THOU shalt not incur a structural deficit. Thou shalt pay down thy excessive debt. Thou shalt adopt a balanced-budget rule in thy constitution, and subject it to the European Court of Justice...It took just a little more than 40 days and 40 nights for Angela Merkel to bring down the tablets of fiscal law. At a summit in Brussels this week, 25 European leaders pledged to observe this covenant and made burnt offerings of their economic sovereignty. But the children of Europe are crying into the wilderness: "œHow long, Lord, must we be tormented by austerity?"Mrs Merkel holds out the prophecy of a political union. For the time being, though, and for years to come, deficit-cutting is the only path to righteousness, she says. Look at Italy and Spain: markets relented once they started reform in earnest. Look at Greece, the doubters retort: EU-induced budget cuts are pushing it into recession and insurrection, and closer to chaotic default. And Portugal is testing the notion that Greece is alone.Some see hope in things that Mrs Merkel has not yet done. She did not block a...
ON A cold morning, when the mist rises over the canals that criss-cross the countryside, spreading over the woods and flatlands, the Netherlands does not feel like a sink-hole of pollution. But the ice-encrusted water is brimming with nitrates and phosphates, and the air is clogged with particulate matter.The country's poor environmental record is revealed in a report by Natuur & Milieu, an advocacy group. Rather than conduct its own measurements the group collected data from various official agencies. Its report shows the Dutch lagging behind their European peers for quality of air, soil and surface water, stuck in fossil-fuel dependency, and with exceptionally high carbon emissions.On Yale University's Environmental Performance Index, the Netherlands comes 20th out of the 27 EU countries. It scores particularly badly on the quality of its soil, where those phosphates and nitrates linger in large quantities. They seep into surface water, the quality of which is also below EU guidelines. Emissions of nitrogen monoxide and dioxide are triple the EU...
SINCE the start of the euro crisis, a hope has been that a way could be found to support governments that were temporarily short of cash (because of skittish bond investors) but that had public finances that were otherwise sound. The €489 billion ($643 billion) of cheap cash that the European Central Bank lent in December to banks for three years may prove such a scheme. With the promise of more long-term ECB loans to come, borrowing costs for euro-zone governments have fallen sharply, in part because banks have put some of the money to work by buying high-yielding bonds (see article).It is damning, in such propitious circumstances, that Portugal has not shared in the rush. Even as yields in other trouble spots, such as Ireland, Italy and Spain, have plunged since the start of the year, Portugal's have risen. In part this is because its bonds were downgraded to junk status on January 13th by Standard & Poor's, a ratings agency, forcing funds that can only hold investment-grade bonds to sell. The surge in yields on two-year Portuguese bonds is a sign that bondholders fear they will have to accept the kind of losses that Greece is still negotiating with its private-sector investors. When bond prices fall in anticipation of uniform losses, the implied yields on short-dated bonds rise by more...
FRANCE'S president, Nicolas Sarkozy, has not yet officially declared his candidacy, nor held a campaign rally. The third-placed contender and leader of the far-right National Front, Marine Le Pen, has yet to secure the support needed to appear on the ballot paper. Yet with less than three months before polling day the race for the presidency is well and truly under way.Fully 15 candidates have declared, although some may drop out before the first round of voting on April 22nd. They include a Green (Eva Joly), an anti-capitalist allied to the Communists (Jean-Luc Mélenchon), a Gaullist former prime minister (Dominique de Villepin), a Catholic traditionalist (Christine Boutin) and other fringe characters. But only four have any chance of making it into the second round run-off on May 6th: François Hollande, the Socialist candidate, Mr Sarkozy, Ms Le Pen, and François Bayrou, a centrist.
