A rescue to save the euro

 The Eurogroup works against time to recapitalize Spanish banks and stabilize sovereign debt to tackle doubts about the single currency

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 Yesterday we were on the edge of the abyss. Today we have taken a step forward! “… The rhetorical delirium attributed to former Chilean dictator Augusto Pinochet illustrates well the risk of derailment facing the euro zone these days with its plan to help Spain to clean up its banking system. 

It was thus, as a step forward before the precipice, as the financial markets seemed to interpret the announcement that the European rescue fund will inject capital into Spanish banks through a loan to the State: the beneficiaries will be the entities but the person responsible for returning it (and of assuming possible losses) will be the State, a perspective that triggered the risk premium of the Spanish and Italian bonds at unknown levels.

Fear of failure

Image result for fear of failureThe fear that the operation will fail and make a total rescue for Spain inevitable (not an intervention of its financial sector but of the whole economy) has forced the euro zone to revise its plans. European governments have been willing to explore in depth the entire catalog of options available to chisel a rescue really tailored to the Spanish case. The pressure of Mario Monti, Italian Prime Minister, has taken a fundamental turn to the debate. The G-20 summit in Los Cabos (Mexico), held in a climate of emergency on the impact of the European crisis on the world economy, was the forum chosen by the skilled Italian technocrat to raise the possibility that the rescue fund European Union intervenes in the debt markets and relax their pressure.

I could not have chosen a more receptive audience. The mere mention of this possibility – provided in the regulations of the rescue fund since last year – has served to relieve pressure on peripheral sovereign debt. The challenge now is to finish off the play, so that Monti’s pass becomes a bit in favor of the euro that dissipates doubts about his future.

All eyes are on the summit that the EU and the euro zone, in a restricted format, will hold next week in Brussels. Expectations are high: Germany and France must agree to give a future perspective to the euro but also to provide solutions to their immediate problems.

Under pressure from the International Monetary Fund, the euro zone has reopened the debate on whether the EU should lend money to the banks without going through the states and without contaminating their problems. Berlin vetoed the proposal last year, but Mariano Rajoy does not rule out that Angela Merkel give in to the pressure and agree to put it in motion, in time for at least part of the rescue operation of Spanish banks.

In parallel, the Eurogroup is studying the launch of an operation to buy Spanish and Italian debt in the secondary markets through the European rescue fund, the place of the reticent European Central Bank. It remains to be seen what price the European partners put, what political conditions they impose in exchange for buying a truce from the pressure on the risk premium. The euro zone wants to close the operation as soon as possible. Not at the end of July as expected by the Government but at the meeting of the Eurogroup next day 9. It will be that day when we know the final amount of credit line that will be offered to Spanish banks and savings banks that need public capital, always in exchange of the implementation of restructuring plans (sale of assets, closing of offices …) that are announced as very severe.

Image result for olli rehn“It is essential that banks in Spain can fulfill their primary role, which is to provide fuel to the economic engine, give credit to households and businesses instead of fueling speculative activities,” said the European Commissioner for Economic Affairs, Olli Rehn. In parallel to the restructuring plans, Brussels and Frankfurt could also request reforms in the Bank of Spain to avoid repeating past supervisory failures.

The comment is also made in German government circles, although more refining. The problem of Spain, they admit, has its origin in the private one, in a real estate bubble that took too long to detect and control. The case is compared to what happened in the United States and Ireland, but they qualify: in these countries the phenomenon was very much financially sound, but in Spain cement was really used … ‘Never more’, they say in Berlin. In its official account of the crisis, however, the role of the German banks does not enter the ‘Spanish party’, as the international press calls the boom of the past decade.

