Tagged: Austerity
Irish People Protest against Austerity Cuts
Article first published as Irish People Protest against Austerity Cuts on Technorati.
Irish Congress of Trade Unions (ICTU) has called for protests against what he called as harshest budget ever since the state was established. Irish Police are expecting at least 50,000 people may participate in the protests. BBC News has reported that thousands of protesters are already gathering on Dublin streets.
The protests come a day after a humiliating defeat for the ruling coalition in a by-poll. The
majority for the ruling coalition has been reduced to just two from six seats after the by-election on Friday, November 26. As a result, the Irish Prime Minister is facing pressures to resign as he lost mandate to take any important decisions on Ireland’s future.
The proposed bailout package of 85 billion euros ($114 billion) is coming with costly austerity measures. The government has already delivered a set of austerity cuts for coming four years that include 5% reduction in minimum wages, pension freeze and public sector job cuts of more than 25,000.
Most depressingly, the media reports suggest that Ireland might be charged with 6.7 percent interest on bailout loans to prop up crisis hit Irish banks. This is well above the interest rate 5.2 percent charged to Greece bailout. This suggests that even more interest rate may be charged for other countries like Portugal and Spain that may claim for bailout in future. There is only 6
Portugal Workers Observe 24 hour Strike against 2011 Austerity Budget
Article first published as Portugal Workers Observe 24-hour Strike against 2011 Austerity Budget on Technorati.
Portugal’s two main two workers’ unions’ joint call for 24 hour strike is going successful as per government and unions’ data. Rail services are paralysed from north to south of the country, with 80% of the rail services not running. Majority of the flight services are cancelled according to government sources. The Joint strike call is said to be the first in 22 years.
The unions are critical of the proposed budget cuts saying it is quite unfair that only the workers
have to sacrifice. They say they oppose the government’s top most priorities are only deficit, deficit and deficit. BBC news quoted the unions as saying, all of the country’s ports are closed; air traffic controllers and ground staff of airports are observing strike; bus and ferry links are disrupted; fewer than 10% of the workforce at Volkswagen’s Auto Europa plant have turned up for work.
Unfair Media Criticism
As usual, various media of the western countries from EU to the US have written negative analyses on Portugal strikes. They continued to support austerity measures and to oppose workers’ anger towards austerity measures. They failed to acknowledge the hardships to which the workers across the Europe and the North America were subjected to, even though they are not part of the problem of debt crisis and financial crises. Such an outlook can be gauzed to the ownership of all media by a few multinational media companies.
These MNCs are beneficiaries are the austerity measures imposed by the EU countries in the name of maintaining fiscal discipline, as if the workers’ salaries and pensions are the main sources of fiscal indiscipline. These media companies never acknowledge the indiscipline of the
Bailout Pushes Ireland into Politico-Economic Instability
Article first published as Bailout Pushes Ireland into Politico-Economic Instability on Blogcritics.
Ireland formally placed request for aid from the EU and IMF. Ireland people are quite against to this. They are not able to believe that their country needed bailout. They are angry with the U-turn taken by the government, which said initially that Ireland could solve itself its crisis. Earlier, Ireland prime minister Brian Cowen and finance minister Brian Lenihan angrily rebutted the claims that Ireland was on the verge of asking for aid from the EU and IMF even as the preliminary talks for aid began with the European authorities by then.
It is said that Irish people were confident about their capacity to overcome any obstacles that
came in their path of development. They had a history of fighting for independence from the England’s colonial rule. They believed that Ireland once saved the European Monetary Union by joining it while it was recording more than 30% of GDP growth rate. They believed in the same vein their country had a capacity to overcome the latest crisis. It seems they could not bear a fact that their country is in a position to beg for aid from other European countries.
Political Opportunity
Political opportunists always will be there to cash in such situations. They stepped in to cash in the people’s anger. Green party, the junior partner of the ruling Fianna Fail party announced on November 22 that they wanted the parliament dissolved for an early election in January next year. The ruling coalition is on political tight rope walk with just three seats majority in the parliament, where Green party holds six seats. Without GP’s support, the ruling coalition will collapse. So, Green party holds the capacity to force the country to seek early election. But, GP’s announcement to seek an early election might be a mere political exercise to extract more benefits for it.
Ireland Plans Tough Austerity
As expected, Ireland has unveiled tough austerity measures for next four years. These measures are part of convincing EU and IMF that it is committed to deliver tough measures.
Ireland’s four year plan aims to save 15 billion euros ($20 billion). BBC and Reuters have said the joint bailout package from EU and IMF is expected to be worth 85 billion Euros ($114 billion).
