Archives for category: Economics & Budgeting is “Occidental world” Priority

Update. I am adding under “More” at the end of this post a 07/24/2015 NYT article:“Why Greece Should Leave the Eurozone”by Hans Werner Sinn (economist) who is also (like a series of known economists…), now, “proposing” to have Greece leave the Eurozone, something that I – not a “trained” economist, but an experienced international businessman, have been writing in my blog, since I created it in April 2011. The NYT article is quoted entirely, I will not comment it, because I have already basically written the same – and more – “ad nauseum” – very repeatedly…

It is a matter of “horse sense”, the Eurozone is badly – not at all  managed (most re known economists don’t say this openly…) and Greece too, they are both better off without each other!

The European government “instances” have spent the majority of their “ineffective” time on the Greek matter for most of 2015 so far (!), coming up with an absurd “agreement” which is born dead because it will not work. If the Eurozone – Really – wants to Keep Greece in the Eurozone, which, mil repetita, is a very big Mistake, because it will become Unavoidable to Keep Greece in the Eurozone, other measures are necessary and urgent, and also will prove to be economically wrong (throwing scarce good money after bad one).

While these bureau technocrats in Brussels spend practically all their time on Greece, the important subjects are NOT being “handled” (sic), like: Reducing – effectively – Huge Total Unemployment (including Under Employment), Too Weak Growth, Reach an agreement with the UK to impede a “Brexit” – which would be very Negative – far more so than a “Grexit”, installing the Eurozone Banking Union, etc…!

The “Agreement”  will not work for two basic reasons:

1. The huge Greek debt (huge relative to its dwindling GDP and not to its abolute value as a Eurozone related “number”) will Never be Repaid, unless there is Debt Relief of around 50% (also called “haircut”).

There was a “haircut” already in 2013 of 105.7 billion euros, which affected private speculators.

This evential “haircut” will affect the Eurozone countries – Directly, through bilateral loans made directly by each Eurozone country to Greece, or – Indirectly through their share / % participation in the loans allowed by EFSF (one third of Greece’s debt), ECB and IMF, which the EFSF, ECB,  IMF will re distribute to Eurozone countries.

The total exposure by Eurozone country  is next shown in a table made by Barclays (where the total is 331 billion euros and not the 320 billion euros which gets mentioned all the time, but the “reasoning” is the same):

Germany – 92.0 billion euros  – 3.2% of its GDP

France – 70.3 billion euros – 3.3% of its GDP

Italy – 61.5 billion euros – 3.8% of its GDP

Spain – 42.3 billion euros – 4.2% of its GDP

All four leading countries in the Eurozone “can” pay for this, but with the exception of Germany, they all (including France) will have to increase their Indebtedness which is close to or exceeds 100% of their GDPs.

Eurozone Exposure

This already impossible to repay Greek debt will be increased to over 400 billion euros with the third baillout – some 100 billion euros – which would be allowed to “keep Greece alive”, bringing Greece’s Indebtedness to way over 200% of its falling GDP, since Growth in Greece willnot happen with all the “pure austerity” measures dictated by the “ex-troika “(EU /ECB / IMF)  in the “agreement”.

This is why, but only lately, IMF makes, once more, a total turnaround in”policy” (sic) lately, taking the posture that Debt Relief is Needed, therefore opposing Germany on this matter, which continues pushing for Debt Re Structuration, which means allowing a longer period for repayment and conceding even lower interest rates(!), which will not work, and all of the “involved” know it…

2. Because most of the measures dictated by the European / Eurozone “Governance ” (sic) – really by Germany – in the “Agreement” are anathema to obtaining Growth, namely:

Privatize “national treasuries ” for 50 billion euros (size of current and dwindling Greek GDP is around 176 Billion euros…, or “impossible mission”), VAT at 23%, including most of its real national asset: Tourism, Delay in Retirement, Implement Rules of Collective Bargaining, the Right to Strike and Collective Redundancies and above mentioned Privatizations, whose “Revenues” will be used to recapitalize banks and reduce debt… In this “package”, social-economic structural reforms are,as usual, requested at “minima”, the real mesures are Tax Increases and Spend Decreases.

At this price, the incapable EU / EC “Governance”, plus Germany, its “de facto” leader, plus France, who is content to create a precedent for eventual own usage…, are trying to convince this poor and ignorant Greek population that their country will soon be “saved” by initiating a return to Growth, and eliminating “Grexit”…!

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France’s government is making some small changes, which the government calls “reforms”, to dismal Labor situations which have perdured for four decades at least, but these changes will not have a real effect on improving France’s economy and diminishing its huge unemployment.

The major so called “Reform”, which is in reality a (very expensive) Tax Facility, was the CICE (“crédit d’impôt pour la compétitivité et l’emploi” = Tax Credit for Competitiveness and Employment), also called the “Responsiblity Pact”, was  implemented in 2013 and supposed to start having full impact in 2015. 

The so called “Responsibility Pact” created  in 2013 by Mr. Hollande’s government offers to companies:

• “Continuing the reduction in labour costs”, with the total abolition of family social security contributions paid by companies by 2017 • “Increasing the visibility of companies”, with the definition of a trajectory out to 2017 for the rate of mandatory contributions paid by companies • “Simplifying and facilitating the life for companies”, with a reduction in the number of standards and procedures deemed to be “costly and useless”, with the creation of a “council of simplification” for this purpose • “Defining counterparties” at the national level in terms of employment, training, social dialogue, etc. – with the creation of a “council of counterparties”, associated to the Parliament, also for this purpose.

This “Pact” has not had the expected impact so far, since most of the measures have not ben implemented, and if so, badly and inefficiently. It might be “reoriented”still in 2015?

I am referring to Le Figaro‘s 06/10/2015 article: “Manuel Valls and the corporations: the disastrous record of the Responsibility Pact”, which refers to this major and very expensive “tax facility”  undertaken by the Hollande Government. I will quote this article (colored lettering is mine) and precede it with my own comments.

My Comments

Very short. Le Figaro is a newspaper edited by the opposition and therefore its comments need to be somewhat nuanced.

But facts are as they are and interpretations of reasons why are varied. It nevertheless still remains that France has been for half a Century, and continues being so (right and left parties combined), a Social Protection / Subsidized by Government / Welfare State, and that since decades it cannot afford to continue being so “generous”, and also, to a great extent, unproductive, urgently requiring (mil repetita” in this blog’s posts) to implement real and complete Social-Economic Structural Reforms to obtain durable and internationally competitive Growth.

But, this government will not do so until 2017 presidential elections, and “Brussels” inefficient, political and techno bureaucratic “Governance” (sic) will not counsel France effectively to do so.

