The moral implications of bail outs and austerity

Morally bankrupt.

Bankrupt?

How little we have seen of the human impact of the ongoing financial crisis in the Europe.

Of course we have seen reportage of the human reaction, be they stern faced Ministers assembling around large oak tables, shooing away the clucking throngs of news journalists awaiting any shred of carrion to be tossed from the wreckage, or the gathering crowds of unhappy protestors, waving banners before being strewn with rubber bullets by an equally unhappy, yet duty bound police.

And yet then, when we read on, we learn that Greece has asked for that, despite being reprehensible for having committed such and such an oversight, while doom laden Spain is sure to encounter this in their fate leaving it to Germany to propose that, and so forth.

As such the anthropomorphic labelling of whole countries is enabling both journalist and reader to be removed from what should be the real news story of the unfolding Eurozone disaster, the true cost to the everyday citizen. The people angle.

But it has suited the European Union to convey this image and the largely national-leaning print press to extenuate it. Define the problem as an entire country’s fiscal profligacy and then the only tool for debt solution is the EU's favoured austerity that must be shouldered by all. In Brussels it allows for a convenient bypass of democratic wont in order to transact further powers within their scope, while for national governments and newspapers, it conjures a sense of national unity  by lauding an "all-in-this-together" sermon that allows the weakest in society to be most heavily burdened, despite being the furthest removed from the causes of the crisis. What is so ironic is that while in Brussels, Barroso readily condemns the very notion of nationalistic, populist barriers to deepening European integration, he relies upon it implicitly to sell the Troika imposed programme of cuts to a nation. Everyone must do their bit.

Mr Barroso, it was your fiscal policy and foolhardy adherence to a single currency, placing political will before economic sense, that both caused the problem and continues to prolong it, so why must Senor Garcia be forced to work until his joints are ground to dust while his children will be taxed for the ills committed by their predecessors? I am sure when the concept of a single currency without unified fiscal policy was being drawn up he wasn't consulted.

Every country that found itself in the same position as the Eurozone after the credit crunch in 2008 was able to find a solution. In Iceland, the economy hit such a wall that the country defaulted and devalued the Krona. Iceland is now recovering very quickly and is borrowing again on the world markets as a creditworthy entity.

You see the debate that has raged in newspapers across Europe about what to do with a problem like Greece depends heavily on viewing each and every man, woman and child on an Athenian controlled island as both part of the problem and therefore responsible for its solution.

If a person borrows money, they receive the amount directly and must pay it back according to the terms and conditions. If a country borrows money, the citizens are unlikely to be informed of the loan, its purpose and certainly not its terms and conditions. How then does central government, let alone the government of a third country, morally justify imposed austerity?

Yet the personification of Greece as the naughty member of the Eurozone allows the EU to paint the picture of the reckless neighbour who, finding themselves unable to pay for their mortgage, appeals to the bank for help to keep their house. They are relucantly granted a reprieve on condition of some very stern, and of course wholly warranted, terms and conditions. Therefore if Greece gets a bail out at the cost of imposed spending cuts and strict austerity measures, then Spain would have to subscribe to the same punitive conditions if their economy is also to be rescued. Of course Senor Garcia cannot see why his benefits are being stripped when he has done nothing but work hard all his life. Meanwhile Germany, who does not find herself in such a financial mess, can bang the fist on the table and make demands which will affect the retirement age of Kirios Papadopoulos. Of course when I say Germany I mean Merkel and her cronies and their Brussels-based counterparts.

In 1995 Germany strongly opposed an IMF bail out of Mexico arguing moral hazard in giving a €17.8 billion loan as it essentially worked out as a rescue package for the American investors who had shored up so much Mexican short-term debt. Now the boot is on the other foot and it is German banks facing losses if Greece is allowed to go under, with as much as €22 billion of Greek public debt held by German investors. Suddenly Frau Merkel repeats the tune of solidarity for Greek and EU ears, but will happily pour scorn on Athens as and when it will placate her own people.

It may suit Brussels, political leaders, newspapers and ministers to talk about Greece, Spain, Germany, Portugal and Ireland as if they are characters in philosophical problem. But the real moral debate is not who should be paying the debt, but how.

