The Daily Visionary: Monday, January 14, 2019

The Euro has failed, and a new Eurozone economic and financial crisis has begun

 

The Story

 

Across the European Union (EU), industrial output is crashing, retail sales have stagnated, business confidence has dropped, and investment has declined. The European Central Bank (ECB) will be forced to step in with emergency measures to rescue the failing Eurozone economy, after investors put in money aimed at steady recovery and the assumption this would turn voters away from populist, up-start political parties, to allow the establishment to reform and continue on their path.

 

The Euro remains a deflationary currency. Weakened banking systems, massive socio-economic imbalances between the core and the periphery states, miniscule wage growth, relentless austerity, and mass unemployment over two decades has proven the EU incapable of generating internal demand. Whereas most countries can reflate their economies with consumer spending, easier credit, and a cheaper currency, the Eurozone doesn’t have this ability because it lacks a monetary union of budgetary sovereign states (which citizens don’t want and would exacerbate existing problems). The short-lived “recovery” of 2017 to early 2018 was funded solely by two trillion of freshly minted euros by the ECB, meaning the Eurozone is incapable of creating a self-sustaining recovery.

 

Not simply a matter of rising protectionism, the Eurozone’s latest labour market figures appear positive with a 10-year low of 7.9 percent in November. However, this data lags behind other economic indicators and youth unemployment in Italy, Spain, and Greece remains above 30 percent. Between 2010 and 2015 Millennial unemployment rates reached the mid- to high 50 percent in Greece, Spain, and Italy.  In our modern developed democracy, these consequences will lower economic growth for at least a generation.

 

The Details

 

  • A synchronised slowdown across the major Eurozone economies, factoring in trade deal renegotiations and a slowdown in China and emerging markets.

  • Industrial production is down: Italy down 2.6 percent year on year; Spain down 2.6 percent, the fastest rate of contraction since May 2013; France down 1.3 percent in November; Germany, the central engine of the Eurozone, down 1.9 percent for November and a steeper drop in October than earlier reported.

  • Germany is in a technical recession (defined as two consecutive quarters of shrinking output) and France and Italy are close behind. Led by Germany, with a trade surplus at more than 8 percent of GDP the Eurozone is heavily dangerously dependent on exports.

  • Spain, which had been growing faster than most of the continent, is slowing along with smaller economies.

  • The Eurozone is in a fresh downturn, when employment and economic output have never recovered to pre-2008 levels.

Background

 

The Euro crisis, triggered by the global financial crash in 2007 and its impacts permeate across Eurozone today, has been the most serious economic crisis in the history of the European Union. Taken together, the global financial crisis and the Eurozone crisis have by now caused more lasting economic damage in parts of Europe than the Great Depression of the 1930s. It has evolved into a serious political crisis, cracking open the long-simmering fault line in individual nations between what the people wanted, and the decisions political leaders made regardless, and threatening the EU identity-integration project.

 

Following the two World Wars of the twentieth century, the European Union (EU) was designed to integrate Europe politically and economically to prevent future wars between nations in the region from occurring. The EU originates from the European Economic Community (EEC), created in 1958, of what was initially increasing economic cooperation between six countries: Belgium, Germany, France, Italy, Luxembourg, and the Netherlands. Initially a free trade area and customs arrangement, the EU has metastasized into a supranational government determining policy for European countries without any accountability or transparency to the electorates, or even politicians, in these countries. In its pursuit of democracy and stability, the EU has become incredibly unstable economically, socially, and politically and undermining democracy rather than strengthening it.

 

Read More: The Anti-Democratic European Union

 

Key Quotes

 

The general expectation was that we would see a rebound in the final quarter of last year. But the Ifo [business surveys] have continued to remain fairly subdued. They also show that weakness is no longer confined to the car sector, but it’s getting broader,” says Felix Huefner of UBS.

 

If output falls, unemployment will rise a bit in a few months time,” says Claus Vistesen at Pantheon Macroeconomics.

 

70% of French say democracy isn’t working, as President Macron announces a 3-month national debate

 

The Story

 

70 percent of respondents in an annual Opinionway poll say democracy in France is not working well, an increase of 9 percent from a year ago. Following the publication of the results on Friday, President Emmanuel Macron published a 2,300-word letter on Sunday to begin a three-month national debate, which he intends will put an end to the months-long Yellow Vest protests. Unlike most political protests, the Yellow Vests have succeeded in legitimately challenging President Macron’s authority and credibility, inspiring similar movements in other western democratic nations. In his letter, President Macron pledged to listen to new ideas but dug his heels in over his core economic reform agenda.

