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Elites Flock to Anti-Euro Party, Alternative for Germany

April 14, 2013 by Leave a Comment

The party, Alternative for Germany, held its first formal party congress on Sunday at a Berlin hotel. It has emerged as a wild card ahead of the September elections and poses a potential threat to Chancellor Angela Merkel’s re-election prospects.

The question is whether the party is experiencing the short-lived buzz of a political fad or represents the beginning of a significant movement that could jeopardize the struggling euro.

The new party is driven by a collection of elites, not a groundswell from the streets, starting with Bernd Lucke, 50, a Hamburg economics professor. Mr. Lucke, along with many of the new party’s supporters, previously belonged to Ms. Merkel’s conservative Christian Democratic Union before the Greek bailouts forced him to reconsider.

“We want to put an end to the flagrant breach of democratic, legal and economic principles that we have seen in the past three years, because Chancellor Merkel’s government said there is no alternative,” Mr. Lucke told more than 1,500 supporters on Sunday. “Now it is here, the Alternative for Germany.”

Mr. Lucke says the euro is dividing Europe rather than uniting it, as the single currency was meant to do. He has the support of a group of fellow academics who filed a case before Germany’s Federal Constitutional Court against the bailouts. Hardly a firebrand, he is also working with establishment figures like a former newspaper publisher and a former leader of the powerful Federation of German Industries. More than two-thirds of the supporters listed on the group’s home page have doctorates.

The party has more than 7,000 applicants and is working to gather enough signatures to be on the ballot in all 16 German states by the July deadline.

The fragile solidarity between the 17 euro-zone members has been sorely tested by the years of crisis and the growing list of bailouts. The countries needing help complain about diktats from Brussels and Berlin, while Germany and its northern allies grumble about the costs. Here in the German capital, the images of demonstrators in Athens, Madrid and now Nicosia, Cyprus — some of them waving swastikas or pictures of Ms. Merkel dressed as Hitler — have begun to try people’s patience.

Pollsters and political analysts doubt that the new party will attract more than 5 percent of the vote, the threshold for representation in the next Parliament. But it does not need that many votes to play the spoiler for Ms. Merkel.

“They don’t need to get 5 percent to make things very tight for the chancellor,” said Wolfgang Nowak, a fellow at the North Rhine-Westphalia School of Governance in Duisburg. “And every swastika on the street in Athens helps this new party.”

One new member, Martina Tigges-Friedrichs, said she belonged to the Free Democratic Party in the state of Lower Saxony for 15 years before she quit this year, frustrated that the pro-business party had abandoned its principles. She said she was attracted to Alternative for Germany because of the prominence of its founders, and because the current center-right government had put the country on a dangerous financial course.

“We keep giving out more and more money when we have so many problems here at home,” said Ms. Tigges-Friedrichs, who runs two hotels and a cafe in Bad Pyrmont.

The new party illustrates the increasing fragmentation of the political scene in Germany, Europe’s economic powerhouse. But the rapid ascent and equally rapid descent of another protest group, the Pirate Party, whose vague platform is focused on greater openness in government, offers a cautionary tale for the professors and professionals behind Alternative for Germany.

Polls show that a large number of voters, as many as one in four, would consider voting for the party. But that might not translate into actual votes. And several other surveys have shown that the nostalgia for the former German currency, the mark, is beginning to ebb.

Discontent has its limits. While Germans dislike the notional price tag for the many commitments and guarantees their government has made over the three years of the euro crisis, the job market is strong, borrowing costs are low and the country is approaching the balanced budget it so desperately craves.

Alternative for Germany has also called for simplifying the tax code, restructuring energy subsidies and favoring the most qualified workers for immigration, but ultimately it is known here as an anti-euro party despite efforts to paint itself as a broader movement.