The austerity plan also aim to cut 24,750 public sector jobs, to save 2.8 billion euros through welfare spending cuts, to raise additional 1.9 billion euros by increasing income tax. Minimum wage for workers will be reduced and new property tax will be launched. Value Added Tax will be raised to 23% in 2013 from 21% and to 24% in 2014.
Europe Records Slow Growth in Third Quarter
The leading economies of the Europe have slowed down in third quarter like the US. The economists and analysts have been in alert mode since it became known that the US growth was 
slowing down in second half. It is interesting to see these analysts are not worried that much for Europe’s slow growth in second half of 2010.
Europe’s largest economy, Germany is estimated to record a sharp decline in its growth to 0.7% in third quarter comparing with its second quarter growth of 2.3%, which is revised upwards from 2.2%, the previous figure. France GDP growth declined from 0.7% in second quarter to 0.4% in third quarter. Italy’s growth declined to 0.2% from 0.5% of second quarter.
The Eurozone countries grew by 0.4% on average which is a sharp decline from its second quarter average growth of 1%. Last month it was revealed that the UK grew by 0.8% in third quarter, less than 1.2% of second quarter. The US is expected to grow by 0.5% in third a slight increase from its second quarter figure of 0.4%. Japan grew in second quarter by 0.4%, which declined from 1.2% of its first quarter growth figure. Its third quarter figure is not yet released.
French strikes force petrol stations to shut
BBC | 18 October 2010 | 17:24 GMT
About 1,500 petrol stations in France have run dry or are about to close as fuel supplies are hit by strikes over government pension reforms, officials say. A blockade of oil refineries has lasted a week and the body that supplies most supermarkets says one in four petrol stations is affected. President Nicolas Sarkozy has called a crisis cabinet to protect supplies. He told reporters that the reforms were "essential" and would be carried out.
The exact number of France’s 12,000 petrol stations affected by the strikes is unclear, but oil company Exxon Mobil has described the situation as "critical". A spokesperson said that anyone looking for diesel around Paris or in the western area of Nantes would face problems. Severe shortages have been reported in Brittany in north-west France and the International Energy Agency says that France has begun tapping into its emergency oil reserves.
Workers at France’s 12 oil refineries have been on strike for a week and entrances to many of the country’s fuel distribution depots have been blocked. Panic buying was blamed for a 50% increase in fuel sales last week. The head of the Leclerc chain of supermarkets, Michel Edouard Leclerc, warned that at the current rate his company’s petrol stations would be empty within two to three days if the blockade of refineries remained and fuel imports were paralyzed.
Go-slow
Strike action against the government’s reform plans is being ramped up, with lorry drivers starting the week by staging a go-slow on motorways around several major cities including Paris, Lille and Lyon. A further day of strikes is scheduled for Tuesday, on the eve of a key Senate vote on the pension bill.
Half of all flights to and from Paris’s Orly airport and one in three flights at other airports are being cancelled, according to aviation officials. Airport operator ADP said there were already some delays at the capital’s largest airport, Charles De Gaulle, on Monday because of strikes by oil workers. Street protests have been planned in a number of cities and disruption is also expected on public transport and in schools. The government wants to raise the retirement age from 60 to 62 and the full state pension age from 65 to 67.
Unions support joint industrial action over cuts
BBC News | 13 September 2010 | 11:43 GMT
Union delegates have backed joint industrial action if "attacks" on jobs, pensions and public services go ahead. The TUC’s annual gathering backed a motion which included calls to build "a broad solidarity alliance of unions and communities under threat". TUC chief Brendan Barber warned that big cuts would make Britain a "dark, brutish and more frightening place". The PM’s spokesman said they wanted "partnership" with the unions to tackle the deficit. The opening of the TUC’s 142nd congress – the first under a non-Labour government since 1996 – comes amid concern among unions about the speed and scope of the coalition’s programme to reduce the £155bn deficit. Most Whitehall departments have been ordered to plan for savings of between 25% and 40% ahead of the comprehensive spending review of 20 October.
Delegates debated a motion calling for the TUC’s general council to "support and co-ordinate campaigning and joint union industrial action, nationally and locally, in opposition to attacks on jobs, pensions, pay or public services". It could lead to strikes if the cuts are not scaled back. The motion rejected the idea that cuts were necessary to pay for the deficit and said they were a "savage and opportunistic attack on public services" which "goes far further than even the dark days of Thatcher". TUC general secretary Mr Barber told delegates: "These are not temporary cuts, but a permanent rollback of public services and the welfare state. Not so much an economic necessity as a political project driven by an ideological clamour for a minimal state. "What they take apart now could take generations to rebuild. Decent public services are the glue that holds a civilised society together and we diminish them at our peril. Cut services, put jobs in peril and increase inequality, that’s the way to make Britain a darker, brutish, more frightening place."
