Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
by Fran on Tue May 5th, 2009 at 01:41:20 PM EST
Fiat boss Marchionne commits to Opel plants in Germany | Germany | Deutsche Welle | 05.05.2009
The head of Italian automaker Fiat, Sergio Marchionne, has said in an interview he wants to keep open all four Opel plants in Germany after a possible takeover of the struggling carmaker.  

In an interview in the Tuesday edition of the Bild newspaper, Marchionne said he wants to hold on to all of the four Opel plants in Germany but that job cuts may be inevitable.

"We don't want to close any of the four Opel plants in Germany. I need these plants in the future to build sufficient numbers of cars," Marchionne told the paper. "But of course the work force will have to be cut. Nobody can change that," the Fiat CEO said.

by Fran on Tue May 5th, 2009 at 01:45:01 PM EST
[ Parent ]
Fiat unveils takeover plan for Opel | Business | Deutsche Welle | 04.05.2009
German Economics Minister Karl-Theodor zu Guttenberg has expressed cautious optimism about Fiat's bid to buy struggling German carmaker, Opel. But, he also said he was open to bids from other suitors.  

On Monday, the head of Fiat met separately with Guttenberg, Chancellor Angela Merkel and Vice-Chancellor Frank-Walter Steinmeier for high-level talks to discuss the Italian automaker's plans for an Opel takeover.

The CEO of Italy's Fiat, Sergio Marchionne, presented an audacious plan at the talks in Berlin to snap up all of US carmaker General Motor's European operations and merge them with bankrupt Chrysler to create a new global auto giant.Fiat CEO Sergio Marchionne's bid for Opel includes all of GM's European operations

Marchionne touted the plan as a "marriage made in heaven."

by Fran on Tue May 5th, 2009 at 01:47:30 PM EST
[ Parent ]
"We don't want to close any of the four Opel plants in Germany

And I'd love to live the life of leisure. Seriously, how a highly leveraged Fiat expects to keep open 4 plants that serve the same market segment as it does while still operating bankrupt Chrysler exceeds my understanding. If I were Marchionne I'd be sorely tempted to take the brand and the patents and scrap the rest.

This entire Opel business is turning really bizarre. There have been reports that Fiat is the preferred candidate of CDU/CSU. Merkel's chosen car advisor, Roland Berger, just happens to sit on Fiat's supervisory board.

On the other side, reports are surfacing that the SPD has been using its contacts to Socialist Austrian ex-Chancellor Vranitzky, who sits on the board of Magna (the Austro-Canadian parts maker which also owns what used to by Steyr in Graz) to get Magna into the bidding.

Interesting times in the car biz.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Tue May 5th, 2009 at 02:53:30 PM EST
[ Parent ]
EUobserver / EU unemployment potentially explosive, says Juncker

EUOBSERVER / BRUSSELS - Euro group chief Jean Claude Juncker warned about the potential social fallout from the economic crisis during discussions on Europe's toxic assets and rising unemployment on Monday evening.

"We are in the heart of an economic and financial crisis and we are headed towards a social crisis," said Mr Juncker after a meeting with eurozone finance ministers, and described the fallout as potentially "explosive".

The eurozone may be heading towards a social crisis, says Mr Juncker

Earlier, economy commissioner Joaquin Almunia presented the EU executive's latest economic forecast to the euro area finance ministers which project unemployment to rise to 9.9 percent for the euro area this year and 9.4 percent for the EU27.

Mr Juncker, who was a labour minister in Luxembourg for 17 years, welcomed the commission's report and said greater emphasis must be placed on schemes to increase employability such as life-long learning and training programmes for workers on shortened weeks.

by Fran on Tue May 5th, 2009 at 01:49:10 PM EST
[ Parent ]
British businessman released on record bail of 100 million euros - Telegraph
A British businessman says he has been made the scapegoat for Austria's economic downturn after being arrested when the share price of one of his companies collapsed.

Julius Meinl V, the head of Austria's largest private bank, was detained over an alleged fraud and released, without charge, only after a world record bail of €100 million (£90 million) was paid.

He spent two nights in a cell after police raided his home and offices in Vienna following the collapse in value of Meinl European Land, an investment fund managed by his Meinl Bank.

