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  • Recommended: Will China mediate the Israeli-Palestinian peace process?
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  • 11
    hours
    ago

    Thousands rally in Italy to oppose austerity measures

    Filippo Monteforte / AFP - Getty Images

    Demonstrators applaud during the left-wing Italian metalworkers' union FIOM rally in downtown Rome's Piazza San Giovanni on May 18, 2013.

    By Carmelo Carmilli and Roberto Mignucci, Reuters

    Thousands of people protested in Rome on Saturday against austerity policies and high unemployment, urging new Prime Minister Enrico Letta to focus on creating jobs to help pull the country out of recession.

    "We hope that this government will finally start listening to us because we are losing our patience," said Enzo Bernardis, who joined the sea of protesters waving red flags and calling for more workers' rights and better contracts.

    Less than a month in power, Letta is trying to hold together an uneasy coalition between his center-left Democratic party and the center-right People of Freedom, led by former prime minister Silvio Berlusconi.

    Confidence in the government, cobbled together after inconclusive elections, is already falling, with one poll on Friday by the SWG institute showing its approval rating had dropped to 34 percent from 43 percent at the start of the month.


    "We can't wait anymore" and "We need money to live" were among slogans on banners held up by the crowds.

    Letta promised to make jobs his top priority when he came to power in April after two months of political deadlock. But several protesters complained he was not sticking to his vow, focusing instead on a property tax reform outlined this week.

    Union leaders said he needed to shift away from the austerity agenda pursued by former Prime Minister Mario Monti, who introduced a range of spending cuts, tax hikes and pension reform to shore up strained public finances.

    "We need to start over with more investment. If we don't restart with public and private investments, there will no new jobs," said Maurizio Landini, secretary-general of the left-wing metalworkers union Fiom.

    Italy is stuck in its longest recession since quarterly records began in 1970, and jobless rates are close to record highs, with youth unemployment at around 38 percent.

    Other protesters were pessimistic that Letta's fragile government would be able to take effective action.

    "This government will last a very short time," said demonstrator Marco Silvani. What we need is a new leftist party that fights for the rights of the people," he said.

    Copyright 2013 Thomson Reuters. Click for restrictions.

    75 comments

    Spend! Spin! Spend! Spin! Coming soon to a capitol near you.

    Show more
    Explore related topics: featured, italy, rome, austerity, eurozone, letta
  • 23
    Feb
    2013
    3:48pm, EST

    Thousands in Spain protest austerity, corruption

    Denis Doyle / Getty Images

    Demonstrators protest on Calle Alcala during a march by thousands of people on Feb. 23, 2013 in Madrid. Public health workers, civil servants and disaffected citizens converged on central Madrid to protest against the austerity measures of Prime Minister Mariano Rajoy.

    By Paul Day, Reuters

    Tens of thousands of Spaniards marched through cities across the country on Saturday to protest deep austerity, the privatization of public services and political corruption.

    Gathering under the banner of the "Citizen Tide," students, doctors, unionists, young families and pensioners staged rowdy but non-violent demonstrations as a near five-year economic slump shows no sign of recovery and mass unemployment rises.


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    "I'm here to add my voice. They're cutting where they shouldn't cut; health, education ... basic services. And the latest corruption scandal is just the tiniest tip of a very large iceberg," said Alberto, 51, an account administrator for a German multinational in Madrid, who preferred not to give his surname.

    Protests in Spain have become commonplace as the conservative government passes measures aimed at shrinking one of the euro zone's highest budget deficits and reinventing an economy hobbled by a burst housing bubble.

    Prime Minister Mariano Rajoy has introduced some of the deepest budget cuts in Spain's democratic history in an attempt to convince investors the country can weather the economic crisis without falling back on international aid.


    But, with more than half of the country's young people out of work and growth not expected until sometime next year, the measures have only scratched the surface of the budget shortfall which is expected to be more than double the target in 2014.

    Cesar Manso / AFP - Getty Images

    Public workers, small political parties and non-profit organizations stage a protest against government austerity on Feb. 23, 2013 in Madrid.

    Meanwhile, corruption scandals that have hit the ruling party as well as the once-popular royal family has left many Spaniards disenchanted with their leaders on all sides of the political spectrum.

    In Madrid, under a clear, cold winter sky, Saturday's marches convened from four different points by early evening in Neptune Square, between the heavily policed and barricaded parliament, the Ritz Hotel and the stock exchange.

