Hungary pays off IMF debt, may eye EU exit

Portuguese bonds and stocks were hit as a coalition of left-of-centre anti-austerity parties looked set to form the country's next government.  The opposition Socialists struck a deal with two smaller far-left parties over the weekend, all but guaranteeing Prime Minister Pedro Passos Coelho will fall.  Mr Passos Coelho's party emerged as the largest in October's election, but has no absolute majority.  Government bond yields hit a five-month high, while shares fell 1.9%.   "The scenario of a left-wing government and the ousting of the centre-right is about to become reality, which the markets obviously don't like," said Joao Lampreia, an analyst at Banco BiG.  Portugal's benchmark 10-year bond yields jumped over 20 basis points to 2.87%, the highest since July, as investors anticipated higher borrowing costs.  Socialist Party leader Antonio Costa sealed the so-called "Triple Left" pact with the Communist Party and Left Bloc over the weekend.  Together they will have 122 seats, enough to out-vote the centre-right coalition government, which was left with only 107 after October's inconclusive elections.  A vote on the government's programme is likely to take place on Tuesday, when the leftist parties are set to use their parliamentary advantage to topple the minority administration. Matt Cairns, a strategist at Rabobank, said there were fears a change in government "could end up in some wind-back of austerity measures".   Another analyst, Rainer Guntermann at Commerzbank, warned "rating jitters are also on the rise for Portugal".  Amid the political uncertainty, Portugal's only investment grade credit rating will be assessed on Friday by credit agency DBRS.  The loss of that rating would bar Portugal from the European Central Bank's quantitative easing (QE) programme, Commerzbank warns.

Finland's parliament will debate next year whether to quit the euro, a senior parliamentary official said on Monday, in a move unlikely to end membership of the single currency but which highlights Finns' dissatisfaction with their country's economic performance. The decision follows a citizens' petition which has raised the necessary 50,000 signatures under Finnish rules to force such a debate, probably the first such initiative in any country of the 19-member euro zoneThe petition - which will continue to gather signatures until mid-January - demands a referendum on euro membership, but this would only go ahead if parliament backed the idea.  Despite the initiative, a Eurobarometer poll this month showed 64pc of Finns backed the common currency, though that is down from 69pc a year ago. But the Nordic country has suffered three years of economic contraction and is currently performing worse than any other country in the eurozone. Some Finns say the country's prospects would improve if it returned to the markka currency and regained the ability to set its own interest rates, pointing to the example of neighboring Sweden, which is outside the euro. The markka could then devalue against the euro, making Finnish exports less expensive. Since 2008 the Swedish economy has grown by 8pc, while ours has shrunk by 6 percent," said Paavo Vayrynen, a Finnish member of the European Parliament who launched the initiative. Now is a good time to have a wider debate whether we should continue in the eurozone or not," said Vayrynen, a veteran lawmaker from the co-ruling Centre Party who is known for his opposition to greater European integration. The center-right government is struggling to balance public finances and improve export competitiveness through "internal devaluation", including cuts to workers' holidays and other benefits, amid opposition from unions. Before 1992, Finland devaluated its markka currency time and again to improve export competitiveness.

So, it seems that despite all of the ZIRP and all of the QE debasement around the world (which was supposedly to "stimulate" economies), none of it has worked. What a surprise! The proof of the pudding is always in the eating. That is the ultimate of pragmatics. Any fool can see from economic history that permanent debasement by whatever tricks are used never works to "stimulate" any economy but just makes things all much worse. However, the fools in control at present cannot even see that, and many of them are supposed to have degrees in History from good universities...Oh those polices stimulated the economy, there is absolutely no doubt about that. But its just been a temporary boost, requiring another "hit" as soon as the last one wears off. The underlying problem is the macro-economic imbalances between young and old, poor and rich, trade surplus nations vs trade deficit nations. These have led to a surplus of global savings on one side, and a deficit of global consumption on the other. The stimulus polices (such as our housing bubble) have simply papered over these imbalances temporarily, but the global plutocratic elite don't want to take the necessary rebalancing steps since they will be big losers from this, and the older wealthier voters/supporters who form their power bases will be losers too... GDP is simply a measure of spending (or in some cases such as imputed rent - imaginary spending). If a government borrows or prints lots of money and makes it cheaper (by lowering interest rates) for others to also borrow and spend, then inevitably spending goes up.   GDP does not differentiate between the spending of earned, and borrowed money.  If I lost 50% of my income but borrowed the missing amount and some more to 'Stimulate my economic activity' naturally my spending would go up. Is that sustainable though? No. I still only have half the underlying income I used to have, but now I have a pile of new debt too.  So the short answer to your question is that borrowing and spending (temporarily) raised GDP because GDP measures borrowing and spending among other things.

