June 11, 2023

Ireland in Recession as Bailout Exit Approaches

Gross domestic product shrank 0.6 percent in the first quarter of this year from the previous three months, confounding analysts’ expectations of 0.3 percent growth – a shock reading that shows the euro zone member is recovering from financial crisis much more slowly than previously thought.

Revised data also showed a quarterly contraction of 0.2 percent in the fourth quarter of 2012, meaning Ireland’s economy has shrunk for three successive quarters and is in its first recession since 2009.

The Irish government is targeting growth of 1.3 percent this year and while Finance Minister Michael Noonan said he would not tie himself to any particular number when asked if that forecast would have to be revised, he said that other parts of the public finances were holding up better.

“They’re certainly disappointing but it’s one set of statistics,” he said.

“We built the budget on 1.3 (percent growth) and the tax flows for the first half of the year are consistent with our budgetary targeting. We’ll be slightly ahead of target, we think, for June.”

Ireland has been one of the few euro zone countries to have eked out mild growth as the currency bloc’s debt crisis has unfolded, despite harsh spending cuts and tax hikes imposed to help bring down one of Europe’s highest budget deficits.

Though Irish people have not protested against austerity as angrily as those in other indebted states such as Greece and Spain, many have endured salary cuts of up to a fifth and big tax rises. Unemployment has more than tripled, to 14 percent.

The second euro zone country to be rescued, in November 2010, it is due to complete its bailout later this year and has made a limited return to bond markets, although yields on its debt have recently started to rise again.

Analysts say the country has enough cash to cover most of its funding needs through next year, however, and should exit the aid deal on schedule, providing the European Union with a badly-needed success story for austerity.


The poor economic data rounds off a bad week for Ireland, where public anger is growing over leaked tapes of bankers laughing about a government rescue of the financial system that led to the bailout and years of austerity.

Three years on, a split in society is becoming clearer – property is selling fast in upmarket areas of Dublin, while shells of unfinished houses litter ghost estates and suburbs around the country. Overall, house prices have fallen by half.

“Dublin is booming, but I go to my home town and most of the shops are closed down,” said human resources worker Lynn, who did not want to give her second name. “It’s heartbreaking. Here it’s completely different. I can’t find properties to rent for people who are relocating.”

Thursday’s data showed the economy grew by just 0.2 percent last year, rather than the 0.9 percent initially thought, and an export-led recovery stalled in the second half of 2012, largely because of the slowdown in the rest of the euro zone.

Economic growth for 2011 was, however, revised up to 2.2 percent from 1.4 percent previously.

But returning to that level of growth this year now looks unrealistic after personal consumption fell 3.0 percent in the first quarter, its sharpest drop in four years. Exports of goods and services had an even steeper decline of 3.2 percent, the most since Ireland’s economic crisis began.

The prospect of easing up a little on austerity, which the government has been considering given leeway offered by a deal which eased the terms of debt repayment, now looks trickier.

Noonan, who has said he would rather use the slack to invest in capital projects, said on Thursday that it was still too soon to say how the leeway would be used and that he would make a call in September, a month before he presents his next budget.

“It’s very fragile and it probably means we have to be very careful about the scale of adjustment in budget 2014,” said KBC Ireland economist Austin Hughes, who revised down his growth for GDP this year to 0.7 percent from 1 percent previously.

(Additional reporting by Padraic Halpin and Sam Cage; Editing by Pravin Char)

Article source: http://www.nytimes.com/reuters/2013/06/27/business/27reuters-ireland-gdp.html?partner=rss&emc=rss

European Union Makes Surprise Deal on Budget

BRUSSELS — The European Union may soon have a new budget — including the first cut to spending in its history — after a surprise breakthrough deal on Thursday.

The European Commission president, José Manuel Barroso, announced agreement on a seven-year, 960 billion euro, or $1.27 trillion, budget after early morning talks with the president of the European Parliament and other officials from E.U. member states.

Mr. Barroso said the deal included more flexibility than earlier versions.

The budget still needs final approval by the European Parliament, but that is looking more likely thanks to this agreement. The European Parliament president, Martin Schulz, called the deal “acceptable” and said he was optimistic that he would have a majority of Parliament members backing it at a vote next week.

The budget includes the first cut to spending in European Union history at a time when many of the bloc’s countries are in recession and struggling to reduce their national debt. The budget sets what the bloc of nations can spend on programs ranging from infrastructure and farming to development aid and employment measures.

