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Monday, April 21, 2008

Economy in February, 2008

In this edition:
For more, read below.

EU presses state funds on good conduct code

28 February 2008

State-controlled funds must sign up to a voluntary code of conduct or face regulatory action, the Commission warned. The move aims to prevent countries like China and Russia using investments in EU nations to obtain political influence in strategic sectors, such as energy and defence.

Under the new proposals, presented on 27 February, sovereign wealth funds would be asked to make public their investment objectives and relationship with government authorities, as well as the size and source of their assets, the currencies in which they are held and the rules under which they are operating.

The code of conduct, which the EU wants agreed globally, would be voluntary, but the Commission reserved the right to propose legislative measures to "protect the public interest" if breaches become apparent.

Sovereign wealth funds have existed since the 1950s, constituting an important source of liquidity in financial markets, Commission President José Manuel Barroso noted, insisting that Europe must remain open to such inward investments.

However, a recent boom in the size and number of states using these funds and a certain opacity in the way they are operated has prompted concerns in recipient states. They fear that the investments could be used for industrial and technological espionage or to further governments' strategic interests, rather than for commercial purposes, "thus both distorting markets and posing potential security problems for the EU and its member states". Russia and China were singled out as "countries with major strategic and political interests".

"Recent experience shows that the opacity of some SWFs risks prompting defensive reactions. Indeed, in recent months, several member states have been under pressure to explore applying exceptions to the free movement of capital and establishment. This pressure can only be increased by SWFs future expected growth in size and importance," states the Communication, stressing that a common EU approach to these threats is essential. "

Economic and Monetary Affairs Commissioner Joaquin Almunia stressed that a global code of conduct represented a "win-win game" for both investors and recipients.

The proposals will be discussed by European leaders at a summit on 13-14 March and would feed into international efforts, both at OECD and IMF level, to draft a code of conduct by the end of 2008.

The Commission said it also expects member states to use the summit meeting to send a strong signal regarding their readiness to take joint action to avoid a repeat of the financial turmoil that hit the global economy since the US mortgage crisis in summer 2007. It urged them to give backing to a roadmap on strengthening European financial market transparency, agreed by finance ministers in October 2007 (EurActiv 10/10/07). source

My comment: I find this approach very smart and well-timed. It is a little paranoid, indeed, but that doesn't make it wrong. And we all know about the rich Russian dream-husbands of half Europe (the other half is either male or gay). I mean, they are wealthy, they look for investments, but also, they are kind of too politically committed. A sign of that is how some rich Russians get in jail, while other don't. I don't mind rich people, of course. But it's a fact that being rich in Russia is rarely a product only of good fortune. And if those investors are so politically dependent, we can't expect that their decisions will be independent or always in the best interest of Europe. That's why I support that idea of EU, I hope it passes. And yeah, all said, is multiplied by 10 and applied to China :)

EU employment reaches new high

26 February 2008

The number of jobs in the EU is steadily rising, but more efforts are needed if the progress being made is to benefit all, a number of reports released by the Commission say.

In response to the twin challenges of globalisation and demographic change, the European Council has set the following employment targets:

  • An overall employment rate of 70% in 2010 (67% in 2005);
  • a female employment rate of 60% in 2010 (57% in 2005), and;
  • an older workers (55+) employment rate of 50% in 2010.

Progress towards these targets is measured in quarterly reports - so-called Labour Market Reviews - the most recent of which covers quarters three and four of 2007.

The Joint Employment ReportPdf external (JER), a draft of which was published by the Commission on 22 February 2008, assesses the implementation of the employment aspects of each country's national reform programme (NRP) under the Lisbon Strategy. It spells out recommendations for the majority of those member states where the Commission sees shortcomings in the NRPs.

According to reports released on 22 and 25 February 2008, employment has risen throughout the EU - the sole exception being Denmark, where a saturation of the labour market seems to have been reached. 3.5 million new jobs were created over the last year, 850,000 of which during the last quarter alone. The creation of five million more jobs is being forecast for this year.

