John Vachon Rain. Pittsburgh, Pennsylvania Jun 1941
It just keeps going. Nobody in China trusts stocks anymore, because Beijing has failed to restore that trust.
• China Stocks Sink Again: Shanghai Down 3.52% (Bloomberg)
China’s stocks slumped for a second day in thin turnover amid concern government measures to support the world’s second-largest equity market and economy are failing. The Shanghai Composite Index dropped 3.5% to 3,005.17 at the close, led by commodity producers and technology companies. About 14 stocks declined for each one that rose on the gauge, while volumes were 36% below the 30-day average. The index completed its biggest two-day loss in three weeks with a decline of 6.1%.
Mainland Chinese equity funds lost 44% of their value at the end of last month compared with July, data showed Monday, as unprecedented state measures to stop a $5 trillion selloff failed to avert redemption. Data this month showed five interest-rate cuts since November and plans to boost state spending have yet to revive an economy weighed down by overcapacity and producer-price deflation. Yuan positions at the central bank and financial institutions fell by the most on record in August, a sign that policy makers stepped up intervention to support the currency.
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Intervening in all asset markets at the same time…
• China Sells Record FX In August, Shows Pressure After Devaluation (Reuters)
China’s central bank and commercial banks sold a net 723.8 billion yuan ($113.69 billion) of foreign exchange in August, by far the largest on record, highlighting how capital outflows intensified in the wake of the yuan’s devaluation last month. The previous largest outflow, in July, totaled 249.1 billion yuan ($39.13 billion). The figures are based on Reuters calculations using central bank data, the latest of which was released on Monday. The figures show the price China is paying to keep its currency from falling further in the face of concerns about the health of the economy and as financial markets anticipate a rise in U.S. interest rates. Shen Jianguang, an economist at Mizuho Securities in Hong Kong, said the figures suggest selling pressure on the yuan remains strong.
“It also shows that the central bank will continue to intervene in the FX market in the coming months as depreciation expectation is still there,” Shen said. Still, traders said the net outflow was within market forecasts. Some had expected a net outflow of $130 billion, said a senior trader at a Chinese commercial bank in Shanghai. This person declined to be identified. “Purchases are likely to fall from September on but uncertainties remain, including the yuan’s own volatility and the dollar’s performance in global markets in line with the Fed’s policy moves,” the trader said. China’s central bank, the People’s Bank of China, surprised global markets on Aug 11 by devaluing the yuan by nearly 3%.
Since the devaluation, China has scrambled to keep the yuan steady, running down its foreign exchange reserves by a record amount in August to stabilize the onshore rate. The central bank has instituted a raft of new policies aimed at discouraging speculation on further yuan depreciation and traders suspect it also intervened in offshore yuan markets. Authorities have also frantically tried to prevent a precipitous slide in equities markets from turning into a market crash with a flurry of policies to prop up prices and restore confidence.
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It starts to smell of desperation. But then, Xi and Li have nothing to lose but their heads.
• China Spending Surge Means Debts Will Only Get Larger (WSJ)
China is falling back on infrastructure spending to stimulate its sputtering economy. The move may support growth, but it is also a setback to getting the country’s debt load under control. Government agencies have publicly confirmed a new willingness to spend on infrastructure in recent weeks. Already in August, infrastructure investment rose 21% from a year earlier, up from 15.8% growth in July, according to calculations by SocGen. That far outpaced total fixed-asset-investment growth, which clocked in at just 9.2%. What is less clear is where the money is coming from. In recent years, much of the infrastructure development has been funded chiefly by off-balance sheet local government financing platforms, which helped get around limits on public borrowing.
This avenue seemed to be cut off by a new budget law in late 2014, which ostensibly banned new borrowing by such financing vehicles. But it quickly became clear that this amounted to a kind of fiscal cliff for the economy. Beijing quietly backtracked, and is now allowing the platforms to keep borrowing for approved projects. Still, China will be eager to keep a lid on borrowing by provinces and towns. An official audit of total local government debt, released earlier this month, found it reached 24 trillion yuan ($3.8 trillion) at the end of 2014, up 34% over 18 months. Beijing doesn’t want to see that pace of growth continue. It is already working hard to clean up the last infrastructure spending boom with its 3.2 trillion yuan program to allow local government-linked high-cost loans to be swapped into lower interest bonds with longer durations.
But this merely reduces financing costs on previous projects. The amount that it frees up for new spending is minimal. So if the central government wants more infrastructure spending, it has to find another way. The plan appears to be to rely on government-controlled policy banks, including China Development Bank and the Agricultural Development Bank. These lenders can access loans directly from the central bank. For fresh funding, they have also issued over 1.8 trillion yuan ($280 billion) of bonds this year, up more than 70% from all of last year, according to Nomura.