The 27 European Union countries have been trying since last autumn to cobble together a budget for the years 2014-2020. The talks were difficult because some countries wanted to increase or maintain spending levels while others insisted it made no sense to increase the budget while individual governments were imposing tough austerity policies.

E.U. leaders agreed to an overall package in February, but the European Parliament asked for more spending and more say in the way the budget would be handled.

Ireland’s prime minister, Enda Kenny, championed the latest agreement. Ireland had been hoping to crown its six-month presidency of the European Union, which ends Sunday, with a comprehensive budget agreement.

“I think it is very significant,” Mr. Kenny told reporters in Brussels alongside Mr. Barroso and Mr. Schulz. Noting that there was “a lot of doubt” at the beginning of the year “about whether compromise could be negotiated” between the E.U. member states and Parliament, he added, “We have now succeeded in doing that.”

Separate from national spending, the budget is designed in part to balance out the economic development of its members by giving funding to poorer countries. The European Union has funded thousands of infrastructure and capital projects over the years, from the installation of broadband networks to the upgrade of road networks.

The budget also includes items meant to generate economic growth, like research and development and a new, more accurate satellite navigation system. It also funds regulation and administration in such areas as mergers and competition, the review of national budgets to ensure they do not include excessive deficits, and banking supervision.

If the European Union fails to get a seven-year deal passed by Parliament before the end of the year, the bloc would have to revert to annual budgets, which would make long-term planning difficult.

Article source: http://www.nytimes.com/2013/06/28/business/global/european-union-makes-surprise-deal-on-budget.html?partner=rss&emc=rss

Amid Recession and Rising Joblessness, Greeks Fall Prey to Employment Swindles

A month later, he was out $2,300 and still jobless.

“They told me to wire the money to cover procedural costs and the airfare,” said Angelos, 38, a father of two who declined to give his full name for fear of jeopardizing future employment possibilities. The airline ticket never arrived in the mail, and follow-up calls went unanswered. A 300-mile road trip from Athens to the northern port of Thessaloniki, the job agency’s stated location, led nowhere. The address did not exist.

Angelos, whose wife is also unemployed and who borrowed the money for the agency fee from relatives, is by no means the only Greek to have been duped in such frauds. The authorities say criminals are busy preying on increasingly desperate Greeks facing an ever-deepening recession and an unemployment rate of 27 percent over all and more than 60 percent for those under 25.

“People come to us regularly with such stories,” said a spokesman for the Greek police’s electronic crime squad, which recorded a doubling in cases of online fraud last year but has no statistics for the job swindles, which he called “a new but growing trend”

“They reel people in with offers of promising-sounding jobs, they get their money and then they disappear,” the spokesman, who spoke on the condition of anonymity because he works undercover, said of the rackets. Sometimes the advertisements refer to jobs that do exist but are exploitive, offering a fraction of the salary promised originally.

“We have evidence, but the investigation stalls as soon as it crosses the border,” said the spokesman, adding that the authorities had lodged requests for help with specific cases in Germany, Britain and other destinations favored by austerity-weary Greeks seeking a rosier future.

Thousands of Greeks have sought to emigrate since the spring of 2010, when the government signed its first loan agreement with international creditors in exchange for an array of austerity measures that have slashed living standards. There are no government statistics confirming the size, or breakdown, of the exodus. But most appear to be heading for relatively prosperous northern European countries like Germany, as well as Australia, which has one of the largest Greek immigrant populations in the world.

German government statistics showed a 43 percent increase last year in Greek immigrants and a similarly large influx from other debt-ridden euro zone countries in southern Europe, like Spain and Portugal. Many Greek émigrés are qualified professionals, with an estimated 120,000 moving abroad over the past three years, according to a recent study by the University of Macedonia in Thessaloniki.

The move is much harder for unskilled workers, particularly those who do not speak the language of the country they move to. It is they who usually fall victim to rackets, according to the police and employment sector officials.

The chief of the association representing private job agencies in Greece, Athanassios Kottaras, said he received six or seven complaints every week (they were almost unheard-of just two years ago) from Greeks moving abroad for jobs that turn out to be nonexistent or exploitive. Mr. Kottaras has appeared several times on Greek television to raise awareness about the problem, which he attributes to hundreds of illegal job agencies.