The main findings of the reports are:

  • Employment growth rests first and foremost on the services sector, where 18 million new jobs have been created since the year 2000. After a slight decrease in the meantime, employment in industry has returned to more or less the level of eight years ago, while agriculture experiences a steady decrease.
  • Unemployment has dropped sharply in the new member states, as well as in Germany and France. The most notable decrease took place in Poland, where the unemployment rate reached 8.4%, down 3.8 percentage points over the last year.
  • On the downside, youth unemployment remains at levels of around 20% in some new member states (Hungary, Poland, Romania and Slovakia), as well as in several old ones (Belgium, Spain, France, Italy and Sweden).
  • With employment rates of 43.5% for older workers and 57.2% for women, the EU is, in spite of steady growth, unlikely to meet the 2010 Lisbon targets.
  • Low-skilled workers, the disabled and migrants remain the most vulnerable groups in the labour market, stressing the importance of social inclusion and lifelong learning in reaching employment targets.
  • A growing number of sectors, form healthcare to arts and crafts, is feeling increasing skills shortage.
  • Germany, the EU's biggest economy, is about to reach the Lisbon employment target of a 70% employment rate in 2010 - in the summer of 2007, the country was only 0.1% away from this figure. With a 1.6 percentage point decrease in unemployment, German employment has become one of the motors of EU growth again.
  • Nevertheless, a report on social inclusion also finds that 16% of EU citizens remain at risk of poverty, while some 8% are at risk despite being employed. source
My comment: Oh, well, that's the data. What could I say. Maybe only that the increase of the employment in France and Germany is pretty obvious- so many people from the new members went there to work. No big surprise. I wonder why EU wants to increase the employment of people above 55. I mean, aren't they supposed to retire? Hmm.

EU makes assurances to industries hit by climate rules

28 February 2008

Europe's metal and paper industries may be given free emission allowances during the post-2013 phase of the EU carbon market, the Commission indicated in two communications announced this week. Brussels is hoping to prevent energy-intensive sectors from fleeing the EU as the bloc's carbon market becomes tighter.

The Commission on 23 January announced plans to beef up the EU's Emissions Trading Scheme (EU ETS).

But the proposals delayed making a decision over which industries could benefit from either free CO2 emission allowances or a tax on imports from competitors operating in countries with less costly environmental rules.

Preventing 'carbon leakage'

"It is not in the interest of the European Union that in the future production moves to countries with less strict emissions limits," the Commission notes in its communicationPdf external in support of the metals sector, announced on 25 February.

The EU executive is waiting on the outcome of ongoing international climate change negotiations, launched in Bali in December 2007, and has abstained from giving a clear 'yes or no' answer to questions about how Europe's energy-intensive industries could be protected in the event that the climate talks fail to produce a global deal under which competiting producers in third countries would be subject to EU-style emissions caps.

EU industries are complaining that the lack of certainty is affecting business decisions, and have stepped up warnings about the potential for 'carbon leakage', meaning the relocation of energy intensive factories and jobs beyond the EU's borders (EurActiv 27/11/07).

In the absence of a clear industry protection framework, the Commission is making public assurances.

Buying time?

But before the Commission can determine how to level the playing field, "a lot of technical work needs to be done," according to Jos Delbeke of the Commission's Environment Directorate, who spoke with EurActiv in an interview.

Global supply crunch

In addition to concerns about the cost of production-related emissions, EU producers and exporters of metals and forest-based products like paper are faced with increasing global competition for shrinking raw material stocks.

Global raw material use has been rising steadily since the 1980s, according to United Nations figures, and is being driven by growing populations and rising incomes across the developing world, notably China and India.source

My comment: No comment. I've said it so many time. Carbon leakage is just a myth. If all the countries apply the same environmental rules, or enforce huge taxes on producers from countries that haven't applied the rules, who's going to go produce in China???

Parliament apprehensive over employment guidelines

5 March 2008

EU leaders are set to discuss the bloc's employment guidelines for the period 2008-2010 at next week's Spring Summit amid pressure from Parliament to give a more social angle to the strategy.

In 2005, the Lisbon Strategy was re-focused on the double objective of Growth and Jobs (see EurActiv LinksDossier).

The Employment GuidelinesPdf external , which are part of the Integrated Guidelines for Growth and Jobs for the period 2008-2010, set out the EU's main goals regarding employment and favoured strategic approaches to achieving those targets.

Following a Commission proposalPdf external on 11 December 2007, EU employment ministers agreed that the existing employment guidelines should remain largely unchanged until 2010. At a meeting on 29 February, they confirmed that the priorities should remain full employment, improving quality and productivity at work, social cohesion, work attractiveness and combining flexibility with employment security.

However, EU heads of state and government will not be able to formally adopt these priorities when they meet for their annual Spring Summit on 13 and 14 March because Parliament's report on the issue, which they must take into consideration although it is non-binding, is not due until May.

