All Quiet On The Western Front – After the business-as-usual mood at the time of the general elections in Portugal the Eurocrats must be feeling shocked by events since. The new Portuguese government only lasted a few weeks before its collapse – as opposition parties defeated the government in a key vote on Tuesday. Now a new government needs to be formed with anti-austerity and left wing parties leading the way.
This change back to the country’s old ways seems likely to increase state spending, halt plans to privatise services and signal a slide back into financial difficulties. Not good news for Brussels especially with the escalating migration crisis, border controls coming back, Britain’s frequent mutterings about reform – and their hopes of a Nobel Prize for Frau Merkel falling flat. But you can’t win ‘em all …
For the third Sunday in a row one of our European partners is having a general election. This time it is the turn of Portugal – another one of those countries bailed-out and still deeply in debt.
But here the economy is starting to recover and none of the EU big players feel under any threat from the possible results. In fact the voting is unlikely to make much impact on anyone except those politicians that are directly involved.
So it’s fine vintage ports and fat cigars all round in Brussels with nothing new to worry about. The Eurocrats can instead contemplate how best to promote Frau Merkel’s case for taking the next Nobel Peace Prize. But things don’t always go to plan …
On Sunday the Greek politicians will again be asking for a mandate from the people – for the third time this year. Last time it was a referendum on austerity plans and this time it is a second attempt at national elections.
Considering that the promises made before the January elections were not met, and that the views of the majority in the referendum were not followed, the population must have little faith in this latest round of voting.
Certainly there is little enthusiasm for more voting with the economy still in dire straits, a quarter of workers jobless and strict limits on cash withdrawals at banks. One interviewee said “What’s the point of going back to the voting booth all the time? Nobody trusts anyone anymore … They all lied to us and nothing has changed; it’s still terrible.” So while today’s media headlines concentrate on migrants going through Greece from Syria, Libya, Iraq, etc it is the migration of young Greek professionals – such as doctors and engineers – to Northern Europe that will impact the country even more in the long term.
With recent opinion polls being shown to be seriously flawed no one is prepared to forecast the outcome. Will the mood swing further against austerity or will voters accept that their country is going to be in hock to the EU for decades?
But at least the 86,000 million euro Greek bailout is still in place. However that leaves little room for winning parties to do anything other than follow the terms imposed by its lenders for the next three years. It was also hoped that the bailout agreement last month would mean that the UK could get back its ring-fenced 1,000 million euro emergency loan. But the absence of any announcement by the Chancellor / Treasury suggests that it has disappeared into the black hole. If so then that’s another cut to our public services coming up to pay for it …
Byte Lives On – Even though the original Byte magazine closed years ago a few enthusiasts have been working away to put some of its back issues online. So now you can read PDF versions of the magazine, starting from Issue 1 (September 1975) by downloading copies from various archives. As usual you need to take care when downloading from untrusted web sites but – ftp://helpedia.com/pub/archive/temp/Byte/ – seems to contain the genuine files.
Cyprus Moves On – While the UK media has lost interest in the financial problems of Cyprus life still goes on there despite the crash. And the latest news from the troubled Bank of Cyprus is the appointment of a new board of directors. Not normally a subject of much interest – but this time the old order was pushed aside by six new directors from Russia. According to a Cypriot commentator – “They have a strong incentive, recovering some of their lost millions, will have no links – and therefore no obligation to help – to big, local businesses that cannot service their loans and will abhor seeking consensus with the union on staff issues. The bank would benefit from the more ruthless management style used at businesses in Russia.” Apparently there has been a sudden boost in demand for English-Russian translators on the island.
Song Contest Drags On – Back in May Denmark won the 2013 Eurovision Song Contest despite a strong showing by Azerbaijan and the Ukraine. Over recent days a number of sources have alleged that more than one song was boosted by bought votes. Grandad has no evidence of any of this Eurovision vote rigging – but equally has no recall of ever hearing any appealing songs from Azerbaijan, or Armenia, or Serbia, or Moldova, or FYR Macedonia, etc [Letting Scotland choose the UK song for 2014 is still an option …]
Cyprus Gives In – Four months on from the announcement and officials have just agreed to a 47.5 percent haircut with international lenders on deposits exceeding €100,000 in the Bank of Cyprus. This will allow the bank to come out of administration but then it will face new problems as account holders look to move their money elsewhere. The bank is already closing branches and firing staff but worse could lie ahead.