GERMANY'S intelligence services failed to detect a gang of neo-Nazis who murdered ten people over several years. Never mind. They have a vice-president of the Bundestag in their sights.Times are awkward for the 17 Offices for the Protection of the Constitution, as the domestic intelligence agencies are known (one at federal level and one for each of the 16 states). The "œZwickau cell" killed with impunity until two of its members shot themselves in November after fleeing a bank robbery. Perhaps that is because the spooks were busy watching the Left Party, the fourth-largest in the Bundestag. The federal office is monitoring 27 of its deputies, including Petra Pau (a Bundestag vice-president) and a member of the committee that oversees the intelligence services. The party, or affiliated groups, are also targets in most states. This constitutes "œdefamation of the opposition", complained Jan Korte, a legislator on the watch list.There are reasons to keep an eye on the Left Party. It is the direct descendant of East Germany's communists and expanded westward by attracting disgruntled Social Democrats. Although the party espouses "œdemocratic socialism" it harbours some groups that seem unsure about democracy. It has seats in 13 state legislatures and has helped govern, mostly pragmatically, three eastern states. The federal agency has been watching it since 1995.The fuss erupted...
IT IS a huge, gleaming spaceship moored imperiously in an old riverbed. But Valencia's iconic City of the Arts and Sciences complex floats on a tempestuous sea of regional debt.The dazzling masterpiece, by Santiago Calatrava, a local architect, is a reminder of the buoyant optimism that swept through this eastern region during Spain's boom years. But as Mariano Rajoy, the new prime minister, gets to grips with the country's fiscal problems, all eyes are on the regional governments that funded glittering projects like this.Mr Rajoy's centre-right People's Party (PP), which took power in December, largely blames the regions, which provide key services and account for a third of the country's public spending, for Spain's failure to meet last year's budget-deficit target agreed with the EU. Definitive data is absent, but the government says it missed the goal of 6% of GDP by at least two percentage points. The regions had been told to limit their deficits to 1.3%. FEDEA, a think-tank, reckons Valencia was one of the worst offenders, with an estimated deficit of 4.2%. Moody's, a ratings agency, has reduced the...
TIME was when "œPolnische Wirtschaft" (Polish economy) was a German byword for chaos and backwardness. Now it's a compliment. Germany trades more with Poland's healthy economy than it does with Russia's sickly one, including oil and gas. Other once-communist countries such as the Czech Republic are closely linked to German industry's supply chains"”more so, in fact, than some "œwestern" neighbours like Belgium or Denmark.The political consequences of Germany's historic eastward integration are still unfolding. The biggest shift is the end of distrust. This dated in part from the scars of the second world war, and more recently from Germany's close relationship with Russia under Gerhard Schröder. Since 2005, under his successor as Germany's chancellor, Angela Merkel, that has changed. From the Baltic to the Balkans, Germany is now seen as the natural leader in efforts to reform Europe's economy.In November Poland's foreign minister, Radek Sikorski, gave a big speech in Berlin in which he urged Germany to act to save the euro. So long as Poland was consulted, he said, it would follow...
SUMMITS are good for Angela Merkel. Germans like to watch the chancellor hobnob with the world's most powerful men. She stands out, for braininess and for bringing a flash of colour to the dark-suited scrums. But she undoubtedly belongs. Thanks to the euro crisis, summits happen almost as often as Republican presidential debates, giving Mrs Merkel frequent opportunities to press Germany's case, in her quietly insistent way. She was the opening speaker at the Davos powerfest on January 25th. On January 30th she will meet fellow European leaders in Brussels for yet another summit on the euro.Mrs Merkel does not always prevail and often fails to persuade. The IMF's head, Christine Lagarde, warned in Berlin on January 23rd that the world faces a "œ1930s moment". German obduracy on the euro might be a cause, she implied. But the crisis is no longer weakening Mrs Merkel at home. Talk of mutiny within her coalition has subsided since the Bundestag voted overwhelmingly in favour of bail-outs for peripheral euro zone countries late last year. And the public mood has changed. Early on, most Germans blamed feckless Greeks...
