REUTERS SUMMIT-Emerging Europe poised for modest economic upturn
Germany’s euroskeptic party Alternative for Germany — which is opposed to the single currency and wants the country to exit the eurozone — did not get past the 5% threshold required to usher it into the Bundestag, or lower house of Germany’s parliament. It did, however, gain 4.5% of the vote. So, while major anti-euro policy plays are out, noise will increase around Germany’s role in Europe, and any benefits it gets from being in the single currency. How will a third term of Merkel influence the German economy? Merkel’s stewardship of the German economy has been good for the country, but not for all of its citizens. Since she was first elected in 2005, Merkel has steered a steady course, shielding German output from the worst of the financial crisis. This is reflected in upbeat readings for business confidence and a 75% appreciation for the Xetra Dax, the nation’s main bluechip stock index. While unemployment soared in the eurozone and in the U.S. after 2008, Germany’s jobless tally decreased. READ MORE: How Merkel become more American Has crisis split Europe in two? Economists have also argued Germany’s exports benefit greatly from being priced in a currency that is much weaker than the Deutsche Mark would otherwise have been. Barroso: Europe not out of crisis However, large numbers of people are reliant on low-paid “mini-jobs” which leave them struggling to make ends meet. The Social Democrats are calling for a national minimum wage to combat the problem of the “working poor.” Human toll of economic crisis The OECD warned recently that the gap between rich and poor in Germany was wider than in any of the group’s member states, which include the U.S. and Mexico. How did Merkel survive while the rest fell?
Europe shares close down as Italian crisis persists
(Photo: Lionel Bonaventure, AFP/Getty Images) SHARE 9 CONNECT 22 TWEET COMMENTEMAILMORE It’s no day at the plage operating a giant, successful, multinational American company, once you’ve run up against some very un-American notions about tax policy from abroad. Such as the “data tax” on Amazon, Apple, Facebook and Google, about to be proposed by France for adoption by the European Union. Apparently, France would like to impose a data transmission tax on those companies — and only those companies — because they are the dominant platforms for Internet usage in Europe just as they are in the US, but they are “non-European,” that is, American. Their dominance therefore prevents European competitors from emerging from obscurity. (How taxing the most popular sites will make other sites more popular with consumers is not clear.) A French member of the European Parliament tells the Wall Street Journal that a data tax should be imposed because the European nations have become “just the puppets of financiers and multinationals.” Or, as Forbes puts it in a now-classic headline: “Gibbering Nonsense From France About Apple, Google, Facebook and Amazon.” The tax plan is just one piece of a proposal that would establish a new Internet regulatory agency within the European Union. In part, the agency would be empowered to impose other rules aimed at leveling the playing field for European competitors, such as forcing the American companies to enable portability among devices for digital purchases. French Technology Minister Fleur Pellerin told the Wall Street Journal that the absence of such regulations is effectively “blocking innovation from all of the other actors,” and making it difficult for European companies to emerge. The call for regulation gets real impetus from another issue that has entangled US technology companies in Europe: data privacy. The issue gained a great deal of heat after revelations of the US government’s continuing collection of private data on a massive scale, and with the cooperation of some of its biggest technology companies. The proposals are expected to be presented in late October at a summit of European leaders. At this point, the data transmission tax is the part of the proposal that seems least likely to succeed. For one thing, it’s not clear how such a usage-based tax could be imposed, though Pellerin told the Financial Times that her agency is looking at data transfer, traffic, and interconnection to work out how the big Internet companies make their money and, therefore, what part of their (free) services could be taxed. In addition, it appears that Great Britain will oppose the idea, according to the British newspaper The Telegraph, not least because the European Union does not currently have the power to levy taxes. The proposal appears to have the support of European telecoms, which have long resented the low tax rates enjoyed by American companies that are, after all, using the physical networks the telecoms built.
“Czech people in the past were stopping at (pricey) petrol stations buying food, drinks, … now people are very careful where they buy, they are much more focused on discounts,” he said. “We are still in recession and the recovery will be long and painful.” A big hurdle for the region is how investors react when the U.S. central bank finally starts scaling back its $85 billion in monthly bond purchases. This has been a flood of liquidity that had helped fuel market rallies in higher-risk markets. Even though the Fed surprised markets this month by keeping the stimulus in place for now, concerns that the monetary fire hose may soon start losing its power have triggered an exodus of short-term investments from many emerging markets. Central and eastern Europe is especially vulnerable to this given the region’s relatively high levels of short-term debt compared with foreign currency reserves. But officials at the Summit put the best face on affairs, even in Hungary, some of whose fiscal policies have drawn the ire of banks and multinationals operating there. “Given the improvement in Hungary’s fundamentals…I am worried – I am paid to be worried – but I see the risk as much less significant than it was in the past or is in the case of certain other countries where those inflows have been more substantial,” said Gabor Orban, a top economy ministry official. The deputy head of the country’s debt management agency, Laszlo Borbely, pointed out that Hungary and Poland were the only two countries in the region with significant government debt markets and had managed to escape much fallout so far. “The fact that the shock experienced in several other countries has not happened in Hungary – a country that has a much weaker credit rating – makes it likely to me that it will not happen in Poland either, which has a better assessment and situation then us,” he said.
German elections and Europe’s economy: Five things you need to know
debt worries. European shares closed down on Friday, as a growing political crisis in Italy weighed on sentiment, combined with continual U.S. debt worries. The pan-European FTSEurofirst 300 Index provisionally closed down 0.3 percent to 1,254.03 points, with the Italian FTSE MIB Index losing 1.3 percent, after the country had to pay the highest yield since June to borrow over 10-years at an auction, reflecting worries that economic reforms may be derailed if the government collapses. Italian prime minister Enrico Letta flew back from a trip to New York on Friday to meet with the country’s president and try to resolve a political crisis that is threatening to tear the government apart. The two will meet to discuss a tense political situation after Silvio Berlusconi’s center-right People of Freedom (PDL) party issued a threat on Wednesday to pull out of the country’s fragile coalition government. (Read More: Italy crisis rages as Berlusconi ‘crunch time’ nears ) Wolf Piccoli, managing director at Teneo Intelligence, told CNBC Friday that the situation is very volatile but did not expect any fresh elections to be called. “(It’s) crunch time for Berlusconi,” he said. “He knows over the next three or four weeks that it is basically the last phase of his political battle.” U.S. stocks were sharply lower Friday, with major averages poised to finish lower for the week, following the latest consumer sentiment report and as mounting concerns of a potential government shutdown weighed on markets. Congress must reach an agreement on the budget before October 1, next Tuesday, to prevent a government shutdown that could result in federal employees taking unpaid temporary leave and a delay in the payment of military personnel.