DAB Radio Hangs On – The Goverment’s decision on the future of DAB radio has been pushed back until December – the latest possible date that still meets the 2013 target. Considering the volume of radios still being sold it seems highly unlikely that the DAB will reach the targets promised by its promoters. Even with all the Internet radio / Freeview / Freesat included volumes are still below target. Another compromise (fudge) coming up.
HS2 and Short Memories – An enormous range of benefits are promised if high speed trains run north of London. But few seem to recall that this has all been promised before. When the first high speed links were agreed part of the justification was the links north of London. And this got further than a promise with someone (the taxpayer I guess) funding new high speed trains to run to Leeds, York, etc. These trains were actually built and then tested on the East Coast Mainline. However there were always technical issues that stopped them going into service. And eventually the northern Eurostar plans were scrapped – along with the promised economic benefits. Soon some ex-Eurostar trains appeared on regular service with GNER on the London-Leeds services – issue free.
In the real world the East Coast Mainline still has “slam-door” [Type 43 Inter-City 125] diesel trains in regular operation. Trains that pre-date the original electrification of the line in 1988. But at least there is some progress here. Hitachi Super Express trains are planned to be built at a new factory at Amazon Park, by Heighington railway station Newton Aycliffe, County Durham. Construction of the factory should now have started with train production beginning in 2015 and aiming to be in normal service on the Great Western Mainline by 2017 and the East Coast Mainline by 2018. Some £5,700 million has been committed to a construction programme involving over 800 carriages / power cars.
The biggest improvements for passengers would come about not through HS2 or even these Super Express trains – but through more carriages and the elimination of pinch points on the network; where fast services are blocked by stopping services running just ahead. This would need some longer platforms and more four track sections – but would benefit far more actual travellers than HS2. Current restrictions mean that the new trains are only planned to have nine or ten passenger carriages – whereas existing Eurostar trains already have eighteen.
Smart Meters – Over recent days British Gas has launched its advertising campaign to convince customers that their new smart meters are going to be a big consumer benefit. It will be interesting to see how many are convinced. But, given the numbers that claimed they did not know what they were doing when they bought useless insurance and investment products, British Gas may get plenty of takers. The lawyers will be lining this one up for the day when all the current mis-selling cases stop raking in the fees.
This week Croatia became the 28th member of the EU. When they started their application process EU membership was an exciting – and profitable – prospect. A club offering lots of cheap money and generous subsidies or handouts. But recently the financial mess in other EU countries – and an extended recession in Croatia – has trimmed back expectations to more realistic levels.
So Croatia, a country with a population less than Scotland, starts out this week as the third poorest EU country – behind Bulgaria and Romania – and the newest member of an unstable euro zone. Now that’s a lot better than civil war but not quite the free ride envisaged ten years ago. Worst still it joins in the week that Portugal is cracking under the strain of the on-going austerity plans. Already this week there has been the resignation of Portugal’s Finance Minister and its Foreign Minister forcing the markets to raise borrowing costs and triggering a fall on the Lisbon stock market. More problems lie ahead.
Back in April Grandad commented that – “Portugal has already had 78,000 million euros in bailouts but new estimates say that it will need to borrow 14,000 million euros more in 2014 – then more again in 2015”. Now that’s a big financial problem; even on an EU-wide scale. And one that has not been improved by adding another poor and recession-hit country into the eurozone mix. Of course Brussels says not to worry and things will improve soon – but the promises are starting to sound less convincing with each repetition.
And grassroots commentators have pointed out that this is exactly why Barosso quit as Portugal’s Prime Minister, before finishing his term, switching to a safe job at the top of the EU. A tactic employed equally well by Herman Von Rompuy – in moving from Belgium’s Prime Minister (for just 11 months) to EU President – and getting enough to retire in the process.
