Results seen as protest vote against Spain’s José Luis Rodríguez Zapatero’s handling of the Spanish economy since 2008This article titled “Zapatero’s socialists defeated by People’s party in regional elections” was written by Giles Tremlett in Madrid, for The Guardian on Monday 23rd May 2011 17.28 UTCThe socialist party of Spanish prime minister José Luis Rodríguez Zapatero is licking its wounds after defeat by the conservative opposition People’s party (PP) in municipal and regional elections.In what was widely seen as a protest vote against Zapatero himself and his handling of Spain’s economy, his party lost control of key city halls in places such as Barcelona and Seville while the PP took control of most of the country’s powerful regional governments.The central Castilla La Mancha region, Aragon and the Balearic islands all ejected socialist administrations.“We are aware of the situation that had distanced people from our party and caused them to criticise us with their vote or abstention,” party spokesman José Blanco said.The socialist drubbing came just 10 months before a general election and appeared to clear the way for PP leader Mariano Rajoy to take possession of the prime minister’s Moncloa Palace residence on his third attempt.The voting coincided with the eruption of numerous popular protests against established politics across Spain, with demonstrators camping out in Madrid’s Puerta del Sol and in dozens of other cities. A backdrop of 21% unemployment and sluggish growth has spread pessimism throughout Spain as the country struggles to find its feet after the 2008 crash.The socialists lost one in five voters on Sunday, compared to the municipal elections of 2007. Not all those votes were picked up by other mainstream parties, however, and the number of spoilt ballots doubled. But overall turnout was a high 66%.Zapatero is blamed by some for mismanaging a debt crisis that saw Spain on the edge of disaster last year. Others dislike the austerity measures he has since imposed in order to avoid a Portuguese- or Greek-style debacle in Spain.His popularity has plunged since a U-turn last year saw him bring in a strict deficit-cutting plan, which he has pledged to stick to, along with labour and pensions reforms.Markets reacted nervously to the poll result on Monday, pushing up the price of Spanish bonds and pushing down Spanish share prices.The PP urged Zapatero to call a snap general election. “Zapatero and the whole socialist party must reflect on what has happened. Spain cannot waste another year like this,” said the party’s general secretary María Dolores de Cospedal.The one socialist leader to have survived Sunday’s debacle, the head of the Extramadura regional government Guillermo Fernández, also suggested that an early general election might be considered.The socialists must first choose a new leader to take them into those elections, with deputy prime minister Alfredo Pérez Rubalcaba and defence minister Carme Chacón as favourites.Party officials said that a timetable for electing the new leader would be set on Saturday.With a general election due in Portugal on 5 June, and with opinion polls showing that socialist prime minister José Sócrates will struggle to hang on to power, the rolling back of leftwing politics that has already taken place in northern Europe now appears to have moved south. guardian.co.uk © Guardian News & Media Limited 2010Published via the Guardian News Feed plugin for WordPress.Thanks for subscribing to Andy Roberts blogZapatero’s socialists defeated by People’s party in regional electionsRelated posts:Blair to go, now give back the Labour PartyCatalan independence boost after Barcelona voteZapatero says Spain safe from bailout
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Zapatero’s socialists defeated by People’s party in regional elections
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May 23 2011, 12:35pm | Comments »
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Portugal admits it needs EU bailout
http://distributedresearch.net/blog/2011/04/07/portugal-admits-it-needs-eu-bailout
Finance minister Fernando Teixeira dos Santos says Portugal has ‘to resort to the financing mechanisms’ of the EU. That means a bailout.
