Advertise On EU-Digest

ADVERTISE ON EU-DIGEST - Please include your URL/Logo information with payment.

4/24/14

European Airline Industry: Brazil Azul Orders Airbus Jets To Start US Flights

Brazil's third-biggest airline Azul will add 11 wide-body aircraft from Airbus to start service to the United States.
Azul Linhas Aereas said it would receive six Airbus A330-200s in early 2015, when the airline will begin flying overseas, and five Airbus A350-900s starting in early 2017.

Together the planes are worth close to USD$2 billion at list prices, executives said at a news conference near Azul's hub in Campinas, outside Sao Paulo. The airline has secured leasing deals from industry financier ILFC for eight of the planes. It is still negotiating the lease or purchase of three A330s.

The selection of Airbus is another blow to Boeing in Latin America's biggest market. Boeing also lost out on a coveted Brazilian fighter jet contract in December.

The expansion will transform Azul, which is controlled by JetBlue Airways founder David Neeleman, from a niche regional carrier into an international player directly challenging heavyweight LATAM Airlines Group, which controls Brazil's number one carrier, TAM.

Read more: Azul Orders Airbus Jets To Start US Flights

European Insurance Industry: Solvency II technical draft too harsh, firms claim - by Hugo Coelho

Insurance industry representatives have called on the European Insurance and Occupational Pensions Authority (Eiopa) to soften draft Solvency II technical specifications, arguing that some of the specifications are not aligned with parts of the Solvency II legislation and impose harsher requirements than politicians intended.

An updated draft of the technical specifications, circulated in March for consultation, is inconsistent with the Solvency II delegated acts in relation to ring-fencing requirements and the calculation of the volatility adjustment, insurers say.

The technical specifications provide the details that insurers will use both to calculate their regulatory capital for forthcoming Eiopa stress tests and to complete reporting exercises during the preparatory period for Solvency II, which comes into force in 2016. They are subordinate to the delegated acts – the second layer of Solvency II legislation now being finalised by the European Commission.

Read more: Solvency II technical draft too harsh, firms claim - Risk.net

Ukraine: Russia plans military exercises as tensions mount in Ukraine - by John Reed, Kathrin Hille, Roman Olearchyk

Russia has ordered new large-scale military exercises on the border of Ukraine on Thursday after Kiev sent its army to flush out armed pro-Russia rebels in the east of the country, raising tensions between the two countries to new heights.

A war of words between Moscow and Kiev intensified as Vladimir Putin, Russian president, warned Ukraine there would be “consequences” for using its army “against its own people”. But Ukraine’s acting president, Oleksandr Turchynov, accused Russia of “co-ordinating and supporting terrorist killers” inside his country.

Concerns were mounting in Kiev and internationally that Russia might use Ukraine’s military action as a pretext for an invasion by troops it has massed on the border – and that the military exercises might be a cover for preparations.

The agreement reached between Russia, Ukraine, the EU and US in Geneva last week aimed at reducing the tensions appeared to be in tatters.
Read more: Russia plans military exercises as tensions mount in Ukraine - FT.com

US Education: University education in America leaves most graduating students heavily in debt - by Max Keiser

The Keiser Report is a no holds barred look at the shocking scandals behind the global financial headlines.

From the collusion between Wall Street and Capitol Hill to the latest banking crime wave, from bogus government economic statistics to rigged stock markets, nothing escapes the eye of Max Keiser, a former stockbroker, inventor of the virtual specialist technology and co-founder of the Hollywood Stock Exchange.

With the help of Keiser's co-host, Stacy Herbert, and guests from around the world, Keiser Report tells you what is really going on in the global economy.

For the latest episode of the Keiser report on the cost of a US University education click here 

Some European countries, like the Netherlands, are also  trying to copy this US system whereby students take out loans to finance the cost of their education. As the Keiser report explains this is a recipe for disaster.

Get more more information about the Keiser Reports

European Elections: Upstart Portuguese party wants more Europe

Rui Tavares sits at a small podium as he faces the audience in the crowded library in Lisbon. He tells them about "Ulysses". But the thin man with the round glasses is no literary critic, and he's not here to talk about Homer or James Joyce. He's talking about the future of Europe.

"Ulysses" is the name the 41-year-old has given to an ambitious economic policy project with which aims to redefine the roles of southern European countries like Portugal, Italy, Greece and Spain in the EU.

"Above all, we want to achieve one thing. We no longer want the countries in the south of Europe to be called PIGS."