The arrival of the Socialist François Hollande in the Elysee has left in suspense several decisions that the EU had left precooked during the French elections: the relay of Jean Claude Juncker as president of the Eurogroup, the replacement of José Manuel González-Páramo in the executive council of the Bank European Central Bank (ECB) and the appointment of a director for the European permanent rescue fund. Hollande is craftily playing his cards and has paralyzed all three decisions. According to several diplomatic sources, not so much because of divergences on the candidates as for strategic reasons. The French leader is reluctant to give Angela Merkel the quota of additional power that would involve placing his Economy Minister, Wolfgang Schäuble, as president of the Eurogroup. Trying to deactivate Hollande’s move, the German chancellor has warned that she will not make a casus belli of that appointment … But until they unblock this point, the appointment of Yves Mersch, governor of the Bank of Luxembourg, as a member of the ECB directory. Neither did Belén Romana as director of the rescue fund. The only irreversible in these three movements is the departure of Spain from the kitchen of the decisions of the ECB.

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The rescue of the Spanish banking sector could accelerate the plans of the European Central Bank (ECB) to dispense with private rating agencies to value the collateral it requires in its liquidity operations. The issuer is not prepared to carry out the delicate mission, both technical and political, of making its own valuations on sovereign issuers. But, according to Reuters, has reached an agreement to make life easier for Spanish banks relaxing their demands on the use as collateral of public debt and mortgage. Throughout the crisis, the ECB has on several occasions lowered its standards on the guarantees it requires from banks. If a decision is not made in this sense, if the Canadian agency DBRS also downgrades Spain’s solvency rating (as Standard & Poor’s, Moody’s and Fitch have already done), Spanish bonds are destined to assume a 5% penalty to be accepted as collateral. This step represents an important turn to reduce the influence and dependence of the agencies, while the ECB is spreading new heights of power in the eurozone. The Bundesbank has already distanced itself: “We will not accept what we do not have to accept,” said its spokesman, Michael Best.

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What Obama should do for the economy

 USA must overcome its extreme allergy to taxes at a time when the State is bleeding

The election of Barack Obama has illuminated a fabulous hope of economic recovery, a hope of historic proportions for the United States and for the whole world. Yes, we can change, provided that we escape from the narrow mentality and the simple retouching of public policy.

The simple fixes that some propose, such as tax refund checks or zero interest rates by the Federal Reserve will not suffice. The government needs a clear medium-term strategy that revitalizes spending on private investment, and will have to resort in the coming years to greater budgetary revenues to devote to urgent public investments and long-term restructuring. The short-term recovery will be enhanced by the clarity in the long-term orientation of economic change

The US economic crisis requires

a new macroeconomy and this is the most urgent task faced by President-elect Barack Obama. The Humpty Dumpty of real estate and consumer bubbles has fallen off the wall and will not be able to be redressed again, by many Wall Street bailouts, liquidity injections and tax refunds that apply.

The end of the consumption boom marks the collapse of a time that began with Ronald Reagan. Some experts and politicians would like to go back to the policies of the Clinton years, but those policies were compromises with Reaganism that will no longer suffice. The US economy is in a downward spiral of recession and huge budget deficits. The Federal Reserve inflated the economy for years and fostered irresponsible lending and borrowing practices in real estate and consumer credit, all to keep the economy growing.

A country that for years supports zero or negative levels of family savings and is heavily indebted abroad is condemned to pay a high price for these practices, and the United States has time to pay. Worse yet, as housing and consumer bubbles grew, the Iraq war continued with its bleeding of lives and money and a series of crucial problems, such as the environment, energy, infrastructure or world poverty, were ignored. . Now the macroeconomic and structural crises have unleashed simultaneously.

Here is a brief overview of our macroeconomic hardship. The 1970s marked the end of two epochs: that of the monetary system backed by gold (which ended between 1971 and 1973) and that of cheap oil (which ended in 1973). This double crisis led to painful years of stagflation in which energy shortages were associated with the ineffectiveness of monetary policy to trigger high inflation and economic contraction. Jimmy Carter was absolutely right in the world regarding the long-term energy problem, but his efforts were mocked and abandoned as soon as he left the presidency.