Ireland stung by S&P cut, pressure grows over banks
Reuters |
Ireland’s government faced mounting pressure on Wednesday after a credit rating cut from Standard & Poor’s pushed its borrowing costs higher. After winning plaudits for moving quickly to tackle its deficit, Ireland is once again at the center of European debt fears with investors demanding a whopping 346 basis point premium to hold Irish 10-year debt over German Bunds, the highest level since the Greek financial crisis gripped in May. S&P cut Ireland’s long-term rating by one notch to ‘AA-‘ on fears of a substantially higher bill for supporting the banking sector and assigned a negative outlook, meaning another cut is likely over the next one or two years. Markets want Ireland to put a final price on purging its banks of a decade-long property binge but the head of Ireland’s debt management agency said that was impossible before the year-end.
“It’s a bit like waking up the patient in the middle of an operation to tell him he’s not feeling well,” John Corrigan, the chief executive of the National Treasury Management Agency (NTMA) told Reuters Insider television. “We know the situation is pretty painful but we have to get to the end of the operation which will be in December.” S&P hiked its estimate of the cost to the government of recapitalising the banks at 45-50 billion euros ($63 billion), a figure dismissed by the debt agency in highly unusual criticism. Corrigan described S&P’s analysis as “flawed”. Fellow euro-zone peripheral Portugal managed to raise 1.3 billion euros in bonds on Wednesday but demand was below Ireland’s auction last week and the cost of protecting Irish and Portuguese debt against default rose. Rating agencies have been steadily hacking away at Ireland’s credit rating and S&P’s is now on a par with Fitch and one notch below Moody’s, which cut its rating to Aa2 last month. Both Fitch and Moody’s have stable outlooks. Continue reading
Time to Buy Dollars as Euro Economies Reach Limits of Austerity
Time to Buy Dollars as Euro Economies Reach Limits of Austerity – Bloomberg 02/08/2010
FX Concepts LLC, the hedge fund that bought the euro in June just as it began a 9.7 percent surge against the dollar, now says it’s almost time to get out of the currency. The firm, which manages $8 billion in assets, expects the euro’s advance from a four-year low on June 7 to come undone by September, partly because European austerity programs will start to weigh on growth. Reports last week that showed Spanish consumer confidence falling to the lowest level this year and banks tightening credit standards in the region suggest the budget measures may already be undermining the recovery. The same fiscal measures that helped restore confidence in the euro may soon weaken the region’s economies and torpedo the rally. A July 30 survey of 21 money managers overseeing $1.29 trillion by Jersey City, New Jersey-based research firm Ried Thunberg ICAP Inc. found 75 percent don’t expect Europe’s common currency to strengthen over the next three months. “Austerity is really bad for growth,” said Jonathan Clark, vice chairman at New York-based FX Concepts, the world’s biggest currency hedge fund. “In the U.S., austerity is mainly on the state level, but in Europe they are whole-hog into cutting spending to reduce deficits. Under a pessimistic scenario, the European currencies are in a lot of trouble.”
Spending Cuts
Spain, Portugal and Greece will reduce spending by an average 4.3 percent of gross domestic product from 2009 to 2011, said Gilles Moec, an economist in London at Deutsche Bank AG, Germany’s largest lender. The euro area will expand 1.5 percent this year, less than a previous estimate of 2 percent, UBS AG, the biggest Swiss bank by assets, said in a July 16 report. The cuts contrast with the U.S., where President Barack Obama signed into law a $34 billion extension of unemployment benefits last month. The Congressional Budget Office projects a record $1.47 trillion deficit this fiscal year ending Sept. 30, and $1.42 trillion in 2011. While U.S. growth is slowing, it beats the European Union, where a 750 billion-euro ($981 billion) backstop for the region’s most indebted nations stabilized the currency after it slid from $1.5144 on Nov. 25 to the June 7 low. U.S. GDP grew at a 2.4 percent pace in the second quarter, compared with 3.7 percent in the prior period, the Commerce Department in Washington said July 30. Corporate spending on equipment and software jumped at a 22 percent annual rate, the biggest increase since 1997. The median second-quarter estimate for the euro region is 1.30 percent, and 1.10 percent for the year, based on a survey of 20 economists by Bloomberg. Continue reading
Hungary Credit Rating May Be Cut to Junk After IMF Talks Fail
Bloomberg | Jul 23, 2010
Standard & Poor’s said it may cut Hungary’s credit rating to junk after the collapse of talks with the International Monetary Fund and European Union. Moody’s Investors Service said it may also lower the country’s grade. The IMF and EU on July 17 suspended talks with the government without endorsing Prime Minister Viktor Orban’s plans to control the budget deficit. The creditors provided Hungary with a 20 billion-euro ($25.9 billion) rescue package in 2008, which had served to reassure investors. “We believe that without an EU/IMF program to anchor policy, Hungary is likely to face higher and more volatile funding costs, which in our view could weigh on financial sector balance sheets, the public finances, and economic growth,” S&P said today in a statement. A rating downgrade would raise the cost of borrowing for Hungary at a time when the country is struggling to repair investor confidence after ruling party officials in June compared the country’s economy with Greece. S&P rates Hungary BBB-, its lowest investment grade. The Moody’s rating is two steps higher at Baa1. S&P will lower Hungary’s rating if in the coming year it concludes “government policies are unlikely to result in a meaningful decline in public debt,” it said in the statement.
