Category: Europe

Romania Discovers that the Euro Sucks Wet Farts from Dead Pigeons………

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Romania is technically required to join the Euro at some point, but considering that they can set the date, my guess would be that date will be decades, if not centuries in the future:

………But as the euro crisis has deepened, it has also helped that Romania and the others have kept their own currencies.

That has given these still-developing countries a host of advantages, while many economists believe the euro zone’s one-size-fits-all monetary policy has hampered Ireland, Greece and Spain in restarting their moribund economies. Indeed, many of the post-Communist states are having strong second thoughts about their long-running goal of joining the euro.

Mugur Isarescu, the governor of the National Bank of Romania, said in an interview that maintaining its own currency had given Romania the flexibility to set interest rates, control liquidity and allow the currency to depreciate to help rein in the deficit. In the absence of control over monetary policy, he noted, euro zone countries like Greece are forced to rely primarily on fiscal policy: taxing and spending.

“Of course there is a backlash and disappointment because E.U. accession was seen as a panacea,” he said. “The dreams were too high.”

In Romania’s case, maintaining its cheaper currency, the lei, has made its exports — two-thirds of which go to the euro zone — more competitive and given it a lower cost of living that has made the country a sudden draw for highly qualified workers from struggling euro zone countries.

………

Seven of the 10 former Communist countries in the European Union have yet to adopt the euro. The Czech Republic, which uses the koruna, wants a referendum before joining and has cited 2020 as the earliest target date. Hungary has stuck with its currency, the forint, and said it would not adopt the euro before 2018. In Poland, Prime Minister Donald Tusk recently deemed the euro “completely unattractive.”

Romania’s previous target for joining the euro zone, in 2015, is now “out of the question,” is actually Mr. Isarescu said.………

The Czech Republic is potentially the most interesting case.

They have a very real possibility, both by virtue of their location and history, of becoming a manufacturing powerhouse that could be a very serious competitor to Germany.

If the Czech Republic drags its feet on Euro accession, and they start grabbing market share from the Germans, one wonders when the German politicians will start sounding more “Mediterranean”.

Greek Journalist Acquitted

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Costas Vaxevanis, who was persecuted prosecuted for publishing a list of Greeks with large Swiss bank accounts, has been acquitted:

A Greek journalist who published the names of more than 2,000 of his compatriots who held Swiss bank accounts was acquitted on Thursday in a case that touched a nerve over the role of tax evasion in the country’s debt crisis.

The trial of Costas Vaxevanis, editor of the weekly Hot Doc magazine, had aroused international concern and intense interest among Greeks hit by the impact of the country’s economic collapse and angry at the privileges of the elite.

He could have faced up to two year years in prison on charges of violating data privacy laws that Vaxevanis said were politically motivated and the result of politicians protecting an “untouchable” wealthy class.

His speedy arrest and trial following publication of the “Lagarde List” at the weekend – so named for Christine Lagarde, the head of the International Monetary Fund – touched a nerve in near-bankrupt Greece, where rampant tax evasion is undermining a struggle to cut public costs and raise revenue under an EU/IMF bailout deal.

It also enraged many who are already furious over the failure of consecutive governments to crack down on the rich while years of recession have wiped out a fifth of economic output and hammered middle-class living standards.

As the old saying goes, “A fish rots from the head.”

Former IMF chief economist Simon Johnson notes, in situations like this, the first priority really has to be breaking the grip of the corrupt elites has over society and over the economy.

That is not going to happen, because the Greek leadership is incapable of doing this, and the corrupt elites in the rest of the EU do not want someone telling regulators where the bodied are buried.

Germans Give the Gift of Malaria

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Because of austerity and EU mandated depression, malaria is making a comeback in Greece:

Global health bodies have issued warnings to travellers to the worst hit region in the south of the country, with fears that Athens could soon be affected.

Austerity budgets have resulted in drastic cutbacks in municipal spraying schemes to combat mosquito borne diseases.

In what is believed to be a first for Western Europe, Greece has experienced the first domestic cases of malaria since 1974.