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Something tells me those funds were already in use, for instance as collateral for the shadow banks.
• China Grabs Unused Funds To Spend On New Projects As Growth Slows (Reuters)
Chinese authorities have seized up to 1 trillion yuan ($157 billion) from local governments who failed to use their budget allocations, sources said, as Beijing looks for ways to spend its way out of an economic slowdown. The exclusive Reuters report came after China’s stocks fell following data suggesting economic growth was running below the 2015 target level of about 7%, heightening concerns about the health of the world’s second largest economy. “China’s economy faces relatively big downward pressure, so investor sentiment remains weak,” said Gu Yongtao, strategist at Cinda Securities. Two sources close to the government said budget funds repossessed from local governments would be used to pay for other investments.
The huge underspend, linked to officials’ reluctance to splash out on big-ticket projects while authorities crack down on corruption, supports the argument of some economists that Chinese state investment has grown too slowly this year. “In the past, local governments had asked for the money. Money was given, but no one acted,” said one of the two sources. On Monday, China’s powerful economic planner, the National Development and Reform Commission (NDRC), said it had approved feasibility studies for two road projects worth a total of 6.2 billion yuan ($973.65 million). Last week, the NDRC gave the green light for railway, highway and bridge projects worth a combined $23 billion, in a sign authorities are focusing on infrastructure spending rather than deeper reforms to shore up growth in the short term.
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Brazil is in for a very deep fall.
• Brazil Downgrade Leaves Firms With $270 Billion Debt Hangover (Bloomberg)
Brazilian companies that piled on $270 billion in international debt during the boom years are seeing their funding costs rise after the nation’s credit rating was cut to junk. The spread for five-year credit-default swaps to protect against a government default, one benchmark for setting what Brazilian companies must pay for external funding, has jumped 7.5% to 400 basis points since the downgrade, the highest since 2009. Adding to the pain, the dollar surged to a 13-year high, making principal and interest on international borrowing more costly for local firms. “Even very small, unknown companies issued international bonds when Brazil was considered one of the most promising economies after the 2008 financial crisis,” Salvatore Milanese at Pantalica Partners said in Sao Paulo. “Now many of them are facing the consequences.”
Standard & Poor’s last week lowered Brazil’s sovereign credit rating one level to BB+ and said it might cut it further in response to the administration’s inability to shore up fiscal accounts as the economy falters. President Dilma Rousseff has failed to win support for her initiatives amid an investigation into corruption at the state-controlled oil company, some of which allegedly occurred while she was its chairwoman, sending her popularity to a record low and generating calls for her impeachment. Federal, state and municipal governments oversaw only modest increases in external debt during the seven years Brazil had an investment-grade credit rating, increasing it 4.5% from December 2007 to March 2015, to $69 billion, according to central bank data. For banks and non-financial companies, the story is different: They more than doubled their dollar-denominated debt to $154 billion and $114.7 billion, respectively.
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Because 100-year bonds never looked stupid?
• Pimco, Fidelity Stung by Collapse of Petrobras’s 100-Year Bond (Bloomberg)
When Petroleo Brasileiro SA sold 100-year bonds in June, the move was largely seen as a sign the corruption-tainted oil producer had put the worst of its problems behind it. For investors like Pimco, Fidelity and Capital Group – the three biggest holders of the securities – that turned out to be a costly miscalculation. Since the $2.5 billion offering, the bonds have tumbled 15%. That’s four times the average loss for emerging-market company debt. The plunge deepened last week, when the securities sank to a record-low 69.5 cents on the dollar after Petrobras, as the Brazilian company is known, had its credit rating cut to junk by Standard & Poor’s. The world’s most-indebted major oil producer was stripped of its investment grade by Moody’s Investors Service seven months earlier as a widening probe into alleged bribes paid to former executives at the state-controlled oil company caused it to delay reporting earnings.
“Everything was priced for perfection, and sadly, except for soccer players, Brazil seldom achieves perfection,” Russ Dallen, the head trader at Caracas Capital Markets, said from Miami. Pimco didn’t respond to e-mailed requests for comment. Fidelity and Capital Group declined to comment. Petrobras didn’t respond to an e-mail seeking comment on the performance of its bonds. The company has already borrowed enough to finance its projects for the medium term, it said in a statement Sept. 10. Yields on Petrobras’s 6.85% bonds, which mature in 2115, have soared 1.5 percentage points to a record 9.86% since they were issued on June 2, according to data compiled by Bloomberg.