Tavares says solving the sovereign debt crisis must no longer be a national task. Instead, the crisis has to be solved by Europe as a whole.

He wants the EU to set up its own,independent financial institution similar to the International Monetary Fund and controlled by the European Parliament. The problems in the south of Europe could be solved with an economic stimulus package, like the Marshall plan set up after World War Two, Tavares says.

He's not short of bigideas for Europe. Tavares has been an independent member of the European Parliament since 2009. Almost three years ago, he decided to join the group of the Greens/EFA.. Tavares is again contesting a seat in the upcoming European elections in late May, with the party he has founded in Portugal
.
"The LIVRE party is based on four pillars: freedom, being leftist in the classic sense - that means equality and social justice - environmental protection and Europe," the party founder explains.

Read more Upstart Portuguese party wants more Europe | Europe | DW.DE | 24.04.2014

4/23/14

Turkey: Police raid suspected ISIS militants in Istanbul, five wounded

Turkish special forces raided buildings in Istanbul used by suspected members of an Islamist militant group active in neighbouring Syria and Iraq late on Monday, leaving three policemen and two suspects wounded, police said.

The five - including a man and a woman thought to belong to the Islamic State of Iraq and Greater Syria (ISIS) - were hit after people in the buildings opened fire on security forces, police added.

ISIS is among fragmented Islamist groups fighting against Syria's President Bashar al-Assad in a three-year conflict. It is has also battled Iraq's government in that country's western Anbar province.

Ankara has repeatedly denied it is arming rebels inside Syria, but its highly publicised opposition to Assad has raised fears that Turkey may have become a safe haven for Islamist militants battling against Damascus.
If ISIS's involvement is confirmed, it would be the first clash with the group inside a Turkish city.

The raid in Istanbul's residential Umraniye neighbourhood came a week after two members of the security forces were killed in the southern Turkish province of Nigde when suspected members of ISIS opened fire from a truck, and just days before Turkey holds high stakes municipal polls.

Read more: Police raid suspected militants in Istanbul, five wounded | News , Middle East | THE DAILY STAR

Terrorism: France to stop citizens joining Syria war - EU member state Governments and EU parliament must also act

ISIS in Syria and Iraq
Aljazeera reported that France has unveiled steps to stop its citizens from joining the Syrian civil war and prevent young French Muslims from posing a threat to their home country.

France, which has been a staunch opponent of Syrian President Bashar al-Assad, estimates the number of its nationals directly involved in the Syrian conflict is about 500, Foreign Minister Laurent Fabius said in a radio interview.

President Francois Hollande has prioritized the crackdown on groups and individuals planning domestic attacks since a Toulouse-based al Qaeda-inspired gunman, Mohamed Merah, shot dead seven people in March 2012.

But with the Syrian conflict entering its fourth year, the government has increasingly come under fire for failing to stop its nationals - some of whom are as young as 15 - from heading to Syria.

"France will take all measures to dissuade, prevent and punish those who are tempted to fight where they have no reason to be," Hollande told reporters on Tuesday.

The Dutch Government also reported recently that two Dutch Muslim nationals, who are part of a group of at least 150 other Dutch citizens, who have joined radical Muslim groups like ISIS, Al Qaeda and others  in Syria,  blew themselves up in suicide attacks in Syria and Iraq.

As ISIS’s name suggests, the interests of the group and its current leader Abu Bakr al-Baghdadi go beyond Syria. Its members believe that the world's Muslims should live under one Islamic state ruled by sharia law. 

War and instability in Syria and Iraq have given it an opportunity to attempt to build a proto-state in the adjacent Sunni-majority areas of these two countries, before spreading further. 

Its 7,000 or so fighters in Syria have expended as much energy on consolidating the group’s rule in towns and cities behind rebel lines as fighting the regime. ISIS is willing to use ruthless tactics to assert its authority. 

Once in control of an area it has told women to cover up and kidnapped journalists, aid workers and Syrian activists. Beheadings and suicide bombings are now a regular feature of ISIS There are also many other EU Muslim citizen, including Germany and Britain, who have voluntarily joined radical Muslim groups like ISIS in  the Syrian conflict.

Many people fear that "rebel fighters" returning home to Europe will have become so radicalized that they could become a danger to their local societies.

There seems to be an urgent need for EU member state Governments and the EU Parliament to legislate laws which forbid and punish anyEuropean citizen for joining external conflicts or radical fighting Units.