The head of Greece’s state labor inspectorate, Michalis Kandarakis, said there were about 300 such illegal job agencies in Greece, compared with the 90 legal ones represented by Mr. Kottaras. But he said closing them down was difficult, as they often changed names, staff and premises to elude the authorities. “They even lodge charges of harassment or attempted blackmail against inspectors to slow down the process,” Mr. Kandarakis said.

Article source: http://www.nytimes.com/2013/06/01/world/europe/out-of-work-at-home-greeks-face-job-fraud-abroad.html?partner=rss&emc=rss

Economix Blog: Recessions Save Lives


Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

More people die in economic expansions, and fewer die in recessions.  Whether and how policy makers should heed this pattern depends on the hitherto unknown links between mortality and economic activity.

Today’s Economist

Perspectives from expert contributors.

Recessions can be stressful and depressing, especially for the people who lose their jobs.  Suicide rates spike during recessions, and for that reason alone recessions have been called deadly.  Two researchers, David Stuckler and Sanjay Basu, noted that suicides and binge drinking are positively correlated with unemployment and concluded that “Austerity kills” by adding to unemployment.

Even if we could be sure that austerity and related fiscal policies create recessions, it would be premature to conclude that they literally kill people.  Industrial and construction accidents are more common in economic expansions, and less common in recessions because those industries’ activities follow the business cycle.  Overtime hours may be more dangerous than average, and overtime is more common at the peak of the business cycle.  Moreover, the share of people working in construction – one of the most hazardous industries – increases during expansions and falls during recessions.

Highway accidents also follow the business cycle because more vehicles are on the road during economic expansions, and fewer on the road during recessions. (Mr. Stuckley and Mr. Basu noted that the United States’ Great Depression of the 1930s also had abnormally low rates of fatalities due to traffic accidents.)

With more accidents at work and on the road during expansions, expansions have more deaths by such accidents, and recessions have fewer.

It turns out that the business cycle for suicides is more than offset by the business cycle for other deaths.  Mortality and the unemployment rate are negatively correlated.  Christopher J. Ruhm, a professor of public policy and economics at the University of Virginia, has looked at all causes of death and found that most of them – suicide was the exception – occur less frequently at the depths of the business cycle.

Perhaps most surprising is that the business cycle for overall deaths is dominated by the business cycle for deaths among elderly people, perhaps especially elderly women.  Because so many elderly people are retired, they are especially unlikely to have recently been laid off from their job (which can lead to suicide), to drive their car to work hurriedly, or to take part in a dangerous construction project.

We don’t really know how the business cycle for economic activity is connected to the cycle for elderly deaths.  One hypothesis is that economic expansions create air pollution, and air pollution kills elderly people.  Another hypothesis is that nursing homes have more trouble retaining their staffs during expansions because they have to compete with other businesses.  Perhaps family members who are busy at work during expansions spend less time helping their elderly relatives.

Life is valuable, so it may be at least as important to understand what determines mortality and its cycles as it is to understand what causes recessions.

Article source: http://economix.blogs.nytimes.com/2013/05/29/recessions-save-lives/?partner=rss&emc=rss

Fresh Israeli Face Plays Down Political Decline

Mr. Lapid, a popular television host with no political experience, stunned Israel in January by galvanizing the secular middle class around kitchen-table concerns to make his new Yesh Atid Party the second largest in Parliament. He was immediately crowned a kingmaker, and talked openly about quickly replacing Prime Minister Benjamin Netanyahu.

But he ended up with the fraught job of finance minister, and facing a huge deficit. As he presented an austerity budget this month with tax increases and subsidy cuts that hit hard the people he claimed to represent, polls showed his approval rating plummeting to 21 percent; fewer than half of those who voted Yesh Atid (There is a Future), said they would pick the party again. The protesters who had helped propel his political rise began showing up outside his home on a cul-de-sac here.

So after months of communicating with the public only on Facebook, Mr. Lapid has embarked on a media blitz, deploying his telegenic good looks and sound-bite savvy. He summoned a series of journalists to an outdoor cafe here on Thursday, wearing jeans and his trademark black T-shirt, and tried to take the long view.

“I’m going to be bashed now, and be the beneficiary of this within, I don’t know, a year or a year and a half,” Mr. Lapid, 49, said in his first interview with an international news organization since his unexpected vault into global headlines. He still hopes to succeed Mr. Netanyahu, but said, “I’m in no hurry.”