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Of things to come.
• Deutsche Bank To Cut 23,000 Jobs, A Quarter Of Its Workforce (Reuters)
Deutsche Bank aims to cut roughly 23,000 jobs, or about one quarter of total staff, through layoffs mainly in technology activities and by spinning off its PostBank division, financial sources said on Monday. That would bring the group’s workforce down to around 75,000 full-time positions under a reorganization being finalised by new Chief Executive John Cryan, who took control of Germany’s biggest bank in July with the promise to cut costs. Cryan presented preliminary details of the plan to members of the supervisory board at the weekend. Deutsche’s share price has suffered badly under stalled reforms and rising costs on top of fines and settlements that have pushed the bank down to the bottom of the valuation rankings of global investment banks. It has a price-book ratio of around 0.5, according to ThomsonReuters data.
The bank unveiled a broad restructuring plan in April but co-chief executives Anshu Jain and Juergen Fitschen quit shortly afterwards, handing over its execution to Cryan. “This is the first time ever that you had the feeling that somebody is talking straight,” said one of the sources. “But the problem is he has to deliver soon.” Deutsche is mainly reviewing cuts to the parts of its technology and back office operations that process transactions and work orders for staff who deal with clients. A significant number of the roughly 20,000 positions in that area will be reviewed for possible cuts, a financial source said. Back-office jobs in the group’s large investment banking division will be concentrated in London, New York and Frankfurt, the source said.
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• UniCredit, Italy’s Biggest Bank, Plans To Cut Around 10,000 Jobs (Reuters)
Italy’s biggest bank by assets, is planning to cut around 10,000 jobs, or 7% of its workforce, as it seeks to slash costs and boost profits, a source at the bank told Reuters on Monday. The planned cuts will be concentrated in Italy, Germany and Austria, several sources said, adding that they include 2,700 layoffs in Italy that have already been announced. A UniCredit spokesman declined comment beyond noting that the bank’s CEO Federico Ghizzoni had on Sept. 3 said there were no concrete numbers on potential lay-offs, after a report said it was considering eliminating 10,000 positions in coming years.
Ghizzoni is reworking a five-year strategic plan, unveiled only last year, that will aim to boost revenue and cut costs. The revised plan is expected to be announced in November. “The plans are for 10,000 job cuts,” the bank’s insider said, speaking on condition of anonymity. “They will be mainly in Italy, Austria and Germany.” UniCredit, which has 146,600 employees across 17 countries, is under pressure to boost its profits as low interest rates are expected to keep hurting its earnings in coming years.
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Why Putin wants to talk to Obama.
• ‘Syria Is Emptying’ (WaPo)
A new exodus of Syrians is fueling the extraordinary flow of migrants and refugees to Europe as Syria’s four-year-old war becomes the driving force behind the greatest migration of people to the continent since World War II. Syrians account for half of the 381,000 refugees and migrants who have sought asylum in Europe so far this year, which is in turn almost a doubling of the number in 2014 — making Syrians the main component of the influx. The continued surge through Europe prompted Hungary, Austria and Slovakia to tighten border controls Monday, a day after Germany projected that in excess of a million people could arrive by year’s end and began to impose restrictions on those entering the country.
How many more Syrians could be on the way is impossible to know, but as the flow continues, their number is rising. In July, the latest month for which figures are available, 78% of those who washed up on inflatable dinghies on the beaches of Greece were Syrian, according to the U.N. High Commissioner for Refugees. Some were already among the 4 million refugees who have sought sanctuary in neighboring countries, but many also are coming directly from Syria, constituting what Melissa Fleming of the UNHCR called a “new exodus” from the ravaged country. They are bypassing the refugee camps and heading straight for Europe, as the fallout from what President Barack Obama once called “someone else’s civil war” spills far beyond Syria’s borders.
More are on the way. Syrians are piled up on the streets of the Turkish port city of Izmir waiting for a place on one of the flimsy boats that will ferry them across the sea to Greece, and they say they have friends and family following behind. “Everyone I know is leaving,” said Mohammed, 30, who climbed three mountains to make his way across the Turkish border from the city of Aleppo with his pregnant wife, under fire from Turkish border guards. “It is as though all of Syria is emptying.” Analysts say it was inevitable it would come to this, that Syrians would eventually tire of waiting for a war of such exceptional brutality to end. At least 250,000 have been killed in four ferocious years of fighting, by chemical weapons, ballistic missiles and barrel bombings by government warplanes that are the biggest single killer of civilians, according to human rights groups.