MARIO MONTI, Italy's prime minister, is set fair to become his country's Margaret Thatcher. But who will play the role of the miners, whose strike represented the most serious challenge to the Iron Lady's free-market reforms?Angry victims of Mr Monti's legislation have queued up for the honour ever since his government approved a wide-ranging package of liberalisation measures on January 20th. Taxi drivers held a one-day national strike to protest at a scheme to increase the number of licences. Chemists, who have a similar objection to a rise in the number of pharmacies, are to down pillboxes on February 1st. Lawyers, who oppose the abolition of minimum and maximum charges, plan a two-day strike later. There is a threat of industrial action by railway workers, upset by proposals to increase competition on commuter lines.So far the most effective and damaging action has been taken by self-employed lorry drivers, whose real gripe is over the soaring cost of diesel. Fuel prices were pushed higher by an increase in excise duty in the Monti government'...
NO FIREWORKS, no flag-waving crowds: just a champagne toast and a sigh of relief. That was the response on January 22nd, when Croats voted to join the European Union. The "œyes" camp won a two-thirds majority, far more convincing than anyone had expected. True, the reported turnout of 43% was low. But Croatia's voting rolls are out of date. Guessing at the real number of eligible voters and subtracting the diaspora, especially Bosnian Croats, the turnout may have been a respectable 60%, says Vesna Pusic, the foreign minister.Croatia's EU accession was negotiated by the Croatian Democratic Union (HDZ) government, which was thrashed in December's election. But it was backed by its left-leaning successor and by all main political figures, academics, institutions and the Catholic church. Parts of the nationalist right were against but the wind was knocked from their sails last week when a hero, Ante Gotovina, who was convicted last year by the UN war-crimes tribunal in The Hague, said the EU was where Croatia belonged.Explore our interactive guide to Europe's troubled economiesOpponents had argued that Croatia, which fought a war of independence against Yugoslavia two decades ago, should not now bind itself in a "œEuroslavia". They were backed by...
JUST when Sweden's opposition Social Democrats thought things could not get worse, they have. Indeed, Europe's most successful political party is in the throes of the worst crisis in its history. Hakan Juholt has quit as leader after only ten months, following a seemingly endless stream of blunders that led many party districts to call for him to go. The opinion polls are sending shivers through the party, with support hovering around 25%, its lowest ever.This is not entirely Mr Juholt's fault. The Social Democrats, who ruled Sweden for most of the 80 years until 2006, lost the elections in 2006 and 2010 because they failed to appeal to middle-class voters. Deep rifts have emerged between the party's left and right wings. The Greens and the Left Party, both of which have new and energetic leaders, have surged on the back of the Social Democrats' problems.The party's executive committee decided it should be speedy in choosing a successor to Mr Juholt. But finding one has not been easy. The Social Democrats have been criticised in recent years for failing to groom new leaders and attract talent. Mr Juholt, who was himself a compromise candidate, was largely unknown to most voters. The choice is always made behind closed doors, guided by a party culture that frowns on naked ambition. The etiquette is that candidates should deny any interest in the top job until they are made...
ONE recent night in Ankara Turkey's foreign minister, Ahmet Davutoglu, woke up drenched in sweat. "œI had a nightmare about a crisis in Libya," he recalls, speaking on his way to Brussels. "œThe real crisis was in Syria, though, and I was unable to fall back asleep."The bloodbath in Syria is only one headache afflicting the architect of Turkey's policy of "œzero problems with the neighbours". This week the French Senate passed a bill to make it a crime in France to deny that the mass killings of Ottoman Armenians in 1915 constituted genocide. Recep Tayyip Erdogan, Turkey's prime minister, had threatened retaliatory measures were the Senate to follow the lower house, which passed the measure in December. Yet no sanctions have been announced"”perhaps because they are unlikely to sway Nicolas Sarkozy, France's president, who is expected to sign the bill into law.Turkey may not care much about the fallout from this on its relationship with the European Union. The membership talks that began in 2005 have ground to a halt, not least because of Mr...