EU-Digest

4/22/14

The Netherlands:- Environment: Most of us know we should live in a sustainable way. But it doesn't happen because we don't feel involved.

Most of us know we should live in a more environmentally sustainable way. But it does not happen because we do not really feel involved.

How can policymakers change the way people think? This is what the InContext project, funded by the EU, hopes to answer. Leading European research institutions in the fields of transition, behaviour and sustainable development are trying to create a manual for change.  

This manual should ultimately be developed into a so-called ‘Transition Theory’ that is, as yet, unproven. And this theory, in its turn, should make it possible to change people’s mindset. For example, towards living in a more environmental sustainable way.

A number of pilot projects have been initiated in Belgium, Germany and the Netherlands. The idea was to put this theory to the test, to refine it and hopefully to prove it right. For example, in the Dutch city of Rotterdam a community centre in the neighbourhood of Carnisse was facing cutbacks. It was due to be closed down in January 2012.  Drift, the Dutch Research Institute for Transitions, which is a project partner, took it upon itself to help the people of Carnisse save it.

Project leader Julia Whittmayer, researcher and consultant, and other colleagues of Drift invited residents to come up with ideas, and to present them in brain storming sessions. This resulted in a plan of action. This also gave people an opportunity to decide themselves how they could help.  

It was expected that this process would provide inspiring examples from amongst the residents of Carnisse to motivate others to spring into action. Thus they would ultimately make a ‘bigger noise’ and save the community center. But to Whittmayer’s dismay, many preferred “to be told what to do!” instead.

It might be true that inspiring examples can help change. But it is just as true that some people rather want to be told what to do, according to behavioural psychologist Max Mulder, who is a market researcher at the Dutch consultancy called Beautiful Lives, based in Hilversum.

Read more: Most of us know we should live in a sustainable way. But it doesn't happen because we don't feel involved.

France: Revolutionary analysis questions basic distribution of wealth - by Paul Sweeney

Few economists inspire popular movements, but Thomas Piketty has. “We are the 99 per cent”, the slogan of the Occupy Movement, was based on his in-depth analysis with Emmanuel Saez of income distribution and inequality in the US in 2003. 

The Frenchman’s new book Capital in the 21st Century is already causing a stir. Some reviewers have called it the economic book of the year, others of the decade.

Piketty’s ground-breaking work on the historical evolution of income distribution is impressive, but he covers many other areas, including the erosion of meritocracy by inherited wealth, public debt, education, health and taxation. He also proposes challenging ideas for funding the social state in the 21st century. 

Piketty’s central point is that when the rate of return on capital exceeds the rate of economic growth, the economy automatically generates arbitrary and unsustainable inequalities which undermine the meritocratic values on which democracy is based.

Unless capital owners consume all of the return on their capital, more will remain for them and they get richer, effortlessly. 

In the late 19th century, the amount of private wealth was a staggering six or seven years of national income.
Two world wars and the Depression wiped out much of this wealth and, since the second World War, the emergence of welfare states, nationalisation of monopolies, labour-friendly governments and high income and inheritance taxes greatly reduced accumulated capital. 

In the public mind, that trend towards equality seemed to be normal, but Piketty shows it was an exceptional period, which will not be repeated on current trends.

It is already over in the US, where average real incomes have hardly risen since the 1970s, despite high productivity. The labour share of national income has been declining in most countries for over 30 years.

This optimistic public misperception was shaped by the work of Nobel economist Simon Kuznets, who argued that, as economies developed, inequality appeared to fall and then stabilised. The labour share of national income seemed to stabilise at about 75 per cent. The distributional issue seemed to be settled and economists ignored it and most still do. 

However, Kuznets only examined a short period of time (1914-1948) and only the US. It was the wars, the Depression and state “interference” that reduced the inequality, rather than any self-correcting market mechanism, he argues.

In Capital ’s 650 pages of tightly argued data-based economics, Piketty and others have compiled their argument from data stretching back to the 1700s. 

Note EU-Digest:  Capital in the 21st Century is a must read book for every economist and Government  Ministers of Finance and Economic affairs. Also people who have no educational economic background can read it because of its simple and very clear definitions as to the workings of economics.