Men on both sides die in the endless battles between the government and rebels for towns, villages and military bases that produce no clear victory. The Islamic State kills people in the areas it controls with beheadings and other brutal punishments. The United States is leading a bombing campaign against the Islamic State but has shown scant interest in solving the wider Syrian war, which seems destined only to escalate further with the deepening involvement of Russian troops. “It should surprise no one. Hopelessness abounds,” said Fred Hof, a former State Department official who is now with the Atlantic Council. “Why would any Syrian with an option to leave and the physical ability to do so elect to stay?”
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“Everybody is coming,” said Iyad, a Syrian student. “They are coming, coming, coming.”
• Refugees Confounded By Merkel’s Decision To Close German Borders (Guardian)
Angela Merkel, Germany’s chancellor, has cut a chequered figure this summer: scorned for taking Greece to the wall, and praised for welcoming large numbers of Syrians to Germany. But nowhere and at no time has she been more of an enigma than she was in Vienna’s central station on Monday where crowds of refugees struggled to reconcile how the same “Mama Merkel” had opened Germany’s borders one week, and closed them again barely eight days later – leaving those at the station stranded. “She said she will bring big boats from Turkey to rescue Syrians!” said Maria, a Syrian who fled the bombs of Damascus six weeks ago. “And now why has she closed the border?” asked Maria’s daughter.
For a week, refugees had been able to freely board trains to Germany from Vienna – but Sunday’s developments returned the status quo to how it was in late August. Station staff said on Monday that the rail border had reopened at 7am, less than a day after Germany had stopped all inbound rail services. But the ticket machines would not let people book journeys to German destinations. And while some had managed to get fares from the ticket office, it was unclear to many people whether the border had reopened or not. Pacing around the concourse with her two children, Galbari al-Hussein saw the constant changes in border policy as a cruel game played at the expense of vulnerable refugees.
“We’ve travelled so far, thousands of kilometres, and now they’re closing the borders,” said Hussein, who reached Vienna barely a week after escaping Islamic State territory, hidden in an unfamiliar niqab. “Is it open, is it closed? It’s very unfair.” Among Syrians, there lingered the suspicion that their chances had been spoilt by people hoping to piggyback on the generosity shown by Germany to the victims of the Syrian civil war. “Not everyone here is Syrian,” said Josef, from Damascus, who disclosed his exact address in an attempt to prove his nationality. “People say they are Syrians, but they are from somewhere else. And that’s why this is happening..” [..] As rumours swirled, even non-Syrian refugees couldn’t help but wonder whether they were the real targets of the German border shenanigans. Hany, an Iraqi engineering student, smiled wistfully. “Germany is very good to Syrians,” he said. “It wants all the Syrians to come, but maybe not the Iraqis.”
There was one thing on which everyone could agree. Whatever Germany does or doesn’t do with its border, refugees will still keep fleeing to Europe. “Everybody is coming,” said Iyad, a Syrian student. “They are coming, coming, coming. My brother will leave Syria in two days.” Iyad’s friend Amal nodded in agreement. “The only people who will stay are those who don’t have any money,” said Amal. “People are selling their cars and homes to come here.”
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How to use a crisis.
• Thousands Of Refugees To Lose Right Of Asylum Under EU Plans (Guardian)
European governments are aiming to deny the right of asylum to innumerable refugees by funding and building camps for them in Africa and elsewhere outside the European Union. Under plans endorsed in Brussels on Monday evening, EU interior ministers agreed that once the proposed system of refugee camps outside the union was up and running, asylum claims from people in the camps would be inadmissible in Europe. The emergency meeting of interior ministers was called to grapple with Europe’s worst modern refugee crisis. It broke up in acrimony amid failure to agree on a new system of binding quotas for refugees being shared across the EU and other decisions being deferred until next month.
The lacklustre response to a refugee emergency that is turning into a full-blown European crisis focussed on “Fortress Europe” policies aimed at excluding refugees and shifting the burden of responsibility on to third countries, either of transit or of origin. The ministers called for the establishment of refugee camps in Italy and Greece and for the detention of “irregular migrants” denied asylum and facing deportation but for whom “voluntary return” was not currently “practicable”. The most bruising battle was over whether Europe should adopt a new system of mandatory quotas for sharing refugees. The scheme, proposed by the European commission last week, is strongly supported by Germany which sought to impose the idea on the rejectionists mainly in eastern Europe.
Hungary’s hardline anti-immigration government said it would have no part of the scheme, from which it would benefit, while Thomas de Maizière, the German interior minister, complained that the agenda for the meeting was inadequate. The ministers agreed “in principle” to share 160,000 refugees across at least 22 countries, taking them from Greece, Hungary, and Italy, but delayed a formal decision until next month, made plain the scheme should be voluntary rather than binding and demanded ‘flexibility’. De Maizière, by contrast, called for precise definitions of how refugees would be shared. Luxembourg, chairing the meeting, signalled that there was a sufficient majority to impose the quotas, but that the meeting had balked at forcing a vote.
