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There are plenty of news headlines rattling Europe today. Let's take a look at some of them.
Severe Capital Controls in Cyprus
In spite of the fact the Maastricht Treaty under which the eurozone was formed mandates a free flow of capital, Cyprus unveils severe capital controls.
"Cyprus is the first eurozone country ever to apply capital controls, with limits on credit card transactions, money transfers abroad and the cashing of cheques. Depositors will be limited to credit card transactions of up to €5,000 per month and will be able take a maximum of €3,000 of bank notes out of the country per trip."
Capital controls are said to expire in seven days. So, don't worry, its only temporary.
Hopefully everyone understands the implied theory: "You have to Destroy the Maastricht Treaty to Save It."
Top Orwellian Comments Of All Times
- An American major after the destruction of the Vietnamese Village Ben Tre: "It became necessary to destroy the village in order to save it."
- Vice President Joe Biden: "We Have to Go Spend Money to Keep From Going Bankrupt."
- President George W. Bush: "I've abandoned free-market principles to save the free-market system."(For a discussion please see The Most Redeeming Feature of Capitalism is Failure)
- Nancy Pelosi said "We have to pass the health care bill to see what's in it." (YouTube Video)
- Larry Summers says "The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending." (Reuters)
But What about those advertised losses of 30% on large Cyprus depositors?
Glad you asked. "Laiki depositors holding more than €100,000 may lose up to 80 per cent of their funds, and only get the remaining 20 per cent back over a period of years, Cyprus’s finance minister said on Tuesday."
Italy Industrial Orders Sink
Dow Jones reports Italy Industrial Orders Fall in Jan on Declining Internal Demand
"Italian industrial orders dropped for the third consecutive month in January and were down compared with the same period a year ago, hit by declining internal demand, the national statistics institute reported Wednesday. Orders fell 1.4% in January from December in seasonally-adjusted terms and were down 3.3% from January 2012 in unadjusted terms, Istat reported."
Merkel Ally Backs Double-Digit Hike in Top Tax Rate
If you thought Merkel and her CDU party were true conservatives, it's time for you to think again.
Reuters reports Merkel CDU Ally Backs Double-Digit Hike in Top Tax Rate.
"A senior conservative ally of Chancellor Angela Merkel, Annegret Kramp-Karrenbauer, premier of the western state of Saarland and a senior figure in the Christian Democratic Union (CDU), said in a weekend radio interview that Merkel's predecessor Gerhard Schroeder had gone too far by reducing the top rate to 42 percent from 53 percent in the 1990s."
Is Poland Having Second Thoughts?
The Financial Times reports Poland opens way to euro referendum.
"Donald Tusk, Poland’s prime minister, took a big political gamble on Tuesday when he opened the door to a referendum on joining the euro, in the face of strong public opposition to the common currency. The latest opinion survey shows 62 per cent of Poles are opposed to joining, with scepticism increasing markedly since the financial and debt crises hit Europe five years ago. But now Mr Tusk has publicly raised the possibility of allowing a referendum – demanded by rightwing opposition parties opposed to euro membership – in return for an agreement with the opposition to push through the necessary constitutional changes."
Tusk is setting a trap. Tusk wants the constitutional changes now, but will only hold a vote when favorable. Should the vote fail, rest assured there will be another and another and another. Unless of course the eurozone splinters to high heavens in the meantime which of course is a likely possibility.
The correct move is for the opposition to demand a referendum immediately, and if and only if it passes (it won't), should the constitutional changes be taken up.
French Unemployment Hits 16-Year High
President Francois Hollande's socialist policies are firing on all four cylinders now, except in reverse as French Unemployment Hits 16-Year High.
The Financial Times reports "French unemployment nudged a record level in February as the jobless total rose for the 22nd month in succession to a 16-year high, adding to the acute political pressure on President François Hollande as he battles a stalled economy. The OECD predicts unemployment will reach 11.25 per cent, surpassing the record level of 10.8 per cent previously hit in 1994 and 1997."
Except for Spain, Germany, Greece, Cyprus, Portugal, Italy, Ireland, Slovenia, Luxembourg, France, and various other eurozone countries, everything in the eurozone is quite lovely.
Mike "Mish" Shedlock