This article titled “Portugal admits it needs EU bailout” was written by Larry Elliott, Heather Stewart and Simon Goodley, for The Guardian on Wednesday 6th April 2011 19.36 UTC Portugal admitted tonight that it will need aid from the European Union to overcome its financial troubles, as the country’s crisis intensified. Fernando Teixeira dos Santos, the finance minister, said: “In this difficult situation, which could have been avoided, I understand that it is necessary to resort to the financing mechanisms available within the European framework.” It was not clear from the comment whether he was referring to a short-term loan until the country’s 5 June snap general election or a fully-fledged bailout such as the ones received by Greece and Ireland – and which markets widely expect Lisbon to need next. The comments came as fears grew of a fresh debt crisis for weak countries on the fringes of the single currency zone as the European Central Bank prepared to start raising interest rates from the emergency level plumbed during the financial crisis. The euro rose on the foreign exchanges today in expectation that the European Central Bank would raise borrowing costs from 1% and signal further policy tightening in the months ahead. But City economists warned that the move would add to debt servicing costs and prove more problematic for countries such as Portugal and Ireland than for the core single country nations of Germany and France. Ben May, of Capital Economics, said: “If interest rates were to rise in line with market expectations, their impact would be greatest in the periphery and may prompt a further escalation of the region’s fiscal crisis. “Higher official interest rates will not only lower economic growth in the periphery, but will also prompt the average interest rate that governments pay on their debts to rise. Other things equal, then, higher interest rates will increase the chance of peripheral government debt spiralling out of control.” Along with other central banks, the ECB slashed interest rates during the financial crisis in an attempt to pull Europe out of recession, but it has responded to rising inflation in recent months with clear signals that borrowing costs will rise. The euro’s strength coincided with a rise in the price of gold to $1,454.84 an ounce. Marchel Alexandrovich, of Jeffries International, said a 1% increase in ECB rates would mean that mortgage debt interest payments of euro area households would rise by around 7% on average, but there would be a 30% jump in debt services payments for households in Portugal and Finland, a 15% increase in Ireland and around a 10% rise in Spain and Italy. “In aggregate, debt interest payments for the euro area households and non-financial corporations would rise by around 0.3% of GDP if ECB rates are one percentage point higher,” he said. “But Germany and France would see a rise of just around 0.1% of GDP, while Portugal, Spain and Ireland would see increases equivalent to 0.8% of GDP. “The countries which least welcome higher interest rates on economic fundamentals are likely to be the ones most affected by them. One more reason why the ECB would be wise to tread very carefully in the months ahead.” Several of Portugal’s banks have been calling on the government to accept help from its eurozone partners, warning that they can no longer continue to buy up Portuguese debt. Lisbon needs to find almost €5bn in repayments this month and another €27bn in June. The rising interest rate on Portuguese borrowing has added to the sense of crisis in the eurozone, amid reports that Greece is under pressure from the International Monetary Fund to default on its borrowing. The Irish government is understood to be concerned about weaker-than-expected tax revenues and the vulnerability of its banking sector. An informal meeting of European finance ministers is planned for Friday
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Related posts:Portugal bailout fears rise as credit rating cut Portugal teeters on brink of bailout Ireland forced into new £21bn bailout by debt crisis
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April 7 2011, 2:35am | Comments »
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Eurozone crisis: Why we’re all in this together, too
http://distributedresearch.net/blog/2011/03/25/eurozone-crisis-why-were-all-in-this-together-too
Portugal‘s financial situation looks bleak – so can the eurozone muddle through yet again?
This article titled “Eurozone crisis: Why we’re all in this together, too” was written by Michael White, for guardian.co.uk on Friday 25th March 2011 12.19 UTC I see the eurozone’s sovereign debt crisis is safely off the front pages, so things must be getting serious. EU leaders, who have got their Nato knickers in a quite separate twist over Libya this week, are gathering in Brussels today to sort it out. Tin helmets on. It’s not primarily Britain’s problem, because Britain is not part of the eurozone. We have retained our own currency and our own central bank and are therefore free to make, and correct, our own mistakes, as 17 of our EU partners are not. Who kept us out of the eurozone, asked the veteran Tory fixer Tristram Garel-Jones, into whom I bumped at Westminster this week. “Gordon got that bit right,” said the clever new Labour MP in the conservation. “John Major, that underestimated man,” TG-J replied before popping outside the building for a fag. Fair dos – it was Major’s UK exemption, negotiated at Maastrict in December 1991, which left the option open for euro enthusiasts (as he then was) like Gordon Brown to exercise, except that he didn’t. Ed Balls talked him out of it, and Tony Blair’s enthusiasm clinched the Treasury veto. Not that Major will get much credit from assorted Tory airheads now jumping up and down, warning David Cameron that he mustn’t contribute a penny to the looming Portuguese bailout – “£300 for every family in Britain” as today’s Daily Mail puts it, as though the Lisbon bailiffs were knocking at the door like tinkers. The bailout will be £3.96bn, according to the eurosceptic (Rupert told them to be) Times, £6bn according to the Mail, though the paper’s City pages seem much calmer than the news pages – as usual. It’s a detail. In a crisis, Britain has commitments via the IMF and the European Stability Mechanism (ESM), which Alistair Darling signed on the last weekend of the Labour government and George Osborne would probably have signed had he taken over by then. But, as the BBC’s Robert Peston gently points out, it’s very