France: The Two Pillars Of French Economic Reform - by Benedicte Berner and Philippe Aghion

The French government has just announced the guidelines for a new labor code, its first major reform to boost France’s economy, by giving more flexibility to companies to adapt to the marketplace. The second major reform sought by President Emmanuel Macron’s cabinet – an overhaul of the French state – is set to follow.

The changes to the labor code have four goals. First, direct negotiations between employers and employees in small and medium-size firms (accounting for 55% of the workforce) would be facilitated by allowing such companies to negotiate with elected representatives not mandated by the trade unions. Second, social dialogue within larger firms would be simplified by merging separate workers’ committees (for hygiene, health, safety, and so on) into a central body. Third, collective bargaining over wages and employment would be decentralized from national to sectoral and/or firm level.Finally, laying off employees would become easier and more predictable, in particular with the introduction of upper and lower levels on payouts issued by labor courts.

The reform of the labor code will soon be accompanied by reforms of the unemployment insurance and job training systems. On the former, the government will take over from the unions, in order to provide unemployment benefits to all categories of workers, including the self-employed and those who voluntarily quit their current job to search for a new one. The cost of reforming unemployment  insurance, however, is estimated at €3-5 billion ($3.6-6 billion), which may prove difficult to square with 2018 budget plans, which foresee a €20 billion cut in spending.

Altogether, the labor market reform is intended to reconcile more flexibility for firms to hire and shed workers – which is needed in an economy where growth is driven by innovation and creative destruction – with more income security and more training for the unemployed. The French labor market currently suffers from a huge divide between qualified workers under long-term contracts and low-skill workers who shuttle constantly between unemployment and short-term jobs. The government’s reform is meant to close this divide by increasing social mobility.

The second pillar of Macron’s economic program, reform of the state, has two major components: a revamp of fiscal policy and an overhaul of the public spending system. Here, too, the reform aims to address four main long-standing problems.

Read more: The Two Pillars Of French Economic Reform

Europe vows to aid banks; disputes persist - by Stephen Castle

European officials vowed yesterday to support banks that fail stress tests but left unresolved deep disputes that have held up a second rescue package for Greece.

The results of the stress tests, scheduled to be released Friday, could cause a headache for the 27 European Union finance ministers who met in Brussels to discuss ways to ease the region’s financial turmoil.

Olli Rehn, the European Union’s commissioner for economic and monetary affairs, said that once vulnerable banks are identified they “must recapitalize themselves, or be recapitalized or restructured.’’

For more: Europe vows to aid banks; disputes persist - The Boston Globe:

Eastern states keep faith in euro - by Neil Buckley

For a decade, central and east European countries saw euro membership as a prize – a safe haven worth making sacrifices to reach. Now, with the eurozone mired in a crisis that threatens to set back their own nascent recovery, they could be forgiven for losing the faith.

Yet, while one or two seem more lukewarm, most aspiring members on the eurozone’s eastern borders remain committed to membership – eventually. They say it could take longer than planned: they may have to do more to get themselves ready, and the eurozone must set its own house in order first.

For more: FT.com / Global insight - Eastern states keep faith in euro

Budget cutbacks in Britain, Europe spell more trouble for U.S. economy - by Don Lee, Henry Chu and Tom Petruno

The European debt crisis sent more shock waves rumbling toward the U.S. economy Monday as British Prime Minister David Cameron announced drastic cutbacks in government spending and Germany pressed ahead with its own austerity plans — steps that are almost certain to impede America's recovery.

The European policy decisions are likely to have a negative effect on the creation of new U.S. jobs, the United States' competitiveness overseas and the strength of the global economy overall.

In Britain, Cameron warned that spending cuts would be felt "for years, perhaps even decades." And German Chancellor Angela Merkel, who presides over Europe's biggest economy, announced similar plans for spending cuts, higher taxes and other belt-tightening measures.

For more: Budget cutbacks in Britain, Europe spell more trouble for U.S. economy - San Jose Mercury News

EU finance ministers vow to reduce debt, approve Estonia to adopt euro

All European Union governments have vowed to start debt reduction efforts by next year in a bid to regain credibility with markets and rein in the region's debt crisis.