Quotes

While Manuel Valls presents 18 measures for SMEs, Guillaume Sarlat criticizes the economics of the Tax Credit for Competitiveness and Employment (CICE) and the Responsibility Pact. According to him, the effect of the decline in expenses was almost zero.

Guillaume Sarlat is a polytechnician and Finance Inspector. He is the author of “Ending the French liberalism” just published by Albin Michel.

The responsibility pact is dead. Vive corporate responsibility!

A small music began to be heard in the media in recent days. Incredible surprise, it seems that the Tax Credit for Competitiveness and Employment (CICE) and the Responsibility Pact have no significant effect on corporate margins, stagnating or on unemployment, which continues increasing month after month.
This small music itself comes from the government itself. It’s Stéphane Le Foll, who said last week as well as an assessment of the responsibility pact would be available in the summer and that it would give rise to “decisions”.

Politically, for François Hollande, the balance of responsibility and CICE Pact is rather satisfactory. They have allowed him to gain time and calm Brussels asking “reforms”.

The “Brussels authorities” (sic) would not have “pressed charges” anyhow, France being, still, the second economy in size in the Eurozone – Proof is that even Greece still gets away with it, without “sanctions” (Grexit…).

And thanks to these measures, it has given the impression of having made a turn to the right, which will better enhance the turn to the left that will probably will come soon, together with blows of criticism of irresponsibility from  employers, on account of all the past and npow present again subsidized employment plans and recruitment in the public service, in order to gather the left in the first round of presidential elections.

But economically, however, the balance of responsibility and CICE Pact are disastrous.

These artificial devices have demonstrated that the decrease in payroll policies practiced tirelessly since 1993 by all governments, left and right, have only a short-term windfall and do in the long term contribute to the impoverishment and attrition of the French economy. 

Decreased charges in labor are artificial, they have been used to some extent with jobs in France, before they are then relocated to Morocco, Romania, India, etc….

But nobody invests in France,since a long time, because of lower expenses. Just like no rational person will only recruit for the “bounty” of 4,000 euros (over 2 years) for a first employment announced by Manuel Valls today.

When CICE’s related tax credits will be “redeployed”, this will be to pay for the usual tools of the state subsidized jobs and recruitment in the public service, which as everybody knows will only increase public expenditure, without offering sustainable prospects of returning to work, and not without improving the quality of public services. This redeployment has already begun: the government announced it a week ago:  100 000 new subsidized contracts will be created, bringing to 545,000 the total number of subsidized contracts entered into in 2015. Worse, the business tax environment is going to change again in the autumn, when we know that the clarity, simplicity and stability of the tax system are key to promote the initiative and risk-taking economic in France.

Finally, and this is without doubt the most serious, this sequence will further reduce confidence in the French economy and businesses. Because it confirms once again the idea that companies and bosses do not keep their commitments and do not act responsibly.

Part of the French economy:  the large multinational groups, live in a largely liberalized universe, while the State, turned into a “social proection  subidies system”, supports those who do not find their place in the liberalized economy.

In this system, the French have lost confidence in large groups,which face social brutality and fragility, often surprising and unexpected (Areva, Alcatel, Alstom, PSA …). As for those working in SMEs, they often have the feeling of living in a third economy, both despised by large groups and exploited by them, with a social framework increasingly degraded. The government proposal today to set a ceiling for  compensation in prud’homales (official labor tribunals) trials, to lower costs of dismissing personnel in SMEs with fewer than 20 employees is a new manifestation of this two-speed economy.

It’s a fact: companies are not empowered today in France vis-à-vis the quality of employment. With the load relief of the type of CICE and responsibility Pact, or the first premium of hiring 4,000 euros, the only objective is that companies maintain employment in number, and if possible recruit, but not caring for the implied cost to society of these jobs, regardless of the type of job and career paths for employees.

This irresponsibility vis-à-vis employment businesses is consistent because liberalism to the French, is the socialprotection / welfare State that supports all social risks: Long-term unemployment, exclusion, health problems, requalification, etc.

This is consistent but it is very costly to society. For thus reason, it has and is being allowed to develop opportunistic behavior in  businesses, which often under-invest in their employees and hire and fire based on their short-term needs. This leads to a very high level of long-term unemployment and exclusion from the labor market in France: the unemployment rate is at its highest, the activity rate to the lowest, and 50% of the unemployed in France experienced more than 12 months of unemployment in the last 18 months.

To reverse this trend it is necessary to break this unconditional support by the community’s economic and social cost of business practices that feed their irresponsibility.
A tool exists: it is the modulation of the unemployment contributions paid by companies, or even all of their social contributions.

This modulation already exists … in the United States. Yes, the United States, and for many years. This is the “experience rating”, which was extended to all of American States, which are unemployment insurance managers in the 1980s This device is built on the model of the bonus / malus of car insurance: employers see their contributions modulated according to unemployment benefits paid to their former employees.

Ideally, payroll taxes should be increased for companies that send many employees to unemployment insurance, in proportion to their size and whose former employees then experience significant difficulties in finding a job. Conversely, contributions could be reduced for companies that hire people who are long-term unemployed, and invest in training and in learning. This is to compensate the action of the company, benefits society as a whole, integrating the world of work.

Such modulation of social security contributions could be implemented quickly in France. The introduction of such measures had also been envisaged in France in the late 1990s … It would make us forget the unfortunate episode of responsibility Pact, misnamed, and also that of the SME / VSE map announced today, very one-sided in favor of companies.

The impact on investment, employment and wages tax credit (CICE) cannot be evaluated until mid-2016, warned the president of the Monitoring Committee, Jean Pisani-Ferry, and may be re oriented.

The motion carried by Jean-Christophe Cambadélis adopted at 60% by the activists of the Socialist Party demands an inflection on the device used in 2014 so that it targets businesses “who are most in need,” thanks to 15 billion still available from the “pact of responsibility,whose total cost is…40 billion euros!

From an initial amount of 20 billion euros, the CICE was melted into the ” Responsibility Pact”, the total amounting to 40 billion of tax credits and compensation expense reductions which companies had to commit to by hiring and investing, which most did not do.

The government promised an evaluation report would be completed before the summer but Jean Pisani-Ferry, Chairman of the Monitoring Committee, declares in “Les Echos” that it will not be made until the second half of September 2015 .

Volatility

For several weeks, financial markets are caught strange jolts, even the most seasoned professionals struggle to explain: the stock market ebbs, oil prices are rising again and above the interest rates on Sovereign borrowings are dangerously rising. France’s rate is still low (1.34%), but nevertheless has quadrupled in 2-3 months.

