Jun 172018
 
 June 17, 2018  Posted by at 9:05 am Finance Tagged with: , , , , , , , , , , , , , , ,  


George Grosz Apocalyptic landscape 1936

 

Is Merkel’s Reign Nearing A Frustrated End? (G.)
Merkel Wants to Hold Urgent Summit With EU States on Migration Issues (Sp.)
Italy Bars Two More Refugee Ships From Ports (G.)
Spain Rescues More Than 900 Boat Migrants, Finds Four Bodies (R.)
First Migrants From Aquarius Rescue Ship Arrive At Spanish Port (Sky)
Spain Says France To Take In Aquarius Ship Migrants (AFP)
Trump Keeps His Promises On Trade (AFP)
China Tariffs On US Soybeans Could Cost Iowa Farmers Up To $624 Million (DMR)
Mattis: Putin Is Trying To “Undermine America’s Moral Authority” (CJ)
Consumers Stubbornly Cling to Cash (DQ)
May To Unveil £20 Billion A Year Boost To NHS Spending (G.)
Greece, FYROM To Sign Name Change Accord Sunday (K.)

 

 

This morning Merkel’s coalition partner, Horst Seehofer, said ‘I can not work with this woman anymore’. Looks like game could be over.

Is Merkel’s Reign Nearing A Frustrated End? (G.)

For nearly 14 years as Germany’s chancellor, Angela Merkel has defined and personified Europe’s middle ground: pragmatic, consensual, mercantilist, petit-bourgeois, above all stable. It is little wonder the leader of Mitteleuropa’s major economic power has dominated the political centre for so long. But what if Merkel falls? Can the centre hold? These are increasingly urgent questions as the once unassailable “Mutti” struggles to hold together a fractious coalition. The immediate issue, which is likely to come to a head on Monday, is a furious row over EU immigration policy. But other problems are piling up, with unpredictable consequences for Europe’s future cohesion.

Merkel’s political obituary has been written many times, but now the final draft is nearing completion. She is under fire from the hard-right, anti-immigrant Alternative für Deutschland (AfD), which stormed into the Bundestag last autumn. She has problems with the failing, unpopular Social Democrats on her left, on whom she depends for support. More seriously, though, Merkel is being challenged from within by her interior minister, Horst Seehofer, former chairman of Bavaria’s rightwing CSU, which is allied to Merkel’s Christian Democrats. In sum, Seehofer is demanding Germany no longer admit migrants who have first entered the EU via other member states – which is nearly all of them.

In Merkel’s view, such a bar would be illegal and would wreck her efforts – ongoing since the 2015 Syrian refugee crisis, when Germany accepted 1 million migrants – to create a balanced, EU-wide policy of voluntary migrant quotas. She says Seehofer should wait for this month’s EU summit to come up with a joint plan. The problem with that approach is twofold. Seehofer’s CSU, which faces a critical electoral clash with the AfD in October, complains that the EU has been trying and failing to agree this for years. Another objection, as her critics see it, is that most Germans, recalling her 2015 “open door” policy, do not trust Merkel on this issue. Polls indicate 65% back tighter border controls.

Last week’s row between France and Italy, sparked by Rome’s decision to refuse entry to a ship, the Aquarius, carrying 629 migrants rescued off Libya, showed how improbable is the prospect of agreement at the Brussels summit. Italy’s new populist leadership, in common with an emerging axis of nationalist-minded governments in Austria, Hungary and Poland, believes it has a mandate to halt the migrant flow. Meanwhile, so-called “frontline states” such as Greece, Spain and Italy accuse “destination states” such as Germany, France and the UK of failing to accept a fair share of migrants. Divisions have been exacerbated by the failure, so far, of a key Merkel-backed initiative, the multibillion-euro EU Emergency Trust Fund for Africa, to reduce migration by addressing “root causes” in places such as Nigeria, Eritrea and Somalia.

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And this is of course far too late. This summit should have been held 3 years ago. And it should be a UN summit, not some talks with Greece and Italy. Give Africa a voice. And Central America. Stop inviting xenophobia.

Merkel Wants to Hold Urgent Summit With EU States on Migration Issues (Sp.)

German Chancellor Angela Merkel wants to hold an urgent summit dedicated to the migration crisis and to discuss this issue with a group of the EU member states, local media reported. The Bild newspaper reported Saturday citing own sources in the leadership of several EU countries that Merkel would like to discuss migration-related issues with leadership of Austria, Greece, and Italy. According to the media outlet, a final decision about the date of the summit has not been made yet, however it could take place later in the month. Earlier, Italy’s Prime Minister Giuseppe Conte, called for reforms of EU asylum rules, proposing that the EU set up centers to process asylum claims in migrants’ countries of origin. France’s President Emanuel Macron also stressed the need to modify current migration rules and criticizing the European Union for not sharing the burden with Rome over the migrant crisis.

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This comes at a bad time given Merkel’s problems.

Italy Bars Two More Refugee Ships From Ports (G.)