Other mosquito-borne diseases that have slipped back into Greece include West Nile virus.

Statistics show that there were 70 instances of mosquito borne diseases in Greece in the first nine months of the year.

Seriously, Germany is not just going to kill the Euro, it’s going to kill the EU.

This Ain’t About the Free Market

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The news that BAE and EADS are in merger discussions has very little to do with the market or market efficiencies.

It’s about EADS purchasing an entry in the the US market, one which BAE purchased when it bought United Defense,  Tracor,  LMCS, LMAES, etc.

Ironically, BAE sold its 20% share in EADS about 6 years ago.

The reality is that the defense market is essentially a monopsony, with governments in general, and the US government in particular serving as a single buyer, though with this merger the other end of the dynamic is heading more towards monopoly as well.

Thus, I find the protestations by BAE management that the French and German governments must not have the ability to exert realistic shareholder rights, together they own about 45% of EADS, to ring a bit hollow:

BAE Systems has insisted it will walk away from talks with EADS unless the combined European champion in aerospace and defence was allowed to operate as a normal company without political interference.

 BAE is also insisting that the combined entity’s defence business would have to be based in the UK if the plan, news of which was leaked on Wednesday before the structure was finalised, is to go ahead.

Gee, a defense contractor must be kept free of political influence?

This deal is all about creating an entity that can manipulate the politics to its own advantage.

The insistence that the French and German governments sell out, if they didn’t they would have about a 27% stake in the merged firm, is all about the company being able to whipsaw governments with  promises, or threats, about defense jobs.

Thanks Angie

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The Euro Zone is back in recession:

The economy in the euro zone officially shifted to contraction from stagnation in the second quarter of 2012, data showed on Tuesday, portending a recession for the region later in the year that would put even more pressure on political leaders struggling to keep the common currency intact.

Gross domestic product from April through June fell 0.2 percent from the previous quarter for the 17 countries that use the euro, according to preliminary estimates by Eurostat, the European Union’s statistics agency. In the previous quarter, growth was zero.

Economists said the decline in output, caused partly by government budget cutting, meant the euro zone was likely to enter recession, broadly defined as two consecutive quarters of shrinking output. Even the German economy, which has helped compensate for weakness in Italy and Spain, seemed to be losing momentum.

“Growth of the German economy was no longer strong enough to keep the total euro zone economy above the zero line,” Christoph Weil, an economist at Commerzbank, wrote in a note to clients.

The newest data added to the challenges facing euro zone leaders as they return from vacation and again confront the debt crisis. Slower growth almost automatically translates into lower tax receipts, because people lose their jobs and companies earn less profit. That, in turn, puts even more stress on government budgets.

Madam Chancellor, this is an artifact your austerity fetish.

No Rule of Law for You!

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Well, we now have reports that
Ecuador intends to grant Julian Assange asylum, but it appears that the British are threatening to storm the embassy:

Ecuador has accused the UK of making a “threat” to enter its embassy in London to arrest Wikileaks’ Julian Assange.

Mr Assange took refuge at the embassy in June to avoid extradition to Sweden, where he faces questioning over assault and rape claims, which he denies.

Ecuador foreign minister Ricardo Patino also said a decision on the 41-year-old’s bid for political asylum had been made and would be announced later.

The Foreign Office said it could revoke the embassy’s diplomatic status.

………

At a news conference in Quito on Wednesday, Mr Patino said a letter from the UK government was delivered through a British embassy official.

“Today we received from the United Kingdom an express threat, in writing, that they might storm our Embassy in London if we don’t hand over Julian Assange,” he said.

“Ecuador rejects in the most emphatic terms the explicit threat of the British official communication.”

He said such a threat was “improper of a democratic, civilised and rule abiding country”.

“If the measure announced in the British official communication is enacted, it will be interpreted by Ecuador as an unacceptable, unfriendly and hostile act and as an attempt against our sovereignty. It would force us to respond,” he said.

“We are not a British colony”.

A Foreign Office spokesman said the UK remained “determined” to fulfill its obligation to extradite Mr Assange.