Interest rates demanded by creditors of France depend directly on the evoltion of the French Debt: A 1% increase corresponds to an increase in cost of 40 billion euros, as calculated by the governor Banque de France itself. The state has not the first penny to settle for such a bill, which would immediately be borrowed in markets. New loans to pay off debts, and taxes for all, theseare the mechanics at work in France, declares the opposition.

This is why to tackle head on the problem of debt and deficits is not an ideological question, but one of national interest. For allowing France’s debt to  increase “uncontrollably” (now amounting to 2.03 trillion euros -100% of France’s GDP – quoting the French Court of Auditors – the governments of the past forty years have sacrificed the sovereignty of France, now in the hands of the markets.

The reality is that with 80 billion euros annual deficit, France is still not even at the stage of rigor. To avoid becoming Greece’s financial situation dictates that conduct: reduce public spending, again and again.

Eurozone’s GDP grows 0.4% in 1rst Qtr 2015 and there is general optimism by economists and analysts (obviously…), once more. Let’s take a look at the real reasons for this GDP growth -without playing Cassandre but taking into account macro facts.

Unemployment continues growing in some major countries, accordingly this (to me temporary) growth is not based on structural improvements, but on higher consumption by households driven by extraneous macro factors: euro decline (the curve is inverting itself) and oil prices being (still) low, both factors being volatile and not controllable by the Eurozone.

I will make some  Quotes of what the Press says and writes in general, preceding these quotes with my own comments.

My Comments 

First of all, a basic “thought”:

It is a common mistake in corporations when preparing sales’ plans by salesmen, to plan the same variation – generally an increase…, for all salesmen/women. This is definitely a gross error, which creates “unfair” competition within the team.

A salesman/woman who had a 15% increase in past year’s sales is given, this way, the same growth objective – say 10% – than one who only increases its sales by 2% (same sales’ periphery in the 2 years in both cases).

It is necessary to look at the starting base. If the general total picture of the total sales areas has not been the object of some type of basic change in sales territories’ potential, the past results need to be validated and taken into account when preparing  per territory / per salesman/ woman sales’ objective for the coming year.

Going back to “Macro”.

As no relevant structural changes have been made by any Eurozone country in 2014, the base can be considered as being relevant, which means that, say, Germany’s past performance can be (“fairly” ) considered as being “better” than that of France and Italy.

Therefore, a higher growth in France and Italy versus Germany (a better past performer – with a higher base), in terms of percentage growth increase, under the same conditions, was to be expected.

The fact that the European Commission (EC) did not assign higher goals to France and Italy, is because they – EC – plan  for mediocrity and “uniformity”. They let France get away without firmly requesting implementation of real and complete structural reforms, which France’s government  has not included in their plans / budgets until election time in 2017….By doing so, obviously France cannot be expected to have “great” growth,but they will continue having “real” – with underemployment increasing – unemployment which will stagnate at best, if not continue to mildly increase.

Italy is “another story”, please see below.

Back to Macro Facts

France

French growth rose 0.6% in the first quarter of 2015. What explains this rebound? Are the economic foundations of France really solidifying? Can we expect the so called “recovery” to continue?

INSEE (national statistics office) published on 05/11/2015 economic indicators induce for some optimism.

Question is, what credence to give to this “optimism”?

First, and to me primarily, because during this period, the general context was particularly favorable: the famous “planetary alignment” (Low, Low Oil Prices and Euro, Zero / Negative ECB Refinancing Interest Rates) has borne fruits, like every where else in the Eurozone (but not with the same growth percentages – please see above comments on competitive “fairness” evaluations…).

Second, a positive factor – if well exploited and implemented (?) –  the CICE, which will have full impact in 2015.

The CICE – “Crédit d’impôt pour la compétitivité et l’emploi” (Tax Credit to further Competitiveness and Employment) has been introduced to enhance the competitiveness of businesses in France. It will be used to boost investment, research, innovation, training, employment and the exploration of new markets, and to help firms recover their working capital.

Finally, when we look a little deeper into the figure of 0.6% GDP growth in the first quarter of 2015, we can see that the foundations of the French economy are still fragile.

We explain why, even if these are “good news”, it is necessary to stay”cool”.. Remember in 2013, when growth was up 0.8% (revised) in the 2nd Qtr of 2013, it relapsed by 0.1% in  the following – and macro conditions (Oil and Euro) were totally different!

• A look at Consumption

In the 1rst Qtr of 2015 the French have consumed more than in the 4th Qtr of 2014 (+ 0.8% against + 0.1%). Which apparently seems to be a  good sign. But going into in detail, this rebound is mainly due to energy costs (+ 3.9%) who inevitably rose after a very soft fourth quarter that had driven down consumption (-1.7%), including heating.

However food consumption only increased by 0.1% (against + 0.3%) and services remains sluggish (+ 0.3% after + 0.1%).

The only really positive point: the consumption of manufactured goods surged 1.4%. In fact, the French won in purchasing power in 2014: wages have increased more than inflation. What was mainly reflected by consuming more products, including the purchase of cars. But not French cars …

The weak euro does not have a positive effect if we consider the Export situation.

The increase in consumption has not really benefited France.

What is surprising in the publication of INSEE, is to see that exports have risen less early 2015, while imports increased more. This means that the decline of the euro, which is supposed to lower prices of French products to better export (and conversely to increase the prices of products that come from the outside), did not have the expected benefits!
In 1rst Qtr 2015, Exports have slowed in effect (+ 0.9% after + 2.5%) especially in transport (-0.9% after + 11.1%). At the same time Imports have greatly accelerated (+ 2.3% after + 1.5%), especially in energy and transport equipment.

In total, foreign trade weighed on the evolution in activity this quarter: -0.5 GDP point after +0.2 point.

Production is recovering well, but construction continues to go wrong.
Corporate side, among the positive points there obviously has the recovery of the total production in France (+ 0.7% in the first quarter against a stagnation end 2014). It’s the manufacturing output that pulls the trend, particularly in transport and energy.

Germany

German domestic demand grew strongly in 1rst Qtr 2015, the German statistics office said, fueled by increases in both household consumption and business investment.

Trade held back growth, with a surge in imports more than offsetting an increase in exports. 

Italy

The strong Italian GDP data came in the wake of conflicting figures on the health of the Eurozone’s third-largest economy, which has long struggled with stagnant growth.

While industrial production rose in March by 0.4 per cent compared to the previous month, exceeding economists’ expectations, the unemployment rate rose for a second consecutive month, to 13 per cent (not including underemployment and the “black market”), reversing what seemed to be a steady downward trend.