“If the euro fails, Europe will not fail,” said Mr. Lucke, contradicting the chancellor’s repeated insistence that the future of the 27-member European Union is tied to the success of its common currency. “If the euro fails, then the policies of Angela Merkel and Wolfgang Schäuble fail,” he said, referring to the chancellor and her finance minister.

Eager to portray itself as a moderate, academic and middle-class party, Alternative for Germany is trying to sift out far-right opponents of the common currency who have praised the party’s anti-euro policy.

“We want to show where the deficits of the main parties lay,” Ms. Tigges-Friedrichs said.

But if the party wins enough votes from the center-right, it could help return a left-wing government of Social Democrats and Greens, who have been even more receptive than the current government to burden sharing between euro countries.

Steffen Kampeter, a deputy finance minister from Ms. Merkel’s party, told the newspaper Frankfurter Allgemeine Zeitung that Alternative for Germany was giving voters a far too rosy picture of how a euro-zone breakup would occur. “The new party is deluding voters that it’s possible to renationalize the common currency without drawbacks,” Mr. Kampeter said, “as if you could make eggs again out of scrambled eggs.”

Article source: http://www.nytimes.com/2013/04/15/world/europe/elites-flock-to-anti-euro-party-alternative-for-germany.html?partner=rss&emc=rss

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Greeks Discuss Drastic Moves to Receive Aid

September 19, 2011 by Leave a Comment

FRANKFURT — Greek leaders struggled through the weekend to agree to a set of radical budget reductions that would satisfy foreign lenders’ demands even as they tried to stave off mounting resistance to those cuts at home.

Reflecting the urgency of the situation, the prime minister of Greece, George A. Papandreou, canceled a planned trip to Washington this week and held talks with his cabinet on Sunday.

The Greeks face an October deadline to qualify for 8 billion euros, or $11 billion, in aid, without which Greece will certainly default on its growing debt. Over the weekend, European finance ministers issued stern warnings at a meeting in Poland that failure to meet financial targets would imperil the release of the payment.

The payment is just one installment in a larger package of 110 billion euros, or $152.6 billion, in aid agreed to by euro zone members in spring 2010; a second bailout fund, for 109 billion euros, or $150.2 billion, was agreed to in July, though that has yet to be ratified.

To reach the financial targets, Greek leaders discussed a range of draconian layoffs and pay reductions among public sector workers. While these measures have long been planned, but never carried out, to the frustration of foreign lenders, the discussion of these cuts represented a marked change in approach for the Greek government, with the emphasis on reductions over revenue increases.

“Everyone wants a smaller state,” the finance minister, Evangelos Venizelos, said on Sunday.

After the meeting, the Greek government reaffirmed its commitment to hit budget targets for 2011 and 2012, to avoid generating new debt and to revamp the dysfunctional economy. The measures are “in order to avoid bankruptcy and remain in the euro zone but also to stop the country being blackmailed and humiliated,” Mr. Venizelos said.

Mr. Venizelos also appealed to Greeks to take responsibility for the challenges they face.

“What is being disputed on a global level is not the ability of the government but the ability of the country to do what is necessary,” he said, in an apparent reference to strong labor union resistance to reforms and persistent tax evasion.

More specifically, Greece officials are being pressed to put thousands of civil servants deemed to be “surplus” on a standby status at a reduced wage. The government has not yet pushed ahead with this measure, which is very unpopular in a country where nearly one million people out of a population of 11 million work for the government.

Several Greek news media outlets, including the influential center-left newspaper To Vima, on Sunday cited an internal government e-mail that set out priorities by Greece’s foreign creditors aimed at raising much-needed revenue quickly. These include cuts in the pensions of Greek sailors and employees of the state telecommunication company OTE, the immediate merger or abolition of 65 state agencies and the freezing of state workers’ pensions through 2015.

Adding to the Greeks’ dilemma is that the proposed cuts come as the Greek economy is contracting faster than expected. Last week, Mr. Venizelos warned that the economy would shrink much more sharply this year than anticipated — by 5.3 percent instead of the 3.8 percent originally forecast in May. The budget deficit is on track to reach 8.2 percent of gross domestic product this year, well ahead of the original estimate of 7.4 percent.