He has been demonised in the media as Austria's equivalent of Sir Fred Goodwin, who presided over the collapse of the Royal Bank of Scotland. However, Meinl Bank, unlike RBS, has no debts and has not been given a state bail-out.

by Fran on Tue May 5th, 2009 at 01:53:13 PM EST
[ Parent ]
Obama targets "tax haven" Netherlands - Radio Netherlands Worldwide - English

The Netherlands is a corporate tax haven for US multinationals, and together with Ireland and Bermuda it is sheltering companies' earnings from the American tax authorities, president Barack Obama said on Monday. As long as they keep their earnings overseas US companies are legally exempt from paying. Taxes only become due when the money is "repatriated" to the United States.

The current practice is perfectly legal, but the US government considers it harmful to the American economy. President Obama announced a crackdown on the tax shelters, aiming to raise 210 billion dollars in taxes over the next decade. A Wall Street Journal report in April quoted a figure of 58 billion dollars in overseas earnings, which are out of the tax office's reach, losing it an estimated 20 billion dollars in tax revenue. One-third of the foreign profits in 2003 came from, what the US Treasury calls, "three small, low-tax countries: Bermuda, the Netherlands, and Ireland".

by Fran on Tue May 5th, 2009 at 01:54:00 PM EST
[ Parent ]
Obama targets "tax haven" Netherlands - Radio Netherlands Worldwide - English
Taxes levied abroad are much lower, with Ireland's corporate tax at 12.5 percent, and the Dutch rate at 0 (zero) percent.  

Emphasis mine. I think this is incorrect.

by Nomad (Bjinse) on Tue May 5th, 2009 at 03:14:21 PM EST
[ Parent ]
Fact checking ain't hard.

Corporation tax - corporate income tax

Rate (last update 3 January 2008)

2008: 20% over the first € 40,000, 23% over the next € 160,000 and 25.5% over the rest
2007: 20% over the first € 25,000, 23.5% over the next € 35,000 and 25.5% over the rest.
2005: 27% over the first € 22,689, 31% over the rest
2006: 25.5% over the first € 22,689, 29.6% over the rest

by Nomad (Bjinse) on Tue May 5th, 2009 at 03:21:41 PM EST
[ Parent ]
Gloomy Forecasts: EU Finance Ministers Mull Recession Measures - SPIEGEL ONLINE - News - International

Pessimism is rampant in the European Union with forecasts now assuming a 4 percent contraction in the bloc's economy this year. As budget deficits balloon and unemployment soars, finance ministers are meeting in Brussels on Tuesday to discuss measures to combat the crisis.

Amid extremely gloomy economic forecasts, Europe is bracing itself for a huge hike in unemployment, mounting budget deficits and, according to some, possible social unrest. The issues promise to loom large on Tuesday as European Union finance ministers gather in Brussels. And with some new member states facing severe budget difficulties, the 27 ministers are expected to double the amount of money it lends to some struggling countries.

 Germany's Finance Minister Peer Steinbrück (L) and his French counterpart Christine Lagarde look glum ahead of the EU finance ministers meeting on Tuesday. "It seems ... the recession is at its worst, but hopefully next year we'll start coming out of it," Czech Finance Minister Miroslav Kalousek, who chairs the meeting, told reporters ahead of the meeting.

Greece's Finance Minister Yannis Papathanassiou called on his counterparts to work at returning to fiscal discipline as soon as the crisis over. "We have to return to the limits of the Stability and Growth Pact," he said on Tuesday.

by Fran on Tue May 5th, 2009 at 01:56:53 PM EST
[ Parent ]
Adidas to close some European offices in cost-cutting maneuver | Business | Deutsche Welle | 05.05.2009
Adidas plans to shut down regional offices in Europe and Asia, and could close retail stores as part of a massive bid to cut costs. It reported an 80 percent plunge in first-quarter operating profit. 

The sporting goods giant said it aims to save more than 100 million euros ($132.4 million) a year, after reporting a drop in operating profits to 58 million euros - well below analyst predictions.

Adidas' German home market is facing its most severe recession since World War II, with the government forecasting a 6 percent contraction. Retail sales there fell 1.5 percent in March.

Taken in net terms, profit dropped 97 percent for the first quarter. A company statement also said sales had fallen by just two percent, 2.58 billion euros in the first three months of the year.

by Fran on Tue May 5th, 2009 at 01:58:08 PM EST
[ Parent ]
Royal Mint Partnership?

THE Royal Mint should be kept in the public sector, but run as a co-operative, it is being proposed.