Italy was seen as among the biggest beneficiaries of the slide in oil prices, the weaker euro and more aggressive monetary easing by the ECB. But Mr. Padoan, Italy’s finance minister, last month warned these favourable conditions would not last forever, and that there were “already signs that they are finishing”.
“We have to exploit this window of opportunity and make the recovery stronger and more sustained,” Mr Padoan said.

Italy is a country which is moving in the right direction, under Prime Minister Mr.Renzi’s, push for reforms and a having a good team with experienced Ministers, like Mr. Padoan, and a bright and enterprising younger team of Ministers, like PM Renzi himself. Unfortunately the classic Italian politics will be a great obstacle to overcome.

Some Quotes (colored lettering is mine)

A spending spree triggered by the plunge in energy prices helped lift Eurozone growth to 0.4 per cent in the first quarter of 2015, as the region made further strides towards a meaningful recovery after years of near stagnation.

The flash estimate for GDP, produced by Eurostat, the European Commission’s statistics bureau, was broadly in line with economists’ expectations and beat the 0.3 per cent expansion recorded for the final quarter of last year.

The currency area was boosted by a sturdier performance from the French and Italian economies, fueling hopes that confidence is finally returning to weaker parts of the region, although Greece fell back into recession.

France’s economy smashed expectations, expanding at the fastest pace in nearly two years as falling prices aided consumer spending. French consumer spending advanced 0.8 per cent, from 0.1 per cent as households bought 1.4 per cent more manufactured goods, including cars, according to data released by Insee, the statistical agency.
The figures will provide some respite to French policy makers.
“Here is finally a spectacular performance,” said Philippe Waechter, chief economist at Natixis Asset Management in Paris. “The goal of more than 1 per cent growth for this year should be exceeded. This is positive for employment.

But France’s 0.6 per cent quarterly growth – a sharp rise from stagnation in the fourth quarter – contrasted with Germany,where growth slowed to 0.3 per cent from 0.7 per cent, missing consensus estimates for 0.5 per cent growth.

The German slowdown could raise doubts about the recent wave of optimism about Europe’s largest economy, which has seen the government lift its 2015 growth forecast to 1.8 per cent and private sector economists raise their targets to 2 per cent and higher.

“The weaker than expected rise supports our warnings that many economists have become over-optimistic,” said Jörg Krämer, chief economist at Commerzbank. “Growth forecasts in excess of 2 per cent now look too high. We even see downward risks to our conservative 1.8 per cent estimate.”

Like France, Italy’s 0.3 per cent expansion also beat forecasts and was the fastest in four years, bidding farewell to nearly three years of stagnant growth or recession.

Spain’s economy, the region’s fourth largest, expanded by 0.9 per cent, according to figures published at the end of April 2015.

The growth figures for the eurozone’s biggest economies underscore the boost consumers have felt from the plunge in energy prices.

However, the impact of lower oil prices could start to diminish and signs of slowing growth in important markets such as the US and China are already weighing on exports, lessening the impact of the weaker euro on the region’s recovery.

The euro, which initially traded higher after the French and German figures were released, slipped slightly to $1.12097 later on Wednesday morning.

But, with price pressures set to remain weak throughout 2015 regardless of what happens to oil prices, some economists are optimistic consumers will continue to spend.

“Headline inflation won’t move materially higher for another year or so. And by then, investment should be kicking in,” Erik Nielsen, chief economist at Unicredit.

 

The US economy is not having such a significant Recovery as many economists and analysts claim it does.

One of the main reasons is that total “real” unemployment, including under employment (a must  since it is there that most employment problems exist) is still 11% of non farm civilian working population, which continues being far too high, even if Eurozone’s exceeds 20%, which is no “consolation”…

Reuters – 04/28/2015 –  reports – my translation – on decreasing US Consumer Confidence, which I quote (colored lettering is mine), preceded by my own comments.

My Comments 

Until major countries like US and most Eurozone countries, address the real issues on why real “total unemployment, including under employment, is still far too high in general, with obvious exceptions, these “Western economies will not grow significantly / enough, being careful to note that growth percentages differ between US and Eurozone.

Quotes

US consumer confidence has, against all odds, deteriorated significantly in April 2015, says Statistics employer organization Conference Board released Tuesday (04/28/2015).

The index measuring US consumer confidence stood at 95.2 in April 2015 against 101.4 in March 2015. The consensus gave an index of 102.5. The March 2015 index was originally announced at 101.3.

The sub-index of consumer expectations stood at 87.5 in April against 96.0 in March, the lowest since September 2014.

Consumer expectations for inflation in the horizon of one year show 4.8% in April 2015  after 5.2% in March 2015 . These expectations have never been so low since February 2007.

European shares have increased losses in reaction to this indicator, while the euro recorded a three-week peak against the dollar, also signing a five-week low face a reference basket of currencies.

European shares closed sharply lower on Tuesday – 04/28/2015, weighed down by several business publications deemed disappointing and unexpected sharp deterioration in US consumer confidence in April 2015.

The French  CAC 40 index finished down 1.81%, The London Footsie Stock Exchange lost 1.03%, Frankfurt and Milan 1.89% 1.15%. The Euro Stoxx 50 index, which includes the main values of the euro area, fell 1.62%.

Dow Jones closed 0.4% up my comment: showing European markets to be far more volatile 

The CAC 40 showed a new high on 04/27/2015 increasing by 1.3% (Euro Stoxx 50 increased by 1.55%, showing that all Eurozone markets increased mainly  for the same reasons), this primarily on account of a “new” political situation in Greece, and the – unexpected by analysts – what is new (?) …, increase in Oil Prices.

Please refer to my separate posts  – today – on Greece and Oil Prices’ increases.

This increase shows, once more, the total Disconnection between markets ‘evolution and the “home”  bad social-economic situation,with unemployment continuing its increase in France in March 2015.

Following “news” are sourced in “Les Echos” / Comments in blue are mine

My Comments

French minister of Labor, Mr. Rebsamen makes the same “official” statements about employment rising than President Hollande since May 2012, Finance minister, Mr. Sapin, all having proven to be totally erroneous, as this latest one will,be, because France’s government has not adopted, nor planned to until 2017 (new elections) implementation of social-economic structural reforms,s tarting with allowing real flexibility for corporations in France with dealing with personnel/workers.

Unexpected – by practically all economists (sic) of increases in Oil Prices contributed to markets’ hikes, makes inflation increase and by the same token makes deflation possibilities illusory.

“Les Echos” 04/27-28 /2015 news, translated by me and quoted (colored lettering is mine).

Quotes

France: the number of unemployed reached a new record in March (3.51 million)

My Comment:  Including underemployment, Real Total Unemployment exceeds 5.5 million workers!