Italy’s interior minister has sparked a new migration crisis in the Mediterranean by barring two rescue boats from bringing refugees to shore, a week after the Auarius was prevented from docking. “Two other ships with the flag of Netherlands, Lifeline and Seefuchs, have arrived off the coast of Libya, waiting for their load of human beings abandoned by the smugglers,” Matteo Salvini, the leader of the anti-immigrant party the League, wrote on his Facebook page. “These gentlemen know that Italy no longer wants to be complicit in the business of illegal immigration, and therefore will have to look for other ports [not Italian] where to go.”

Italy’s closure of its ports to the migrant rescue ship Aquarius, which was carrying 620 people, triggered warnings from aid agencies of a deadly summer at sea for people trying to cross the Mediterranean. Axel Steier, the co-founder of Mission Lifeline which operates the Lifeline ship, said his crew had rescued more than 100 migrants off Libya on Friday in an operation with a US warship, and transferred them to a Turkish merchant vessel. He said his ship was too small to make the journey from Libya to Italian ports and that he always transferred migrants to other ships, but insisted those craft should have the right to land in Italy.

“I am sure there is an obligation for Italy to take them because its closest safe harbour is Lampedusa. We hand over migrants to Europe because of the Geneva convention,” he said. Vessels chartered by an assortment of European NGOs have plied the waters off Libya for three years, rescuing migrants from leaking boats and transporting them to Sicily.

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Greece, Italy and now Spain.

Spain Rescues More Than 900 Boat Migrants, Finds Four Bodies (R.)

Spain’s coast guard rescued 933 migrants and found four dead bodies in the Mediterranean Friday and Saturday, as the country prepared for the arrival of a charity rescue ship that was denied a port by Italy and Malta. The number of people fleeing poverty and conflict by boat to Spain doubled last year and is likely to rise again in 2018, according to the EU border agency, potentially pushing migration up the national political agenda. Spanish Prime Minister Pedro Sanchez has already made migrant-friendly moves in his first two weeks in the job, offering to take in the rescue ship Aquarius with 629 people on board and pledging free healthcare to undocumented migrants. The coast guard said on Twitter it had rescued 507 people from 59 small dinghies in the Gibraltar strait, where it also found the four bodies.

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Kudos to Sanchez. But what comes next?

First Migrants From Aquarius Rescue Ship Arrive At Spanish Port (Sky)

The first boat of the Aquarius convoy carrying 630 people, who have become the focus of a pan-European disagreement over migration, has docked in Valencia. The Italian coast guard vessel Dattilo arrived in the Spanish port just before 7am local time on Sunday, and will be followed by the Aquarius and another Italian navy ship, the Orione. The migrants were rescued a week ago off the coast of Libya and have been at sea ever since after the Italian government refused to allow the vessel they were aboard to dock in Italy. Among those rescued are seven children aged under five, 32 children aged between five and 15 years, 61 young people aged from 15 to 17 and 80 women, seven of whom are pregnant.

They were rescued in several different operations last weekend after Italian coastguard vessels reported a group of small rubber dinghies off the coast of Libya. The Aquarius, a charity rescue vessel operated by French charities SOS Mediterranee and Medecins Sans Frontieres (MSF), picked up more than a hundred people in a complex night-time rescue before being asked by the Italian authorities to take on board hundreds more people they had recovered. However the Italian interior minister, Matteo Salvini, then refused to allow the Aquarius to dock at Italian ports, fulfilling an election pledge to stop the arrival of migrants from Africa. Malta also refused to allow them to dock there, arguing that the Italians had assumed responsibility for the rescue operations.

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More kudos for Sanchez. France is moving.

Spain Says France To Take In Aquarius Ship Migrants (AFP)

Madrid said Saturday it had accepted an offer from France to take in migrants from the Aquarius rescue ship, currently en route to Spain with more than 600 people on board. “The French government will work together with the Spanish government to handle the arrival of the migrants” scheduled for Sunday, Spain’s deputy prime minister Carmen Calvo said in a statement. “France will accept migrants who express the wish to go there” once they have been processed in Valencia, the statement said. The vessel is at the heart of a major migration row between European Union member states.

Chartered by a French aid group, the vessel rescued 629 migrants including many children and pregnant women off Libya’s cost last weekend. Italy’s new populist government and Malta refused to let it dock in their ports, accusing each other of failing to meet their humanitarian and EU commitments. Spain eventually stepped in and agreed to receive the refugees. France – who had angered Rome by branding it irresponsible over the vessel rejection – offered Thursday to welcome Aquarius migrants who “meet the criteria for asylum”.

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Still negotiating.

Trump Keeps His Promises On Trade (AFP)

By inflicting tariffs on the steel and aluminum of his allies, and then on tens of billions of dollars in goods from China, US President Donald Trump has quickly moved to fulfill the tough campaign pledges he made on trade. During his first year in office, Trump and his top economic aides made repeated threats and warned that preliminary investigations were launched into whether certain imports were being unjustly subsidized. But no concrete steps were taken. That all changed in March, when the “America First” president went on the offensive. “What happened for a period of time is the president was constrained by different members” of his administration, said Edward Alden, a specialist on US economic competitiveness at the Council on Foreign Relations.

