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Carl
Monday, January 1st, 2007, 11:43 PM
New Year : New EU Members ... and at the same time, Slovenia takes on the new Euro Currency. But how well is it working throughout Europe as a whole - there are clearly some big differences in the perception of this new Universal Currency. Even in France, there have been questions raised recently about the European Central Bank's overall management of Bank and Interest Rates. Considerable divergences can already be seen - what therefore does the future hold?

"" Slovenia adopts euro as others lose faith

"" D.Telegraph. 01/01/2007

Slovenia today becomes the first ex-Communist state to adopt the euro amid growing doubts across eastern Europe over the wisdom of joining monetary union.
The Alpine republic is giving up its short-lived tolar, the national currency launched after Slovenia broke away from the Yugoslav federation in 1991.

Slovenia boosts the eurozone population by 2m to 315m. It is the first country to join since the launch of euro notes five years ago and it may be the last this decade apart from tiny Malta and Cyprus.
Poland has abandoned any serious effort to join under the eurosceptic Kaczynski twins, despite a treaty obligation to do so. Only Britain and Denmark have legal "opt-outs".

Warsaw has talked vaguely of a referendum in 2010, tantamount to "No" in the new mood of prickly nationalism :D . Fears that Poland would suffer by clinging to the zloty have faded as Britain, Denmark and Sweden prove that countries can do as well or better by going it alone.

The Czech Republic has shelved its entry plans for now and Hungary's chances collapsed when the budget deficit mushroomed to 10.1pc of GDP, not helped by a secret tape of the premier admitting that he had lied about the true state of the economy "morning, noon and night".

A growing number of finance experts across eastern Europe now think it would be an error to join EMU too soon, chastened by the cautionary tale of the eurozone's "Club Med" bloc. Portugal has lurched from boom to bust and Spain may face a similar fate before long.
The EU's southern states are now trapped inside the currency bloc with over-valued exchange rates, the result of monetary stimulus in the early years of EMU that they were unable to handle.

The incipient troubles have led to a backlash against the euro in Italy and now France, where 52pc now say the euro has damaged the country.

Slovenia, an economic satellite of Austria, is the richest state of the old Communist bloc. Per capita income is 82pc of the EU average, higher than Portugal or Greece.
Slovenia has one of the highest tax rates in the world, with a bloated welfare state and rigid labour markets, sharing all the symptoms of euro-sclerosis.
The state still owns 40pc of the corporate economy and privatisation has stalled. While GDP growth has been at a respectable 3.2pc for five years, this pales against the double-digit rises of the Baltic tigers.

Lithuania was barred from joining today because it was too dynamic. With growth roaring at 11pc, it was unable to stop inflation creeping fractionally above the entry limit, although Italy, Belgium and Greece would never have been let in if the rules had been applied so strictly to them.

Jean-Claude Trichet, the European Central Bank's chief, denied the EU had double standards. "It is in everybody's interests that, when a new country enters, it has converged, not only in terms of a snapshot, but also in terms of sustainable convergence," he said.

Flat-tax Estonia is growing at 12pc. With a flexible labour market and a swelling budget surplus, it is far too dynamic even to try to join the euro today. Most economists argue that fast-growing catch-up tigers need higher interest rates than mature economies.""
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Should we not be delighted that Blair's plan to take Britain into such a Euro-zone have come to nothing? Should we perhaps lament that nobody dared to ask the German's whether they wanted originally to loose their own successful currency?

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Carl
Wednesday, January 3rd, 2007, 11:30 PM
I find it curious that this subject is not of wider interest. The failure of the Euro would have major implications for the future of Europe and its Union. Unless the various parts can work together effectively, there is a danger that slippage & fragmentation could occur. This is nodoubt what many people would like to see - but the implications for us all are hard to imagine. Another report here points to the difficulties which might well await the countries of Europe.

""Euro-zone split widens as growth slows

""D.Telegraph. 03/01/2007

""VW factory in Wolfsburg, Germany - growth is forecast to stall.


The euro-zone's short-lived boom is showing signs of flagging, hit by the triple whammy of a rising euro, German VAT rises and weaker global growth.

The PMI manufacturing index slipped to a nine-month low in December, with a widening gap between North and South.

The euro shrugged off the data, jumping 0.62pc to $1.3283 against the dollar as traders returned from holiday determined to test a two-year high.

