The Passion of Monti: A Christmas Story

Author: Marc Chandler · December 27th, 2012 · RGE EconoMonitor

The political dysfunction of the world’s largest economy is epic. Even though Mr. Market is not forcing the US hand, the political class is intent on shooting itself in the foot. Yet the uncertainty over next year’s marginal tax rates has not impacted the hiring process as the average monthly non-farm payroll growth has not diminished. Nor have investment plans been adversely impacted. Non-defense durable goods orders, excluding aircraft, a useful proxy for capital investment, rose 2.7% in November after posting a 3.2% increase in October.

Italy is not as fortunate. Its economy is contracting. Mr Market is likely to be less patient. Although Italy’s net debt issuance in 2013 appears less than in 2012, there is little room for error.

Monti was looked upon as the savior of Italy after Berlusconi had undermined its gravitas on the world stage with his antics that are unbecoming of a man of his stature. Yet Monti took his role too seriously and not seriously enough.

Is Growth Over?

Date: 28-12-2012

Source: Paul Krugman

The great bulk of the economic commentary you read in the papers is focused on the short run: the effects of the “fiscal cliff” on U.S. recovery, the stresses on the euro, Japan’s latest attempt to break out of deflation. This focus is understandable, since one global depression can ruin your whole day. But our current travails will eventually end. What do we know about the prospects for long-run prosperity? 

The answer is: less than we think.

The long-term projections produced by official agencies, like the Congressional Budget Office, generally make two big assumptions. One is that economic growth over the next few decades will resemble growth over the past few decades. In particular, productivity — the key driver of growth — is projected to rise at a rate not too different from its average growth since the 1970s. On the other side, however, these projections generally assume that income inequality, which soared over the past three decades, will increase only modestly looking forward. 

Behind the Scenes in Brussels: EU Summit Reveals a Paralyzed Continent

An amazing and enlightening analysis – discouraging, disillusioning, just confirming the „hopelessness“ of trust in the political „elite“ of Europe. A friend of mine calls it the „most shocking article of the year“. (hfk) Nur eine bescheidene Frage: War da Faymann eigentlich auch dabei???
   Date: 27-12-2012
Source: SPIEGEL

Media reports of European Union summits are often full of tales of conflict and endless debate. But what really happens? It is not always easy to know and the lack of transparancy is one of the key criticisms of the European Union
Merkel, 58, a Christian Democrat, the chancellor of Germany for the last seven years, and Hollande, also 58, a Socialist and president of France for more than half a year now, rarely agree. Merkel was outraged when Hollande said in October that the German position on Europe is already being influenced by the upcoming parliamentary election in the fall of 2013. How could he! It annoys Hollande that Merkel paints herself as a great European, and yet is only interested in protecting Germany’s money.

Merkel is mainly interested in discussing competitiveness in Brussels. It’s the Germans‘ strength, and it’s an area in which Berlin can make demands of others without having to spend any money

What happens behind closed doors at an EU summit, when European leaders are among themselves? SPIEGEL has reconstructed the negotiations at the most recent meeting in Brussels in December based on documents and accounts given by numerous sources. It was a summit of hopelessness.

Lagarde Warning IMF Concerned about Possible German Austerity

Date: 27-12-2012
Source: DER SPIEGEL

International Monetary Fund head Christine Lagarde has said that Germany should be the motor of growth in the EU.

Germany should move slower on fiscal consolidation and savings to counteract the economic effects of austerity programs currently throttling growth in Southern Europe, argues Christine Lagarde. Still, the IMF chief remains cautiously optimistic about the euro-zone’s economic prospects for the next year.

International Monetary Fund head Christine Lagarde has said that Germany should not be looking at measures aimed at consolidating its finances, apparently in concern over a SPIEGEL report indicating that the German Finance Ministry is working on a far-reaching package of spending cuts and tax hikes for introduction following general elections next autumn. In an interview with the Thursday edition of the influential weekly Die Zeit, she said that Germany needs to continue to work as a counterbalance to the biting austerity programs passed in crisis-stricken countries in Southern Europe.