 

In the 2,330-word letter, to be published in French newspapers Monday morning, President Macron asked a series of questions he hoped the French will answer in town hall meetings across the country or in online questionnaires. Among the questions President Macron asked:

 

  • Which taxes do you think we should cut?

  • What kind of public spending savings do you think we should make a priority?

  • Are there too many administrative layers?

  • Should we use referendums more often and who should be able to trigger them?

 

Interestingly, the questions are not proposed as politicians usually would, presenting a simplistic black-or-white question to produce an intended black-or-white response intended to maintain the establishment status quo.

 

President Macron said proposals made during the debate will help build a new “contract for the nation” and influence government policy-making and France’s stance on European and international issues. He said he would give his own conclusions within a month of the end of the debate on March 15, but did not mention a possible referendum on his policies, an idea floated privately by some in his administration.

 

The Details

 

The poll was conducted for research group Cevipof and published in Le Figaro newspaper. It was carried out between December 13 and 24, 2018 with 2,116 people surveyed using a quota system.

 

  • The number of French having confidence in their local mayor rose 3 points to 58 percent, while confidence in their parliamentary representative fell 4 points to 31 percent.

  • Confidence in the president dropped 13 points to 23 percent.

  • When asked what they feel about politics, 37 percent said “distrust” and 32 percent said “disgust.” Only 2 percent of those polled answered “respect” and 1 percent “enthusiasm.”

  • Seventy percent said they want referendums to be held on all important questions.

  • On specific issues, 60 percent said there are too many immigrants in France, 46 percent want the return of the death penalty, and 23 percent want to get rid of gay marriage.

 

Background

 

The ‘Gilets Jaunes’, or ‘Yellow Vests’, began as an anti-tax protest in France but has evolved and coalesced people across the political left-right spectrum into a broader anti-government movement. The movement, which has spread beyond France to Belgium, Sweden, and the Netherlands has become so large that political experts are now calling it a “new revolution.” Unlike traditional protest movements, the Yellow Vests began online through petitions and was organised by ordinary working people posting videos on social media, without a leader, trade union, or political party behind it.

 

President Macron said he would remain faithful to his campaign manifesto and appeared to rule out rolling back some of the pro-business economic reforms, such as scrapping a wealth tax, which have earned him the nickname “President of the rich”.

 

Read More: Revolt Against Ever-Increasing Taxes: The Yellow Vests

 

Key Quotes

 

For me, there is no banned issue. We won’t agree on everything, which is normal in a democracy. But at least we’ll show we’re a people which is not afraid of talking, exchanging, debating. When taxes are too high, our economy is starved of the resources that could be usefully invested in companies, creating jobs and growth. We will not undo the measures we have introduced to put this right, encourage investment and ensure that work pays more.” President Macron wrote in the letter published by his office.

 

Venezuela’s Millennial Opposition Leader Guaido says the “game has changed” after being detained

 

The Story

 

On Sunday, Venezuela’s 35-year-old Leader of the Popular Will party, Juan Guaido, said that President Nicolas Maduro’s adversaries were “not afraid” after being briefly detained by intelligence agents and days and saying he would be willing to replace the increasingly isolated President. His wife and opposition legislators said intelligence agents pulled Mr. Guaido from his car on the way from the capital, Caracas, to the coastal town of Caraballeda and was released shortly after.

 

The Details

 

  • Information Minister Jorge Rodriguez told state television the detention was an “irregular procedure” by rogue agents who wanted to help the opposition create a “media show,” adding that the agents would face disciplinary action.

  • Mr. Guaido called Minister Rodriguez’s comments a sign that the government had lost control of its own security forces.

  • The United States State Department called on Venezuelan security forces to respect the “safety and welfare” of Mr. Guaido and other legislators.

 

Background

 

President Nicolas Maduro was sworn in to a second term on Thursday last week, defying critics in the United States and Latin America who called him an illegitimate usurper of a nation where economic chaos has wrought a humanitarian crisis.

 

A regional bloc, known as the Lima Group, that opposes the continuation of President Maduro’s leadership in Venezuela, said it condemned the “arbitrary detention” of Mr. Guaido and would reject any pressure on Congress or its members. Venezuela’s habitually fractured opposition has made numerous failed attempts over the past twenty years to remove the ruling socialists. Opposition leaders have called for a transition to a new government yet have not drawn up a clear plan for how to do so.

 

The Organization of the Petroleum Exporting Countries (OPEC) member’s formerly-booming economy collapsed following the fall of global oil prices in 2014. Inflation is close to 2 million percent and around 10 percent of the population has emigrated since 2015 in search of better living conditions. President Maduro said Venezuela is the victim of an “economic war” led by his political adversaries with the help of the U.S. government, insisting the 2018 vote was legitimate and that the opposition boycotted it because it knew it would lose.