“But the president has become increasingly confident in his own judgment on these issues… He is willing to do radical things he promised during his campaign and for many years before that.” In its latest move, the White House on Friday announced stiff 25 percent tariffs on Chinese imports, sparking immediate retaliation from Beijing. The move, which Trump justified as payback for the theft of American intellectual property and technology, reignited a trade spat between the world’s two largest economies, spooking markets and worrying business leaders.

It came on top of the tariffs on Chinese steel and aluminum that went into effect in late March – measures that prompted Beijing to slap punitive duties on 128 US goods, including pork, wine and certain pipes. Since June 1, steel and aluminum imports from the European Union, Canada and Mexico have been hit with tariffs of 25 percent and 10 percent, respectively. Trump has seemingly opted to go with his gut, sometimes over the protestations of his closest aides.

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Since there is no glut of soybeans globally, this looks improbable.

China Tariffs On US Soybeans Could Cost Iowa Farmers Up To $624 Million (DMR)

Perhaps Iowa farmers’ biggest fear is becoming a harsh reality: The escalating U.S.-China trade dispute erupted Friday, with each country vowing to levy 25 percent tariffs on $50 billion in goods. U.S. and Iowa agriculture is caught in the crossfire, with farmers selling $14 billion in soybeans to China last year, its top export market. Soybeans are among hundreds of U.S. products China has singled out for tariffs. The U.S. has an equally long list that includes taxing X-ray machines and other Chinese goods. Iowa farmers could lose up to $624 million, depending on how long the tariffs are in place and the speed producers can find new markets for their soybeans, said Chad Hart, an Iowa State University economist.

U.S. soybean prices have fallen about 12 percent since March, when the U.S.-China trade dispute began. “Any tariff or tax put in place will have a significant impact, not only to the U.S. soybean market but to Iowa’s, because we’re such a large producer,” Hart said Friday. Iowa is the nation’s second-largest soybean grower, producing 562 million bushels last year worth $5.2 billion. “It will slow down the market. Even with the tariffs in place, we will ship a lot of soybeans to China,” Hart said. “It just won’t be nearly the amount we did before. “It’s likely to still be our largest market even with these tariffs in place.”

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Word.

Mattis: Putin Is Trying To “Undermine America’s Moral Authority” (CJ)

At a graduation ceremony for the US Naval War College (barf), US Secretary of Defense James Mattis asserted that Russian President Vladimir Putin “aims to diminish the appeal of the western democratic model and attempts to undermine America’s moral authority,” and that “his actions are designed not to challenge our arms at this point but to undercut and compromise our belief in our ideals.” This would be the same James Mattis who’s been overseeing the war crimes committed by America’s armed forces during their illegal occupation of Syria.

This would be the same United States of America that was born of the genocide of indigenous tribes and the labor of African slaves, which slaughtered millions in Korea, Vietnam, Cambodia, Iraq, Libya and Syria for no legitimate reason, which is partnered with Ukrainian Nazis, jihadist factions in Syria and Iranian terror cultists, which supports 73 percent of the world’s dictators, which interferes constantly in the electoral processes of other countries as a matter of policy, which stages coups around the world, which has encircled the globe with military bases, whose FBI still targets black civil rights activists for persecution to this very day, which routinely enters into undeclared wars of aggression against noncompliant governments to advance plutocratic interests, which remains the only country ever to use nuclear weapons on human beings after doing so completely needlessly in Japan, and which is functionally a corporatist oligarchy with no meaningful “democratic model” in place at all.

A casual glance at facts and history makes it instantly clear that the United States has no “moral authority” of any kind whatsoever, and is arguably the hub of the most pernicious and dangerous force ever assembled in human history. But the establishment Russia narrative really is that cartoonishly ridiculous: you really do have to believe that the US government is 100 percent pure good and the Russian government is 100 percent pure evil to prevent the whole narrative from falling to pieces. If you accept the idea that the exchange is anything close to 50/50, with Russia giving back more or less what it’s getting and simply protecting its own interests from the interests of geopolitical rivals, it no longer makes any sense to view Putin as a leader who poses a unique threat to the world. If you accept the idea that the west is actually being far more aggressive and antagonistic toward Russia than Russia is being toward the west, it gets even more laughable.

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“Currency in Circulation vs. GDP is increasing on all continents..”

Consumers Stubbornly Cling to Cash (DQ)

The last month has been an unhappy time for daydreamers of a cashless nirvana. Following weeks of disruptive tech failures, payment outages, and escalating cyber fraud scams, much of it taking place in Britain, consumers have been reminded of one of the great benefits of physical cash: it is accepted just about everywhere and does not suddenly fail on you. The findings of a new study by UK-based online payments company Paysafe, partly owned by US private equity giant Blackstone, confirm that consumers on both sides of the Atlantic continue to cling to physical lucre. For its Lost in Transaction report, Paysafe surveyed over 5,000 consumers in the UK, Canada, the US, Germany, and Austria on their payment habits.