If you are old enough to remember the Iranian hostage crisis, it wasn’t the Iranian government that took the American embassy in Tehran, it was a bunch of kids with no “official” ties to the government.

Even Ayatollah Khomeini understood that the consequences of flaunting the sanctity required a fig leaf.

The British are not doing this for the Swedes. They are doing this because the US government, with the certain knowledge of, and likely active participation of Barack Obama personally, has demanded this.

Seriously, Obama’s war on whistle blowers makes Richard Nixon look like the Sunlight Foundation.

The Next Gen Gripen Looks to Be a World Beater

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Click for full size


This is a lot cheaper

Saab put out a very impressive briefing on the next generation of Gripen at Farnborough, where the headline was much lower direct operating costs:

Third (and most important) is that all air forces are finally realizing that operating costs are more important than acquisition costs. The debate over JSF costs – from the Navair leaks of 2010, through program director VAdm Dave Venlet’s “it makes their knees go weak” quote in April 2011 to Lockheed Martin’s recent assaults on the competence of Pentagon accountants – revolves around operating costs, and that is a fight that Gripen wins.

Saab says that the E/F will cost under $5,000 per flight hour – one-third to one-quarter of its estimates for Eurofighter, Rafale or JSF (Saab uses Australian numbers for the latter, which are lower than some).

These numbers are not just pie in the sky. The Gripen has been in service for over a decade, as has its engine, and it’s half the size of its competitors, and you pay for aircraft like you pay for ground beef, by the pound.  (And yes, the numbers for the JSF are unsupportable)

However, what I found most interesting was the fact that they touted the advantages of non-integrated avionics, (page 33) explaining how you can move more quickly if your tactical avionics are separate from flight critical systems, which also allows greater access by the operating nations who might want to make their own upgrades and weapons.

This is a direct challenge to the tightly integrated, and inaccessible avionics package in the JSF.

PDF after the break. (H/T Eric Palmer for the embed.)

Dutch Parliament Deals Blow to JSF

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The Dutch Parliament has voted to ask the PM and cabinet to cancel the jet order:

The Netherlands should scrap plans to buy F-35 Joint Strike Fighter jets because it cannot afford the project’s ballooning costs as the country attempts to cut spending, a majority of parliament said on Thursday.

One leading party, Labour, will submit a proposal to the 150-seat legislature on the last session before Sept. 12 elections calling for an end to Dutch participation in the Lockheed Martin Corp warplanes project.

Whether the Netherlands, which has already ordered two F-35 test planes, will quit the project depends on the outcome of the elections, and the new government that takes office afterwards.

The Dutch government collapsed over painful austerity measures in April, but the state has to cut costs by billions of euros to meet EU guidelines. About 4.5 billion euros has been set aside for the F-35 jets.

During a debate with Dutch Defence Minister Hans Hillen, lawmakers complained about the project’s escalating costs and said there were no guarantees over Dutch jobs or future costs.

I’m beginning to think that this will end up a lot like the F-111.

The only people who bought that plane were us and the Australians. (The British canceled after escalating costs)

We Are Not Looking at the Collapse of the Euro Zone

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We are looking at a collapse of the whole European.

If the Euro goes titsup in Greece, UK Prime Minister David Cameron intends to ban Greek immigrants if the country leaves the Euro:

David Cameron is prepared to override Britain’s historic obligations under EU treaties and impose stringent border controls that would block Greek citizens from entering the United Kingdom, if Greece is forced out of the single currency.

The prime minister told MPs that ministers have examined legal powers that would allow Britain to deprive Greek citizens of their right to free movement across the EU, if the eurozone crisis leads to “stresses and strains”.

In an appearance before senior MPs on the cross-party House of Commons liaison committee, the prime minister confirmed that ministers have drawn up contingency plans for “all sorts of different eventualities”.

Angela Merkel is not just threatening the Euro, she is putting the whole European Experiment is at risk.

