| EU "Ayatollahs" Killing Italy’s Recovery Chances Says Italy's Prime Minister; Italy Attempts Another "Quick Fix" Posted: 22 Nov 2013 05:07 PM PST The European budget debate stepped up a notch today as Italy, Spain Warned on Budget. After Italy rebuffed warnings about its budget, euro-area finance ministers late Friday agreed to give the country additional opportunities to show it can make savings and bolster revenue.
The tensions over Italy's budget grew after Enrico Letta, the country's prime minister, warned on Friday that "ayatollahs" in Europe were seeking to promote austerity even though it was killing Italy's chances of recovery.
The meeting here came a week after Olli Rehn, the European Union's commissioner for economic and monetary affairs, warned that Italy and Spain faced debt and deficit problems under their current spending plans for 2014. The main topic on the agenda was whether the verdicts by Mr. Rehn, who has gained authority to review national spending plans, should be followed.
On Friday, Mr. Rehn dryly rebutted Mr. Letta's "ayatollahs" comment, rejecting any suggestion that he was too tough on Italy. "I trust Mr. Letta meant the negotiations on the Iranian nuclear program," Mr. Rehn told a Finnish broadcaster. "It is very important that all E.U. member states, including Italy, aim at the stability of their public finances."
But the meeting of ministers and European officials avoided, for now at least, a full-blown fight with Italy by agreeing to give Rome a chance to meet its budgetary targets with additional measures to raise revenue and trim spending. No Quick FixEurointelligence accurately comments about Italy's Quick Fix proposals to meet EU targets. Instead of solving the underlying problem of an unsustainable growth trajectory, the Italian government continues to be preoccupied with quick-fix measures to chase after some official fiscal target, which have become the be-all and end-all of economic policy. The Italian government yesterday agreed on a privatisation programme, which should net some €10-12bn in 2014 (it would reduce debt-to-GDP from a number of above 130% of GDP by some 0.6pp to a number still above 130%). The sales include a 3% stake in Eni, the energy company, plus stakes in seven companies in total. In two of them, the government would be selling the controlling interest.
Politically, the announcement came under immediate attack by Matteo Renzi, the mayor of Florence and the presumptive next leader of the PD. It said the sale comes at the wrong time, when the economy is still weak, and when the government is not in a position to attract good prices for its holdings, as this fire-sale is heavily tilted in favour of the buyers. The benefit this sale would bring in the short term, comes at the expense of the medium-term, he said.
Corriere della Sera writes in its front page article that Enrico Letta wanted to conquer Brussels with this manoeuvre after the European Commission raised doubts that Italy may not make sufficient progress on debt reduction in 2014. There is no quick fix and no recovery either. Europe is back in recession, not that it ever left in the first place. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Expect "Dramatic Slowdown" in Germany: Saxo Bank Analysis Posted: 22 Nov 2013 12:46 PM PST Saxo Bank chief economist Steen Jakobsen had some interesting comments on Germany and German exports given a slowdown in China and a rising Euro. To help put things in perspective, here is a chart on the Euro.  Technical analysts will point out this is a bearish break of the trendline, thus the euro may be headed lower. Fundamentally, the chart reflects an unexpected rate cut by ECB president Mario Draghi as well as statements by various ECB members regarding the possibility of negative interest rates. Let's continue the fundamental view as presented by Steen Jakobsen. Expect Dramatic Germany SlowdownVia email, Steen writes ... The German economy is heavily exposed to global growth which we see dramatically slowing down - the strong EURO will impact export 5-7 month from now which creates dramatic slow-down where we even could see the German economy going below 1% growth and come close to recession.
Our Economy-Physics models sees slow-down for the next three to six-month then small rebound before dramatic slow-down in tail-end of 2014 - overall the German GDP will be challenged.
German industry and its consumer is increasingly becoming uncompetitive through one of the worst energy policies in Europe. Right now German companies (Read: BMW and Daimler) are either already moving or about to move jobs to mainly the US due to steep rises in energy cost.
The new coalition furthermore wants to pursue less flexible labor market model to "reset" inequality. Nice top line effort wrong method.
Finally, the European economy is almost perfect symmetrical in its peaks and valleys: (Source: Bloomberg LLP & Citigroup CESI Index) Eurozone Symmetry I agree with the viewpoint stated by Steen. For further discussion and analysis, please see ... Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| California Business Owner with 600 Employees Chimes in on Obamacare Effect; Clown to the Left, Jokers to the Right, Musical Tribute Posted: 22 Nov 2013 11:14 AM PST Yesterday I received an email from a California Business Owner with 600 employees. Let's tune in to how Obamacare affected him, as well as his employees. Dear Mish
My company, based in California, employs 600. We used to insure about 250 of our employees. The rest opted out. The company paid 50% of their premiums for about $750,000/yr.