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They’ll pull aid funds from whoever won’t comply.
• EU Plan To Share 120,000 Refugees Has Fallen Apart (FT)
EU efforts to agree a binding plan to share out 120,000 refugees fell apart after a minority of countries led by Czech Republic and Hungary objected to a heavily watered down proposal. After six hours of argument, member states failed to reach unanimous agreement on the plan, although a majority — including France and Germany — supported the scheme. Countries in favour of the plan will now try to force through a deal with a qualified majority at another meeting in October, setting the stage for a bitter diplomatic fight in the intervening period. Although qualified majority votes are acceptable under EU law, they are rarely used to force through decisions on politically sensitive topics against vocal opposition.
Hungary was supposed to be one of the beneficiaries of the scheme but has opposed it, arguing that it is not a front-line country and that it has only suffered a huge influx of migrants because Greece has failed to manage its borders. Officials also say that it would risk turning the country into a holding pen for migrants who do not want to stay there. French interior minister Bernard Cazeneuve criticised those countries opposed to the measures. “Europe is not Europe a la carte. If Europe wants to surmount this humanitarian challenge, it is necessary that all countries live up to their responsibilities.” The Czech Republic also refused to sign up to the proposals, saying that it would oppose efforts to introduce an automatic relocation scheme. Romania and Slovakia were also against the scheme.
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7,437 migrants recorded entering Hungary from Serbia yesterday. Times 365 equals 2.7 million.
• Border-Free Europe Unravels As Migrant Crisis Hits Record Day (Reuters)
Two decades of frontier-free travel across Europe unraveled on Monday as countries re-established border controls in the face of an unprecedented influx of migrants, which broke the record for the most arrivals by land in a single day. Germany’s surprise decision to restore border controls on Sunday had a swift domino effect, prompting neighbors to impose checks at their own frontiers as thousands of refugees pressed north and west across the continent while Hungary sealed the main informal border crossing point into the European Union. A majority of EU interior ministers, meeting in Brussels, agreed in principle to share out 120,000 asylum seekers on top of some 40,000 distributed on a voluntary basis so far, EU president Juncker said.
But details of the deal, to be formalized on Oct. 8, were vague with several ex-Communist central European states still rejecting mandatory quotas. Austria said it would dispatch its military to help police carry out checks at the border with Hungary after thousands of migrants crossed on foot overnight, filling up emergency accommodation nearby, including tents at the frontier. Thousands more raced across the Balkans to enter Hungary before new rules take effect on Tuesday, which Budapest’s right-wing government says will bring a halt to the illegal flow of migrants across its territory. By 1400 GMT on Monday, police said 7,437 migrants had been recorded entering Hungary from Serbia, beating the previous day’s record of 5,809.
Then helmeted Hungarian police, some on horseback, closed off the main informal crossing point, backed by soldiers as a helicopter circled overhead. A goods wagon covered with razor wire was moved into place to block a railway track used by migrants to enter the EU’s Schengen zone of border-free travel. Hungary later declared the low-level airspace over its border fence closed but allowed a trickle of refugees to enter the country at an official crossing point. As the shockwaves rippled across Europe, Slovakia said it would impose controls on its borders with Hungary and Austria. The Netherlands announced it would make spot checks at its borders. Other EU states from Sweden to Poland said they were monitoring the situation to decide whether controls were needed.
“If Germany carries out border controls, Austria must put strengthened border controls in place,” Vice Chancellor Reinhold Mitterlehner told a joint news conference with Chancellor Werner Faymann. “We are doing that now.” The army would be deployed in a supporting role.
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How the end begins.
• Europe Fortifies Borders as Germany Predicts 1 Million Refugees (Bloomberg)
One day after Germany curbed the freedom of movement in the region by temporarily reinstating border controls, the country’s vice chancellor estimated that as many as 1 million refugees may arrive by the end of the year as other nations moved to fortify their frontiers. The prediction from Sigmar Gabriel, who leads the Social Democrats, underscored how quickly the numbers fleeing to Germany are spiraling upward. The official government estimate, released just a few weeks ago, is for roughly 800,000 in 2015, nearly four times the 2014 figure.