Asked about the transition to politics, he called it “painful,” joking, “I used to have so many opinions before I learned the facts.”

In an hourlong conversation, Mr. Lapid offered no criticism of Mr. Netanyahu. He said he talks or exchanges text messages almost daily with Naftali Bennett, the leader of the nationalist Jewish Home Party, with whom he formed an alliance to block the ultra-Orthodox from joining Israel’s governing coalition. He declined to discuss security issues like Iran.

An avowed centrist, Mr. Lapid nevertheless took a hard line on policy toward the Palestinians, the issue that has defined Israeli politics for decades but that was overshadowed by domestic concerns in the recent campaign. He said that Israel should not change its policy on Israeli settlements in the West Bank in order to revive the stalemated peace process, and that Jerusalem should not serve as the capital of a future Palestinian state — an essential part of Palestinian plans.

Mr. Lapid acknowledged that tens of thousands of Jews would someday be uprooted from what he described as “remote settlements” in the West Bank, something he called “heartbreaking.” But he said that problem should be set aside for now, advocating the immediate creation of an interim Palestinian state in parts of the West Bank where no Jews live, with final borders drawn in perhaps three, four or five years. Palestinian leaders have roundly rejected temporary borders.

While he described the two-state solution as “crucial” to preserving Israel as a Jewish nation, he offered no hints of Israeli concessions that could break the stalemate in the peace process. Instead, he repeatedly said he hoped that Secretary of State John Kerry, who is scheduled to arrive here this week for his fourth visit in two months, would “jump-start” it.

And he expressed extreme skepticism about the likelihood of reaching a deal with President Mahmoud Abbas of the Palestinian Authority, saying, “He’s one of the founding fathers of the victimizing concept of the Palestinians.”

He also questioned whether Palestinians truly wanted a state.

“Israelis want peace and security and Palestinians want peace and justice — these are two very different things, and this is the real gap we have to close,” he said. “More and more people are saying to themselves and to others, this is not going to happen, all we have to do is some maintenance and we’ll see. Some people think ‘we’ll see’ is ‘God will help us,’ which is not a very tangible idea to me. Others say, ‘Some problems are not to be solved,’ which is a very sad idea.

“I am saying what we need to do is something.”

Yet while Mr. Lapid vowed “to be proactive about this and do everything in my power to contribute to the discourse,” he said he has not spoken with Mr. Kerry since sitting with him at a state dinner during President Obama’s visit to Jerusalem in March. Nor has he met with any Palestinians since taking office.

He said he had found Mr. Netanyahu “more willing” and “more prepared than people tend to think” to make peace with the Palestinians. Indeed, there was little daylight between the two men’s positions. Mr. Lapid said he would not stop the so-called “natural expansion” of settlements in the West Bank, nor curtail the financial incentives offered Israelis to move there. He said the large swaths of land known as East Jerusalem that Israel captured from Jordan in the 1967 war and later annexed must stay Israeli because “we didn’t come here for nothing.”

“Jerusalem is not a place, Jerusalem is an idea,” he said. “Jerusalem is the capital of the Israeli state.”

Little known outside Israel a few months ago, Mr. Lapid in April ousted Mr. Netanyahu from Time magazine’s list of the world’s 100 most influential people, and last week topped the Jerusalem Post’s ranking of influential Jews. (Mr. Netanyahu landed at No. 3.) But he has become the target of angry Facebook campaigns and editorial cartoons, and is battered daily by columnists across the spectrum.

“In no time at all, he has lost his major assets: the credibility and trust of the Israeli voter,” Yossi Verter, the political writer for the left-leaning daily Haaretz, wrote Friday. In Yediot Aharonot, Nahum Barnea said, “The truth is that Lapid has taken too much upon himself.” And in the right-leaning Jerusalem Post, Gil Hoffman observed, “The boxer who idolizes Muhammad Ali has now become a political punching bag.”

One of the things that led some to turn on Mr. Lapid was the revelation that he met in April with Sheldon Adelson, the ultraconservative financier who backs Mr. Netanyahu and owns the Israel Hayom newspaper that loyally supports him. Mr. Lapid said Thursday that Mr. Adelson requested the meeting to ensure that the government would continue its matching grant of about $40 million to Birthright, a program that brings young Jews to Israel, and that “there was nothing political about it.”