The number of job seekers registered at employment center Class A was up 15,400 people in March in France, reaching a new high of 3,509,800 people, said Monday the Ministry of Labour.

Compared to February, the increase in unemployment is 0.4%. In one year, the increase was 4.9%.

“The beginning of the year 2015 remains a phase of improving trend, although it is not enough to obtain, for the moment, a steady decline in the number of job seekers,” said Labour Minister, François Rebsamen, in a statement. “The measures adopted are beginning to bear fruit and the government continues its effort to support and enrichment of growth in jobs,” he added.

The same day – 04/27/2015 – that these to be expected bad news were published, the CAC 40 (France’s selective market / stock exchange) increased by 1.30% (Euro Stoxx 50 increased by 1.55%   ) mainly because of “news” related to …Greece, and Oil ¨Price Increases

Tsipras sends the Cac 40 to a new high of just over seven years

The Paris CAC 40, prey to profit-taking until the mid-session, reversed the trend in the progress on the Greek case hope and went to visit a new high for more than seven years.

The Paris Stock Exchange today (04/27/2015) signed a new high since January 2008 while yet the day had started badly. The CAC 40 ended up 1.3% to 5268.88 points, after a push to 5283.71.

The lowest of the session, the index yielded 1.26% for lack of progress on the Greek case this weekend but the announcement by Prime Minister Alexis Tsipras, at midday, a reshuffle the team in charge of negotiating with creditors Brussels Group (formerly Troika, that is to say, the European Commission, the ECB and the IMF) has changed the game. Friday, during the Eurogroup meeting, which took place in Latvia, the Greek Finance Minister, Yanis Varoufakis, was widely criticized by his peers.

Note also that, according to the German newspaper Bild, Mr. Tsipras would be willing to give up his campaign promises, especially with regard to the minimum wage increase.

New record session for the S & P 500, Nasdaq close of exceeding the 2000
In Athens, the ASE index rose 4.37% and the index closing banks increased by over 9%.

Elsewhere in Europe, the London FTSE is 0.28% after registering a new record of 7122.74 points. The Dax in Frankfurt Stock Exchange ahead of 1.88% and the Euro Stoxx 50 of the largest stocks in the euro area of ​​1.55%.

In New York, the Dow Jones wins 0.29%, the Nasdaq Composite 0.19%, as the S & P 500. The latter has a new record at nearly 2,126 dots when the barometer of technology stocks is fast exceed its peak in March 2000 to 5132.52 points made at the meeting.

  The rebound in oil prices from their lowest in six years hit in mid-January heckling the scenario of sustained low inflation that pushed the monetary officials at very accommodative policies precipitated bond yields to new lows even in negative territory and fueled a new surge in stock market indices.

If the bounce of about 40% of the price of oil is confirmed or even accentuated during this year, inflation could rise significantly next year.

Since the beginning of the year, no fewer than 27 central banks in one way or another easing monetary policy against the risks of deflation or slowing growth.

 

France’s successive governments since 1960 have continuously increased government spending – from 35% of GDP in 1960 to 57% in 2014(!) – A 63% increase in GDP participation!

If this enormous increase is not broken down into its “components in order to effectively know the”origin of evil” (sic), no decrease actions will be effective – as proven in the last 40 – 50 years.

This is what is called “targeting action effectively”, this not having been done. All this information is obviously available in INSEE (French official statistics) and well known, only that successive governments have not taken positive actions, the “most” being – partial – non replacement of retiring employees, which requires no targeting whatsoever!

57% of public spending on GDP: Anatomy of a French record built on a bubble of social spending in 40 years.
All data comes from INSEE

1960 – The “30 glorious” – non-existent unemployment, when the level of public spending still accounted for 35% of GDP. As we can see below, the increase in the size of government has been uninterrupted since then, reaching a new record in 2013 of 57% of GDP.

This increase, however large it does not tell us much about the nature of this evolution. If the weight of the state has increased by over 50% in the economy, it is necessary to consider its causes, that is to say the factors that have made possible this preponderance of the public sector .

The breakdown of data identifies three major items that can explain the phenomenon:  The addition of social benefits, social transfers in kind and, for a residual part of the compensation of employees, may explain almost 90% of this growth.

The expenditure of social benefits and social transfers in kind alone accounting for 70% of the total increase. Indeed, these two items increased by 123% of GDP.

The “Welfare State” represented 12% of GDP in 1960 and grew to 26% in 2012.
A so strong increase that it is the cause of structural change.

While the bulk of expenditure was based, prior to the reporting period, on infrastructure, defense, education, etc …, that is to say on sovereign functions, the weight of social benefits and other social transfers in kind rose from a level close to 12% in 1960 to a total level of 26% today to GDP.

This structural change in government expenses from a state having a “regal” spending structure “regal”, made of France simply put a “huge social insurance”.

In a second step and through the analysis of data available over the last 25 years, that is to say, since 1989, it can be seen that the government has practically abandoned some positions, which are essential.

The result is indeed a significant drop in people working under “Education”, in relation to population growth. And this being clearly the case from the beginning of 2000. Conversely, the number of persons employed in the public administration services increased!

Specifically, it is noted that the number of teachers of “public” education has fallen by more than 7% since 2000, or a 15% decrease in the ratio “public teachers in relation to the population “. A decrease of 65 000 jobs
Another can be found. The increase in size of the civil service was more important than the increase in the remuneration of its agents. Which means that they are less paid. This can be explained by the desire to hire a growing number of people in a falling unemployment situation rather than providing the public services they need. The consequence of such policies is the devaluation of the trades in question.
The ratio of compensation of public employed as% of GDP was 13.7% in 1960, decreased in 2012 to 13.2%, passing through a low of 12.8% in 2008 (beginning of crisis).

In a completely different note, the weight of debt and especially the weight of debt interest is regularly implicated in this overall process. Despite strong growth in this expenditure to the end of the 90s, the data provided by INSEE used to highlight the gradual decline in the interest burden of the debt in GDP since the early 2000s. despite the sharp increase of the debt itself. This was made possible by the significant decline in interest rates aware of this period:
The Interest expense on Public Debt Increased as% of GDP from 1959 (1.35%) to 1995 (3.5%) to 2.6% again to Decrease in 2011, to reach, probably, less than 2% in 2014 – “thanks” to ECB’s 1.14 trillion euro QE over 3 years at zero or negative interest rates!

Thus, despite the ever increasing demands of the voters on the issues of sovereign status, education, security etc … we can see that successive governments – mainly the incumbent one – simply respond with the introduction of ever more generous redistribution policies.

Yet the sense of inequality has never been as strong as today. The reason is simple, the state only tries to mitigate the consequences instead of addressing the economic causes.