Read more: Revolutionary analysis questions basic distribution of wealth - Economic News | Ireland & World Economy Headlines |The Irish Times - Fri, Mar 28, 2014

Slovenia - Italy: 4.4 earthquake in Slovenia and Italy, near nuclear plant

A 4.4-magnitude earthquake has struck Slovenia southwest of the country’s capital, Ljubljana, at a depth of 12.4 kilometers, says USGS.

According to the European-Mediterranean Seismological Center, the magnitude of the quake was measured at 4.5, with a depth of 2 kilometers.

The earthquake took place about 200 kilometers from a nuclear power plant at Krško, a town in eastern Slovenia. The plant is co-owned by Slovenia and Croatia.

The quake struck at about 11:00 local time (09:00 GMT).

According to the US Geological Survey (USGS), the quake hit about 5 kilometers northeast of the Slovene town of Ilirska Bistrica, 32 kilometers northwest of the Croatian city of Rijeka and 37 kilometers east of the Italian city of Trieste.

Read more: 4.4 earthquake in Slovenia, Italy, nr nuclear plant — RT News

Ukraine: Photos show undercover Russian troops - by Arwa Damon, Michael Pearson and Ed Payne

Do a series of photos of gun-toting men wearing green uniforms prove Russian forces are operating in eastern Ukraine?

Ukrainian officials point to the pictures in a dossier obtained Monday by CNN, arguing that the images show Russian "sabotage-reconnaissance groups" acting in Ukrainian towns.

The images, Ukrainian officials say, prove organized Russian activity in the region.
CNN cannot independently confirm the photographs, some of which were first published in The New York Times.


The dossier shows what Ukrainian officials say are images of well-equipped gunmen in eastern Ukraine who look similar to photographs of Russian forces taken in Crimea, Russia and during Russia's 2008 invasion of Georgia.

Last week, Ukrainian security officials told CNN they had arrested a Russian military officer and a woman Ukrainian officials said is a Russian intelligence agent.

Moscow has disavowed involvement in the takeover of government buildings in eastern Ukraine or other acts by often-masked pro-Russian gunmen.

Read more: Ukraine: Photos show undercover Russian troops - CNN.com

Middle East: Syria conflict: West criticises Assad election plan

The US has dismissed a Syrian plan to hold a presidential election on 3 June as a "parody of democracy".

UN chief Ban Ki-moon also condemned the plan, saying it could torpedo efforts to broker a deal to end the three-year civil war, which has killed 150,000.

Government forces have made gains recently, but rebels still control vast territories. It is unlikely that voting would be held in those areas
.
President Bashar al-Assad is expected to seek a third seven-year term.

The government recently framed an election law that stipulated all candidates must have lived in Syria for the past 10 years.

Read more: BBC News - Syria conflict: West criticises Assad election plan

Economics: Capital in the 21 Century: Still Mired in the 19th - by Dean Baker

Thomas Piketty's new book on the history and future of capitalism (Harvard University Press) is a bold attempt to pick up where Marx left off and correct what he got wrong. While there is much that is useful in this lengthy and well-written book (Piketty and his translator Arthur Goldhammer can fight over credit), it owes too much to the master, and not in a good way.

For backdrop, economists and social scientists in general have a huge debt to Piketty. His work with Emmanuel Saez has advanced enormously our understanding of income distribution at top end. The World Top Income Database that they constructed along with Facundo Alvaredo and Anthony Atkinson is an enormously important source of data that economists are just beginning to analyze. This book is a further contribution in providing a wealth of information about historical trends in income distribution and returns to capital over large parts of the world.

Piketty begins his book by dissing the unnecessary complexity of economics. While the theoretical excursions of the last four decades have been an effective employment program for economists, they have done little to advance our understanding of the economy. The book itself is laid out in a way that makes it easy for the non-expert to understand, with the mathematics kept to a bare minimum.

Based on his analysis of capitalism's past, Piketty has a grim picture of the future. The story is that slowing growth will lead to a rise in the ratio of capital to income, which we have already seen throughout the world with the rise in stock and house prices. This is turn will imply growing inequality as wealth distribution is hugely unequal and there is little reason to believe that the market will somehow reverse this inequality. Piketty's remedy is higher income taxes on the rich and wealth taxes, solutions that he acknowledges do not seem to have good political prospects right now.

While the book presents this story with the sort of the determinism that many have seen in Marx's theory of the falling rate of profit, there are serious grounds for challenging Piketty's vision of the future. First, there are many aspects to the dynamics that have led to the redistribution to profit and high earners in the last three decades that are likely to change in the not too distant future.