To be sure, there is no proof thus far that Juncker himself promised tax relief to individual companies. He told the European Parliament committee that he had never personally met with consulting firms.  That may be true. But the former head of tax issues for Amazon testified last December that Juncker, in personal meetings between the two, had offered to assist the online retailer in setting up a tax home in Luxembourg. He said that the Luxembourg government had behaved as a "business partner."...Juncker's credibility has been shaken, partly because the accusations aren't just about tax law. They also call into question the image that Juncker has for years been portraying of himself, that of the model European. Now, he stands accused of being the architect of a business model that is based on the extremely un-European principle of steering tax flows away from neighboring countries into Luxembourg's coffers. As Commission president, he demands EU solidarity almost daily when it comes to the refugee crisis. But how credible can he be after years of promoting policies that can accurately be described by the term "tax dumping?"  The question regarding responsibility must be reexamined," says Green Party politician Giegold. "The European Parliament special committee must continue its investigations." The committee is currently scheduled to wrap up its work at the end of November, in accordance with the wishes of powerful Juncker allies, such as Manfred Weber, head of the conservative European People's Party group in European Parliament, and Parliament President Martin Schulz, a Social Democrat. Now, though, pressure to continue the investigation is growing.  In Luxembourg, meanwhile, Juncker's successors are doing what they can to absolve the country of its image as a tax paradise. Recently, Luxembourg's government opened a large university campus in the capital to finally enable companies to do that which they have long claimed to be doing: perform research.

The European Central Bank (ECB) pushed for a quick fire sale of Irish bank assets as Ireland entered the bail-out programme in late 2010, putting the protection of its own balance sheet ahead of the interest of Irish taxpayers, former IMF deputy director Ajai Chopra has said.   Mr Chopra, who was one of the senior IMF officials responsible for the design and monitoring of the bailout programme, wrote in a report for the European Parliament that the ECB’s advice on fiscal policy and structural reforms - which he said were outside its mandate - were wrong for Ireland. The report was requested by the parliament’s committee on economic and monetary affairs.  In the report, which analyses the ECB’s role in the design and implementation of the programme, Mr Chropra writes that several missteps were made which tainted the bank’s legitimacy in Ireland. Identifying the letters sent by then ECB president Jean Claude Trichet to then finance minister Brian Lenihan, pressing Ireland to enter the bailout or risk losing bank funding, Mr Chopra said their “imperious tone is unbecoming of the way in which EU institutions and nations should conduct business.”   He said that as the central bank and bank supervisor of each euro zone member, the ECB should not be a part of the troika where it sits across the table from country authorities and negotiates and monitors fiscal assistance.  “The ECB belongs on the country’s side of the table,” he said.  I think the last sentence is critical.

BUCHAREST ROMANIA - Dacian Cioloş Cabinet was sworn by the two joint Chambers of Parliament, after the hearing of proposed ministers and debating the government’s program. The new government has kept the structure of ministries from the tenure of Victor Ponta and aims to find short-term solutions to Romania’s problems, but also to “lay the foundations of structural developments in the future.” In the government program is clear that this government is taking responsibility to introduce “a set of concrete measures, limited in number, but with systemic impact and relevance.” The first task is to organize local and parliamentary elections scheduled during the year of 2016. Then Cioloş office “will seek to create optimal mechanisms for informing the political environment about executive or legislative measures that will be adopted. The same logic will be applied to all social partners, to which this government will show transparency and openness by providing innovative systems for consultation and exchange of ideas.” Finally, the Government aims to test and apply “new working methods regarding the internal operation of the central apparatus (government and ministries), trying to create until the end of the mandate a number of viable alternatives for proper functioning of administration.” As regards the economic policies and priority areas, the major goal announced by Government is “strengthening the macro-economic parameters, the prospects for sustainable development of the country”, with separate entries for absorption of European funds and infrastructure investments. Here is the list of ministers:

• Dacian Cioloş, Prime Minister
• Victor Grigorescu – Minister of Energy, SMEs and Business Community
• Costin Borc – Minister of Economy, Trade and Tourism
• Cristina Paşca Palmer – Minister of Environment, Water and Forest
• Anca Dragu Paliu – Minister of Public Finances
• Vasile Dâncu – Minister of Regional Development and Public Administration
• Lazăr Comănescu – Minister of Foreign Affairs
• Petre Tobă – Minister of Interior
• Mihnea Motoc – National Defense Minister
• Achim Irimescu – Minister of Agriculture and Rural Development
• Adrian Curaj – Minister of Education and Scientific Research
• Vlad Alexandrescu – Minister of Culture
• Aura Răducu – Minister of EU funds
• Raluca Prună – Minister of Justice
• Claudia Ana Costea – Minister of Labor, Family, Social Protection and Senior Citizens
• Marius-Raul Bostan – Minister of Information Society
• Patriciu Achimaş-Cadariu – Minister of Health
• Elisabeta Lipă – Minister of Sports
• Marian Dan Costescu – Minister of Transportation
• Victoria-Violeta Alexandru – Delegated Minister for Social Dialog
• Dan Stoenescu – Delegated Minister for Romanians Abroad
• Ciprian Bucur – Delegated Minister for Parliamentary Relations
• Ioan Dragoş Tudorache – Prime Minister Chief of Staff