European Union interior and justice ministers will try to bridge a divide over the region’s worst refugee crisis since World War II when they meet Monday in Brussels to hammer out an agreement over binding quotas redistributing 160,000 migrants who have flooded into Hungary, Greece and Italy. Eastern European countries including Poland and the Czech Republic have opposed such measures. Germany, which supports the EU proposal, on Sunday introduced the temporary controls on the southern border with Austria, where thousands of migrants have been crossing into the country. Austria responded Monday by sending 2,200 troops to its frontier with Hungary, while Slovakia reinstated checks along its border with both countries.
“Of course, the idea is not to prolong this, but it’s a short-term measure that should be in place for as short a time as possible,” Felix Braz, the justice minister of Luxembourg, which currently holds the rotating EU presidency — said in an interview. “A lot will depend on what comes out of Brussels this afternoon.” Germany’s move risks creating widespread disruption as governments weigh a further tightening of frontier controls across Europe.
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EU leaders are a much bigger threat to the union than refugees.
• EU Governments Set To Back New Internment Measures (Guardian)
EU governments are expected to back radical new plans for the internment of “irregular migrants”, the creation of large new refugee camps in Italy and Greece and longer-term aims for the funding and building of refugee camps outside the EU to try to stop people coming to Europe. A crunch meeting of EU interior ministers in Brussels, called to grapple with Europe’s largest refugee crisis since the second world war, was also expected to water down demands from the European commission, strongly supported by Germany, for the obligatory sharing of refugees across at least 22 countries. A four-page draft statement, prepared on Monday morning by EU ambassadors before the ministers met, focused on “Fortress Europe” policies amid increasing confusion as a number of countries set up border controls in the Schengen free-travel area that embraces 26 countries.
The draft statement, obtained by the Guardian, said “reception facilities will be organised so as to temporarily accommodate people” in Greece and Italy while they are identified, registered, and finger-printed. Their asylum claims are to be processed quickly and those who fail are to be deported promptly, the ministers say in the draft statement. “It is crucial that robust mechanisms become operational immediately in Italy and Greece to ensure identification, registration and fingerprinting of migrants; to identify persons in need of international protection and support their relocation; and to identify irregular migrants to be returned.” The Europeans are to set up “rapid border intervention teams” to be deployed at “sensitive external borders”. Failed asylum seekers who are expected to try to move to another EU country from Greece or Italy can be interned, the statement says.
“When voluntary return is not practicable and other measures on return are inadequate to prevent secondary movements, detention measures … should be applied.” The European commission demanded last week that at least 22 EU countries accept a new system of quotas for refugees, with 160,000 redistributed from Greece, Italy and Hungary under a binding new system. Germany is insisting on the binding nature of the proposed scheme and its unilateral decision on Sunday to re-establish national border controls within the Schengen area was widely seen as an attempt to force those resisting mandatory quotas to yield. The resistance is strongest in eastern and central Europe.
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• Hungary Transports Refugees To Austria Before Border Clampdown (Guardian)
Hungary is transporting thousands of refugees by train and dumping them on the border with Austria, the UN refugee agency has said, as EU states scrambled to follow Germany’s lead and introduce new controls on their borders. Special trains were taking refugees on a four-hour journey from camps in southern Hungary directly to Austria, the UNHCR said. There are signs that Hungary’s prime minister, Viktor Orban, wants to empty refugee camps before a law comes into force on Tuesday criminalising the act of crossing or damaging a newly built border fence. At least three trains carrying 2,000 people left on Sunday from the Hungarian town of Röszke, the UNHCR’s regional representative Erno Simon said. He added: “During the night our colleagues saw police waking people up at the [Hungarian] border collection point.”
Austria said it was sending troops to its border to help with security. The numbers entering from Hungary had reached overwhelming levels, police said, with 14,000 arriving on Sunday and another 7,000 by mid-Monday, and more expected. Austria’s vice-chancellor, Reinhold Mittelehner, said: “If Germany carries out border controls, Austria must put strengthened border controls in place. We are doing that now.” Slovakia said it was introducing checks on its borders with Hungary and Austria and would deploy 220 extra officers. Polandd’s prime minister, Ewa Kopacz, said Warsaw would restore border controls in response to “outside threats”.
On Sunday Berlin announced new controls on its border with Austria and halted train traffic between Austria and Germany. Germany’s interior minister, Thomas de Maizière, said the measures were necessary because record numbers of refugees, many of them from Syria, had stretched the system to breaking point. The measures are likely to remain in place for weeks if not months, German officials have indicated. Police patrols have been set up on road crossings between Austria and Bavaria, leading to four-mile tailbacks on Monday. Similar measures will be rolled out in the federal state of Saxony, on the border with the Czech Republic.