    Carrying placards that condemned everything from cuts in the health sector to massive bailouts granted to Spain's banking system, crowds banged drums and chanted, while dozens of riot police stood on the sidelines.

    The march coincided with the anniversary of a failed coup attempt in 1981 by Civil Guard officers who stormed Parliament and held deputies hostage until the next day.

    Related:

    Spanish king's son-in-law in court over tax fraud allegations

    Copyright 2013 Thomson Reuters. Click for restrictions.

    269 comments

    The "greedy" are the Progressives. Mr. "Drama" Obama's agenda: Tax Spend Redistribute (and now more American taxpayer dollars to poor countries via the IMF) And a lot more REGULATIONS via Executive Orders or by Progressive Cabinet members' regulation changes.

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    Explore related topics: featured, spain, protests, austerity, eurozone
  • 15
    Nov
    2012
    9:54am, EST

    Greek protesters pelt German diplomat with water bottles, coffee

    Nikolas Giakoumidis/AP

    A protester, not seen, throws a coffee at German consul Wolfgang Hoelscher-Obermaier, with the blue shirt, in Thessaloniki Thursday.

    By Reuters

    ATHENS - Public sector workers stormed a building where Greek and German officials were meeting in the northern city of Thessaloniki Thursday and pelted a German diplomat with water bottles in a protest over austerity measures.

    Riot police used teargas and truncheons to break up a crowd of 250 city employees outside the building and formed a shield around German Consul Wolfgang Hoelscher-Obermaier as he entered.

    Photographs also showed coffee being thrown over Hoelscher-Obermaier.


    Follow @NBCNewsWorld

    Protesters chanted "It's now or never!" and held up mock gravestones and banners proclaiming "Fight until the end!"

    They said they were furious at comments by German envoy Hans-Joachim Fuchtel, who told journalists on Wednesday that Greece could do more to reform its bloated local government sector, the head of the workers' union said.

    "Experts say that as far as local government is concerned the work carried out by 3,000 Greek employees can be done by 1,000 Germans," Fuchtel said. On Thursday, he said his remarks had been misinterpreted.

    Anger and sometimes violent protests have been staged across Europe against unemployment and austerity measures.  ITN's Emma Murphy reports. 

    Violence breaks out amid austerity protests in Europe

    Fuchtel was appointed by German Chancellor Angela Merkel late last year to explore ways to boost grassroots cooperation between the two countries, and has been lampooned as overbearing in Greek media.

    His comments struck a nerve in Greece at a time when its lenders, the European Union and International Monetary Fund, have demanded layoffs and steep spending cuts in exchange for a second $165 billion bailout.

    More photos: Demonstrations across Europe over austerity measures

    At the Thessaloniki city hall, a woman who answered the switchboard phone said: "No one can talk to you now. They have occupied the building."

    A spokesman for the German Foreign Ministry said: "No one was hurt and there was no material damage. The meeting continues as planned and that's what's important."

    Garbage piles
    Municipal employees have held several nationwide protests and strikes in recent weeks against the new wave of budget cuts, triggering severe disruptions in public transport and causing garbage to pile up across the capital.

    The head of the POE-OTA union of municipal workers, Themis Balasopoulos, said Fuchtel's comments showed the government planned to push ahead with controversial public sector layoffs, about 2,000 of which are scheduled by the end of the year.

    Read more coverage from NBC News about Europe's austerity troubles

    Unions and some politicians oppose the layoffs, which are mainly expected to target local government workers.

    "We are here to express our deep anger at his absurd comments," Balasopoulos told Reuters from the protest in Thessaloniki.

    "We are not a democracy -- we are under German supervision. If we had decent politicians they would have put him on a plane last night and sent him back home," he said.

    Many Greeks, worn down by years of austerity, blame Merkel for forcing the painful cuts in exchange for the bailouts.

    In Germany, media have long characterized the Mediterranean state's 11 million people as lazy, corrupt and ungrateful.

    Tens of thousands of Greeks protested against a visit by Merkel to Athens in October and some burned Nazi flags. 

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    Copyright 2013 Thomson Reuters. Click for restrictions.

    16 comments

    Apparently these Greek public sector workers have never heard the adage, "Don't bite the hand that feeds you."

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    Explore related topics: business, featured, economy, world, germany, greece, euro, austerity, strikes, eurozone, commentid-greece
  • 29
    Oct
    2012
    3:55am, EDT

    Greece riskier for investors than war-torn Syria, survey of experts suggests

    Aris Messinis / AFP - Getty Images

    A woman walks past graffiti in the center of Athens on October 23.