Throughout the interview, Mr. Lapid was charming, confident — and controlling. Pressed on a certain point, he warned, “I’m so good at not answering questions I don’t want to answer that we could go all night.” And he refused to be photographed for this article at the cafe, insisting that the photographer try Friday, when Mr. Lapid would don a jacket to meet with the German foreign minister.

He was sanguine about his situation, rejecting the conventional wisdom that he has made a series of missteps.

“Making hard choices always seems to be mistakes, but these are not mistakes,” he said. “If you want to change a country, you’re going to be bumped every now and then.”

Ethan Bronner and Irit Pazner Garshowitz contributed reporting.

This article has been revised to reflect the following correction:

Correction: May 20, 2013

An earlier version of this story misstated the timing of Secretary of State John Kerry’s arrival in Israel. He is scheduled to arrive this week, not next week.

Article source: http://www.nytimes.com/2013/05/20/world/middleeast/fresh-israeli-face-plays-down-political-decline.html?partner=rss&emc=rss

The Saturday Profile: Olli Rehn Tries to Shed ‘Austerity’ Label

OLLI REHN, the European Union’s top economic policy maker and scourge of debt-fueled budget deficits, is fed up with austerity. Or at least with being tarred by a term that “is clearly used to label somebody as an unworthy person who is almost eating children.”

With more than 26 million Europeans out of work and the economies of the 27-nation bloc shrinking over all for six quarters in a row, Mr. Rehn, the commissioner for economic and monetary affairs, has become a lightning rod in recent months for swelling anger across Europe against the harsh belt-tightening policies generally known as austerity.

But in an interview, Mr. Rehn, 51, described himself as a “doctrinaire agnostic in terms of economic policy” who has read and found much of value in the writings of the British economist John Maynard Keynes, whose name is synonymous with the idea of economic stimulus in times of crisis.

A onetime semiprofessional soccer player in Finland, Mr. Rehn (pronounced ren) said the depth of Europe’s economic gloom — which has led to widespread public disillusionment with the European Union, even in richer countries — had shown that no single prescription had all the answers.

“If there were a silver bullet, we would have used it already,” he said. “There is no single silver bullet.” He indicated that policies long criticized as too focused on budget cuts were being relaxed now that the financial markets had calmed down after panic swept them at the onset of Europe’s debt crisis four years ago.

On Wednesday, he met for lunch in Brussels with the French president, François Hollande, a frequent critic of austerity, and agreed to give Paris two extra years to reach a budget deficit target of 3 percent of gross domestic product, a goal it was supposed to reach this year.

France’s more pressing problem is its flagging ability to compete, Mr. Rehn said. France enacted legislation this week to slightly loosen notoriously rigid employment rules, and Mr. Rehn said he was “looking forward to the reforms that they will continue to work on,” particularly to the country’s labor market and pension system.

Spain and the Netherlands, he added, will probably be given extensions, too, when the European Commission, the union’s Brussels-based executive arm, makes proposals at the end of the month for how each country should proceed.

Asked whether policy had changed, Mr. Rehn, paraphrasing President John Quincy Adams, said, “I see no change in policy, only a change in circumstances.” This, he said, contained “more than half the truth” to explain the European Union’s evolving economic policy.

In the early period of Europe’s current crisis, Mr. Rehn said, Greece, Portugal and other countries burdened with heavy debts lost access to financial markets and simply could not cover their expenses, leaving policy makers no choice but to push for swift budget cuts and tax increases.

“We now have more room for maneuver,” he said, explaining that cutting deficits is no longer such an urgent priority and can be pursued at a “slower pace” as long as countries recognize “that we cannot solve this crisis by building up new debt.”

The progress that Latvia, Estonia and Lithuania have made in repairing their economies through tough austerity programs shows that “fiscal consolidation” can work, he said, but does not offer a template for others. “You can never apply the experiences of one country to another,” he said.

A cerebral soccer enthusiast with degrees from Macalester College in Minnesota and the University of Helsinki and a doctorate from Oxford, where he focused on industrial competitiveness, Mr. Rehn started out as a striker with Mikkelin Palloilijat, a soccer club in his hometown, Mikkeli, in southern Finland, but decided against making a career in sports.