The dramatic increase in social benefits is only the consequence of three major reasons.

The first is the sharp increase in unemployment. Not present in the 60s, it now affects over 5 million people, and more than 10 million if we take into account the number of affected households. Governments,again mainly the present one, continuously tried to decrease unemployment by adopting “supportive” policies.

But these re distributive measures also had the effect of reducing the country’s growth potential. The snake biting its tail. While these reforms were designed to fight against the effects of unemployment, they have increased the evil.

The second reason is the aging of the population, which has brought about progress in health spending, but also in pension / retirement expenditure. But again, adjustments are possible, it is useful to recall that the French pension system is still largely subject to reforms, especially on the issue of retirement age.

The third point, more intuitive, relates to the social structure of the country. The importance of the family as a place of solidarity, has gradually disintegrated over the years. This lack was offset partially by the government.
Analysis of this data over the long term finally revealed a profound change in the nature of public spending.

By becoming a “social insurance”, the public sector has actually abandoned some positions yet considered essential by the population.

To break this vicious circle, it is for governments to focus where they are expected: education-security – infrastructure etc … To achieve this, the primary objective is to implement a full employment policy, which will greatly reduce the protection needs. Provide opportunities for millions of people to find employment, and see their incomes increase is more buoyant than the mere payment of social benefits. Such a reversal of public spending would eventually come back to the basics.

I am now referring to Le Figaro‘s 04/27/2015 article: “Why France fails to cut spending”, which I translated and quoted, preceded by my own comments.

My Comments

There is absolutely nothing new in thus “umptieth”study” by”France Strategies” requested by the French Government .

“Everybody” in government knows all this.

The matter – huge problem – is that governments have no political will to implement real and targeted changes, do not plan any social- economic structural reforms until 2017, not that previous governments “did much” – only some “reformettes” that did not really change anything.

Probably, the situation needs to worsen much more for”action” to take place, but ECB with its “confounded” QE (to boost markets and Big Banks!), with its zero/negative rates, provides artificial and “political comfort” to weak countries like France!

Quotes

Between 2015 and 2017, France has undertaken to reduce its public spending by 50 billion euros.

For France Strategy, countries that manage to reduce their expenses are those that operate cuts in budget items, opposing a proportional reduction in each of them.

Countries that have achieved an effective reduction in their public spending are those choosing to save money on carefully chosen positions, it is the conclusion that can be drawn from the analysis notes of “France Strategy” on reducing public spending, published this Monday – 04/27/2015.

However, France is the European country with has changed the least the structure of its expenditure in the 2009-2012 period and therefore has the least reduced public expenditure, reveals the collaborative body and attached reflection the Prime Minister.

Strategic reviews, which involve spending choices that must waive or save, are among the most effective ways to get significant reductions. Such a review requires strong arbitration depends on national preferences and priorities of the political authorities.

“For a strategic review to be effective, says Vincent Aussilloux, head of the Economics and Finance Department France Strategy, it must benefit both strong political will and a high degree of ownership administrations concerned.

For example, if there is a reduction in health spending, the administration concerned will be the Ministry of Health. ” The objective of reducing the multi-annual expenditure must be precise and ambitious. “The strategic review is to assess all expenditure fields even if it finally decides to touch only a few positions, such as transport and housing.

This overall process can make an “informed choice” between the different positions and to prioritize, unlike the method of plans that reduces all expenses in the same proportion, indiscriminately, without efficiency, “says Vincent Aussilloux.

“The method of plans reducing all expenses in the same proportion, indiscriminately, is without any efficiency”, said Aussilloux Vincent, head of the Economics and Finance Department France Strategy.

France has made its public spending review exercises in recent years, but with limited success: “First between 2007 and 2010 with the General Review of Public Policies (RGPP) and, since 2013, Modernization of public action (MAP). In both cases, the effects of these exercises were small. RGPP would have led to a reduction in public spending of around 11 billion euros, and it is difficult to estimate the effects of PAD, “said France Strategy. Reasons? “The small scope of these reviews and the lack of quantified objectives and ambitious expenditure”, justifies the analysis notes.

Between 2015 and 2017, France has undertaken to reduce its public spending by 50 billion euros through the Covenant of Responsibility “and it is undeniable that this effort has already created difficult trade-offs in price” commented France Strategy .

Note that this is not necessarily the countries that change the structure of their expenditures that have been most succcessfull. Some States may place the burden of fiscal adjustment on some relevant expenses for their growth potential, “investment in R & D, education and training,” the report lists. The UK appears to be one of the European countries that have made the most important trade-offs. However, public spending has not decreased significantly between 2009 and 2012.

In addition, certain expenses such as pensions or unemployment benefits depend not only budget decisions but, respectively, demographics and unemployment rates.

Between 2004 and 2007, France is already one of the countries where the various expenditures evolve proportionally on each workstation. The increase in public spending over this period was also the result of a general increase in spending. More than arbitration.

  

Under President Hollande’s first 3 years(out of a mandate of 5 years…) the French social-economic situation has worsened, this after 4 to 5 decades of absence of implementation of Social-Economic  Structural Reforms in France and indecisive Governance on major issues, heightened by this incumbent Government (which is not the only one who lacked in major decision making) – this having been commented since this blog’s creation in April 2011.

I am referring to Le Figaro‘s 04/19/2015 article: “Unemployment, Taxes, Growth: What Results for François Hollande since 2012”. I have translated this article, quoted it (colored lettering is mine) and will precede it with my own short (in order to not be always repetitive…) comments.

My Comments

The above text, “numbers”and graphs illustrate a very deficient economic situation,which does not sustain the Government’s continuous”optimism”, which has proven erroneous since 3 years.

Due to the absence of structural reforms to, mainly, flexibilize labor, face the pension / retirement matter, decrease significantly the Government Apparel, etc…, whatever growth there might be in France will depend on extraneous macro factors which France’s government does not control and which are volatile: the weak euro / US dollar exchange rate, the low oil prices and the practically non existing interest rate France pays due to the bad impact of ECB’ QE who prints money at zero to negative interest rates, increasing therefore already very high French (and Eurozone in general) Indebtedness.

Quotes

François Hollande: «La reprise est là»

Three years after the election of François Hollande, the French economic situation is not satisfactory: practically no Growth huge unemployment,deficit in continuous increase. This is now the situation of France, which has become the sixth world wide economy.

“The year will be better than 2014”. Since January (2015), the Head of State and Minister of Labor, François Rebsamen have been repeatedly expressed in emulation optimism for this year. The combined declines of the euro, oil prices and loan rates have been their main reasons for believing in hopes of improving the economic situation of a now sixth largest economy countries. If the deficit seems to be reduced faster than expected, it is clear that growth barely started.