One of its main findings is that 87% of consumers used cash to make purchases in the last month, while 83% visited ATMs, and 41% are not interested in even hearing about cash alternatives. “Despite the apparent benefits of low-friction payment technologies, these findings suggest many consumers aren’t ready to lose visibility of the payment process,” says Paysafe Group Chief Marketing Officer Oscar Nieboer. “It’s clear that the benefits are not unilaterally agreed upon, with cultural and infrastructure trends at play, and it may be some time before adoption is widespread.” Although consumers continue to cling to cash, they appear to be carrying less of it: 49% overall in the survey and 55% of U.S. respondents said they carry less cash now than they did a year ago.

The average American consumer carries $42 today — that’s $8 less than in 2017. In the UK the average amount carried in 2017 was £33; that has now fallen to £21. But that does not mean that the amount of cash in circulation is dwindling. On the contrary, according to this year’s G4S cash report, the world average ratio of currency vs GDP continues to rise, reaching 9.6% in 2018. “Currency in Circulation vs. GDP is increasing on all continents, indicating a consistent, growing demand for cash across the world,” says the report. South America has by far the highest cash dependency relative to its GDP, with an average ratio of over 16%.

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First you kill it, then it needs to be revived. How much of the £20 billion goes to repairing the damage already done?

May To Unveil £20 Billion A Year Boost To NHS Spending (G.)

Taxpayers are to be asked to help fund a £20bn a year injection of extra cash into the National Health Service by 2023-24 that will pay for thousands more doctors and nurses, while cutting cancer deaths and improving mental health services, Theresa May will say today. The announcement, before the NHS’s 70th birthday next month, will represent the biggest funding boost since Gordon Brown imposed a one percentage point rise in National Insurance to pay for more NHS spending in his 2002 budget, in the face of Tory claims that Labour was slapping a “tax on ordinary families”.

Government sources said the increases, which would be paid for in part by a “Brexit dividend”, would amount to around £600m a week extra for the NHS in cash terms within six years. Health and social care secretary Jeremy Hunt said last night that the government wanted to “show the world what a cutting-edge 21st-century healthcare system can look like”. He added: “This long-term plan and historic funding boost is a fitting birthday present for our most loved institution. Like no other organisation could ever hope to be, the NHS is there for every family at the best and worst of times, from the wonder of birth to the devastation of death, living and breathing those very British values of decency, fairness and compassion.

He said the extra cash “recognises the superhuman efforts made by staff over the last few years to maintain services in the face of rapidly growing demand. But it also presents a big opportunity for the NHS to write an entirely new chapter in its history”. Details of how the public will be required to pay through tax rises, and the proportion of the funding increases they will pay for, will not be spelled out until the budget, because of ongoing arguments involving the chancellor Philip Hammond, Hunt, and No 10.

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70% of Greeks is against the deal, protests are everywhere. But he pushed it through. In Foreign Policy, someone suggested giving him a Nobal Peace Prize for it. But, but, democracy…

Greece, FYROM To Sign Name Change Accord Sunday (K.)

Greece and the Former Yugoslav Republic of Macedonia (FYROM) are set to sign a historic accord to modify the latter’s name after Greek Prime Minister Alexis Tsipras survived a no-confidence vote in Parliament Saturday. The accord is to be signed in the Prespes region, a lake district which borders Greece, FYROM and Albania, by the two countries’ foreign ministers Sunday. Tsipras and his FYROM counterpart Zoran Zaev will both attend the ceremony, along with UN mediator Matthew Nimetz and other European officials – including the European Union’s foreign policy chief Federica Mogherini and European Neighborhood Policy and Enlargement Negotiations Commissioner Johannes Hahn.

Following the ceremony, members of the two delegations will hold a working lunch in the town of Otesevo, in FYROM. Security at the event is expected to be ultra-tight. A protest against the deal will be held in the nearby village of Pisoderi. On Saturday, after more than two days of vehement debate in Parliament, Greece’s SYRIZA-led government survived a no-confidence vote brought against it by the main opposition New Democracy party, but with one less MP. The motion garnered 127 votes with 153 against. The junior coalition partner Independent Greeks (ANEL) backed the government despite its opposition to the name deal with FYROM that Tsipras announced last week, bar one MP, Dimitris Kammenos, who backed the motion. He was subsequently expelled from the party, reducing the government’s majority to 153.

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Jun 032018
 
 June 3, 2018  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , , , ,  


Andrew Wyeth Christina’s world 1948

 

Why Italy Had To Say Goodbye To The Dolce Vita (David McWilliams)
An Italian Exit May Be Rome’s Best Option – JPMorgan (ZH)
Angela Merkel Rules Out Debt Relief For Italy (CNBC)
New Italy PM Starts Off In Shadow Of His Powerful Deputies (AFP)
Juncker: EU Won’t ‘Meddle’ In Italy’s Affairs (O.)
Political Bruiser Sánchez Stuns Spain To Become PM (Spain Report)
Europe: Confront Trump or Avoid a Costly Trade War (NYT)
US Wants Structural Changes To China’s Economy: Mnuchin
Uber’s ‘Business Is Finished’ In Turkey, Erdogan Says (R.)
Britain’s Low-Paid Face Decade Of Wage Squeeze (O.)
UK Universal Credit Change To Bar 2.6m Children From Free School Meals (Ind.)
Whale Dies From Eating More Than 80 Plastic Bags (AFP)

 

 

Excellent from David McWilliams on what the euro has done to Italy.