Norbert Walter, the chief economist at Deutsche Bank, said German growth would stall to 1.25pc this year following a rise in German VAT from 16pc to 19pc on New Year's Day.

"The picture looked extremely positive at the end of 2006 but let's not be fooled. People rushed to buy consumer durable goods before Christmas and this is now going to dry up," he said.

"Purchase of equipment is going to fall by half because companies planning to invest in 2007 have already done it. Exports will suffer because of the world slowdown and the strong euro," he said.

Under Germany's tax plan — modelled on Margaret Thatcher's reforms in the 1980s — the fiscal burden is being switched from business to consumption. Unemployment insurance costs are dropping from 6.5pc to 4.2pc, a tax cut for employers.

While reform will boost German dynamism over time, it could hit euro-zone demand at a delicate moment. It also makes Germany even more ferociously competitive, raising the risk of a serious clash with the struggling "Club Med" bloc.

France's economic Observatory (OFCE) said Germany's reform could slash French GDP by 0.4pc this year. "By raising taxes on imported goods and boosting wage-cost competitiveness, Germany is carrying out what amounts to an exchange rate depreciation that will weigh on the rest of the euro-zone," it said. The squeeze comes at a bad moment for France, which saw growth slump to zero in the third quarter. French exports are withering as the delayed effect of the strong euro begin to bite, with the car industry bearing the brunt.


Germany entered the euro at an overvalued exchange rate, causing a deep slump. It has since clawed back competitiveness by squeezing wages, extracting longer hours for no extra pay.
Re-emerging as the world's top exporter, it is now too lean and fit for the rest of the euro-zone. Critics have begun to accuse Berlin of "beggar-thy-neighbour" tactics, snatching market share from Italy, France, and Spain through deflation......

Stephen Lewis, an economist at Insinger de Beaufort, said the growing split between Germany and Southern Europe would emerge as "the big story" in 2007, causing investors to rethink the wisdom of buying euros. ""

Carl
Thursday, January 4th, 2007, 02:23 PM
Report on Romanian & Bulgarian Admission to the EU.

""Are the good times over for the EU's latest recruits?
""DTelegraph 4 Jan 2007

The Balkan tigers of Romania and Bulgaria enjoyed a giddy asset boom for four years waiting in the EU ante-chamber, logging a fivefold increase in equity prices.

Now that they are safely inside the club – adding 30m new citizens on New Year's Day – foreign investors are beginning to ask whether it might be time to move on to fresher pastures.

"The gains of EU accession are already in the price," said Kingsmill Bond, a strategist at Deutsche Bank.

"The convergence theme of the last few years is played out. These markets are now some of the most expensive in the emerging world."

The two ex-Communist states turned themselves inside out to win the EU's "free market" stamp of approval and to comply with its 90-page rule-book, known as the Acquis. Romania put 550 nationalised industries on the block, selling the state auto dinosaur Dacia to Renault. Not much remains for sale beyond the telephone system, a couple of banks and a TV station. Hundreds of rust-belt plants were shut down.

The state sector has been slashed to 30pc (lower than Britain), and 97pc of the land is now in private hands with newly-issued property titles. Taxes have been cut to a flat rate of 16pc.

However, a whole new set of problems has emerged as Romania racks up growth of 8.3pc a year, with a current account deficit reaching the danger level of 10pc of GDP.

"We've got all the usual warning signs," said Richard Fox, a director at Fitch Ratings.

"Credit is growing too fast and there are bubbles in the property and asset markets. The question is whether anything will trigger a turn in the credit cycle."

Bulgaria began its reforms earlier under the free-market "king", Simeon Saxe-Coburg , the former child-monarch who returned from exile half a century later as prime minister. The socialists have since taken power.

Yet Bulgaria too is plagued with problems, not least the failure to lock anybody away for the murder of 100 people in gangland shoot-outs and contract hits over the last five years. Organised crime operates with near impunity in Sofia.

Tero Halmari, the head of the Aim-listed Equest Investments Bulgaria, said the region was not a place for turning quick profits.

"Everybody is worried about overheating and you obviously have to be cautious because growth is not linear. There is huge potential if you look ahead five or 10 years.

"The fact that these countries are joining the EU lowers political risk. People across the Atlantic or in Asia know investor rights will be protected. Funds that have an allocation to EU markets in their portfolio will now start including Romania and Bulgaria."