Forint Falls
Hungary’s currency fell 1.1 percent to 286.83 per euro as of 3:15 p.m. in Budapest. The forint has dropped 8.1 percent in the past three months, making it the worst performer among more than 170 currencies tracked by Bloomberg. The cost of insuring Hungary’s government debt against default rose 14.5 basis points to 343, according to data provider CMA. “Running a higher budget deficit while losing your biggest potential supplier of capital isn’t a good mix,” said Kieran Curtis, who manages $2 billion in emerging market debt at Aviva Investors in London. “The market isn’t going to finance a higher budget deficit without an IMF agreement.” Hungary’s government said credit rating companies “don’t understand” that fiscal responsibility needn’t come at the expense of independent economic policy. “We’re going to continue a disciplined fiscal policy, which doesn’t equal the usual austerity policy that affects families and businesses,” the Economy Ministry said in an e- mailed response to questions from Bloomberg News.
Hungary under pressure to agree with IMF, central bank eyed
Reuters | Mon Jul 19, 2010 | 3:52pm IST
Hungary’s markets sold off on Monday after talks with lenders fell through at the weekend, rattling investor confidence in the government’s policies and raising concerns over the country’s debt vulnerability. Hungary’s government had insisted on a new financial sector tax this year and rebuffed lenders’ calls for further austerity measures, the economy minister said on Monday. The forint plunged over 2.5 percent versus the euro and yields surged 20-30 basis points as the collapse of the talks — intended to review the IMF/EU financing deal Hungary struck in 2008 — dealt the second major blow to investor confidence since the new centre-right government took power in May. In early June, officials alarmed markets by comparing Hungary’s problems with those of Greece.
The International Monetary Fund and European Union have both said the government needs to take tougher measures to rein in the budget deficit. Analysts said market weakness could spill over to other markets in the central European region, and the sell-off would likely to push the Hungarian government to reach agreement with its lenders soon. "Arguably continued adherence to the current IMF programme had anchored both markets and Hungary’s (credit) ratings: the fact that Hungary is now going off-piste suggests both may be under threat," said Timothy Ash at Royal Bank of Scotland.
RATE RISE TALK
Hungary, which runs central Europe’s highest public debt at about 80 percent of gross domestic product (GDP), won’t be able to use remaining funds in its 20 billion euro ($26 billion) loan secured in 2008 until it reaches a deal with the IMF and EU. Even though Hungary is not under immediate financing pressure, such delays would raise its financing costs, potentially forcing the central bank to raise interest rates and putting pressure on Hungary’s ratings, analysts said. The central bank will hold a regular rate meeting on Monday with a rate decision
Moody’s downgrades Portugal debt
BBC News | Tuesday, 13 July 2010 | 09:13 GMT
International ratings agency Moody’s has downgraded Portugal’s sovereign debt rating, citing worsening public finances and weak growth prospects. It cut the rating by two notches from the maximum AA2 to A1. And it said Portugal might need further austerity measures, as well as those already announced. The euro fell against the dollar and sterling but market reaction was muted. Rival agency Standard & Poor’s already rates Portugal two grades lower at A-. The downgrade means that the rating agency is losing confidence in the Portuguese government’s ability to meet its financial obligations.
Tax rises
A sovereign debt downgrade tends to make it more expensive for a government to raise money on the international markets. However, the bonds are still some way from the “junk” status suffered by Greece. The latest available figures show Portugal’s total government debt stood at roughly 77% of GDP at the end of 2009. This is quite similar to the numbers in countries such as France and Germany, two of Europe’s economic powerhouses. However, Portugal’s economy is significantly smaller in absolute terms and is not expected to revive any time soon. Continue reading
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