Why Italy Had To Say Goodbye To The Dolce Vita (David McWilliams)

Sometimes it is not appreciated quite how industrial Italy is. It has long been Europe’s second-biggest manufacturing power, beaten only by Germany. Italy is far more industrial than France or the UK. In some areas of design and high-quality manufacturing, Italy is still without peer. However, since it gave up the lira and adopted the euro – in effect Germany’s currency – things have gone pear-shaped. This economic calamity is driving Italian politics, leading many to question the euro and Italy’s membership of it. From 1945 to 1995 there was an understanding that Italy would devalue the lira. This is what Italy did. Traditionally, it devalued the lira every few years. This kept Italian industry competitive.

For example, when Italy joined the European Monetary System, in 1979, the exchange rate was 443 lire per Deutschmark. By 1990, the year of German reunification, the rate was 750 lire to the Deutschmark. By 1995 it was 1,000 lire to the Deutschmark. In the 1992 currency crisis the lira fell to a low of 1,250 against the Deutschmark before recovering a bit. The gradual fall in the value of the lira was a price that the Italians were prepared to pay for industrial success. Contrary to the dogma spouted by Europe’s central bankers, Italian devaluations worked particularly well. From 1979 to 1998, Italian industrial production outpaced that of Germany by more than 10%. Italian equities outperformed German equivalents by 16% – after having taken into account the devaluations.

So not only was Italian industry growing faster than German industry, aided by lira devaluations, but also the return on capital in Italy was higher than in Germany. This is because if the stock market of a country is outperforming another country’s, it implies that the capital that is deployed in the faster-growing country is being deployed more efficiently. Therefore, not only was Italy growing more quickly than Germany, but it was more efficient too. Then came the euro. Since Italy joined the single currency, almost to the day, its industry has gone backwards. Having outperformed German stocks during the period of the lira, Italian stocks have underperformed German stocks by a whopping, bankruptcy-inducing 65%.

During the half-century when Fellini was writing the story of postwar Italian success, the Italian stock market almost always returned more than the German stock market. Once Italy joined the euro that stopped almost overnight. Deep in the economy, the strictures imposed by the euro have destroyed much of Italian industry. For example, having outgrown Germany’s industrial output in the 1980s and 1990s by 10%, Italian factory output since Italy joined the euro has lagged Germany’s by 40%.

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Hard to summarize this long Zero Hedge piece. Depending on where you look, Italy may not be all that weak.

“If you owe the ECB €10 billion, you have no leverage. If you owe the ECB €426 billion, you have all the leverage.”

An Italian Exit May Be Rome’s Best Option – JPMorgan (ZH)

[..] with €426BN, Italy has the highest Target2 deficit with the Eurosystem (Spain is a close second with €377BN) any discussion about an Italian euro exit raises concerns about costs. [..] due to QE induced cross border flows since 2015, Target2 balances have exploded since the launch of the ECB’s QE (and third Greek bailout in 2015), and surpassed the previous extremes from the depths of the euro debt crisis in the summer of 2012.

[..] a euro exit by a debtor country would represent more of a cost to creditor countries such as Germany rather than to the exiting country itself. And, as shown in the chart above, Germany sure has a lot of implicit accumulated costs, roughly €1 trillion to be precise, as a result of preserving a currency union that allowed German exporters to benefit from a euro dragged lower by the periphery, relative to where the Deutsche Mark would be trading today. But here the analysis gets slightly more complex, as Target2 does not provide the full picture of potential costs (or benefits, assuming a scorched earth approach). As JPMorgan writes, the Target2 liabilities of a debtor country give only a partial picture of the cost to creditor nations from that debtor country exiting.

This is because Target2 balances represent only one component of the Net International Investment Position of a country, i.e. the difference between a country’s total external financial assets vs. liabilities. The broader metric that one must use, is of the Net International Investment Position for euro area countries and is shown in the chart below. It shows that contrary to the Target2 imbalance, Italy leaving the euro would inflict a lot less damage to creditor nations than Spain leaving the euro. This is because Spain’s net international investment liabilities stood at close to €1tr as of the end of last year, almost three times as large as its Target2 liabilities. In contrast Italy’s net international investment liabilities were much smaller and stood at only €115bn at the end of last year, around a quarter of its €426bn Target2 liabilities. This, as JPM explains, is because Italy has accumulated over the years more external assets than Spain and should thus be overall more able to repay its external liabilities.

[..] Ironically, the surprisingly low net international investment liabilities of Italy are the result of the persistent current account surpluses the country has been running since the euro debt crisis of 2012, and smaller current account deficits compared to Spain before the crisis. The flipside is that the current account surplus – in theory – also makes it easier for a country like Italy to exit the euro relative to a current account deficit country. This is because the higher the current account deficit of a debtor country, the higher the cost of an exit for this country as the current account deficit would have to be closed abruptly following an exit. Most importantly, this means that as a result of Italy’s decent current account surplus, from a narrow current account adjustment point of view, its own cost of a euro exit should be relatively small.