The original aid package requires Greece to reduce its deficit to 7.5 percent of gross domestic product this year, and below 3 percent by 2014, according to the International Monetary Fund.

The reduced number of workers employed in the public sector would only add to the difficulty of meeting these targets as payroll tax collections shrink.

Despite the dire circumstances, Mr. Venizelos denied rampant speculation that the country was on the brink of default.

Acknowledging that the mood in both Greece and the euro zone is “fluid and nervous,” he said the country was committed to taming its widening budget deficit and carrying out reforms, one of which is a new levy intended to ensure that property owners pay taxes.

Mr. Venizelos also lashed out at “those intent on speculating against the euro and carrying out organized attacks on the heart of the euro zone.”

Greece, he said, risks “becoming a scapegoat and an easy alibi for institutions that are unable to curb the crisis and to respond to attacks on the euro.”

On Monday, Mr. Venizelos will have a chance to make his country’s case in a conference call with representatives of the foreign lenders known as the troika: the European Commission, the European Central Bank and the International Monetary Fund.

Jack Ewing reported from Frankfurt, and Niki Kitsantonis from Athens. Stephen Castle contributed from Wroclaw, Poland.

Article source: http://www.nytimes.com/2011/09/19/business/global/19iht-euro19.html?partner=rss&emc=rss

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Greece Nears a Tipping Point in Its Debt Crisis

September 19, 2011 by Leave a Comment

FRANKFURT — Greek leaders struggled through the weekend to agree to a set of radical budget reductions that would satisfy foreign lenders’ demands even as they tried to stave off mounting resistance to those cuts at home.

Reflecting the urgency of the situation, Prime Minister George A. Papandreou canceled a planned trip to Washington this week and held talks with his cabinet on Sunday.

The Greeks face an October deadline to qualify for 8 billion euros, or $11 billion, in aid, without which Greece will certainly default on its growing debt. Over the weekend, European finance ministers issued stern warnings at a meeting in Poland that failure to meet financial targets would imperil the release of the payment.

The payment is just one installment in a larger package of 110 billion euros in aid agreed to by euro zone members in spring 2010; a second bailout fund, for 109 billion euros, was agreed to in July, though that has yet to be ratified.

To reach the financial targets, Greek leaders discussed a range of draconian layoffs and pay reductions among public sector workers. While these measures have long been planned, but never carried out, to the frustration of foreign lenders, the discussion of these cuts represented a marked change in approach for the Greek government, with the emphasis on reductions over revenue increases.

“Everyone wants a smaller state,” the finance minister, Evangelos Venizelos, said on Sunday.

More specifically, Greece officials are being pressed to put thousands of civil servants deemed to be “surplus” on a standby status at a reduced wage. The government has not yet pushed ahead with this measure, which is very unpopular in a country where nearly one million people out of a population of 11 million work for the government.

Several Greek news media outlets, including the influential center-left newspaper To Vima, on Sunday cited an internal government e-mail that set out priorities by Greece’s foreign creditors aimed at raising much-needed revenue quickly. These include cuts in the pensions of Greek sailors and employees of the state telecommunication company OTE, the immediate merger or abolition of 65 state agencies and the freezing of state workers’ pensions through 2015.

Adding to the Greeks’ dilemma is that the proposed cuts come as the Greek economy is contracting faster than expected. Last week, Mr. Venizelos warned that the economy would shrink much more sharply this year than anticipated — by 5.3 percent instead of the 3.8 percent originally forecast in May. The budget deficit is on track to reach 8.2 percent of gross domestic product this year, well ahead of the original estimate of 7.4 percent.

The original aid package requires Greece to reduce its deficit to 7.5 percent of gross domestic product this year, and below 3 percent by 2014, according to the International Monetary Fund.