 

Key Quotes

 

I want to send a message to Miraflores [the presidential palace] – the game has changed. Here we are! We are not afraid!” said Juan Guaido from a stage surrounded by cheering opposition sympathizers.

 

Beijing’s Millennials vent their rage and stress out in “anger rooms”

 

The Story

 

Customers at Smash in Beijing, China are paying 158 yuan (USD $23) to spend thirty minutes in a so-called “anger room” to wear protective gear and use hammers and bats to vent their frustration on household objects, from telephones, audio speakers, rice cookers to mannequins, while staff play music of their choice in the background. 25-year-old Jin Meng co-founded Smash with her friends to help people deal with the pressures of living in big cities and is not intended to promote violence. Their target customers are Millennials between 20 and 35 years old.

 

The Details

 

  • Since opening in September 2018, customers have smashed around 15,000 bottles every month.

  • Around 600 people visit Smash each month.

  • In Beijing, Ms. Jin said her next step is to open a new anger room in a shopping mall where people can take a break from their shopping to smash a bottle or two.

 

Background

 

Recreational smashing in rage rooms, also known as smash rooms or anger rooms, have opened in cities around the world, and they offer a safe place for people to shatter away their anger. The first rage room opened in Japan in 2008. Since then, rage rooms have spread to countries from Serbia to the United Kingdom to Argentina. Customers have flocked to the smash room as a form of stress relief, not anger management.

 

Some mental health professionals doubt that rage rooms are an effective way of expressing anger. Scott Bea, a clinical psychologist at the Cleveland Clinic, said rage rooms can be fun, but they should not substitute communication or seeking help, and are not particularly therapeutic for people who have anger problems.

 

Key Quotes

 

If you have money, you can smash anything - smash some TVs, computers, wine bottles, furniture, mannequins, but the only thing you can’t do is to smash someone. A woman brought all her wedding photos here, and she smashed them all. We welcome people to bring their own stuff. Every time when we come across cases like this, they affirm our belief that we’ve provided a safe place to let out negative energy. And we are happy for that,” says client Liu Chao.

 

"So you have an anxious consumer who needs to let off some steam, and this provides an experience for them. This is more substantial than a unicorn frappuccino." Maxwell Luthy, Director of Trends and Insights at TrendWatching.

 

Greece faces a snap election as PM Tsipras calls a confidence vote after a coalition ally quits

 

The Story

 

On Sunday Greek Prime Minister Alexis Tsipras said he would call a confidence vote in his government, after his right-wing coalition ally and Defense Minister quit, leaving him without a parliamentary majority. Earlier, the Defense Minister resigned in protest at a deal ending a long running dispute with Macedonia over its name, saying he was taking his other six Cabinet Ministers with him. A firebrand leftist, PM Tsipras was elected in 2015 on a platform of anti-austerity but was forced into a third international bailout to bring back Greece from the brink of bankruptcy. The country exited a bailout program in mid-2018.

 

The Details

 

  • Outgoing Defense Minister Panos Kammenos’s Independent Greeks party had seven MPs, enough to get PM Tsipras’s administration past the threshold of 150 deputies in the 300-member parliament.

  • PM Tsipras’s Syriza party has 145 seats and the support of one independent lawmaker.

  • The confidence vote is expected to take place later this week and parliamentary speaker Nikos Voutsis proposed January 16. Minister Kammenos said he would not support PM Tsipras in the vote.

  • Pre-election polls show Syriza trailing between 8 and 12 percent behind the main conservative New Democracy party, which also opposed the deal with Macedonia.

 

Background

 

The Greek province of Macedonia has long demanded its local government in Skopje change its country name to remove what Athens considered to be an implied claim to Greek sovereign territory. In 2018, a deal was made to change the name of Macedonia to North Macedonia.

 

Greece is a member of both institutions and has a say in who gets to join, like other member countries. Greek parliamentary endorsement of the name is required for the tiny Balkan nation to join the European Union and NATO. Macedonia’s parliament has already ratified the accord with a constitutional amendment. The Greek parliament’s vote on the name deal has been expected later this month. The government hopes the pact will pass with the support of center-left and independent lawmakers.

 

Minister Kammenos forged a coalition pact with PM Tsipras in 2015 and never concealed his hostility to the deal with Macedonia. Minister Kammenos said that any deal including “Macedonia” in the name of the Balkan state to Greece’s north was unacceptable as the name was irrevocably tied to Greek civilization and culture.

 

Key Quotes

 

I have taken my decision and have informed the president of parliament that we will immediately move to the process outlined by the constitution for the renewal of the confidence in my government,” PM Tsipras told journalists.


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