EU STEALTH TAX

Poor old Cyprus has the difficult job of being at the helm of the rotating Presidency of the EU Council while negotiations over budget for the next seven years take place.
Their valliant attempt to cap the budget at  €1,033 billion  was effectively thrown out after EU ministers failed to agree yesterday.
While those countries inevitably filling their pockets as net benficiaries decried such a limit on spending, member states such as the UK, who bankroll a lot of the EU waste, are fighting hard to encourage the Commission to live by their own rules of zealous austerity that have been so damagingly imposed on bailed out Eurozone countries.
No wonder then , considering how morally and financially bankrupt the EU is, that the Commission has once again put in a bid for their own tax raising powers through a direct levy on consumers and businesses across the Union. This would mean Governments themselves would pay lesser contributions, while the European Commission dipped their hands into the pockets of the 500 million EU poopulation.
The proposals cover a one per cent rise in VAT which Brussels would siphon off to spend how they see fit. On top of this, disguised 'green' policies would see tax on fuel and flying also be driven towards the unelected bureaucrats in Brussels.
Britian has also been threated with having to give up the rebate, which sees Britian receive cashback from Brussels to offset discrepancies between contribution and funding. Where as other net contributors such as France benefit greatly from Agricultural spending, Britain receives little in relation to the funds poured into Brussels and so is the only country to receive a refund, something which many other member states oppose.
However without the rebate, Britain would top the table of contributions to Brussels meaning a hugely distorted per capita burden on the UK taxpayer.
It is often said there should be no taxation without representation. By gearing up to arm themselves with full fiscal powers, Brussels would effectively have created a self-funding, unimpeachable centralised government with little democratic representation.
The Commissars of Brussels prefer working via protection rackets and loan sharks than attempting to function as a 21st century democratic institution. The sooner the world wakes up to this, the better.

Unscrupulous but not sexist!

Insurance Companies.
Custodians of morality.
Purveyors of good will and justice.
Never the sort of industry to make assumptions, jump to conclusions and forge the edifice of their profit upon the shifting sands of prejudice.
This is why the EU, as a bastion of equality and sense, will impose the new EU Gender Directive on car insurance this December.
How utterly despicable that in this day and age, insurance companies decide how much your premium is going to be based upon likelihood to crash your car!

It is only right, surely, that women drivers be forced to pay up to £2,000 MORE a year, despite, generally, being safer and more prudent drivers than their brothers, boyfriends and husbands.

Now traditionally, women pay less than men for car insurance because statistics show that they have fewer accidents and cause less damage when they are involved in a crash. But the good people of Brussels aren't fans of tradition. So they decided it was better to bar insurers from charging men more than women based on the expectation of higher and more frequent payouts.

It is estimated the average woman will end up paying an extra £362 a year, or around £30 a month. Yet for female teens, the price hike could be more like 94%, pushing the total cost to £2000, which, let's face it, most teenagers cannot afford.

Sorry Susan, we cannot afford your car insurance. Better you walk home by yourself at night or take a dodgy looking minicab. Or you could stay at home and put the supper on.

The money will essentially be used to subsidide the lower premiums male drivers of the same age will enioy - although the drop in their insurance is likely to be only 9%.

So all's fair once again. We have the safest drivers covering the costs of the accidents of the most reckless, insurance companies opportunising and harvesting huge profits and the EU smiling beatifically at the balance they are forging as the arbiters of equality in Europe.

All Eyes on Germany This Wednesday

Wednesday could be the most pivotal day yet in deciding the fate of the Eurozone.

Yes we’ve had critical summits and last minute emergency meetings. But September 12 is being hailed by some as the day that could make or break the common currency as Germany’s constitutional court will announce whether or not the European Stability Mechanism, or permanent bail out fund of €700 billion, is legal according to German law. So far 14 of the 17 Eurozone members have ratified the treaty, with Estonia, Italy and Germany yet to put pen to paper.

It is the reaction in Germany however that will pull the most influence. As the economic powerhouse of Europe, Germany has already been criticised by George Soros, one of the world’s leading financiers, for failing to face the brunt of the crisis and has been warned that the Eurozone would face a long depression unless Germany are prepared to take on some of her neighbour’s debts. “Stay and lead, or quit the Euro” has been the message from Soros.

As the clock runs down on a rescue mission, it is becoming increasingly apparent that time is no longer on the side of the Eurozone. With Spain sizing up the possibility of needing a full state bail out, Prime Minister Mariano Rajoy has been clear in his intent to review all the conditions of seeking financial aid from the European Central Bank before arriving cap in hand. Nothing will be clear about the ECB’s recently announced bond buying plan until a rescue is requested, and how much this would mean signing over sovereignty to faceless bureaucrats in Brussels and at the IMF. Even if this were to happen, the Bundestag would then have to approve the terms of the agreement, and with recent backlash against the German Government from the media about the ECB’s proposals to buy Eurozone government debt, it is clear public opinion does not support the idea of Germany effectively bankrolling and underwriting the financial problems in other single currency member states.

Whereas in America, the banking crisis was quickly resolved after the collapse of Lehamn Brothers in 2008, Europe, due to its lack of federal unity, has been unable to find a weighty enough solution. On the same day as Germany decides on the legality of the ESM, the European Commission will announce proposals for a new Eurozone supervisor, an offshoot of the ECB that will regulate some 6,000 banks. Yet once again Germany is no longer playing ball. Whereas many see the creation of a supervisory institution as a concession to Germany’s demands that a watertight structure be brought in if German euros are to be used to underwrite Eurozone debt, Germany has now cast doubt on whether one central supervisor is enough and whether the ECB can supervise so many banks at onece. There has even been murmurings that some Germans suspect the French of trying to shift so much responsibility onto the ECB so as to deliberately render it impracticable. Meanwhile Britian, which houses the majorty of the EU’s financial industry, is of course outside the single currency and sceptical about any legislation or supervision that would shift power away from the City towards Brussels.