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Merkel has weakened a lot. Italy knows it.

Angela Merkel Rules Out Debt Relief For Italy (CNBC)

German Chancellor Angela Merkel appeared on Saturday to rule out debt relief for Italy, saying in a newspaper interview that the principle of solidarity among members of the euro zone should not turn the single currency bloc into a debt-sharing union. “I will approach the new Italian government openly and work with it instead of speculating about it intentions,” Merkel told the Frankfurter Allgemeine Sonntagszeitung in an interview to be published on Sunday.

On Friday, Italy swore a populist coalition into power, ending months of political uncertainty that hit global markets in the last week. Newly designated Prime Minister Giuseppe Conte will lead Western Europe’s first anti-establishment government with the aim of cutting taxes, boosting spending on welfare and overhauling EU rules on budgets and immigration. Italy accounts for 23.4 percent of the euro zone’s public debt and 15.4 percent of the bloc’s GDP, according to Eurostat.

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Conte has a full agenda.

New Italy PM Starts Off In Shadow Of His Powerful Deputies (AFP)

Italy’s new prime minister Giuseppe Conte mostly kept quiet on his full first day in office Saturday, while his two powerful deputies took centre stage in setting the tone of the populist government’s policy. Conte, a political novice, was finally sworn in on Friday as the head of a government of ministers from the anti-establishment Five Star Movement and the far-right League, ending months of uncertainty since elections in March. But Conte was a compromise candidate between Five Star leader Luigi Di Maio and the League’s Matteo Salvini – both of whom are now his deputy prime ministers – and he will have to walk a delicate line to push through the anti-austerity and pro-security promises their populist parties campaigned on.

The 53-year-old academic also inherited a daunting list of issues from his predecessor Paolo Gentiloni, including the financial travails of companies such as Ilva and Alitalia, a Group of Seven summit in Canada and a key EU summit at the end of the month, as well as the thorny question of immigration. Immigration is the bugbear of Conte’s interior minister, Salvini, the 45-year-old leader of the anti-immigrant, anti-Islam League. Salvini announced Friday that he would visit Sicily to see the situation for himself at one of the main landing points for refugees fleeing war, persecution and famine across North Africa and the Middle East. “The good times for illegals is over – get ready to pack your bags,” Salvini said at a rally in Italy’s north on Saturday, adding however that he wants to economically assist migrants’ countries of origin.

His comments come after more than 150 migrants, including nine children, disembarked from a rescue ship late Friday in Sicily. Conte attended a military parade alongside President Sergio Mattarella on Saturday, marking Republic Day for the foundation of the Italian Republic in 1946. However the new prime minister has issued few public statements since being appointed. On Saturday he did post on Facebook that he had spoken with German Chancellor Angela Merkel and French President Emmanuel Macron and would meet the two leaders at the G7 summit, where he will be a “spokesman for the interests of Italian citizens”. Conte has also opted to keep the country’s intelligence services under his personal control.

Deputy premier Di Maio, who is serving as economic development minister, also took to Facebook, calling for “entrepreneurs to be left alone”. “Employers and employees in Italy must not be enemies,” he said, promising “I will not disappoint you”. On Saturday evening Five Star held a rally in the centre of Rome with thousands of supporters and all its ministers to celebrate “the government of change”. Di Maio told the crowd that “from today, the state is us”. Five Star’s founder, former comic Beppe Grillo, rang a bell in front of the crowd, saying the sound “marks the fracture between a world that is going away and a new one that is arriving”.

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Right. Sure.

Juncker: EU Won’t ‘Meddle’ In Italy’s Affairs (O.)

Italy, the third-largest economy in the eurozone, has a public debt second only to Greece’s and there was a negative reaction from the financial markets to the League-M5S coalition, which plans to significantly raise public spending. Juncker offered a more placatory tone, suggesting that Brussels and Berlin had learned the lessons of the Greek crisis. He also denied that the eurozone was set on a course for another economic downturn: “The Italians cannot really complain about austerity measures from Brussels. However, I do not now want to lecture Rome. We must treat Italy with respect. Too many lectures were given to Greece in the past, in particular from German-speaking countries. This dealt a blow to the dignity of the Greek people. The same thing must not be allowed to happen to Italy.”

Juncker said that the financial markets’ reaction was “irrational”: “People should not draw political conclusions from every fluctuation in the stock market. Investors have been wrong on so many occasions.” Neither of the coalition parties in the new Italian government campaigned on leaving the euro or the EU, but both have backed such calls in the past and are scathing about the rules that underpin the eurozone. Mujtaba Rahman, a former European commission and UK Treasury official who now works for consultancy the Eurasia Group, warned that as the cornerstone of the coalition government’s platform was fiscal expansion, it was liable to clash with the commission this autumn.