Early signals from the Parliament indicate that it will criticise the approach taken by the Commission and for the most part endorsed by the Council.

Rapporteur Anne van Lancker (PSE) has repeatedly spoken out in favour of a strengthened social dimension of the guidelines. In the explanatory statement of her first draft reportexternal , van Lancker goes to lengths to explaining that "the renewed Lisbon Strategy is not delivering for all European citizens" and that it "may have delivered more jobs but not always better jobs". She also cites figures showing "that Member States are currently not working towards a balanced 'flexicurity' approach." source

My comment: More jobs doesn't equal better jobs obviously. But as long as Europe supports farmers more than researchers, that's very unlikely to change.

Euro's record high troubles EU finance chiefs

5 March 2008

Finance ministers from the 15 countries using the euro expressed, for the first time, their joint concern regarding their currency's surge to its highest level yet, hinting that the US should be doing more to halt the dollar's downward slide.

The statements came just one day after the euro hit a record high of $1.5275 on 3 March, making exports from the bloc even more expensive for its largest trading partner.

France has already been pushing for the European Central Bank to do something about the euro's rise for months, saying it is killing its exporting enterprises' competitiveness. But some eurozone countries, including the Netherlands and Germany, consider that a strong euro has advantages – most notably in terms of controlling soaring inflation levels, which hit a 14-year high of 3.2% in February.

While the strength of the euro should increase European consumers' purchasing power, the steep rise in energy and food prices has prevented this from happening and consumer spending in fact retracted in the last quarter of 2007, according to the EU's statistical agency Eurostat.

In light of this, the ECB, which holds its monthly meeting on 6 March, is expected to keep its interest rates stable at 4%, despite some signs of growing attention for currency market developments.

The statement came after Federal Reserve Chairman Ben Bernanke caused a further slide in the dollar's value by telling Congress that its decline was helping to narrow the huge US trade deficit.

Trichet's words are also looked upon as a sign that the ECB may consider a rate cut in the coming months. They were immediately welcomed by French Economy Minister Christine Lagarde, who commented: "I simply want to underline in passing that the President of the ECB, contrary to his custom, chose to talk today about exchange rates when entering the meeting." source

My comment: I start having the feeling that the whole world crisis is aimed to hurt Europe. I know I'm little paranoid here, but without actual home crisis, like that in USA, we're loosing on so many grounds, it's unbelievable. Did you know EU is the biggest investor in USA? No surprise every trouble on American soil hits back Europe even harder. And while their authorities are doing their best to cushion the blow for the regular citizens, the EU's policy is to stay firm. That might work, but the fact is that everything is getting more and more expensive.

Berlin wins first battle against European tax havens

5 March 2008

EU finance ministers agreed yesterday to hasten an analysis and possible overhaul of EU rules on tax havens after Germany successfully pressed its European partners to take action.

Ministers agreedPdf external to request the European Commission "to accelerate preparation of a report" on the functioning of the main EU legal instrument to counter tax evasion, the Savings Tax Directiveexternal .

The original deadline to deliver the document was October 2007. Ministers agreed to reschedule it to May 2008, when a new debate on tax havens has been added to the agenda of the Ecofin meeting in Brussels.

German Finance Minister Peer Steinbruck managed to get the apparent support of the majority of EU member states, including Belgium, which has so far been one of the most reluctant to accept any intervention on the topic. Austria and Luxembourg, sharing the same concerns as Belgium, remained opposed to an overhaul of the directive.

The reforms might include the extension of the EU rules against tax evasion. At the moment, the only measure in place to soften the effects of capital migrations for fiscal purposes is the taxation of interest payments on bank deposits in the owners' country of residence, instead of the country where the account is based.

EU institutions are now considering extending these provisions to other returns on assets. Moreover, investment vehicles might be subject to tighter rules, with trust funds coming under particular focus.

The debate on fiscal havens was prompted by the suspected illegal use of financial trusts by wealthy German citizens who, according to Berlin, stash hundreds of millions of euro in secret bank accounts in Liechtenstein, one of the three European tax havens, together with Andorra and Monaco (see EurActiv 03/03/08).

However, talks to modify rules on the subject, and extend them to extra-European tax havens such as Hong Kong, Macao or Singapore, are still expected to go on for a long time. French diplomatic sources underlined that the topic is not a priority of the coming French EU Presidency, which will replace Slovenia on 1 July and run until the end of 2008. source

My comment:Lol. I mean, seriously. If a country is outside EU, how can you possibly make it increase its taxes. It's weird...

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