• Unemployment:

“Unemployment is expected to decline in 2016 and 2017″
Declaration by Michel Sapin on April 8, 2015
For three years, and the election of François Hollande as president, unemployment has continued to climb. 4.4 million (categories A, B and C combined) in May 2012, the number of unemployed rose to 5.26 million in February. An increase of 19.5%! If you believe the forecasts Unedic reversing the unemployment curve should not take place before the end of 2015. The unemployment insurance system in fact anticipates 96,000 more unemployed in Class A this year.

It would require a growth rate of 1.5% for the French economy to create enough jobs to start a moderate decline in this huge unemployment rate. A rate that France should reach in 2016, according to forecasts from Bercy … and the European Commission. “Unemployment is expected to decline in 2016 and 2017,” promised last week Finance Minister Michel Sapin.

• Growth

“The year 2015 will be the year of the return to growth”
Declaration Manuel Valls March 25, 2015
Despite the oil price declines (-39% over the last three months of 2014) and the euro (-5%), growth in France remained very soft: + 0.4% for 2014 . The figures for the first quarter 2015 will be announced shortly. Proof that the two are far from sufficient to ensure recovery of economic activity. Yet Hollande – “the recovery is here” – and Manuel Valls – “The year 2015 will be the year of the return to growth” – continue to show optimism. The Executive optimism is based on the “encouraging” figures of consumption, consumer confidence and investment. An enthusiasm that even the European Commission has shared in February 2015, aligning itself with the economic predictions of Bercy, or 1.5% growth in 2015.

For the next two years, the government, anticipating an increase in GDP of France to … 1.5% opts for caution, preferring to rely on deficit reduction. “This caution is a deliberate choice that aims to give back to France all credibility, said last week Michel Sapin. Our growth must now be regarded as floor targets and not as ceilings, even found some good news later. ” One way to reassure Brussels and its European partners, particularly upset to see France get from the European Commission for a grace period to reduce its deficit.

 • Taxes

“My biggest mistake is perhaps not having built more quickly the issue of taxes.” The confession of Manuel Valls illustrates how the government has recognized the importance of reducing the tax burden. France is ranked second among OECD countries where the tax burden is highest, just behind Denmark.
The samples were further increased to 2.8 billion in 2014. But in the stability program to Brussels, the government plans to lower tax burden relative to GDP in 2015, 2016 and 2017.
The “invoice” decreased by ten billion for businesses, thanks to competitive employment tax credit (CICE). But it has increased for households, especially the upper middle classes. The 20% of the wealthiest households have suffered 75% of the tax increase on income (IR) in 2013 and 2014.

• Deficit / Debt

“France hates being forced”
Declaration Michel Sapin April 17, 2015

Follower of the stimulus by growth, Hollande has had to drastically reduce its deficit. However, the government does not intend to be dictated its strategy: to reduce the deficit, yes, but on condition of not breaking growth. “France hates being force” blurted Michel Sapin, in response to his German counterpart Wolfgang Schäuble, who said the previous day that “France would be glad someone forces Parliament” to take hard reforms. In an interview with Le Figaro last March, the European Commissioner for Economic Affairs, Pierre Moscovici, had found the effort of France “not enough”, calling the country “not to disappoint his partners” and claiming, as in Greece, a comprehensive reform plan. The executive expects to achieve four billion additional savings this year, including 1.2 billion in state spending reductions, and five billion in 2016.

Prospects side Bercy revised its deficit forecasts downwards for 2015 and 2016. The result: public debt is expected to rise less quickly than expected 97% of GDP in 2016 and 96.9% in 2017. The 100% cap will would therefore not be crossed. But we are still far from the 74% posted by Germany. Yet the 10-year borrowing rate in France is barely higher than its German neighbor, 0.3% against 0.08%. A difference of 0.22 points while a year ago it was $ … 2 points.

 

 

This miserable Greek saga continues endlessly with sterile negotiations where no kind of Greek promises will be fulfilled, but seemingly “nobody” (?) wants to take a final decision on “Grexit” on this longstanding issue.

I am referring to Les Echos 04/17/2015 article: “Greece: Dijsselbloem argues against policy which reflects the worse situation”, which I translated and  quoted (colored lettering is mine) and will precede with my own comments.

My Comments

This whole situation is ridiculous, these”negotiations” are far too lengthy and it is not understandable how so much time is devoted with a left radical populist government who will not keep promises, same as with its politically different predecessors, too much money and time has been spent on this country which represents less than 1% of Eurozone’s GDP – mil repetita in this blog!

From all the financial data that  has been divulged on Greece’s “finances” it seems practically certain that by June 2015 Greece will have run out of funds, unless IMF or ECB re become “flexible”, which, referring to the past, remains possible and would represent the umptieth error in this miserable saga, which should have ended long ago with Greece’s exit from the Eurozone.

The Greek situation, accordingly, continues impacting markets and the current IMF / World Bank meeting in Washington.

This had almost been forgotten while European stock markets went from record to record.

Greece and its debt eventually come back to the memories of investors, interrupting this weekend, the upward movement of EuroStoxx 50,who, falling by 2.07 on Friday – 04/17/2015 had its worst day since beginning of 2015. 

Profit taking after a gain of more than 22% of the index this year are coming out of a resurgence of fears of Greece from the euro area (Grexit). In view of the German Finance Minister’s statements or remarks attributed to the Director General of the IMF, Athens and its creditors would be far from reaching an agreement. Sign of the gravity of the moment, a new multi-party meeting was announced Friday for the next day in Brussels.

In this environment, economic statistics, yet numerous enough this week, remained in the background, like the first positive signals in terms of inflation in the Eurozone.

Quotes

Greece and the countries of the euro area should not engage in a game of brinkmanship to see who will bow the first in negotiations on plan to  aid Greece in return for structural reforms, said Jeroen Dijsselbloem, the President of the Eurogroup, Friday.

Speaking to reporters on the sidelines of a meeting of the International Monetary Fund in Washington, Dijsselbloem said the creditors of the eurozone will not be able to offer a deal to the approval of finance ministers on April 24 as expected because of the slow pace of reforms agreed by the Greek government.

The Eurogroup President added that at least two more weeks will be needed to achieve conciliation on the reform plan.

“It would be very welcome for Greece to present a more complete plan for May 11 at the next Eurogroup program,” he said.

He admitted not being able to establish precisely the date on which Greece will be in short of cash and unable to repay the loan of around one billion euros to the IMF, which expires in May 2015.