Mr Halmari, who invests in property, retail and insurance, said scare stories of Britons buying houses in Bulgaria only to find that they did not have a legal title were becoming a thing of the past.

"It takes time to clarify who owns what after years of Communism, but so long as you use a reputable law firm you will not have to fear a knock on your door," he said.

Koon Chow, a strategist at Barclays Capital, advised investors to shun Balkan bonds now that yields were compressed to wafer-thin levels. "We think that there is still another one to two years left in Romanian equities, but Bulgaria is exhausted."

While EU entry does not in itself change much – since the two already had access to EU markets – it will double aid from Brussels from 0.5pc of GDP to more than 1pc.

For the EU, the extension of Pax Europa into the Balkans is a strategic and moral triumph. Whether a union of 27 states with nearly half a billion people can function is another matter.""


So. Watch this theme?

Carl
Monday, January 8th, 2007, 12:53 PM
The problems for Bugaria are highlighted in a new report from the news service Deutsche Welle. It is relevant in so far as difficulties within Bulgaria (-- as elsewhere) will provoke yet further emigration from that country and into the already overcrowded west & north. As a result, everyone suffers! Surely things could be better done?

""Deutsche Welle:
"" Eastern Europe : 07.01.2007

""Doubts about the EU ...... Many worry about the future.

While many cheered Bulgaria and Romania joining the EU, some were not so thrilled. In Pravetz, the hometown of Bulgaria's former communist dictator Todor Zhivkov, residents are only half-heartedly welcoming the change.
Joining the EU is, after all, seen as the last nail in the coffin of a communist system that at least provided jobs.

In the town cafe, a bunch of youngsters said they are sceptical and not cheering over the EU accession as "prices will rise but salaries will not." **

"During Zhivkov's time, my parents had jobs and we went to the seaside every summer," said 16-year-old Lyubomir Dyakov, who lives in Pravetz with his grandmother. "Now my mother is a waitress in Bahrain and my father is a driver in France. I will also leave Bulgaria as soon as I finish my tourism studies." (??)

A European town?

Pravetz celebrated EU accession along with the coming of the New Year on its central square, which is named for Zhivkov, who fell from power along with communism in 1989 after ruling for 35 years.
At the town's entrance, an overhead banner framed by Bulgarian and European flags reads: "Pravetz, a European town."
"We are awaiting the EU accession with enthusiasm and hopes for a better life for us and the young," Pravetz Mayor Krasimir Zhivkov, who is also a distant relative of the dictator, said before the New Year.

"European funds will help develop the infrastructure," he added, praising his town's future as "a tourist destination and an educational center."

A US university correspondence program in business administration is already functioning in this small town west of Sofia.

Formerly a small village, stuck at the foot of the Balkan mountains and at one point with no sewage facilities or electricity, Pravetz blossomed after Zhivkov's rise to power in 1954 and was officially declared a town in 1981.
The town's microprocessor plant once shipped its eight-megabyte "Pravetz" computers to the whole Soviet bloc. Now the plant is closed after a series of unsuccessful privatizations.

After being ousted in 1989, Zhivkov was arrested and brought to court for embezzlement of government funds.
But he was never prosecuted since Bulgaria's constitution rules that a former head of state can only be tried for treason.

The man who was Moscow's staunchest ally spent the last years of his life under house arrest in his daughter's suburban villa outside Sofia. He died in 1998.

Moving Away

Now the dictator's modest home in Pravetz has become a museum and his statue stands in the town's public gardens.
Pravetz suffered when communist money stopped pouring in but it is now recovering thanks to investment by former communist faithful turned businessmen.

Still, a quarter of Pravetz' 5,000 residents have moved abroad, seeking jobs in Italy and Spain.

Bulgaria had to shut off its nuclear reactors before Jan. 1
"Unemployment chased away my two sisters who are now babysitters in Italy," said one town resident. "I have seen what a European Union country looks like -- nothing to do with the Bulgarian reality."
"People there go grocery shopping for 200 euros ($262) and not for two leva (one euro) like here," said Albena Ivanova, a grocer whose monthly salary stands at 81 euros.
One of her clients complained she had to start a cleaning job after years as a communist administration secretary.
"There is no longer central heating in Pravetz as nobody can pay for that," she said. "I now once again use my coal stove." ""

cielblanc
Tuesday, January 9th, 2007, 11:02 AM
Oh please, give me a brake here.This whole "problem" is completely overrated.Besides, people who are living these two countries are mostly from the national minorities- ethnic turks and more often gypsies.Romanians and Bulgarians can not possibly be hold responsible of gypsie & turkish crimes abroad.