The reduced number of workers employed in the public sector would only add to the difficulty of meeting these targets as payroll tax collections shrink.

Despite the dire circumstances, Mr. Venizelos denied rampant speculation that the country was on the brink of default.

Acknowledging that the mood in both Greece and the euro zone is “fluid and nervous,” he said the country was committed to taming its widening budget deficit and carrying out reforms, one of which is a new levy intended to ensure that property owners pay taxes, a persistent problem in a country beset by tax evasion.

Mr. Venizelos said that the government would make the long-delayed cuts to the public sector, though he also lashed out at “those intent on speculating against the euro and carrying out organized attacks on the heart of the euro zone.”

On Monday, Mr. Venizelos will have a chance to make his country’s case in a conference call with representatives of the foreign lenders known as the troika: the European Commission, the European Central Bank and the International Monetary Fund.

Public sector workers in Greece have shown little appetite for the cuts that have already been made, let alone those being proposed. Over the summer, protests have turned violent as workers have bristled at the new austerity measures.

In Germany, the mood seemed to be turning increasingly in favor of letting Greece fail rather than to bear the growing cost.

Wolfgang Schäuble, the German finance minister, repeated warnings that Greece would not receive any more aid unless it kept promises it had made to the International Monetary Fund, the European Commission and the European Central Bank to cut government spending and improve the economy.

“The payments on Greece are contingent on clear conditions,” Mr. Schäuble told the newspaper Bild am Sonntag.

As the largest country in the euro area, which has 17 European Union members, Germany is the biggest contributor to a bailout fund meant to help Greece as well as Portugal and Ireland continue to pay their debts while their economies recover.

Voters in Berlin, at least, did not punish Chancellor Angela Merkel for her handling of the debt crisis. Her Christian Democratic Union gained two percentage points in regional elections on Sunday compared with the last election five years ago, winning 23.4 percent of the vote. The Social Democrats, who have generally been supportive of aid to Greece, remained in power with 28.3 percent.

Support for the Free Democrats, whose leaders have been among the most vocal critics of Greek aid, plunged to 1.8 percent from 7.6 percent in 2006. That is below the 5 percent needed to seat representatives in the state Parliament.

The European Central Bank will also play a role in the decision of whether to continue aid to Greece, and has a strong interest in preventing a Greek default.

The central bank has spent an estimated 40 billion to 50 billion euros buying Greek bonds in an ultimately unsuccessful attempt to hold down the yield, or effective interest rate. It might need to rebuild its capital if those bonds default and will do all it can to dissuade political leaders from allowing Greece to fail.

In the end, when political leaders do the math, they may realize it is cheaper to save Greece than engineer a bank rescue only two years after the last round of bank bailouts, analysts said.

“There is no political advocacy for such a prospect in Greece or in Europe as it would signal the beginning of the unraveling of the euro zone,” said George Pagoulatos, a professor at the Athens University of Economics and Business. “The markets would start attacking Portugal and Ireland, and the domino would stop somewhere around France.”

Jack Ewing reported from Frankfurt, and Niki Kitsantonis from Athens. Stephen Castle contributed from Wroclaw, Poland.

Article source: http://feeds.nytimes.com/click.phdo?i=cee775fb6ce825a014a558f9f85c32e6

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A Small Country — Finland — Casts Doubt on Aid for Greece

August 28, 2011 by Leave a Comment

FRANKFURT — France and Germany may effectively run the European Union, but Finland has been demonstrating how even a small country can disrupt their grand designs.

By insisting that it receive collateral from Greece in return for aid, Finland is threatening to upend an agreement that euro zone countries, led by France and Germany, made in July to expand the E.U. bailout fund.

Finland would contribute less than 2 percent of the guarantees provided to the fund, known as the European Financial Stability Facility. But the country’s demands, the subject of intense negotiations in recent days, threaten to derail the fragile consensus that is preventing Greece from defaulting on its debt.

