) and slash the public deficit.

Among the steps is a cut to the Christmas bonus paid to civil servants, equivalent to a seven-percent reduction in annual pay. This came on top of a pay cut in 2010, which was followed by a salary freeze.

“There’s nothing we can do but take to the street. We have lost between 10 and 15 percent of our pay in the past four years,” said Sara Alvera, 51, a worker in the justice sector, demonstrating in Madrid.

“These measures won’t help end the crisis.”

Spain is struggling with its second recession in four years and an unemployment rate of more than 24 percent.

Under pressure from the European Union to stabilise Spain’s public finances, the conservative government also cut unemployment benefits and increased sales tax, with the upper limit rising from 18 to 21 percent.

As Rajoy’s conservative Popular Party passed the measures with its majority in parliament Thursday, Budget Minister Cristobal Montoro defended them, insisting they were needed to lower Spain’s borrowing costs.

“There is no money in the coffers to pay for public services. We are making reforms that will allow us to better finance ourselves,” he said.

Protestors angrily rejected this claim.

“There isn’t a shortage of money — there are too many thieves,” read one sign hoisted in the Madrid crowd.

Critics say the government’s new austerity measures will worsen economic conditions for ordinary people.

Cristina Blesa, a 55-year-old teacher, said she and her husband would struggle to pay their son’s university tuition fees because of the cuts and tax hikes.

“We’re earning less and less and at the same time the price of everything is going up,” she said at the Madrid protest.

“Now with the rise in VAT everything is going to be even more expensive. It’s more and more difficult at the end of the month.”

Spain is due this month to become the fourth eurozone country, after Greece, Ireland and Portugal, to get bailout funds in the current crisis, when it receives the first loan from a 100-billion-euro credit line for its banks.

Eurozone leaders were expected to finalise the deal in a telephone conference on Friday.

Spain had to offer investors sharply higher interest rates in a bond sale on Thursday, suggesting investors remain worried over the country’s ability to repay its debts.

Protestors complained that they were being made to pay for the financial crisis while banks and the rich were let off.

“We have to all come out into the street, firefighters, street-sweepers, nurses, to say: enough,” said Manuel Amaro, a 38-year-old fireman in Madrid holding his black helmet by his side.

“If we don’t, I don’t know where this is going to end.”

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

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.