“I learned the limits of my talent, fortunately early enough. But I’ve enjoyed a great deal of the game for the past 45 years,” he said, speaking in his Brussels office, decorated with soccer memorabilia, a large map of Europe, a small tree and a soft toy of a grimacing bird from the wildly popular game Angry Birds, created by a Finnish game developer. He said he planned to give the bird to his 15-year-old daughter.

Article source: http://www.nytimes.com/2013/05/18/world/europe/europe-economist-rehn-rejects-austerity-label.html?partner=rss&emc=rss

Global Financial Leaders Avoid Public Rift With Japan

At the end of two days of talks among the Group of 7 finance ministers outside London, other nations appeared to accept — at least for now — Japan’s explanation that its new monetary efforts were meant to stimulate its domestic economy, rather than to drive down the yen on international currency markets.

The chancellor of the Exchequer in Britain, George Osborne, said on Saturday that ministers from the G-7, made up of the United States, Germany, Japan, Britain, Italy, France and Canada, had reaffirmed earlier commitments on exchange rates and agreed to make sure policies are “oriented towards achieving domestic objectives.” Other officials described the talks as in-depth and positive. Last week, the dollar breached the 100-yen mark for the first time in over four years.

The two-day meeting, in Buckinghamshire, also focused on efforts to stem tax avoidance and on banking reform, and Mr. Osborne said it was “important to complete swiftly our work to ensure that no banks are too big to fail.” The officials discussed efforts to create a European banking union, which have slowed in recent months.

“We agreed on the importance of ensuring banks’ balance sheets are adequately capitalized to enable them to play their role in supporting the economy,” Mr. Osborne said.

The talks took place against a background of growing austerity fatigue in Europe, and concern that the region’s focus on reducing deficits and debt risked driving some economies into a downward spiral.

One United States Treasury official, who spoke on the condition of anonymity, said there was a recognition that, because of the economic weakness in southern European nations like Greece, Portugal and Spain, it was “more important than ever” to have higher private demand in the euro zone countries that are performing better. Germany has the most room to lift demand, although the Treasury official did not identify it or other countries by name.

The official added that recent, positive suggestions that France and Spain should have more time to reduce their budget deficits would be helped by “a greater contribution of private demand” from better-performing European countries.

But a German official, who also spoke on the condition of anonymity, disputed any consensus on that point, noting that there was no official statement on the matter after the meeting. As planned, no communiqué was issued after the event. The idea of stimulating domestic demand is contentious in Germany, in part because of the risk of stoking inflation.

Nevertheless, the German finance minister, Wolfgang Schäuble, seen as one of the main architects of the euro zone’s austerity policies, has shown some signs of greater flexibility and said, before the meeting, that he supported the European Union’s move to give France and Spain more time for deficit reduction.

Slow growth in much of the developed world, and particularly in Europe, provided an uncertain backdrop to the meeting, despite efforts by several central banks to stimulate economic activity.

Article source: http://www.nytimes.com/2013/05/12/business/global/financial-leaders-avoid-public-rift-with-japan-over-yen.html?partner=rss&emc=rss

Europe Looks to Merkel of Germany to Revive Economy

BERLIN — Even as the United States economy displays unanticipated resilience, with a healthy jobs report released on Friday, the outlook for Europe’s economy grows ever dimmer. As it does, the pressure builds on Europe’s most powerful leader, Chancellor Angela Merkel of Germany, and her economic team to find a way to get the Continent growing again.

But this puts Ms. Merkel in a bind, as she has to answer to German voters in September when the country holds parliamentary elections. While the European economy may be deteriorating at an alarming rate, the electorate here is still enamored of her as the Iron Chancellor, advocating the austerity policies that are rapidly falling into disfavor elsewhere, among economists as well as the public.

Her response, in recent months, has been to try a delicate balancing act, quietly easing up on crisis-stricken states, giving them more time to narrow their budget deficits, while showing no outward signs of weakness that her political rivals can pounce upon.

But this stance may become increasingly untenable, if the United States’s more stimulative economic policies begin to bear fruit and Europe continues to struggle, as seems to be the case. The European Commission said Friday that the economy of its member nations would shrink by 0.1 percent this year, while the countries that use the euro would contract even more sharply, by 0.4 percent.

And there are signs that the contagion from the south is migrating north and beginning to drag down Germany’s export-driven economy, which is expected to grow by a meager 0.4 percent this year, adding another potential source of voter discontent to Ms. Merkel’s concerns.