Even if a resolution is found, many still believe it is too late to make a real difference. The Eurozone is back in recession and unemployment has reached recird highs.

Also on Wednesday theDutch will go to the polls to decide on their future Government, with more vocal opposition to the country’s role in single currency bail outs than ever before. While it seems likely a pragmatic centrist government will be elected, there is no doubt that the ongoing Euro crisis has played a key role in many of the election campaigns with increasing public discontent over the handling of the Eurozone crisis and calls for the Netherlands to become  more assertive and sceptical about demands made in Brussels and by other Eurozone members.

Meanwhile in Greece the three party government cannot agree on austerity measyres designed to save almost €12 billion and ensure the next tranche of bail out funding from the IMF and EU. It is estimated that Greek debt is still at a whopping 166% of GDP. If the next chunk fo bail out money is withheld in the wake of insufficient reform, it is likely Greece would default, catapaulting the single currency back into crisis as markets would once again rally at the threat to the single currency, rocketing the cost of borrowing sky high and serving a heavy blow for Spain who is already teetering on the edge of insolvency.

According to Der Spiegel today Merkel’s rhetoric has somewhat changed on a Greek exit. Whereas before her and finance secretary Wolfgang Schäuble may have viewed Greece as the runt of the litter, it is reported she has now spoken out about the suffering of the Greek people in the wake of the crisis and implored that everything must be done to prevent a 'Grexit.'

This may of course also have something to do with the fact that in the wake of an exit, the €62billion owed by Greece to Germany would effectively have to be written off.

It will be interesting to see on Wednesday what the German Constitutional Court rules.

Bovine EID - What's your view?

Parliament has reconvened with a session in Strasbourg next week to kick things off. On the agenda and on my remit is the proposition that cattle received electronic identification tags, EID, in the same way that movement monitoring was introduced for sheep in 2008.

The farming community seem to see more sense in tagging cattle than sheep. Stringent paper records are already a requirement of the industry, and quite a few farmers believe switching to digitised record keeping will save time and effort. But what about money?

There is no stipulation under the proposals on who pays for the equipment, whether Bovine EID will be compulsory and whether strict penalties will be levied against non-compliance.

Sheep EID has suffered a great many issues, costing farmers hundreds of thousands through equipment failure and fines. Are we likely to encounter the same littany of issues when the ear tags are attached to cows? Is this monitoring really necessary? Before the introduction of such legislation, was farming and meat more dangerous, say, 30 years ago?

I will be reading into these matters and addressing Parliament next week and would appreciate any feedback from farmers about their concerns and questions. Feel free to comment on the blogpost.

In the meantime, here's a rather pertinent joke I stumbled across the other day.

A farmer named Bill was overseeing his herd in a remote mountainous pasture in Wales when suddenly a brand-new BMW advanced toward him out of a cloud of dust. The driver, a young man in a Brioni suit, Gucci shoes, RayBan sunglasses and YSL tie, leaned out the window and asked the farmer, "If I tell you exactly how many cows and calves you have in your herd, will you give me a calf?" Bill looks at the man, obviously a yuppie, then looks at his peacefully grazing herd and calmly answers, "Sure, why not?" The yuppie parks his car, whips out his Dell notebook computer, connects it to his Cingular RAZR V3 cell phone, and surfs to a NASA page on the Internet, where he calls up a GPS satellite to get an exact fix on his location which he then feeds to another NASA satellite that scans the area in an ultra-high-resolution photo. The young man then opens the digital photo in Adobe Photoshop and exports it to an image processing facility in Hamburg. Within seconds, he receives an email on his Palm Pilot that the image has been processed and the data stored. He then accesses an MS-SQL database through an ODBC connected Excel spreadsheet with email on his Blackberry and, after a few minutes, receives a response. Finally, he prints out a full-colour, 150-page report on his hi-tech, miniaturized HP LaserJet printer, turns to the farmer and says, "You have exactly 1,586 cows and calves." "That's right. Well, I guess you can take one of my calves," says Bill. He watches the young man select one of the animals and looks on with amusement as the young man stuffs it into the boot of his car. Then Bill says to the young man, "Hey, if I can tell you exactly what your business is, will you give me back my calf?" The young man thinks about it for a second and then says, "Okay, why not?" "You're a Member of the European Parliament", says Bill. "Wow! That's correct," says the yuppie, "but how did you guess that?" "No guessing required." answered the farmer. "You showed up here even though nobody called you; you want to get paid for an answer I already knew, to a question I never asked. You used millions of pounds worth of equipment trying to show me how much smarter than me you are; and you don't know a thing about how working people make a living - or about cows, for that matter. This is a flock of sheep... .... now give me back my bloody dog.