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“I certainly don’t want to see Islamic State in a war with our troops because – let’s be honest – they are just impressionable young men who have been manipulated into a life of murder by those who teach hate, and Isis isn’t much better.“
• Cameron Invents The Humanitarian Offside Rule (Frankie Boyle)
David Cameron visited a refugee camp in Lebanon on Monday. Our prime minister, a man who can normally muster all the moral authority of Roman Polanski’s penis, has discovered his soul. Amazing what a three-week break away from parliament can do. It only took David Cameron six years to finally come out and take a moral stand, and all it took was the death of one toddler. You may call the Tories’ glacial crawl towards respecting human life a political and personal train crash. I call it compassion. In Europe we have the stereotype that Africans view life cheaply, but we’ve spent much of the summer watching van loads of Syrians being washed in by the tide and all we worried about was whether this meant the beach might be closed during the October holidays.
There were Greek kids incorporating human remains into their sandcastles and yet the big story here was that the drinks trolley didn’t make it down the Eurostar. One dog locked in a car on a sunny day – Britain goes apeshit. Seventy-one dead migrants roasted in a truck – oh that reminds me, Bake Off’s on tonight. It seems we are naive about the workings of this modern culture, where people Skype each other masturbating before a first date, and forget that the general populace now don’t believe children are dying unless you show them a closeup picture of a dead child. The Kurdi family were trying to get from Turkey to Kos, so many people said, “Why would they want to leave Turkey? Turkey is nice!”
Turkey is nice if you’re a sunburnt Brit with a taste for overpriced kebabs, cheap jeans and waterslides. It’s not so nice for a member of their oppressed minority who speak a language that’s been banned by law. What we haven’t heard is that children get washed up on the shore at Bodrum every single day. What are Turkish journalists doing? Generally about two to four years’ hard labour. Of course there are many people who say we shouldn’t be helping refugees when there are homeless people here that we can do nothing to help first. Indeed Britain may have entirely forgotten how to be welcoming. We’ll probably welcome refugees by putting the word Syrian in the sidebar of xHamster. We are only taking people from camps – we don’t want refugees already in Europe as they cheated and didn’t wait to shout “What’s the Time Mr Wolf?” We don’t want any refugees who are already close to us, like there’s some kind of humanitarian offside rule.
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Fraudulent Foreclosure Documents
• US Officials Cover Up Housing Bubble’s Scummy Residue (David Dayen)
Every day in America, mortgage companies attempt to foreclose on homeowners using false documents. It’s a byproduct of the mortgage securitization craze during the housing bubble, when loans were sliced and diced so haphazardly that the actual ownership was confused. When the bubble burst, lenders foreclosing on properties needed paperwork to prove their standing, but didn’t have it — leading mortgage industry employees to forge, fabricate and backdate millions of mortgage documents. This foreclosure fraud scandal was exposed in 2010, and acquired a name: “robo-signing.” But while some of the offenders paid fines over the past few years, nobody cleaned up the documents. This rot still exists inside the property records system all over the country, and those in a position of authority appear determined to pretend it doesn’t exist.
In two separate cases, activists have charged that officials and courts are hiding evidence of mortgage document irregularities that, if verified, could stop thousands of foreclosures in their tracks. Officials have delayed disclosure of this evidence, the activists believe, because it would be too messy, and it’s easier to bottle up the evidence than deal with the repercussions. “All they’re doing is making a mockery of our judicial system,” said Bill Paatalo, a private investigator and one of the activists. Like many other anti-foreclosure activists, Paatalo got involved with the issue through a case involving his own property — in Absarokee, Montana. Like many homeowner loans purchased during the housing bubble, Paatalo’s was packaged into a mortgage-backed security.
The process worked like this: The loans were eventually sold into a tax-exempt REMIC (Real Estate Mortgage Investment Conduit) trust; the REMIC trust received monthly mortgage payments from homeowners; and the payments were passed along to investors in the mortgage-backed securities. The trust where Paatalo’s mortgage ended up is known as “WaMu Mortgage Pass-Through Certificates Services 2007-OA3 Trust.” When he faced foreclosure, the trust, as the nominal owner of the mortgage, was the plaintiff. In doing research for his own trial, Paatalo discovered that all “foreign business trusts” established outside of Montana have to register with the Secretary of State in order to transact business, under Title 35-5-201 of the Montana code. Trustees must file an application, along with legal affidavits affirming its trust agreement and identifying all trustees, and pay a $70 filing fee. WaMu Mortgage Pass-Through Certificates Services 2007-OA3 Trust – based in Delaware — didn’t.
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“Neoliberalism’s ultimate purpose, and its finality, is that of transformation to a single global economy and society governed and disciplined by finance capital.”