Finland is the most vivid example of the way parochial domestic politics can become Continental problems, threatening the unity of the 17 euro zone members as they face their deepest crisis ever. But Germany, the Netherlands and Austria — all wealthy countries with strong economies — also harbor deep opposition to bailing out Greece, Portugal, Ireland or any other country that may become overwhelmed by debt.

“In countries like Finland the opposition to what are described as bailouts is huge,” said Philip Whyte, senior research fellow at the Center for European Reform in London. “Governments are politically constrained.”

In Finland, Prime Minister Jyrki Katainen faces discontent within his governing coalition as well as pressure from a nationalist opposition group, the True Finns, which rode euro-skepticism to big gains in April parliamentary elections.

Finland is just one of 17 euro zone countries whose parliamentary approval is needed for the expanded bailout fund and whose domestic politics could upset the process. The case of Finland points to a bigger governance problem in Europe, said James Savage, a professor at the University of Virginia who has published a book on European monetary union.

“You have all these multiple veto points, so they can’t come to a reasonable conclusion, at least not easily,” Mr. Savage said. “You have increasingly less efficient decisions that are being made.”

European squabbling has contributed to market turmoil around the world and alarmed policy makers.

The possibility that euro zone members will not agree on an expansion of the bailout fund is a concern of the Federal Reserve Bank of New York, according to a person briefed on issues there. Matthew Ward, a spokesman for the New York Fed, declined to comment.

Christine Lagarde, the president of the International Monetary Fund, warned European leaders Saturday that their fractiousness was threatening the common currency.

“The current economic turmoil has exposed some serious flaws in the architecture of the euro zone, flaws that threaten the sustainability of the entire project,” Ms. Lagarde, the former finance minister of France, said in Jackson Hole, Wyoming, where makers of economic policy were meeting.

The dispute provides one more measure of market uncertainty this week as the summer lull ends and trading regains a more normal volume.

Officials from European Finance Ministries spent much of Friday in long- distance negotiations about the collateral issue but did not reach an agreement. Conflicting reports about the negotiations have fed market confusion. The news media in Germany and other countries reported Friday that Finland had dropped its demands, but the reports were swiftly denied by Finnish officials.

The climate created by the collateral dispute could make it more difficult for the European Central Bank to continue to defend Italy and Spain in bond markets and contain their borrowing costs. This month the E.C.B. has spent €36 billion, or $52 billion, intervening in debt markets in an effort, so far successful, to cap bond yields for the two countries.

The E.C.B.’s task could prove more difficult when trading volume picks up, especially since both Spain and Italy are scheduled to try to sell debt this week. “A litmus test for the effectiveness of the E.C.B.’s bond-buying program is in the cards,” Rainer Guntermann, an analyst at Commerzbank, wrote in a note.

Article source: http://www.nytimes.com/2011/08/29/business/global/finland-casts-doubt-on-aid-for-greece.html?partner=rss&emc=rss

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Sarkozy and Merkel Call for More Fiscal Unity in Europe

August 16, 2011 by Leave a Comment

Amid a backdrop of official figures showing that economic growth in the heart of Europe is slowing and investors growing wary of a deepening debt crisis across the region, the two announced a series of proposals that they said were aimed at defending economic growth and strengthening the competitiveness of euro zone countries.

Ms. Merkel and Mr. Sarkozy vowed to set an example for other euro zone members by harmonizing their national policies on corporate income taxes and to establish a common tax on financial transactions by 2013. In addition, they said, French and German finance ministry officials would meet quarterly to share economic forecasts and coordinate policy.

“We want to express our absolute will to defend the euro and assume Germany and France’s particular responsibilities in Europe and to have on all of these subjects a complete unity of views,” Mr. Sarkozy said at a news conference alongside Mrs. Merkel at the Élysée Palace following two hours of closed-door meetings.