Ronald Reagan misdiagnosed stagflation and put the United States on a disastrous long-term course. President Reagan and his supporters erroneously held that the problems lay in state regulation, excessive taxes and welfare handouts, rather than in the need for a redesign of monetary policy and a responsible long-term energy policy.
As a result, they proceeded to dismantle a good part of the social protection network, creating a marginalized class in the United States that is scandalous according to the parameters of any other advanced economy: they left the country in the twenty-fourth position of the world by as regards life expectancy and in the twenty-fifth in terms of infant mortality.

The great myth in the United States is that capitalism demands that brutal contempt for the poor, something that is questioned every day by the high incomes, the low level of poverty and by the social cohesion of other advanced economies. Reagan’s tax cuts led to a generation during which we have been unable to invest in basic infrastructure. And the Reagan era initiated the enormous financial deregulation that has caused our current calamities.

The Clinton era reversed some of the excesses

The Clinton era reversed some of the excesses

but it was essentially a commitment to the Reagan era. During the 1990s, fiscal revenues as a part of gross domestic product remained low, and Washington continued to undo the social protection network and accelerate the deregulation of the financial market. Foreign aid plummeted during that decade, which allowed the spread of the AIDS pandemic and the African famine. Both then and now, Americans have failed to understand that doing nothing to fight hunger, disease and poverty is, precisely, paving the way for extremism and conflict.

The big money continued to infect the political system.

<br /><br />The big money continued to infect the political system.


Both Democrats and Republicans made peace with immense wealth and were linked to the promising and innovative Wall Street. And the appeal to the bond market was interpreted as the end of the ambitions to solve the great challenges of energy, climate, poverty or infrastructure.

According to the famous phrase of Karl Marx, the story takes place once as a tragedy and is later repeated as a farce. However, with Bush we have had tragedy and farce. The Bush administration made purchases and tax cuts in the official macroeconomic policy of the United States. Families had to borrow on their real estate wealth to keep the consumer machine running. Financial deregulation was going to maintain the health of the real estate market.

As a result of all these changes, today we have an economy on the brink of disaster. Consumer spending is in free fall and housing, the automobile and other sectors of consumption are dragged into it. Unemployment will grow several percentage points. The budget deficit keeps growing.

The US dependence on the foreign loan has also acquired gigantic and unsustainable proportions, more than 700,000 million dollars a year (more than half a billion euros). Foreign central banks, especially Asian ones, have accumulated trillions of dollars in US securities. And, of course, banks are still in a state of deep decapitalization and can not or do not want to grant loans.

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New CyL Energy Efficiency Strategy to reduce CO2 emissions by 30% by 2020

The Junta de Castilla y León will launch a new Energy Efficiency Strategy, the third since 2002, with an “ambitious objective” that seeks to reduce the final energy consumption by 32.45 percent – some 1,113 kilotonnes of oil equivalent. – and reduce CO2 emissions by 30.24 percent in the 2020 horizon –2.5 million tons – without altering the autonomic mix of electricity generation in which coal maintains a gap “for strategic reasons” with a “preponderant role” for renewable energies.

This was announced by the Minister of Economy and Finance, Pilar del Olmo, in the press conference after the Governing Council that has approved the new Energy Efficiency Strategy of the Board that includes 79 measures to reduce energy consumption and emissions up to 12 percent above the targets set by the European Union.

“It is much more ambitious,” said the counselor who recalled that it is not so easy to reduce consumption and polluting emissions in a stage of economic growth. That said, it has meant the results of the two energy efficiency plans launched in 2002-2007 and 2008-2012 with an energy saving of 20.89 percent in Castilla y León in relation to the 1990 indicators set by the EU .

“This data implies that Castilla y León has fulfilled the goals set by Europe seven years earlier – it urged the regions to increase energy efficiency by 20 percent in 2020 compared to 1990 and to reduce CO2 emissions by 20 percent. in the same horizon– “, said the counselor, who highlighted the” significant improvement “of business competitiveness provided by these measures.