So the question now is not just whether Ms. Merkel will further relax her insistence on strict austerity but how far she thinks she can go in an election year, or perhaps how far she needs to go to prop up her own economy. Few experts expect any drastic departures.

“In the end, she’s this sort of Prussian-Protestant determined person,” said Stefan Kornelius, an editor at the Süddeutsche Zeitung and the author of a new book about Ms. Merkel. “She’s not ideological, but she’s truly convinced about the rightfulness of her course.”

But the constant questions about austerity are taking their toll on Ms. Merkel, who has begun to bridle in public when people ask about spending cuts.

“I think budget consolidation is now interestingly labeled with the word austerity, which is otherwise not used in Germany,” Ms. Merkel said this week at a news conference with the new Italian prime minister, Enrico Letta. “In Germany we didn’t even know this word before the crisis.”

Aware of the shifting dynamics in Europe, Ms. Merkel has chosen instead to emphasize the need for structural reforms to the labor markets of struggling countries over slashed spending. And she is not insisting on strict adherence to budget-cutting goals. That may help in the long run but can do little to immediately pull economies out of free fall.

“Her overarching goal right now is to get re-elected, and she won’t get re-elected if she spends German money on French and Italian problems without getting anything in return,” Mr. Kornelius said.

Ms. Merkel is forced to navigate dissension within her own conservative ranks at the slightest wavering from the disciplined German line, and a new party on the right, the Alternative for Germany, pressing for the more extreme step of a breakup of the euro.

To critics, Europe is facing an undeniable economic crisis and Germany is making decisions based on politics. “They are prevaricating all the time and allowing short-term domestic considerations to determine euro-zone policy,” said Charles Grant, director of the Center for European Reform, London.

Critics contend that fiscally solid countries like Germany have already gotten plenty in return and that the narrative of parsimonious Northern Europeans bled dry by profligate southerners is a false one. They have pointed to studies quantifying how Germany has been able to save billions of dollars because lower interest rates for perceived safe havens have made borrowing money dramatically cheaper.

Chris Cottrell contributed reporting.

Article source: http://www.nytimes.com/2013/05/04/world/europe/europe-looks-to-merkel-of-germany-to-revive-economy.html?partner=rss&emc=rss

Ex-Defense Minister on Trial in Greek Bribe Case

Mr. Tsochatzopoulos, 73, a onetime socialist heavyweight, is on trial with his wife, daughter and another 16 former aides and associates alleged to have participated in the scheme. He, his relatives and another five suspects have been in custody at Athens’ high-security Korydallos Prison for the past year.

Mr. Tsochatzopoulos and his wife, who were transferred to the courthouse on Monday morning by a police bus, have been subjected to intense media scrutiny of their wealth as the living standards of ordinary Greeks plummeted after three years of austerity. Dressed in a dark blue suit and clutching a file of documents, the white-haired minister held his head high as police escorted him into the court building while his 50-year-old wife, a former assistant in his political office, appeared pale and drawn.

The charges are highly unusual in a country where top-ranking state officials are rarely prosecuted. During his stint as defense minister between 1996 and 2001 and for several years after that, Mr. Tsochatzopoulos is alleged to have used a network of offshore companies to siphon off millions of euros in bribes he is said to have taken in exchange for procurement contracts including the purchase of a Russian missile defense system and German submarines.

According to prosecutors, around €160 million, or about $210 million, in bribes was paid for those two deals which were worth an estimated €3 billion. Authorities have traced €57 million.

The former minister, a founding member of the country’s once dominant socialist Pasok, which is now part of a conservative-led coalition, has denied the charges, claiming his prosecution is politically motivated. He has called for members of the political and defense council that co-signed the contracts for the defense deals — including two former prime ministers, Costas Simitis and George Papandreou — to testify at his trial which is expected to last several months. The request has been rejected by the Greek judiciary which said the bribery allegations, not the deals, were under scrutiny.

Irrespective of the outcome of his trial for money laundering, which could yield a 20-year prison term, Mr. Tsochatzopoulos will not escape jail time. Last month he was sentenced to eight years in prison for concealing assets from the authorities, notably by failing to report the purchase of a neo-Classical mansion near the Acropolis. That property has been linked to the money laundering scheme Mr. Tsochatzopoulos is alleged to have set up.