The proposals came as the leaders of the euro zone’s two largest economies faced mounting pressure to forge a joint approach to a widening economic crisis that has already engulfed Ireland, Greece and Portugal and threatens to pull in Spain and Italy as well.

In the United States, where stocks were still trading, the Standard Poor’s index of 500-stocks and other major indexes fell steeply as the two leaders held a news conference announcing the results of their meeting.

In what may likely be the most ambitious proposal, Mr. Sarkozy and Mrs. Merkel outlined a plan for each of the euro zone governments to enact legislation that would constitutionally bind their governments to balancing their budgets. This “golden rule” would be expected to be enshrined in the constitutions of all euro members by the middle of next year, the leaders said.

France and Germany also proposed the creation of what Mr. Sarkozy called “a true economic government for the euro zone” that would be made up of heads of state of all of the 17 nations that share the European currency. This council, he said, would meet at least twice a year and would be led by a president who would serve for a term of two and a half years. He said he and Mrs. Merkel would jointly propose that Herman van Rompuy, a Belgian and the current president of the European Union, be the first to take on this role.

“Germany and France feel absolutely obliged to strengthen the euro as our common currency and further develop it,” Mrs. Merkel said. “It is entirely clear that for this to happen, we need a stronger interplay of financial and economic policy in the euro zone.”

The summit meeting came as European stock markets were in retreat Tuesday for the first time in four days and the euro slid against the dollar following fresh economic data that showed growth in the euro area fell more than expected in the three months through June as growth in Germany came almost to a standstill.

Gross domestic product in the 17-nation euro area rose 0.2 percent in the second quarter of 2011 compared with the previous quarter, according to Eurostat, the E.U. statistics agency. Euro area growth was down from 0.8 percent in the first quarter.

G.D.P. growth in Germany, which has been the region’s economic locomotive, fell to 0.1 percent compared with the previous quarter, when the economy expanded 1.3 percent, the German Federal Statistical Office said. Analysts had expected growth of 0.5 percent.

Those gloomy statistics followed news on Friday that showed the French economy, Europe’s second-largest after Germany’s, did not grow at all in the second quarter. Slower growth means that tax receipts will also grow slowly, which will make it harder for Germany and France to support countries like Italy and Spain that are finding it increasingly difficult to borrow money at interest rates they can afford.

Greece is already in recession, while growth in Spain is slowing down more than expected this year. The Portuguese government expects the economy to contract 2.3 percent this year, compared with a previous forecast for a 2 percent decline.

German and Italian shares led a broad decline in European stocks Tuesday. Germany’s DAX index closed down 0.45 percent, while the FTSE Italia index shed 0.87 percent. France’s CAC 40 was 0.25 percent lower and Spain’s IBEX slipped 0.40 percent.

The S.P. 500 was down 1.40 percent in afternoon trading in the United States.The euro fell 0.48 cents to $1.4396.

Both leaders also flatly rejected — for now — an idea that has recently gained currency among a growing number of economists: The creation of new government bonds backed by all the nations of the euro zone.

“What we are proposing here is the means with which we can solve the crisis right now and win back trust, step by step,” Mrs. Merkel said. “I do not think euro bonds will help us in this.”

Mr. Sarkozy said he would not rule out euro bonds at some point in the future, but said greater coordination of economic policy among euro zone members was a necessary first step.

“Euro bonds can be imagined one day, but at the end of the European integration process not at the beginning,” Mr. Sarkozy said.

Euro bonds are a deeply controversial idea among both economists and ordinary Europeans. Critics say that they would not solve the financial crisis, and might create unbearable political tension instead. Voters in stronger countries would balk at assuming the obligations of less-prudent members. Some critics argue that euro bonds would unfairly raise borrowing costs for countries like Germany, and, rather than protecting the euro, could lead to the breakup of the currency union.

Article source: http://feeds.nytimes.com/click.phdo?i=7d91043b24e4fd068b47541346eef4c9

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