    By The Associated Press

    LONDON -- The world's markets may believe that the worst of the financial crisis in Europe is over after three turbulent years, but those people who control the purse strings of the world's businesses are not breathing any easier.

    An annual survey of finance directors from global business consultancy BDO finds that the crisis over too much government debt in Europe remains one of their key concerns — so much so that Greece is considered a riskier place to invest and set up business in than war-torn Syria.

    Car bomb in Damascus shatters feeble Syria cease-fire

    Only Iran and Iraq are considered more risky than Greece, which also struggles to convince its international creditors that it deserves bailout loans to avoid bankruptcy and a possible euro exit.

    "CFOs are becoming increasingly wary of Southern Europe, parts of which they now see as risky as the politically unstable countries of the Middle East," said BDO chief executive Martin Van Roekel.

    Greece isn't the only country in the 17-country group that uses the euro in the survey's top 10 riskiest countries to invest in. Spain, which even as the eurozone's No. 4 economy with a long-standing relationship with Latin America, stands at No. 7.

    Hate crimes increase, extreme right strengthens as Greece economy sinks

    This reluctance by finance directors, particularly from fast-growing economies such as Brazil and China, to invest in Europe's indebted countries goes to the heart of the financial crisis. A major part of these countries' recovery is dependent on the private sector stepping in to fill the investment gap left by cuts in government spending.

    While countries like Greece and Spain are struggling to convince international business that they are good places to invest, others are prospering. Despite recent signs of slowing down, China is considered the most attractive country for expansion, closely followed by the U.S. Others such as Brazil, India, Germany and the U.K. also feature in the top 10 of countries ripe for expansion.


    Follow @NBCNewsWorld

    PhotoBlog: 'Enough is enough': Striking Greeks clash with police

    Overall, the survey from BDO found that CFOs around the world are finding it more difficult to conduct business abroad. As well as an uncertain global economic situation, they cite increased regulation and greater competition.

    Van Roekel also said he is "surprised" that more finance directors haven't voiced concerns about the heavy debts of countries outside of Europe, notably Japan and the U.S.

    With the Greek unemployment rate at 25 percent, anti-foreigner sentiment is growing. NBC News' Andy Eckardt meets politician Ilias Panagiotaros of the far-right Golden Dawn party and Ali Rahimi, an Afghan national who was attacked by a mob and told to leave Greece.

    Though Japan's debt is worth around double the size of its economy, the country has managed to avoid stoking too many investor concerns because most of its self-financed by its own pension funds.

    The U.S., which has the advantage of having the dollar, the world's reserve currency, has problems of its own and the winner of the presidential election, whoever it is, will soon have to grapple with the "fiscal cliff" — a package of huge tax hikes and spending cuts that will automatically be introduced if the different arms of government don't come to a budget agreement.

    BDO surveyed 1,000 CFOs from medium-sized companies currently planning foreign investment.

    Read more coverage of Greece on nbcnews.com

    Read more economic coverage from bottomline.com

    40 comments

    Whether Syria is a better "risk" than Greece is beside the point. The fact is, few would invest in either country right now. The difference is that once al-Assad is out things may improve for Syria; in Greece, there is nothing to look forward to but years of austerity.

    Show more
    Explore related topics: featured, economy, middle-east, investment, syria, greece, financial-crisis, eurozone
  • 9
    Oct
    2012
    5:37am, EDT

    IMF: Global economic slowdown is getting worse, US must avoid 'fiscal cliff'

    By NBC News wire services

    Updated at 8:30 a.m. ET The International Monetary Fund said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump. 

    Global growth in advanced economies is too weak to bring down unemployment and what little momentum exists is coming primarily from central banks, the IMF said in its World Economic Outlook, released ahead of its twice-yearly meeting, which will be held in Tokyo later this week. 

    "A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," it said. "The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges." 

    Hannbial Hanschke / EPA

    Greek Prime Minister Antonis Samaras receives German Chancellor Angela Merkel at the airport in Athens on Tuesday.

    Meanwhile, German Chancellor Angela Merkel arrived in Greece on her first visit since Europe's debt crisis erupted here three years ago, braving protests to deliver a message of support -- but no new money -- to a country seen by many as a prime example of Europe's ongoing and entrenched economic woes.