Once Again Matt Taibbi Proves Me Irrelevant

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In this case, he’s all over the LIBOR manipulation scandal, where banks manipulated reporting of interbank lending rates in order to generate additional profits and create the illusion of financial health, with Barklays being at the center of the investigation for now (it’s cooperating with authorities)

So just go read Taibbi on the emails and recorded conversations, the Royal Bank of Scotland joining the dance, and allegations that the Bank of England (the British central bank )directed the conspiracy, which are backed up by internal emails.

He’s gets to the heart of the matter in a way that the non-financial wonk can understand.

Just go read him.

And Then They Turn to Blackmail

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The latest twist in the Barklays LIBOR price fixing scandal is that the (now former) CEO of the bank tried to blackmail the Bank of England:

The chairman resigns to save the CEO. The CEO makes a public threat to drag the central bank into the mire. And the previous government. And the Treasury.

Next morning, the CEO resigns and the chairman re-installs himself to “oversee transition”. The police, who said they could not prosecute, now say they might.

You have just seen the British establishment operating at a level of panic and indecision on a par with the Norway disaster in 1940. And it is not over.

These are people whose job is to speak to each other on a daily basis. But trust is shattered at the very top of the financial system.

He was claiming that the Bank of England approved the manipulation of the crucial interbank lending rate, there are witnesses who corroborate this:

On a crucial day (29 October 2008) the Bank of England’s Paul Tucker had a conversation with Bob Diamond, as a result of which, more junior Barclays employees came away with the impression that they had been instructed by the central bank to manipulate Libor down.

I want the same thing as the cat, someone frog marched out of their offices in handcuffs.

The Worm Has Turned

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Germany is clearly the largest power in the Euro Zone, but without a sycophant like Sarkozy in France, the 2nd largest power in Europe, it turns out that she actually can’t decree what will happen:

European leaders have moved to halt the crisis engulfing Spain and Italy by agreeing a radical bailout package for the single currency’s teetering banks.

Amid deep divisions over the debt and currency crisis, and under immense pressure to come up with credible moves, Angela Merkel, the German chancellor, softened her hard line on fiscal discipline and debt repayment to hand Mariano Rajoy, the Spanish prime minister, a summit triumph.

Leaders agreed to set up a supervisory system for eurozone banks that will form the first step towards full banking union, scrapped the requirement that governments get preferential status over private investors in the event of a default and eased the stiff terms for future bailouts.

When she has the governments of France, Spain, and Italy unite to oppose her, she had to blink.

I don’t expect her to do anything that she is not absolutely forced to do, but she is not an immovable object, and now the others in Europe realize this.

Merkel Blinks

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Thank God:

Under intense pressure at the G20 summit in Mexico to take more decisive action to contain the European sovereign debt crisis, eurozone leaders were reported last night to be preparing to allow the Continent’s bailout funds to intervene directly in the capital markets to ease the pressure on Spain and Italy.

G20 sources suggested that Angela Merkel, the German Chancellor, was preparing to allow eurozone institutions to begin buying bonds issued by member state’s governments. The purpose of the intervention would be to bring down sovereign bond yields of weaker eurozone states, which have been pushed up to unsustainable levels by wary investors in recent months. Spanish 10-year yields this week hit their highest levels in the history of the single currency at 7.28 per cent.

An impending move was hinted at by the Chancellor George Osborne last night. “We will see what the eurozone announce in the next couple of weeks, but there is no doubt that they realise that individual measures in individual countries are by themselves not enough,” he said.

Whoever knocked some sense into Merkel’s head should be commended.

Wrong Again, Matthew Saroff Edition.

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The Greek Democrats have formed a governing coalition including the 3rd place PASOK party:

A conservative-led government took power in Greece on Wednesday promising to negotiate softer terms on its harsh international bailout, help the people regain their dignity and steer the country through its biggest crisis for four decades.

The swearing-in of Antonis Samaras as prime minister after elections last Sunday ended weeks of uncertainty that rattled financial markets and threatened to push near-bankrupt Greece out of the euro zone.