EU finance ministers also approved Estonia's bid to join Europe's troubled currency union next year after the Baltic nation promised it would take action to avoid the soaring wages and inflation that have hit new euro members.

It will enter a currency union facing sweeping budget cuts and desperately seeking ways to coordinate member economies to curb mounting debt across the continent.

For more: TODAYonline | Breaking News | EU finance ministers vow to reduce debt, approve Estonia to adopt euro

EU finance ministers seek European bank tax

A consensus is growing in Europe that banks should be charged for the costs of financial crises but although the bloc is moving slowly toward taking such measures to reduce bank profits, there is disagreement over how this should be done.


Finance ministers from the Group of 20 countries ditched plans for a global bank levy at the weekend in the face of opposition from Japan, Canada and Brazil, whose lenders sailed through the credit storm unharmed.

This throws down the gauntlet to the European Union to go it alone. Many of the EU's leaders have promised they will do so, but European diplomats said their differences were unlikely to be settled on Tuesday.


For more: EU finance ministers seek European bank tax | Reuters

WORLD RECESSION AND RECOVERY: Most European countries still persuing failed neo - liberal policies

A report from the International Labour Organisation (ILO) released Wednesday points to dramatic levels of unemployment in the developed countries.

”The number of unemployed in the (developed economies and European Union) region is estimated to have surged by more than 13.7 million between 2007 and 2009, with an increase of nearly 12 million unemployed in 2009 alone.” Despite comprising less than 16 percent of the global workforce, ”the developed economies and European Union region accounted for more than 40 percent of the increase in global unemployment since 2007,” the report says. ”Unemployment in the developed economies and European Union is expected to remain elevated, with a projected increase in the regional unemployment rate to 8.9 percent in 2010.”

The trend in Europe seems to be running counter to trends at the level of national policy. ”Unfortunately, most governments in Europe never really renounced the neo-liberal paradigm, despite the profound social and economic crisis that deregulation and radical free-market policies triggered in the continent,” Kerstin Sack, who tracks international financial institutions and economic solidarity at the German anti-globalization movement ATTAC, tells IPS.

Despite the negative effects of deregulated market economy policies, Sack says the conservative new German government in office since last September ”is acting the same as in the most dogmatic neo-liberal years of the 1980s.” Indeed, the German government - made up of the Christian Democratic Union of Chancellor Angela Merkel and the neo-liberal Free Democratic Party - has deepened the neo-liberal regime of the last 20 years, with tax cuts for high income sectors, reduction of social benefits for workers and low-income families, and a call for a further salary freeze for civil servants and employees of private enterprises. The reluctance of European governments to give up neo-liberal policies is hard to understand because the worst of the crisis may lie ahead, Xavier Timbeau, director of the French Economic Observatory (OFCE), tells IPS.

And the same goes with France, which appears determined not to learn lessons. ”The government is not ready to discuss a tax increase,” says Philippe Frémeaux, former director of the Agency for Economic Research and Forecast, and now chief editor of the monthly magazine Alternatives Economiques. ”On the contrary, (President Nicolas) Sarkozy's government has just approved yet another tax cut in favour of restaurants and hotels owners, and is paying additional subsidies to physicians.”


For the complete report: RECESSION AND RECOVERY: The Lucky Are Unemployed

Daily Kos: Why the Rich Can't Afford to Get Richer - by Zach Carter

For the complete report from the Daily Kos click on this link

Why the Rich Can't Afford to Get Richer - by Zach Carter

If we want our economy to be strong and stable, we have to start thinking about it as a product of community—not a get rich quick scheme. As unemployment escalates and the housing crisis deepens, ordinary people are feeling the economic pinch. In the meantime, corporate executives and shareholders are coasting above the storm. If we want to tear down the useless casino that is Wall Street, our wealthiest citizens will have to pitch in when times get tough. Salon carries an excellent three-part email exchange between Simon Johnson, former Chief Economist for the International Monetary Fund, and John Talbott, a reformed Goldman Sachs investment banker. Taken together, the emails constitute a thorough, in-depth analysis of the causes of the economic crisis, needed reforms and political hurdles to making policy changes. Johnson's basic argument is as frightening as it is accurate: Bankers line our elected representatives' pocketbooks, convincing them to re-write regulations that made big bonuses for bankers and a catastrophe for everyone else.