• Defining Neoliberalism (Jeremy Smith)
In a twitter exchange today, involving Duncan Weldon, Tony Yates, George Magnus, Jo Michell and PRIME’s Ann Pettifor, the question arose (not for the first time!) over the definition of “neoliberalism.” It is often argued that the term has no distinct or discernible meaning, and certainly Wikipedia’s entry for Neoliberalism only adds to confusion. Ann tweeted this: “puzzle over definition of “neoliberalism. Definition elastic? Insult? Help Twitter..” Well I’m not going to try and make my offer via twitter, because I can’t manage a decent definition in the allotted 140 characters. But I am convinced that neoliberalism does have a clear meaning – and offer the following as my contribution to the discussion:
Neoliberalism: The utopian politico-economic system and ideology, under constant and conscious construction by its “priesthood”, under which the interests of society are to be subordinated to the interests of actors in financial markets and the dominance of finance capital, minimally regulated and flowing unfettered across frontiers. Under this system, the role and remit of the state and public sphere, beyond protection and furtherance of those interests and that dominance, are to be reduced to their practical minimum. Neoliberalism’s ultimate purpose, and its finality, is that of transformation to a single global economy and society governed and disciplined by finance capital.
My definition owes much to Karl Polanyi’s approach. In “The Great Transformation” Polanyi wrote:
This paradox [of the need for a strong central executive under laissez-faire] was topped by another. While laissez-faire economy was the product of deliberate state action, subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned; planning was not. If ever there was conscious use of the executive in the service of a deliberate government-controlled policy, it was on the part of the Benthamites in the heroic period of laissez-faire. (p.141)
Polanyi also draws attention to the disastrous contribution of “economic liberalism at its height” in the 1920s. He argues (p.142):
The repayment of foreign loans and the return to stable currencies were recognized as the touchstones of rationality in politics; and no private suffering, no infringement of sovereignty was considered too great a sacrifice for the recovery of monetary integrity. The privations of the unemployed made jobless by deflation; the destitution of public servants dismissed without a pittance; even the relinquishment of national rights and the loss of constitutional liberties were judged a fair price to pay for the fulfilment of the requirements of sound budgets and sound currencies, these a priori of economic liberalism.
This nicely captures the consciousness of the creation of globalising “economic liberalism”, as well as – once programmed correctly – the way it rolled out the consequences automatically, via a kind of austerity algorithm. This coincides with what we see today in the way neoliberalism works. And that is why I call it both an ideology (or philosophy if you feel kinder) and a system.
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We just don’t care.
• One In Six Americans Go Hungry. We Can’t Succeed On An Empty Stomach (Guardian)
As millions of kids head back to school this month, some of them are missing summer, but many are excited to once again receive regular meals. Many low-income children are able to get the food they need through the federal nutrition programs such as free school lunches. But, only half of these kids also get a nutritious school breakfast. And 75% of them struggle over the summer to get enough to eat. One child out of every five in the United States is fighting to learn, grow and prosper while combating the gnawing stress of hunger. In fact, kids make up nearly half of all people living in households struggling with hunger. That’s why lawmakers on Capitol Hill are currently working to reauthorize the laws that govern, among other things, whether or not more kids have access to summer meal programs.
Last month, a bipartisan group of six senators introduced the “Hunger Free Summer for Kids Act.” If the policies in this bill make it into law this year, it could mean as many as 6.5 million can get the nutrition they need during the summer holidays. These nutrition laws expire on September 30th, so Congress needs to act quickly. And we need to be doing more. Hunger impacts every American. According to the latest “food insecurity” numbers by the United States Department of Agriculture, 14% of all households struggle to have enough to eat. That’s 48 million of our friends, neighbors and fellow Americans. And that is one in six Americans — not just in the inner city, but in the suburbs, rural areas and every primary and battleground state across the country. These numbers show how many American households struggle to consistently provide all of its family members enough food for an active, healthy lifestyle. It could mean some days the cupboards are completely bare.
It could mean a mother is skipping meals to ensure food for her son at night. It could mean a family is choosing between food and medicine, or food and rent. It does mean there is never enough. Hunger has a devastating effect on the food insecure, but, it is not just those with empty bellies who suffer. Hunger impacts education, health and the economy at large. Children struggling with hunger struggle with schoolwork and tend to have lower test scores and are less likely to graduate. People are not getting the nutrition they need, and are at higher risk for expensive, avoidable health conditions, like diabetes, heart disease and asthma. As a nation, we spend billions on the fall-out from hunger, including avoidable health care costs and the rising cost of poor education outcomes, all while losing productivity in the workplace.
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