Samaras, a Harvard-educated economist from a prominent Greek family, will head an alliance of his New Democracy party and Socialist PASOK rivals – the same discredited establishment parties which have dominated politics since 1974.

I said that it would not happen, and it did.  Oh, well.

BTW, the outgoing PASOK leader, George Papandreu, went to Harvard too (and Amherst, and the London School of Economics).

You know, I think that the value of a Harvard education might be overrated.

The Bad Guys Win in Greece

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I’m not sure what the right path is, but Antonis Samaras and the New Democracy Party, which appears to have eked out a 2% win, are not it.

They are the ones who created the crisis in the first place, working with Goldman Sachs to create the swaps that masked the debt.

I don’t see a government coming from this.

SYRISA, the leftist party, and close 2nd place finisher, wants to completely renegotiate the bailout agreement, and PASOK (Socialist in name only and almost as corrupt as the New Democracy Party) which fell even further as a 2rd place finisher has said that it will not join a government without SYRISA.

ND needs 43 seats to gain a majority, they have 108 in the 300 seat parliament, but SYRISA and PASOK have 104 together, which means that they would either need to go hard right (which would have to include the facist/neo-Nazi Golden Dawn) or try to thread the needle with the left of center, but not as left of center as SYRISA, Democratic Left, and the Independent Greeks, who were formed by politicians thrown out of ND when they voted against the austerity packages.

Not a clue as to how this will shake out.

Gripen Plans Progress

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It looks like the Swiss and the Swedes have got their program together:

Provided nationally endorsed plans in Sweden and Switzerland survive political or economic upsets, the JAS 39E/F, the product of the Gripen Demo and Next Generation programs, will be delivered to customers in 2018. This will mean that Saab and its supplier team will have created what is in most respects an entirely new aircraft, compared to the original JAS 39A/B, since development of the in-service C/D started in June 1997.

This has been done so far under fixed-price contracts for development, new production and retrofits, according to a presentation by FMV, the Swedish defense procurement organization. After the delivery of the last Gripen C/D, Saab returned an unspecified sum of money to the Swedish government because costs were lower than predicted.

More details of the JAS 39E/F emerged at an aerospace conference hosted by the Swedish air force and Saab earlier this month at Malmen air base, and attended by current and prospective Gripen operators.

The schedule is set by two interlocking commitments. The Swedish government has decided to replace the C/D with the E/F and has committed to developing the aircraft in time to support Switzerland’s requirements. The Swiss government has selected the E/F as the sole affordable replacement for the F-5E/F, and subject to a referendum and negotiations will sign a contract in 2014, triggering a full-scale go-ahead by Sweden .

Some development work will continue to lay the foundation for the four-year program. As long as the political process stays on track, the first of two built-from-the-ground-up E/F development aircraft, identified as 39-8, will fly in late 2013. The Gripen Demo has been equipped with a prototype of the Selex Raven ES-05 active, electronically scanned array radar and will be used to test the E/F’s revised avionics system and weapons.

The E/F airframe will be largely new, although it should be possible to use some major components from existing C/D airframes, including the wings. Mid and aft fuselage sections will be new, to accommodate the General Electric F414 engine (and its larger airflow) and the new landing gear. The blended wing-body sections will be larger, placing the wing attachment points an estimated 30 in. farther apart. The goal is to maintain the same wing loading for the E/F’s 2.5-ton increase in gross weight. The body will be slightly longer, maintaining or improving fineness ratio. Sources suggest the design will incorporate F-35-style diverterless supersonic inlets.

So, it looks like the New Gripen is going to be basically a new aircraft.

One of the interesting points is that they intend a large amount of systems commonality between the E/F and the C/D, particularly in terms of upgrades, which can serve to address concerns about the costs of upgrades, which Norway used as an alibi to select the F-35. 

It should that this did problem did occur with Italy, when they were the sole customer for the Sparrow capable F-104S, and were stuck with shouldering upgrades on their own.

Seeing as how the Gripen is about half the direct operating cost of the Typhoon and Rafale, and probably less than 1/3 that of the F-35, I think that it continues to occupy a niche at the low end of the market.