The execution of the 79 measures programmed up to 2020 will imply an investment effort of 799.1 million that will be contributed by the private sector, with 547.9 million, and by the public, with 251.2 million, both with funds of autonomous character and State and European in this case with the co-financing of the European Regional Development Fund (ERDF), through various instruments such as grants, zero-cost or low-interest loans, direct investments or participation in strategic projects.

According to Del Olmo, the industrial sector will absorb 51.3 percent of the global volume of resources, followed by the construction sector (25.1 percent), transportation (10.8 percent), improvements in services Public administrations (10 percent) and the Autonomous Administration (2.4 percent). The R + D + i chapter will address 0.3 percent of funds and 0.1 percent to initiatives for the dissemination of responsible consumption.

Most of the reduction in CO2 emissions planned corresponds to transport, with 1.10 million, followed by industry (844,500), buildings (447,600), local entities (98,800) and Autonomous Administration (23,600).

Among the measures to improve the competitiveness of the industry and the livestock sector, with the challenge of achieving a third of the estimated savings for 2020, include the promotion of efficiency investments in processes, equipment and facilities of companies and the diversification of the sources used in the production through the call for different lines of subsidies.

The aim is also to introduce “the best available technology”, implement energy management systems UNE-EN-ISO-50001 or apply techniques on conservation agriculture, water consumption reduction and the introduction of higher performance engines and pumps.

The second block of the document focuses on building, which covers the domestic, commerce and services and hospitality subsectors. In the area of ​​households, support measures are established for the replacement of energy-consuming equipment with others of high energy efficiency, as well as incentives for zero-energy buildings (‘near zero energy building’).

With regard to buildings in the tertiary sector, it seeks to promote improvements in the air conditioning, lighting and thermal insulation systems. The estimate is that the decrease in consumption achieved with these actions represents 17.7 percent of the total target, said Del Olmo.



Transport is the protagonist of the third section of the plan since it is the first consumer sector of final energy – almost 40 percent of the total in the Community – with the aim of assuming 44 percent of the savings effort projected in the strategy.

In this field, we will work on the transition towards more efficient models of people and goods mobility through sustainable transport plans; in the planning of infrastructures that favor the incorporation of alternative vehicles and in the promotion of the use of fuels other than conventional fuels through aid. For its part, the Board will continue with the development plan for the plug-in electric and hybrid car in the Administration.

The fourth chapter revolves around energy consumption derived from the provision of public services by local entities, both in electrical energy (public lighting and buildings, in addition to the water cycle), and in gas oil for buildings and vehicles, gas natural and gasoline.

Among the foreseen initiatives, stand out the programs of collaboration with town halls and councils to undertake improvements in buildings, systems of exterior lighting and purification and water supply since 4 percent of the goal of reduction of consumption set for 2020 corresponds to this area .

In the Autonomous Administration, fifth section of the plan, optimization measures are articulated through the replacement of boilers, cooling installations and windows, and other improvements in lighting and air conditioning systems in offices, hospitals, schools, health centers and social services.

In this area, the Regional Energy Agency (EREN), under the Ministry of Economy and Finance, will promote the use of the OPTE tool (Optimization of Electric Rates), in order for the Board to contribute 9.4 percent to the estimated energy savings for the whole of Castilla y León at the end of the strategy’s validity period.

The sixth axis is dedicated to R & D & I and aims to guide scientific research, technological development and innovation towards safe, sustainable and clean energy. For Del Olmo, the proposal to seal agreements between the EREN and research groups of the public universities of Castilla y León in terms of energy efficiency deserves a special mention in order to participate in projects and put them in value, both in specialized journals and through the patent registry.

Finally, the seventh area of ​​the Energy Efficiency Strategy of Castilla y León plans information, training and awareness-raising actions aimed at citizens, large companies, SMEs and institutions, which will be channeled through the EREN website, conferences and seminars. the media.

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