EVEN the right judged it a success. On January 22nd François Hollande, the Socialists' presidential candidate, addressed his first big rally at Le Bourget, an airport just north of Paris. He answered critics of his lacklustre campaign with a strong performance that electrified his supporters. The polls make him the clear favourite to beat Nicolas Sarkozy, the incumbent, in the second round of the election in May. Mr Sarkozy, who has yet formally to enter the race, has started to talk publicly about life beyond politics.To the surprise even of some who work with him, Mr Hollande declared war on global finance. The financial industry, he said, had grown into a nameless, faceless empire that has seized control of the economy and society. To tackle the enemy and restore the French dream, Mr Hollande wants to separate banks' "œspeculative" activities from their lending arms. He would outlaw "œtoxic" financial products, keep banks out of tax havens and ban stock options for all companies except start-ups.
Socialist dreamer
Bashing bankers is popular, even though the banks needed little...
THE buzzword in Brussels these days is "œgrowth". Perhaps the looming recession across much of Europe is concentrating minds. Or leaders may realise that the prospect of years of austerity is stirring bad blood. Unless the debt crisis was resolved and growth recovered, said Christine Lagarde, the IMF's head, Europe and the world risked reverting to the 1930s. At their next summit on January 30th, European Union leaders will solemnly talk of boosting output, tackling youth unemployment, supporting small firms and much else. They might even commit money to job creation, for example by recycling unspent EU funds through the European Investment Bank.Do not be fooled by such pieties. Everybody has different ideas about growth and they often reflect longstanding prejudices. For Germany, fostering growth is not about spending more money, but about fiscal discipline and structural reforms in weaker countries. For France, the priority is to curb "œdisloyal" competition, by harmonising taxes to stop low-tax states (eg, Ireland) taking business away from high-tax ones (eg, France), or stopping Britain from imposing tougher...
CREDIT-RATING agencies are a favoured scapegoat of many European politicians, incurring mounting wrath as they downgrade the debt of one sovereign after another. They stand accused of ignorance over European reforms or even of being part of an Anglo-American conspiracy to destroy the euro. Such opprobrium owes much to the fact that, although they are flawed arbiters, the rating agencies can speak uncomfortable truths. The decision by Standard & Poor's, one of the big three, to downgrade nine European governments on January 13th was an example. S&P punctured the optimism over recent bond auctions in Italy and Spain. It chastised governments for their inadequate response and their misguided obsession with austerity. And by drawing so many into the net, it made clear that the problem is not just individual countries, but the euro zone as a whole.Above all, by downgrading France from its AAA status"”and by leaving Germany as the only top-rated country with a "œstable" outlook"”S&P has changed the balance in Europe. At a stroke, it has restored the dividing line down the Rhine that generations of leaders have...
ARCANA such as credit ratings are not the usual butt of cartoonists and chat-show hosts. But thanks to President Nicolas Sarkozy, France's AAA rating became a national symbol last year. Every voter knew it was bad news when Standard & Poor's (S&P), a ratings agency, downgraded France from AAA to AA+ on January 13th. S&P blamed the euro-zone crisis and France's high debt. It also stripped Austria of its AAA rating and downgraded seven other countries. But Germany kept its top rating, despite being on credit watch. Had Germany also been downgraded, Mr Sarkozy's failings might have come under less intensive scrutiny.It was Mr Sarkozy himself who reportedly said last year that, if France lost its AAA, "œI am dead". François Baroin, finance minister, added that France could preserve its social model only if it kept the top rating. A poll this week for Europe 1, a radio station, found 68% of the French cared about the rating and thought its loss would have grave consequences. The main worry is that France's cost of borrowing will rise"”though so far rates have been steady.François Hollande, the...