In The Progressive, Naomi Klein argues that the surreal boom-and-bust cycle of U.S. capitalism is an awful lot like a Sarah Palin fairy tale, a world in which the most outrageous structural imbalances never result in problems for ordinary people because a new dose of market magic swoops in at the last minute to save the day. "What Palin was saying is what is built into the very DNA of capitalism: the idea that the world has no limits. She was saying that there is no such thing as consequences, or real-world deficits. Because there will always be another frontier, another Alaska, another bubble. Just move on and discover it. Tomorrow will never come," Klein writes.

The Hill’s Blog Briefing Room: U.S. couldn’t even join EU due to debt levels - by Michael O'Brien

For the complete report from The Hill’s Blog Briefing Room click on this link

U.S. couldn’t even join EU due to debt levels - by Michael O'Brien

The United States wouldn't even be eligible to enter the European Union if it wanted to because of its debt levels, Sen. Judd Gregg (R-N.H.) claimed Thursday. "We won't even be able to get into the EU if we wanted to," Gregg said this morning on MSNBC, "because our government is so large and so huge." The European Union's Stability and Growth Pact (SGP) adopted in 1997 requires a budget deficit to be less than three percent, and requires a national debt beneath 60 percent of Gross Domestic Product (GDP).

Note EU-Digest: The EU has always taken fiscal responsibility very seriously, because fiscal responsibility has been essential to creating a better, stronger, more prosperous EU. Unfortunately the US mind-set in general does not possess this fiscal responsibility. Consequently the so-called "free market "philosophy has gone completely out of control. Statistics show that the wages at the bottom of the pay scale are 30% bellow what they were thirty years ago. We seemed to think children would be better off than their parents, but the children of the bottom are worse off!

Noble Prize winner Joseph E. Stiglitz wrote: "what happened is also that in the United States we have this myth what we call Horatio Algier, a myth that everybody from anywhere can become president, wealthy, etc. The so-called "American Dream". And there are examples of that, but the statistics are against you. Statistics today show that the likelihood, if you are at the bottom, is that your children will also be at the bottom. Horatio Algier is becoming less and less true. And actually less true in United States than in some European countries."



The Independen: José Luís Rodríguez Zapatero: The Spanish presidency of the EU will focus on global solidarity

For the complete report from The Independent click on this link

The Spanish presidency of the EU will focus on global solidarity

The Spanish Prime Minister José Luís Rodríguez Zapatero who was speaking to a gathering of the Association of European journalists last week said: "A multipolar world is offering Europe a whole set of new chances for leadership, but we must make the most out of them. When Spain takes responsibility for the EU presidency we will turn to Africa, a continent that is progressively becoming more important. As to Russia, we must integrate it in the Euro-Atlantic space we are currently creating. And then, of course, the Middle East, and the efforts Europeans must make in order to achieve regional peace and stability, which must be built from scratch after the consolidation of the ceasefire and the re-channeling of a peace process between the Israelis and Palestinians. We are going to promote, firmly, the European Security and Defense Policy. We will try to promote the development of the revised European Security Strategy, planning our strategic targets according to the missions, capacities and partnerships. Before that, and since it is closely linked to it, we intend to elaborate a National Security Strategy, which I think will be very useful for the Government, but also for citizens to understand the challenges we face.

In a world characterized by uncertainty, after the collapse of the two great models that developed over the previous century, we will need a model and the new great commitment of both governments and societies in order to overcome this crisis. That model is Europe’s model, because Europe is, in the first place, the so-called “pax europea”. This European peace entails co-existence, rights, welfare, creativity and freedom. It is a guarantee to guide us in a multi-polar world, whose stability is based upon sustainable development and solidarity. The European peace is, and has been for 30 years, the best way for Spain to defend its principles and interests."

Note EU-Digest: Progressive thinking on the future of the EU by Mr. Zapatero. That is the way to go if the European model is to succeed. Bravo !