Last month the UK Government announced its intention to turn the Mint, based at Llantrisant, into a company as a prelude to privatisation.

The move is being opposed by the workforce and some politicians.

Sustainable enterprise charity the Nordic Enterprise Trust has linked up with Martin Davies, leader of the Welsh "apolitical party" Newid to propose an alternative solution.

Under the pair's proposal, a Royal Mint Capital Partnership would be set up, with a structure entirely different to that of an orthodox public or private limited company.

The physical assets would be lodged with a "custodian" on behalf of the public - Newid believes this ought to be the National Assembly for the time being since the Royal Mint is situated on Welsh soil.

Shares in the company managing the business, the "managing partner", would be placed in trust for its management and staff, just like, for example, the John Lewis Partnership. This company would receive an agreed proportion of the revenues received from the Royal Mint's customers through the partnership.

Investors would become "capital partners'" rather than owners, sharing in the revenues.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue May 5th, 2009 at 02:12:04 PM EST
[ Parent ]
This is very good news, even though there is a tortuous journey still ahead. It will bring media attention. If the workers at the Mint fully support it, it will get even more attention - long lasting as well, as the fate of the Mint plays out.

I especially liked the reference to the Welsh traditional acceptance of cooperatives.


You can't be me, I'm taken

by Sven Triloqvist on Tue May 5th, 2009 at 02:25:36 PM EST
[ Parent ]

And good luck with the following steps.

Truth unfolds in time through a communal process.

by marco on Tue May 5th, 2009 at 03:04:44 PM EST
[ Parent ]
Is the "Custodian" and capital partnership approach suitable as an organizational structure for the national and international governance of the internet?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 5th, 2009 at 07:48:13 PM EST
[ Parent ]
I believe it is: it also enables a new synthesis between Open Source and proprietary software. It's possible to create a cross-border protocol which is both Open and Closed.

It's closed because only members may use it, but open, because anyone who consents to the agreement may be a member. Also a percentage of nothing is nothing so thosr interested in free (as in beer) software can participate......

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed May 6th, 2009 at 12:46:07 PM EST
[ Parent ]
Bernanke Sees Hopeful Signs but No Quick Recovery - NYTimes.com

WASHINGTON -- The chairman of the Federal Reserve, Ben S. Bernanke, said on Tuesday that the economy appeared to be stabilizing on many fronts but cautioned that a recovery was still months away and that "further sizable job losses" will continue even after an upturn begins. Skip to next paragraph NYT_VideoPlayerStart( { playerType : "article", videoId : "1194840002236" } );

"We continue to expect economic activity to bottom out, then to turn up later this year," Mr. Bernanke told the congressional Joint Economic Committee, according to his prepared remarks.

"Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while," he predicted. "We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly."

Notwithstanding his caveats, the Fed chairman gave his most upbeat assessment since the United States fell into its most severe financial crisis since the Depression and its steepest recession since at least the early 1980s.

He noted that consumer spending, which sank sharply the second half of 2008, actually grew in the first quarter of this year. Sales of existing homes have been "fairly stable" since late last year, in part because plunging home prices have made houses more affordable and interest rates on some fixed-rate mortgages have fallen below 5 percent.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Tue May 5th, 2009 at 03:11:17 PM EST
[ Parent ]
Andy Xie: "If China loses faith the dollar will collapse"

With increasingly dubious accounting and lax enforcement, the US capital markets no longer stand out by virtue of being better regulated. Yes, they still may be deeper and more liquid. But overseas buyers have to look hard at foreign exchange risk. The direction for the dollar in the long term is certain to be down. Overextended debtors trash their currencies (see the Great Depression, the Nordic and Swedish banking crises, and the Asian crisis for a few of many examples).

What is interesting about the Xie piece is that even the stalwart Chinese retail investor has become leery of the dollar. Despite th logic of "oh if you sell, you only hurt yourself", the flip side is if you become certain you are indeed holding a depreciating asset, it makes sense to exit. You want to be early, not late, out.