    Greece ramps up security ahead of Merkel visit

    Thousands of Greeks defied a ban on protests, gathering in Syntagma square in central Athens as Merkel's plane touched down. Two protesters dressed in German military uniforms waved a red-black-and-white swastika flag and held out their arms in the Nazi salute.  

    PhotoBlog: Merkel greeted warmly by PM, but not by Greeks

    Many Greeks blame Merkel, who is holding talks with conservative Prime Minister Antonis Samaras, for forcing painful cuts on Greece in exchange for two EU-IMF bailout packages totaling over 200 billion euros. 


    Follow @NBCNewsWorld

    Fiscal cliff
    Ahead of the IMF's Tokyo meeting, policymakers have flagged the U.S. "fiscal cliff" -- government spending cuts and tax raises due to take affect early in 2013 -- and resolving the euro area's debt crisis as the top issues facing the global economy. 

    Europe's debt crisis is "a clear and present danger," Canadian Finance Minister Jim Flaherty said last week. 

    In an interview with NBC's Andrea Mitchell, IMF chairwoman Christine Lagarde calls for urgent action from lawmakers to turn around the U.S. economy, saying that the combination of automatic tax hikes and spending cuts poses a major threat to the recovery.

    The IMF forecast that global output in 2012 would grow just 3.3 percent, down from a July estimate of 3.5 percent. 

    That would make this the slowest year of growth since 2009 when the world was struggling to pull out of the global financial crisis. It predicted only a modest pickup next year to 3.6 percent, below its July estimate of 3.9 percent. 

    It projected U.S. growth would be a little more than 2 percent this year and next, but forecast a contraction in the euro area this year by 0.4 percent and modest growth in 2013 of 0.2 percent. 

    Emerging markets are still expected to grow four times as fast as advanced economies, but the IMF took a sharp knife to its estimates for India and Brazil, with the latter now seen growing slower than the United States this year. 

    Households could face average $3,500 tax hit if Congress can't avoid 'fiscal cliff'

    It also cut its expectations for China in 2012 and 2013 but warned against being overly pessimistic about the prospects of these economies, which were major engines of growth in the global financial crisis. 

    "Let me be clear. We do not see these developments as signs of a hard landing in any of these countries," IMF Chief Economist Olivier Blanchard said at a briefing, referring to China, India and Brazil. 

    More at work
    The IMF said "familiar" forces were dragging down growth in advanced economies -- fiscal consolidation and a still-weak financial system, the same problems that have plagued the world since the global financial crisis exploded in 2008. 

    "More seems to be at work, however, than these mechanical forces -- namely, a general feeling of uncertainty," Blanchard said in a commentary on the forecasts. 

    CNBC's Steve Liesman breaks down the data on the IMF's forecast for global growth, including the downside risks from Europe's financial crisis and the U.S. "fiscal cliff."

    Measures of risk and uncertainty remain at low levels, Blanchard pointed out, which makes it difficult to assess the nature of the uncertainty. 

    "Worries about the ability of European policymakers to control the euro crisis and worries about the failure to date of U.S. policymakers to agree on a fiscal plan surely play an important role, but one that is hard to nail down," Blanchard said. 

    The IMF said financial conditions are likely to remain "very fragile" over the near term because repairing euro zone problems will take time and there are concerns about how the U.S. economy will cope with the expected spending cuts and tax increases. 

    Boehner 'not confident at all' fiscal cliff can be avoided

    The "urgent policy priorities" for the United States should include avoiding the fiscal cliff, which the IMF said at the extreme would amount to a fiscal withdrawal of more than 4 percent of GDP in 2013, and economic growth would stall. 

    "Both sides of the political aisle (should) signal that they are willing to compromise and that they're willing to get this done ... that could help lower the level of uncertainty that is affecting U.S. investors and consumers," IMF First Deputy Managing Director David Lipton told Reuters in an interview on Monday. 

    Violent protests in Greece and Spain over tough austerity measures are striking fear in investors. Brian Kelly, JPMorgan Funds; Mark Travis, Intrepid Capital Funds; and CNBC's Michelle Caruso-Cabrera and Rick Santelli discuss.

    Resolving the euro area crisis would require progress in adopting and implementing the various measures discussed, including banking and fiscal union, the IMF report said. 

    "If the complex puzzle can be rapidly completed, one can reasonably hope that the worst might be behind us," Blanchard said. 
    Euro zone finance ministers on Monday unveiled the European Stability Mechanism (ESM), a 500 billion euro rescue mechanism for lending to distressed economies in the 17-country bloc. 