indirect and the chances of losing any money via guarantees are remote, more so than the damage which would affect confidence in the wider EU economy – including ours – if Portugal defaulted on its debts, with or without a prior restructuring. Never mind. You can read here (under European summit) how Tory MPs like my old chum Bill Cash got over-excited in the Commons, denouncing the ESM as legally doubtful and urging Cameron to dig his heels in against more British financial support at today’s summit. As Ian Traynor reports, this week’s collapse of Portugal’s minority government after the opposition refused to back another austerity package leaves the EU without a government in Lisbon to negotiate with. As with Ireland last winter, the eurozone’s German paymasters (the French tagging along) want the Portuguese to seek a formal bailout for their debts for fear of “contagion” in the financial markets which could spread to much larger Spain or Italy. The cost of servicing Ireland’s 10-year debt rose again this week, to 10.1%, and Portugal’s is pushing 8% – a level at which it cannot realistically hope to grow its way to solvency. It’s like a mortgage in which the accumulated interest keeps enlarging the householder’s debt. Notwithstanding chancellor Osborne’s justified boast that his austerity package has kept ours closer to debt-free Germany’s at 3.6%, one of the soporific credit agencies, Moodys, warned him yesterday that the UK could lose its triple-A status if his growth predictions don’t come good. Few think they can. This is all grim stuff. Just as Greek voters rioted against their government’s enforced austerity and Irish voters kicked their government out after they agreed to underwrite their country’s grotesque banking debts, so the Portuguese are angrily resisting their doom. More austerity will be hard to bear and, as elsewhere, may not do much good anyway if they overwhelm hopes of resumed growth. Forty-eight hours after the UK coalition’s second budget reconfirmed a similar-sounding Plan A, and on the day the Guardian launches its own review of the cuts now descending on Britain’s public and third sector services, I know what you are thinking. But at least we are managing our own affairs. Because the debtor nations inside the eurozone are not the only ones cutting up rough. The creditors, not just those sober North German Protestants, but their Dutch neighbours, plus the French – and even the Finns – are finding that their voters are ill-disposed towards their profligate southern allies, who borrowed money they could not repay. Hopes of a “grand bargain”, whereby the new stability mechanism, due to come into force in 2013, will have a lot more money to shore up the edifice (€440bn instead of €250bn) remain in doubt. The Germans and Dutch want to restrict its capacity to buy bonds to buying them from ailing governments which must agree fresh austerity in return. And Finland’s normally-staid government has been hit by a surge of populist anti-euro rhetoric which threatens trouble at next month’s elections, and forced Helsinki, another triple-A rated state in creditworthiness, to block its increased contributions to the new stability mechanism. Meanwhile, Italy – whose respected central bank governor has kept the show on the road (he should be the next man to head the European central bank except the Germans won’t have a southerner) despite Silvio Berlusconi’s antics – is moving to block unpopular French takeovers of important Italian firms like Bulgari the jewellers, and the food company Parmalat. It’s what the French do, of course, but it’s very un-European. It’s not a currency issue but it is a nationalist one, explicitly protectionist and reflected in the currency battles. Britain has been allowed to devalue sterling by close to a quarter – thereby boosting exports – without triggering the protectionist charge which is levelled against the Chinese, who have been doing the same thing for years. We should be grateful, but we’re not. None of this is good for them, or good for any of us in our cold north Atlantic corner of an increasingly Pacific-orientated world. It’s no good saying “I told you so,” that it’s hard to imagine a single currency without a single state, at least for tax and spending purposes. But lots of people did say that (me included), and the German answer seems to be to say: “Ok, let’s construct a fiscal as well as monetary union.” There is logic to that position, but it won’t easily hold politically. The broken-backed Portuguese government, now facing a two-month general election campaign without a credible option, this week embraced even tougher cuts in return for a lower interest rate on its EU debts over a longer period. Ireland’s new Fine Gael-Labour government rejected similar terms because part of Berlin’s price would have been abandonment of the republic’s core economic strategy, the 12.5% rate of corporation tax which attracts inward investment so well. Irish voters have told all parties it is a red line for them but, to Germans, it is fiscal piracy. Osborne is offering a similar rate for Northern Ireland in returns for grant cuts elsewhere, a differential rate that will annoy the rest of corporate Britain, where the post-budget rate is still 26%. Tricky, isn’t it? Will the eurozone make sensible compromises it can sell to angry voters, north and south, ones not bound by ties of language or national culture? Will it fall apart? It shouldn’t. Portugal’s is a small economy, its debt problems less acute than those of Greece or Ireland, though its politics have been weak. But we should all hope it muddles through and support the process where we can, despite our own acute domestic problems. “Beggar my neighbour” policies are always tempting but rarely smart, because my neighbour does it back. By the way, which member of the G7 saw the largest rise in per capita income in the 20 years after Margaret Thatcher’s fall in 1990? Why, Britain did, according to new figures, by 36.5 % – just ahead of the US and Canada (32%), Germany (29.3%) and France (23.1%). Where did it go? Not fairly shared, I realise. Unsustainable? In part, yes. The coalition’s budget says the answer is austerity and supply side measures to boost growth. Here’s hoping.
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Related posts:Budget Deficit Portugal teeters on brink of bailout Portugal bailout fears rise as credit rating cut
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March 25 2011, 7:52am | Comments »
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