And that logic, if it starts to take hold, in classic run on the bank fashion, could lead to a disorderly fall in the dollar. It isn't clear what the trigger might be, but Bob Shiller contends that sudden flights from markets don't necessarily require an event to kick them off. And given that Willem Buiter, who though fond of colorful writing, is hardly an extremist, foresees a collapse in dollar assets if the US fails to contain its fiscal deficit, talk of a dollar plunge isn't a a radical view.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 5th, 2009 at 09:02:17 PM EST
[ Parent ]
FT.com | Willem Buiter's Maverecon | What's left of central bank independence?
The modern independent central bank was born in New Zealand in 1989. It had a short life.  The onset of the financial crisis of the north Atlantic region in August 2007 signalled the beginning of the end.  Today, only the ECB still has a significant degree of operational independence left, and it will have to give that up if it is to be effective in the current phase of the crisis. In other words, the ECB is the last central bank to understand that, if it is to play a significant financial stability role, it cannot retain the degree of operational independence it was granted in the Treaty over monetary policy in the pursuit of price stability.


Fundamental target independence - the right to choose its own fundamental objective or objectives - is possessed by no central bank.  Even the most independent of all central banks, the ECB, has its multiple fundamental objectives laid down in an external document - the Treaty Establishing the European Community.  Article 105 states that "The primary objective of the ESCB shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2. The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 4."


Operational independence is the freedom or ability of a central bank to pursue its objectives (regardless of who sets them) as it sees fit, without interference or pressure from third parties. It is not a binary variable but a matter of degree. Operational independence from an elected, sovereign government is not easily achieved.


There can be little doubt that the ECB is the central bank with the highest degree of formal or legal operational independence. Since it also sets its own operational objectives (medium term HICP inflation below but close to two percent per annum ), it can also be characterized as the most independent central bank, when operational independence and target/goal independence are taken together.  The ECB's operational independence and its mandate are enshrined in the Treaty establishing the European Community and the associated Protocol. These can only be amended through a Treaty revision requiring the unanimous consent of the EU member states (currently 27 in number).

Interestingly, he "conventional" a monetary policy that has been in effect only since 1989 by his own analysis, and that is based on an economic theory - monetarism - which holds sway among economists and policymakers only since the 1970's.

Unconventional monetary policies require close central bank - Treasury cooperation

Every time a central bank makes a loan at the discount window or engages in a reverse repo secured against private collateral, it takes credit risk (default risk).  In the Euro Area, the ECB even takes credit risk when in accepts the Treasury debt of some of the Euro Area member states as collateral in its lending operations.  There is no guarantee that cross-border fiscal solidarity in the Euro Area will ensure that sovereign debt issued by fiscally incontinent member states will be made good by Germany and other member states with deep pockets.


It is a mistake for central bankers to express, in their official capacities, views on what they consider to be necessary or desirable fiscal and structural reforms. Examples are social security reform and the minimum wage, subjects on which Alan Greenspan liked to pontificate when he was Chairman of the Board of Governors of the Federal Reserve System, and Ben Bernanke's tendency to lecture on everything, from equality and opportunity to teenage pregnancy. It is not the job of any central banker to lecture, in an official capacity, the minister of finance on fiscal sustainability and budgetary restraint, or to hector the minister of the economy on the need for structural reform of factor markets, product markets and financial markets. This is not part of the mandate of central banks and it is not part of their areas of professional competence.


Even a nano-second of reflection will convince you that financial stability requires the close cooperation and coordination of the source of ultimate, unquestioned liquidity (the central bank), the ultimate deep pockets (the Treasury) and the supervisor/regulator.  Recognition that such a tripartite or quadripartite arrangement is necessary for financial stability (both ex-ante, that is, the prevention of instability, and ex-post, that is, dealing with the instability that happens is spite of (or because of) the ex-ante best efforts) does not answer the question as to how many institutions should be involved, and what the lines of authority among them should be.

We live in interesting times.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Wed May 6th, 2009 at 06:26:08 AM EST
[ Parent ]
Leaking under stress - Paul Krugman Blog - NYTimes.com (May 4, 2009)
John Hempton has a good question, which other people have asked me: who is leaking about the stress tests?


... there's Yves Smith's version: these are all trial balloons to see how outsiders will react to different stress reports.

But that just adds to the bad feeling about all this. Even Brad DeLong, who has been relatively sympathetic to the administration here, is disturbed by the idea that regulators are negotiating with the banks about the test results. Now it seems as if the report's contents may also be dictated by what, based on the response to leaks, the informed public is willing to swallow. ("Would you believe it if we say Citi is fine? OK, what if we say they need $5 billion? Not enough? How about 10?")


Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Wed May 6th, 2009 at 09:29:06 AM EST
[ Parent ]


Occasional Series