Under Obamacare, no one can opt out without penalty, and the rates are double or triple, depending upon the plan. Our 750k insurance for 250 employees is going to $2 million per year for 600 employees.
By mandate, we have to pay 91.5% of the premium or more up from the 50% we used to pay.
Our employees share of the premium goes from $7/week for the cheapest plan to $30/week. 95% of my employees were on that plan. Remember, we used to pay 50% now we pay 91.5% and the premiums still go up that much!!
The cheapest plan now has a deductible of $6350! Before it was $150. Employees making $9 to $10/hr, have to pay $30/wk and have a $6350 deductible!
They can't afford that to be sure. Obamacare will kill their propensity to seek medical care. More money for less care? How does that help them?
Here is the craziest part. Employees who qualify for mediCAL (the California version of Medicare), which is most of my employees, will automatically be enrolled in the Federal SNAP program. They cannot opt out. They cannot decline. They will be automatically enrolled in the Federal food stamp program based upon their level of Obamacare qualification. Remember, these people work full time, living in a small town in California. They are not seeking assistance. It all seems like a joke. How can this be the new system?
Pelosi, pass the bill to find out what's in it? Surprise! You've annihilated the working class.
California Business Owner In a followup email, I asked what would happen if he dropped coverage altogether. Here is his reply ... Our calculus suggests that the penalties could be worse because it is per employee per year. There are different kinds of penalties too. One for not offering a qualifying plan and one for when an employee signs up for an exchange in the absence of a plan at work. However, more importantly than the money is the unions.
If I drop my health plan, we would be exposed to union maneuvering.
As Steve Miller said, "clowns to the left and jokers to the right" Clown to the Left, Jokers to the RightI offer the following musical tribute, by Stealers Wheel. SongFacts comments on Stuck In The Middle With You by Stealers Wheel. Also known simply as "Stuck In The Middle", this Stealers Wheel classic was co-written by the group's guitarist Gerry Rafferty and keyboard player Joe Egan.
In his obituary of Rafferty for the January 5, 2011 issue of the Daily Telegraph, Martin Chilton said of this song that it was
"Written as a parody of Bob Dylan's paranoia, it ridiculed a music industry cocktail party, with the lyrics:
'Clowns to the left of me,
jokers to the right,
here I am, stuck in the middle with you.'
To Rafferty's utter disbelief his parody, composed as little more than a joke but with a catchy pop arrangement, struck gold, selling more than a million copies. The song reached a new generation of listeners when Quentin Tarantino used it in the notorious ear-slicing scene in his 1992 movie Reservoir Dogs. Unions and Obamacare As an interesting footnote, unions were the biggest Obamacare proponents, but now they too are upset with it. Obama to the rescue ... On November 7 the New York Post commented Rule lets unions avoid ObamaCare tax ... " Buried in the new rules is a proposal to exempt 'certain self-insured, self-administered plans' from the fee in 2015 and 2016. That description applies to many union plans, according to experts." On November 17 the Wall Street Journal commented on such a ruling in great detail in its article ObamaCare's Union Favor. The Affordable Care Act's greatest hits keep coming, and one that hasn't received enough attention is a looming favor for President Obama's friends in Big Labor. Millions of Americans are losing their plans and paying more for health care, and doctors are being forced out of insurance networks, but a lucky few may soon get relief.
Earlier this month the Administration suggested that it may grant a waiver for some insurance plans from a tax that is supposed to capitalize a reinsurance fund for ObamaCare. The $25 billion cost of the fund, which is designed to pay out to the insurers on the exchanges if their costs are higher than expected, is socialized over every U.S. citizen with a private health plan. For 2014, the fee per head is $63.
The unions hate this reinsurance transfer because it takes from their members in the form of higher premiums and gives to people on the exchanges. But then most consumers are hurt in the same way, and the unions have little ground for complaint given that ObamaCare would not have passed in 2010 without the fervent support of the AFL-CIO, the Teamsters and the rest.
The unions ought to consider this tax a civic obligation in solidarity with the (uninsured) working folk they claim to support. Instead, they've spent most of the last year demanding that the White House give them subsidies and carve-outs unavailable to anyone else.
There's no conceivable rationale—other than politics—for releasing union-only plans from a tax that is defined as universal in the Affordable Care Act statute. Like so many other ObamaCare waivers, this labor dispensation will probably turn out to be illegal. Illegal? Yes, but who cares if it buys union votes. Certainly not president Obama. And everyone else pays the price. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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