ROMANIANS are not often thought of as combustible folk. That may change after the country was overrun by street protests that show no sign of letting up. Bucharest, the capital, saw its worst violence for 20 years, as protesters burnt tyres and scuffled with riot police. Dozens were hurt and the city centre was damaged.The riots were started by a public spat between Raed Arafat, a popular health-care official, and Traian Basescu, Romania's president, over a plan to privatise a medical-emergency system set up by Mr Arafat. The Palestinian-born doctor quit after Mr Basescu had called a television talk show to denounce his "œleftist views".The pro-Arafat demonstrations began on January 13th and reached their violent peak two days later, thanks partly to football hooligans, well used to fighting with the police. On January 16th the police made over 100 arrests. That largely stopped the violence but did not quell the anger. As the protests spread, the government said it would rethink its health plans. On January 17th it gave Mr Arafat his job back, pledging that he would be part of the team working to revise the proposals. "œNot even the president is perfect," said Emil Boc, the prime minister, blaming the crisis on "œmisunderstandings". Mr Arafat said he was amazed by his support.By then the protesters had other things on their minds. As many as 10,000 people continued their...
BEFORE the European Union summit on January 30th, Italy's new prime minister, Mario Monti, will have visited the German chancellor, Angela Merkel, the French president, Nicolas Sarkozy, and the British prime minister, David Cameron, whom he saw on January 18th. Herman Van Rompuy, president of the European Council, has been to see him in Rome. And the French, German and Italian leaders plan a pre-meeting just before the summit.It is a far cry from most of the second half of last year, when Europe's leaders did as much as they could to avoid being caught in a photograph with Mr Monti's scandal-tainted predecessor, Silvio Berlusconi. Italy, it seems fair to say, is back at the top table. And that could have far-reaching effects on the euro crisis. For, as he is making increasingly plain, Mr Monti's ideas on how to resolve it are significantly at odds with those of the Germans who have until now been doing most of the ordering"”and choosing pretty thin gruel."œAdherence to fiscal discipline is a necessary condition for growth," he told an audience at the London Stock Exchange on January 18th. "œIt is not however a...
RUSSIA'S first president, Boris Yeltsin, thrived in a crisis; he enjoyed spontaneity. By contrast, Vladimir Putin does not like uncertainty and prefers a plan"”like the one he hatched four years ago when he appointed Dmitry Medvedev to keep the presidential seat warm until he was able to return to the Kremlin in March 2012.So when protests erupted after rigged parliamentary elections in December, Mr Putin suspected a subversive plan and blamed America. The idea that protests were a natural response to blatant electoral fraud does not fit the Kremlin's view of a world based on interests, not values. Mr Putin's article in the pro-Kremlin Izvestia newspaper on January 16th confirms this.Its title, "œRussia is collecting itself", is a quotation from a dispatch in 1856 from Alexander Gorchakov, the then foreign minister, to Russian embassies in Europe after the Crimean war. "œRussia is reproached for isolating itself...They say Russia is angry. Russia is not angry. It is collecting itself," the foreign minister wrote. The Crimean war led to big domestic reforms, including the abolition of serfdom. Mr Putin's manifesto offers no such radical plans, but calls rather for consolidation in the face of turbulence.It portrays the protests as a jostling for political power. "œAt every opportunity 'rebels' turn into 'self-satisfied masters' who oppose any changes and...
A PAINTING on the ceiling of Madrid's Supreme Court shows a scene of Goya-like intensity, with knife-wielding savages and children being throttled to death. On the wall a sculpture depicts the crucifixion of Jesus. As Spain's most famous magistrate, Baltasar Garzón, went on trial on January 17th, supporters claimed he was suffering crucifixion. His enemies, who claim he has abused his powers and want him barred from the judiciary for 17 years, see him as more like the villains on the ceiling.Mr Garzón has made many enemies. They include supporters of Augusto Pinochet, the former Chilean dictator arrested in London on Mr Garzón's orders in 1998; and backers of the military junta that ran Argentina, since he used international human-rights law to prosecute and jail their henchmen in Spanish courts. But if his enemies abroad are numerous, so they are at home. Mr Garzón took on Socialist-led state terrorism and corruption in the conservative People's Party (PP), which now runs Spain, as well as drug barons, arms traffickers and the Basque terrorist group,...