The top of my list is the loss of China as a source of extremely low cost labor. According to the International Labor Organization, real wages in China tripled in the decade from 2002-2012. While these data are not very accurate, there is little doubt that wages in China are rising rapidly. While Chinese wages still have a long way to go before they are on a par with wages in the United States or Europe, its huge cost advantage is rapidly disappearing. Manufacturers can look for other low-wage havens, but there are no other Chinas out there.

The loss of extreme low wage havens is likely to enhance the bargaining power of large segments of the workforce.

However, perhaps a more fundamental objection to Pikettys' grim future is the fact that a very large share, perhaps a majority, of corporate profit hinges on rules and regulations that could in principle be altered. My favorite example is drug patents. This industry accounts for more than $340 billion a year in sales (@ 2 percent of GDP and 15 percent of all corporate profits). The source of its profits is government granted patent monopolies.

Suppose the government weakened patent rights or allowed low-cost generics from India to enter the country, profits and presumably the value of corporate stock in the sector would crumble. Is there a fundamental law of capital that prevents this from happening? The same could be said about the patents that provide the basis for enormously profitable tech companies like Apple. Are we pre-destined never to take steps to weaken these laws which lead to enormous corruption and economic waste?

Another big profit sector is cable and telecommunications where we seem to have unlearned the lesson from intro-econ that monopolies are supposed to be regulated to prevent them from gouging consumers. Obviously the monopolists won't like to see their profits eroded, but allowing near monopolies to operate without regulation does seem like an aspect of capitalism that can be altered in the future as it was in the past.

The financial sector has gone from accounting for less than 10 percent of corporate profits in the 1960s to over 20 percent in recent years. Is there a law of capitalism preventing us from instituting financial transaction taxes like the UK has had on stock trades for more than three centuries or breaking up too big to fail banks?

Piketty is not just pessimistic when it comes to profit shares. He also tells us there is little hope that improved corporate governance will put a lid on CEO pay. Is it really implausible to believe that shareholders will ever be able to organize themselves to the point where they can do something like index CEO stock options to the performance of other companies in the industry? This means the CEO of Exxon doesn't get incredibly rich by virtue of the fact that oil prices rose. Is it a law of capitalism that shareholders will forever throw money in the toilet by giving unearned bonanzas to CEOs?

These and other areas might be viewed as important institutional details that get short-shrift in the book. To take another example, in an analysis of returns on university endowments Piketty attributes the extraordinary returns to the endowments of Harvard, Princeton, and Yale to the fact that they could afford top quality financial advisers. This is another source of inequality for Piketty; the rich can buy good financial advice, while the average person has to rely on their brother-in-law.

Harvard, Princeton and Yale undoubtedly have sophisticated financial advisers, but many equally sophisticated advisers don't consistently produce above market returns. An alternative explanation is insider trading. The graduates of these institutions undoubtedly could prove their alma maters with plenty of useful investment tips.

I have no idea if such insider trading takes place, or if so whether it is a major factor explaining above average returns, but it would provide an alternative and more easily remedied fix for this particular source of inequality. A few years in jail for some prominent perps would do much to curtail the practice.

Rather than continuing in this vein, I will just take one item that provides an extraordinary example of the book's lack of attentiveness to institutional detail. In questioning his contribution to advancing technology, Piketty asks: "Did Bill [Gates] invent the computer or just the mouse?" (To be fair, the comment is a throwaway line.) Of course the mouse was first popularized by Apple, Microsoft's rival. It's a trivial issue, but it displays the lack of interest in the specifics of the institutional structure that is crucial for constructing a more egalitarian path going forward.

In the past, progressive change advanced by getting some segment of capitalists to side with progressives against retrograde sectors. In the current context this likely means getting large segments of the business community to beat up on financial capital. This may be happening in the euro zone countries where there is considerable support for a financial speculation tax - although the industry is fighting hard.

In terms of drug patents, India's generic drug industry is a natural ally for progressives everywhere who care both about public health and want to stop the upward redistribution to drug barons. In the United States, public options for both health care insurance and retirement savings accounts could be a boon not only to workers who use them, but also small businesses who lose valued workers to larger employers who offer better benefits.

The list of options could be extended considerably, but the point is that capitalism is far more dynamic and flexible than the way Piketty presents it in this book. Given that we will likely be stuck with it long into the future, that is good news.

Read more: Capital in the 21 Century: Still Mired in the 19th (See correction) | Dean Baker