“Though no official estimates have been produced, independent estimates suggest the proposed measures would cost, combined, upwards of €100bn per annum, around 6% of GDP.“If the government were to propose a very expansionary budget, the commission – which provides its opinions and recommendations on member states’ draft budgetary plans – would have to reject it in September. This would be a first, and would set the stage for a real confrontation with Rome,” he said. “A significant deviation from EU-mandated fiscal targets may prompt the commission to open a new Excessive Deficit Procedure, a process designed to give the EU more power to enforce austerity on Rome. Yet the symbolism of this move would only strengthen the Italian government’s domestic standing.”

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Poker player?!

Political Bruiser Sánchez Stuns Spain To Become PM (Spain Report)

Forget about what the new socialist government’s policies are going to be, because no one really knows yet. Forget about who the new ministers are going to be, because no one really knows yet. And forget about how long this government is going to last. No one has a clue right now. What is worthy of note is how Pedro Sánchez has just crushed all of his political opponents in a week. Last Friday, the PSOE had slowly slumped to less than 20% in the polls and he was being written off by columnists and commentators. This Saturday, he will be driven to Zarzuela Palace to be sworn in as the new socialist Prime Minister of Spain [..]

Mr. Rajoy is likely not the only political leader who needs a stiff drink this weekend. Pedro Sánchez has just left Pablo Iglesias—who nine days ago thought his biggest problem was an absurd internal ballot about his new luxury home—sitting in the dust in the fight for the Spanish left. Two years ago, with the sudden appearance and meteoric rise of Podemos, Mr. Iglesias’s stated strategic goal was not to win the election but to dominate the Spanish left. He just lost that race. Pedro Sánchez has just left Ciudadanos leader Albert Rivera rabbiting on incessantly about wanting a new general election instead of the socialists “unfairly” grabbing power, because Mr. Rivera is—or was—doing rather better in the polls than the rest.

But rabbit on is all he can do for now because, just like nine days ago, in the real world Ciudadanos still only has 32 seats in Congress. And Pedro Sánchez has just left the powerful leader of the Socialist Party in Andalusia, Susana Diaz, well, in Andalusia. This might be the sweetest victory of all for the new Prime Minister, because it was she who wielded her considerable internal and establishment influence in October 2016 to oust Mr. Sánchez as leader of the PSOE, allowing Mariano Rajoy to be reappointed Prime Minister after a year of national stalemate unbroken by two general elections.

Again: Pedro Sánchez, written off by some as being too handsome to have any interesting ideas, has, somewhere along the way, learnt to execute political hit jobs that have left all of his major political opponents staggering, and sent what was a confident conservative party that had only just passed a new budget—two days previously—scurrying into opposition, wounded. In a week. Whatever happens next in Spanish politics, do not underestimate Pedro Sánchez.

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More division.

Europe: Confront Trump or Avoid a Costly Trade War (NYT)

Despite its name, the European Union is not generally a model of unity. If Mr. Trump was banking on internal division stymieing the European response, he picked an opportune moment. Britain is consumed with domestic sniping over its pending departure from the European Union, making it a bit player in these proceedings. Italy has been immersed in the operatic political drama at which it excels, only Friday swearing in a new government after inconclusive elections in March. The incoming government presents a coalition of two populist parties that have expressed disdain for the European Union and the shared euro currency, stoking fears that the bloc will be presented with a new challenge to its cohesion.

Spain just swapped governments. Germany is headed by a chastened chancellor Angela Merkel following her own lengthy struggles to form a government after elections last fall. The French president has been frustrated in his attempts to forge greater political unity within the bloc. “Europe is in disarray,” said Nicola Borri, a finance professor at Luiss, a university in Rome. “It’s even difficult to understand who is in power in Europe.” In deliberating how to respond to Mr. Trump’s tariffs, the key schism appears to run between Germany and the rest of the bloc. “I don’t think there is a unified consensus for how to deal with the Americans,” said Meredith Crowley, an expert on international trade at the University of Cambridge in England. “The Germans benefit from open markets globally, so they don’t want to throw up more barriers to free trade.”

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That’s quite the statement. What if Beijing said the same about the US?

US Wants Structural Changes To China’s Economy: Mnuchin

The United States wants trade talks in Beijing this weekend to result in structural changes to China’s economy, in addition to increased Chinese purchases of American goods, U.S. Treasury Secretary Steven Mnuchin said on Saturday. U.S. Commerce Secretary Wilbur Ross arrived in Beijing on Saturday with an interagency team of U.S. officials for talks on long-term purchases of U.S. farm and energy commodities, just days after Washington renewed its threats to impose tariffs on Chinese goods.

The purchases are partly aimed at shrinking the $375 billion U.S. goods trade deficit with China. Mnuchin, speaking at a G7 finance leaders meeting in Canada where he was the target of U.S. allies’ anger over steel and aluminum tariffs, said the China talks would cover other issues, including the Trump administration’s desire to eliminate Chinese joint venture requirements and other policies that effectively force technology transfers.

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It’s election time.

Uber’s ‘Business Is Finished’ In Turkey, Erdogan Says (R.)