By the way, I was on vacation in Sofia some months ago and I can assure you that the so-called "Bulgarian reality" is not much more different from the French one.That being said I would like also to remind you that the White race is only between 6-8% of the world's population so I would rather be glad if a white, diligent Romanian or Bulgarian becomes my next door neighbour instead of a non-white alien invading France.

If you think about it there even are some levels on which the situation in Romania and Bulgaria is even better from the wealthy Western countries.For start I can mention the fact that each of these two countries is much more WHITE from your England or my France and that's what really counts, not what your salarie is.

Anyway, mass immigration from Africa and Asia is much more dangerous and consist the real threat for Western Europe.And I don't see how the Romanian and Bulgarian membership becomes a problem when the real problem is the EU itself.Romania and Bulgaria are just dragged into it.

Carl
Tuesday, January 9th, 2007, 11:17 AM
Well. Gordost, you do have a point to make, its true. We can't be too pleased with what has happened in the West.... and its not the fault in any way of the Romanians or Bulgarians! But two wrongs don't make a right; many people are clearly concerned about that immigration as well...although its obvious that it is occuring within Europe - and not from the great black beyond! I imagine it will be a question of numbers - which doesn't mean that I think they will get it right.

Carl
Tuesday, January 9th, 2007, 11:29 AM
""Euro leaves bitter aftertaste for Slovenia

"" - Bruno Waterfield in Ljubljana 08/01/2007


""Just one week after joining Europe's single currency, many Slovenes are complaining that prices are soaring.

Slovenia is an enthusiastic member of the European Union but a technically smooth entry to the euro has also been marked by anxiety and regret.

Price rises and the demise of the Slovenian tolar — a trusted symbol of the country's independence from communist Yugoslavia in 1991 — are making it hard for the people to love Europe's single currency.

Sunday morning finds Breda Kutin, like many Slovenes, sipping a cup of coffee in one of Ljubljana's many kavarna, the charming cafés for which the capital is famed. But Mrs Kutin, the president of the Slovene Consumers' Association, is finding that her kava has a bitter taste.

"The price of this cappuccino has increased by 28 per cent over the last week," she said. "This increase of prices is worrying since the change-over to the euro does not increase the revenues of citizens."

Slovene consumers are up in arms and Mrs Kutin says complaints are pouring in at a rate of 175 per day — representing a major consumer rebellion in the country of two million people.

Price rises are keenly felt in Slovenia where the net monthly salary is 800 euros. Many people fear more increases in the cost of living in June when a price freeze on major retailers ends and receipts stop showing prices in both the tolar and the euro.

Teja Boovi, a 22-year-old student working her way through university, says the price increases are a talking point among her friends because they have hit people's lifestyles.

"The good things in life, entertainment, movies, going out, have gone up. My student wages always seem to be going down," she said.

Slovenia's experience is not unique. Official EU polling this autumn found that 93 per cent of euro-zone citizens "stated that the euro has added to the increase of prices" in the five years after its introduction.

Price inflation has been blamed for polls that indicate that those finding the euro "advantageous" have become a minority of 48 per cent.

Eric Kersevan, 32, a professor of administrative law at the University of Ljubljana, admits that enthusiasm for the euro is thin on the ground. "The euro is already established. There is no surprise, not a lot of enthusiasm or scepticism. We look at the euro pragmatically," he said.

But 20-year-old Eva Menart, drinking in Ljubljana's popular Maek kavarna, fears that Slovenia is losing more than its currency.

"It is not only about losing the tolar. The EU does not impress me," she said. "We tried so hard to be independent — now we want to be part of something bigger again. It does not make sense."

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It isn't easy to make a judgement from a distance - this is mostly relying on reports by others! It is however obvious that there are internal imbalances which might well, at some stage , cause big probelms for the financial managers within the EuroZone. We shall see. So far as Britain is concerned , there is scant enthusiasm for this currency - and I am being my usual mild self here! ;)

If prices are "soaring" in Slovenia after only one week, it seems opportunist to want to blame the new Euro -- but I guess that if businesses have to display the new prices , there is always the danger that they will "round up" the price! That is not unknown to have happened elsewhere - its all part of the Joy of the Euro I imagine.