Since age seems to be no barrier it must be time for any Grandads that are short of funds to apply for vacant EU posts now – and make some serious money before the euro cash dispenser runs out.
European finance ministers are currently having a couple of days enjoying the delights of Dublin at our expense – but then they do have a growing portfolio of problems to consider between pints (or does that have to be litres?)
First it’s Cyprus where the money needed to stave off disaster has grown by some 5,500 million euros since our last posting just two weeks ago. With only 1.16 million people on the island that equates to thousands of euros of extra debt – per person – since the end of March! Even selling off national gold reserves will not make a significant dent in the 23,000 million euros total bailout identified so far. The expected jump in unemployment, fall in property values and closures of businesses will kill off chunks of the Cyprus Government’s income stream and make the situation worse.
Take, for example, Cyprus Airways. Here the plan, drafted by Air France, involves reducing the number of planes operated from just ten to six and firing 650 of the staff immediately. The remaining 350 staff having their salaries cut by 17%. This will, probably, save money short-term – but then finish off the business entirely soon after.
While all of this is disastrous for Cyprus there are bigger problems for the finance ministers to face. Portugal has already had 78,000 million euros in bailouts but new estimates say that it will need to borrow 14,000 million euros more in 2014 – then more again in 2015. Now in proportion to its 10 million population that’s not as bad as Cyprus – but with the Portuguese courts blocking the austerity plans the situation is getting worse. Having more people in a country doesn’t help unless they are employed and paying taxes.
In contrast the situation in Italy and Spain looks relatively calm – even though unemployment in Spain has gone over 25% and is now almost at the level of Greece (27.2% in January). While in Italy the calm may be due to the fact that there is still no government. A temporary prime minister being required to mark time until there is yet another general election.
Meanwhile the Cameron family are being entertained at Schloss Meseberg – a rare event at Angela Merkel’s official country retreat. Speculation in the media says that this signals Britain will get concessions from the EU – but more likely Germany wants to cool demands for reform by showing just how friendly our chums in the EU club can be.
So the financial summary for EUland seems to be a continued, slow decline overall – but that hides some big problems for the small economies. The worry is that some small nations are experiencing now what still lies ahead for some big ones. But if you want to be really worried look here …
Despite the advantages of oil and gas rights, sunshine holidays and euro-zone banks Russian interests did not jump in to save bankrupt Cyprus.
And the Cyprus government agreed a deal with Brussels far worse than predicted. With the threatened haircut on bank deposits turning into a full-blown decapitation. This deal seems certain to asset-strip investors, kill off the island’s financial services sector – but also serve to encourage the others within the EU not to expect any easy bailouts in future. But despite all this the Cypriot leaders aim to stick with the euro.
So pundits are now reassessing what all this means. Perhaps the Russians already knew that there is no oil and gas under Cyprus – or that they can get it cheaper if they wait. Perhaps Germany is running out of patience – and the funds – for bailing out governments that have deliberately mismanaged their economies. But then Cyprus may well be just one more chapter in a euro-zone disaster story that has no end in sight …
While the UK Budget was being announced, amidst the juvenile cat-calling that passes for debate these days, Cyprus was reported to be in discussions with Russia about a possible bailout.
These reports suggest that Gazprom, Russia’s state gas and oil giant, would refinance the insolvent Cyprus banks in exchange for the nation’s gas and oil rights. Since Gazprom can be considered a proxy for the Russian government you can see why this could dent the plans of the EU. Cyprus could become a new version of Cuba – under Russian influence yet sitting in the Med and within the eurozone. Cyprus would not be in debt to Brussels – or Berlin – but to Moscow. Also the Russian billions stashed in the island’s banks would be protected from any EU “haircuts”.
By using Gazprom Russia would have an indirect, commercial influence – so avoiding any military issues with Greece, Turkey and the UK troops based there. They would also avoid direct political contact with Brussels – even though the EU would be far from happy. As others have already commented – Russia would get the oil and gas rights, a sunny place for holidays and gain control of some euro-based banks. Nice one!
Meanwhile back at the Westminster village the yokels are still discussing the boost to the economy of no-change to petrol duty and 1p off a pint of beer …