Turkey’s President Tayyip Erdogan has said ride hailing app Uber is finished in Turkey, following pressure from Istanbul taxi drivers who said it was providing an illegal service and called for it to be banned. About 17,400 taxis operate in Istanbul, home to about a fifth of Turkey’s population of 81 million people, and since Uber entered the country in 2014 tensions have risen sharply. Erdogan’s statement came after new regulations were announced in recent weeks tightening transport licensing requirements, making it more difficult for drivers to register with Uber and threatening a two-year ban for violations.

“This thing called Uber emerged. That business is finished. That does not exist anymore,” he said in a speech in Istanbul late on Friday. “We have our taxi system. Where does this (Uber) come from? It is used in Europe, I do not care about that. We will decide by ourselves,” added Erdogan, who is running for re-election in three weeks. [..] Uber said that about 2,000 yellow cab drivers use its app to find customers, while another 5,000 work for UberXL, using large vans to transport groups to parties, or take people with bulky luggage to Istanbul’s airports.

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The Tories can’t wait to return to Dickens.

Britain’s Low-Paid Face Decade Of Wage Squeeze (O.)

The wages of 10 million low-paid workers have stalled for two decades and face pressure for a decade to come, according to a bleak assessment of Britain’s future jobs market. Global economic competition, automation, the shift to the gig economy and a widening regional divide will see further pressure placed on the incomes of those earning between £10,000 and £15,000, it warns. The analysis by the Centre for Social Justice (CSJ) thinktank, which is on the political right and chaired by the former Tory leader Iain Duncan Smith, also blamed a chronic national failure to boost skills and education. It will be seen as another warning to Theresa May from Conservative figures to kickstart her domestic agenda.

There have been concerns within the party that the focus on Brexit has led to inaction in other crucial areas that could hold Britain back after its exit from the European Union. The analysis, co-written by Boris Johnson’s former economic adviser and Brexit supporter Gerard Lyons, concludes that wages of those on the lowest salaries stalled long before the 2008 financial crash. It warns that the current evidence shows that most never escape a life on low pay. The centre’s support for action on low pay shows that it is now an issue of concern across the political spectrum, with automation expected to place further pressure on jobs in some low-paid sectors unless new skills and opportunities are developed.

The CSJ report states that 20% of Britain’s 33 million workers earn £15,000 a year or less, and that 50% earn no more than £23,200. Only 10% of employees, or about 3 million people, earn above £53,000 a year. Britain does not compare well with other developed nations when it comes to low pay, it states. Taking data from manufacturing, and giving the US a score of 100, Switzerland topped the table with a pay rate of 155, followed by Norway on 126, Germany on 111 and France on 97. However, the UK was much further behind, on 73.

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These people would be better off moving to Poland.

UK Universal Credit Change To Bar 2.6m Children From Free School Meals (Ind.)

Up to 2.6 million children whose parents are on benefits could be missing out on free school meals by 2022, the shadow education minister will warn. Angela Rayner will tell a GMB union conference on Sunday that the Government’s claims on school meals are “falling apart” after changes to eligibility under Universal Credit (UC). When the system was first introduced in 2013, all children of recipients – who were all unemployed – were eligible for free school meals (FSM), as they would have been under the old system. But in April the criteria was tightened based on income. In England, the net earnings threshold will be £7,400 whereas in Northern Ireland it will be £14,000.

A government technical note published in May said that if the change had not been made, “around half of all (state school) children would become eligible for FSM and the meals would no longer be targeted at those who need them the most”. It said that in 2017 around 1.1 million disadvantaged children were eligible and received a free school meal, some 14 per cent of all state-school pupils. But if the change had not been made the number of additional children who would have been eligible was between 2,300,000 and 2,600,000 by 2022.

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And that’s just one animal that we could see.

Whale Dies From Eating More Than 80 Plastic Bags (AFP)

A whale has died in southern Thailand after swallowing more than 80 plastic bags, with rescuers failing to nurse the mammal back to health. The small male pilot whale was found barely alive in a canal near the border with Malaysia, the country’s department of marine and coastal resources said. A veterinary team tried “to help stabilise its illness but finally the whale died” on Friday afternoon. An autopsy revealed 80 plastic bags weighing up to 8kg (18lb) in the creature’s stomach, the department added. People used buoys to keep the whale afloat after it was first spotted on Monday and an umbrella to shield it from the sun. The whale vomited up five bags during the rescue attempt.

Thon Thamrongnawasawat, a marine biologist and lecturer at Kasetsart University, said the bags had made it impossible for the whale to eat any nutritional food. “If you have 80 plastic bags in your stomach, you die,” he said. Thailand is one of the world’s largest users of plastic bags. Thon said at least 300 marine animals including pilot whales, sea turtles and dolphins, perished each year in Thai waters after ingesting plastic. “It’s a huge problem,” he said. “We use a lot of plastic.” The pilot whale’s plight generated sympathy and anger among Thai netizens. “I feel sorry for the animal that didn’t do anything wrong, but has to bear the brunt of human actions,” wrote one Twitter user.

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