“We had concerns about previous repayments they had to perform but they did it, so I will not know when it will become really dangerous.”*

The Eurogroup President said he understood the reluctance of Prime Minister Alexis Tsipras to impose painful reforms approved by the previous government.

“There was a real room for compromise from the perspective of the Europeans,” he continued, adding that the contents of the new reform plan would be serious.

On the reform of the pension system, one of the crucial points of the new plan, Dijsselbloem acknowledged that it was not currently feasible but that the terms and timing of its implementation could be negotiated.

“If necessary, more can be done (about the debt),” he said. “I’ll stick to my end of the contract,” he added in reference to the promise made in November 2012 in Greece by the finance ministers of the euro area to help if his government was meeting its commitments to implement the reforms.

It would not erase the Greek debt but possibly lengthen the maturities of reimbursement or reducing interest rates

Markets had a bad Friday (04/17/2015) in Europe mainly due, to once more, Greece (1% of Eurozone’s GDP!) with whom irrational dealings continue where it should have exited the Eurozone years ago, whereas there should have been a “bad day” due to Central Banking repeated errors in policies, please refer to coming comments on this matter

Les Echos 04/17/2015 article: “With Greece, the Cac 40 in the process of signing its worst week since mid-January”, which I have translated and will quote and comment

Euro Stoxx 50 fell strongly – 2.07 %, weighed down by uncertainty about Greece and the sharp decline on Wall Street, which is down 1.3% at 6 pm Paris time.

The trend is bearish on Wall Street, where business results and statistics are always mixed. If the consumer confidence index from the University of Michigan has far exceeded expectations 95.9 points in April, against 84.1 estimated, the index of leading indicators rose by only 0.2% in March against 0.3% expected. Consumer prices meanwhile rose 0.2% in March, against 0.3% expected, but down 0.1% year on year, while the consensus expected stabilization.

European markets have suddenly stalled late morning at the announcement of an impromptu meeting, starting tomorrow afternoon, the Brussels group. The former “Troika” is now a quintet consisting of representatives of the Greek government, the European Commission, the ECB, the IMF and the European Stability Mechanism.

Traders also reported rumors of changes in Chinese securities laws, including a tightening of regulations on trading spreads. The market has also responded to technical criteria related to deadlines on future contracts on Eutostoxx 50.

Les Echos’ 04/17/2015 article:“The G20 is concerned about financial instability”, translated by and quoted, preceding quotes with my own short comments.

My Comments

Quotes

The Group of Twenty (G20) should emphasize increased risk of financial instability in that the monetary policies of major central banks begin to diverge, according to a draft communique.

“In a monetary policy environment differences and increased financial market volatility, it is necessary to develop policies carefully and communicate clearly to minimize the negative impact,” explain the central bankers of the G20 in the document.

“We will continue to carefully monitor the financial market volatility and take the necessary decisions.”

The text is fully in line with previous releases of the G20 at a time when the US Federal Reserve is preparing to raise interest rates, while the European Central Bank (ECB) and the Bank of Japan (BoJ) continue to follow ultra-accommodative monetary policies.

The group of advanced and emerging economies also welcomes the strengthening of some weight savings but emphasizes the heterogeneous nature of global growth.

“There are risks: volatility of exchange rates and sustained low inflation with negative interest rates, persistent imbalances and geopolitical tensions,” we read further in the draft statement.

It is also mentioned that the G20 will design individualized investment strategies across countries. “We will design investment strategies by our meeting (Ministerial) in September in order to present them to the summit of Antalya,” write the finance ministers in the draft statement.

Finally, the G20 must give its support to the initiatives of regulators to ensure that clearing houses are resistant to shocks occurring in the markets.

These intermediaries between buyers and sellers of securities should become even more important to the extent that more derivatives channeled through them to make the markets more transparent.

The G20 also intends to recommend any measures designed to restrict if necessary the risks taken by the area of ​​asset management, which is growing, despite the strong resistance What oppose professionals.

“We agreed to recommend any initiative dealing with risks, including those arising from asset management activities, if necessary,” we read in the draft communiqué of central bankers – central bankers and finance ministers – the G20.

As mentioned very often and lately several times in this blog, the continued criticism by well known Prize winning economists and top executives of the European Commission (EC)  and European Union (EU) plus mainly IMF Chairwoman and also (less) ECB’s president, on German’s economic policies is to a great extent unfounded.

Le Figaro’s 04/17/2015 article: “Germany: growth could exceed 2%” , which I translated and will quote, preceding it with my own comments.

My Comments

Germany’s  good social-economic performance and various surpluses help weaker European partners, by opening markets for additional imports provided they are internationally competitive (which, in general is not the case, refer to Eurozone’s second biggest economy – France).

Critics say that Germany should invest more, they do, that Germany should increase macro expenses, they did with a higher minimum wages and pensions’ increases.

Why not target criticism on weak Eurozone performers who do no implement structural reforms they badly need?

Why not target criticism on US’s shortsighted foreign policy regarding Russia, who is a much better ally for the US and Europe than, say, China,and where economic sanctions to Russia and their retaliation hurt far more Europe than the US, since the latter has far less exposure to trade with Russia than Europe

Quotes

Economists German economic research institutes issued Thursday in Berlin, with their “Spring Report”.
German economic institutes revised forecasts for growth in 2015 for Germany. GDP could rise by 2.1% in 2015, almost double their estimates of last fall.

The German economy is better, always better. According to forecasts of the major economic analysis institutes, presented Thursday, the German growth in 2015 could reach 2.1%. Twice that of France: the Valls government plans 1% this year (the IMF announced 1.2%). Last fall the same institutes, IFO, DIW, IWH, RWI, expecting growth of only 1.2%. In 2016, growth should be 1.8% according to their latest forecasts.

Supported by solid fundamentals, as the tissue’s competitive SMEs and a low unemployment rate, Germany is doped with the rest of Europe by the oil price decline and the weakness of the euro. “The weakness in oil prices leaves more money for Germans to consume. It pushes exports, “says Timo Wollmershäuser of the Ifo Institute. If this growth continues, the decline in unemployment is expected to continue in 2014 from 6.7% to 6.3% this year to 5.9% in 2016.

20 billion budget surplus

In this more favorable context, Germany, who presented a balanced budget for 2015, is expected to record additional tax revenues. A surplus of EUR 18 billion in 2014, the institutes have estimated 20.7 billion euros this year and 25.6 billion next year.

So the debate will soon embark on the use of these new operating margins: tax reform on income, as suggested by the institutes, increased investment, as recommended by a group of experts in report commissioned by the Ministry of Economy; or reducing the weight of debt, which seems to have the preference of the Ministry of Finance. If the German economy is now better than others, it faces significant long-term challenges of an aging population.