With public anger growing after the years of economic crisis, the government of Prime Minister Antonis Samaras has vowed to crack down on corruption among the political elite whom most Greeks blame for the dysfunctional state system that created the country’s huge debt problem and led it to dependence on foreign rescue loans. In an unusually severe sentence in February, a court in Salonika, Greece’s second-largest city, convicted the former mayor, Vassilis Papageorgopoulos, to life in prison for embezzling at least €18 million from city coffers.

Last September, the Greek authorities began examining the bank accounts of more than 30 politicians to determine whether they should be charged with tax evasion and other crimes and last month three former ministers were charged with submitting false income declarations.

Mr. Tsochatzopoulos is the most senior government official to stand trial since the former prime minister and Pasok founder, Andreas Papandreou, was acquitted in 1991 on charges of accepting bribes in return for forcing state companies to prop up a troubled private bank.

Article source: http://www.nytimes.com/2013/04/23/world/europe/ex-defense-minister-charged-in-greek-bribe-case.html?partner=rss&emc=rss

Danes Rethink a Welfare State Ample to a Fault

It turned out, however, that life on welfare was not so hard. The 36-year-old single mother, given the pseudonym “Carina” in the news media, had more money to spend than many of the country’s full-time workers. All told, she was getting about $2,700 a month, and she had been on welfare since she was 16.

In past years, Danes might have shrugged off the case, finding Carina more pitiable than anything else. But even before her story was in the headlines 16 months ago, they were deeply engaged in a debate about whether their beloved welfare state, perhaps Europe’s most generous, had become too rich, undermining the country’s work ethic. Carina helped tip the scales.

With little fuss or political protest — or notice abroad — Denmark has been at work overhauling entitlements, trying to prod Danes into working more or longer or both. While much of southern Europe has been racked by strikes and protests as its creditors force austerity measures, Denmark still has a coveted AAA bond rating.

But Denmark’s long-term outlook is troubling. The population is aging, and in many regions of the country people without jobs now outnumber those with them.

Some of that is a result of a depressed economy. But many experts say a more basic problem is the proportion of Danes who are not participating in the work force at all — be they dawdling university students, young pensioners or welfare recipients like Carina who lean on hefty government support.

“Before the crisis there was a sense that there was always going to be more and more,” Bjarke Moller, the editor in chief of publications for Mandag Morgen, a research group in Copenhagen. “But that is not true anymore. There are a lot of pressures on us right now. We need to be an agile society to survive.”

The Danish model of government is close to a religion here, and it has produced a population that regularly claims to be among the happiest in the world. Even the country’s conservative politicians are not suggesting getting rid of it.

Denmark has among the highest marginal income-tax rates in the world, with the top bracket of 56.5 percent kicking in on incomes of more than about $80,000. But in exchange, the Danes get a cradle-to-grave safety net that includes free health care, a free university education and hefty payouts to even the richest citizens.

Parents in all income brackets, for instance, get quarterly checks from the government to help defray child-care costs. The elderly get free maid service if they need it, even if they are wealthy.

But few experts here believe that Denmark can long afford the current perks. So Denmark is retooling itself, tinkering with corporate tax rates, considering new public sector investments and, for the long term, trying to wean more people — the young and the old — off government benefits.

“In the past, people never asked for help unless they needed it,” said Karen Haekkerup, the minister of social affairs and integration, who has been outspoken on the subject. “My grandmother was offered a pension and she was offended. She did not need it.

“But now people do not have that mentality. They think of these benefits as their rights. The rights have just expanded and expanded. And it has brought us a good quality of life. But now we need to go back to the rights and the duties. We all have to contribute.”

In 2012, a little over 2.6 million people between the ages of 15 and 64 were working in Denmark, 47 percent of the total population and 73 percent of the 15- to 64-year-olds.

While only about 65 percent of working age adults are employed in the United States, comparisons are misleading, since many Danes work short hours and all enjoy perks like long vacations and lengthy paid maternity leaves, not to speak of a de facto minimum wage approaching $20 an hour. Danes would rank much lower in terms of hours worked per year.

In addition, the work force has far more older people to support. About 18 percent of Denmark’s population is over 65, compared with 13 percent in the United States.

Anna-Katarina Gravgaard contributed reporting.

Article source: http://www.nytimes.com/2013/04/21/world/europe/danes-rethink-a-welfare-state-ample-to-a-fault.html?partner=rss&emc=rss