    Merkel Greece visit
    Police have readied 6,000 officers, including anti-terrorist units and rooftop snipers, to provide security during Merkel's six-hour visit. German sites in the Greek capital, including the embassy and Goethe Institute, are under special protection. 

    Merkel was given the red carpet treatment and full military honors at Athens airport. Samaras greeted her with a handshake as she exited the German air force jet. A band played the German and Greek national anthems. 

    In the center of Athens, the reception was less warm. On Syntagma square, banners read "Merkel out, Greece is not your colony" and "This is not a European Union, it's slavery."

    Merkel tries to calm uproar over eurozone plans

    "We don't want her here. Merkel go home!," said Maria Dimitriou, a 40-year-old unemployed woman who travelled to Athens from southern Greece to protest. "They've turned our lives into hell." 

    Many of Europe's leading politicians have avoided official travel to Greece and the risk of a hostile reception, as the debt-saddled country struggled to keep up with commitments needed to guarantee rescue loan payments and long-term euro membership. 

    Greece's respected Kathimerini daily said Tuesday that "no foreign leader should be afraid to come here." 

    Debt-choked Greece looks to sell off islands, marinas

    "Extreme behavior, violence, and exaggerated comments by politicians on TV can achieve nothing to help the unemployed or pensioners and just place the country in a position where it looks bad whatever it does," an editorial said. "Today's visit is crucial and historic. Let us all treat it accordingly." 

    Reuters and The Associated Press contributed to this report

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    225 comments

    i will admit, there is no "short fix" to our own economic straits... however after 4 yrs, we have the same policy that didnt even keep the economy up, improve, just putter along between vacations, photo ops, and campain trails. there is a lot more room for real/reasonable change. lets see the mud fl …

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    Explore related topics: featured, economy, greece, fiscal-cliff, merkel, eurozone, samaras, global-growth
  • 28
    Sep
    2012
    9:16am, EDT

    France wants to slap rich with 75 percent 'super-tax'

    The French officially unveiled a 75 percent super tax-rate for the wealthy, reports CNBC's Robert Frank. The new rate is rumored to affect only about 2,000 people in the country.

    By Daniel Flynn and Leigh Thomas , Reuters

    PARIS - President Francois Hollande's Socialist government unveiled sharp tax hikes on business and the rich on Friday in a 2013 budget aimed at showing France has the fiscal rigour to remain at the core of the euro zone.

    The package will recoup 30 billion euros ($39 billion) for the public purse with a goal of narrowing the deficit to 3.0 percent of national output next year from 4.5 percent this year - France's toughest single belt-tightening in 30 years.

    But with record unemployment and a barrage of data pointing to economic stagnation, there are fears the deficit target will slip as France falls short of the modest 0.8 percent economic growth rate on which it is banking for next year.

    The budget disappointed pro-reform lobbyists by merely freezing France's high public spending rather than daring to attack ministerial budgets as Spain did this week as it battles to avoid the conditions of an international bailout.

    "This is a fighting budget to get the country back on the rails," Prime Minister Jean-Marc Ayrault said, adding that the 0.8 percent growth target was "realistic and ambitious".

    "It is a budget which aims to bring back confidence and to break this spiral of debt that gets bigger and bigger."

    With public debt at a post-war record of 91 percent of the economy, the budget is vital to France's credibility not only among euro zone partners but also in markets which for now are allowing it to borrow at record-low yields around two percent.

    France's benchmark 3.0 percent 10-year bond was steady, yielding 2.18 percent after the announcement.

    The government said the budget was the first in a series of steps to bring its deficit down to 0.3 percent of GDP by 2017 - slightly missing an earlier target of a zero deficit by then.

    But early reactions were sceptical.

    "The ambitions that were flagged are very audacious," said Philippe Waechter at Natixis Asset Management. "I struggle to see how we'll find the growth needed in 2013 and afterwards."

    Of the total 30 billion euros of savings, around 20 billion will come from tax increases on households and companies, with tax rises already approved this year to contribute some 4 billion euros to revenues in 2013. The freeze on spending will contribute around 10 billion euros.

    "Sick" model
    To the dismay of business leaders who fear an exodus of top talent, the government confirmed a temporary 75 percent super-tax rate for earnings over one million euros and a new 45 percent band for revenues over 150,000 euros.

    Together, those two measures are predicted to bring in around half a billion euros. Higher tax rates on dividends and other investments, plus cuts to existing tax breaks are seen bringing in several billion more.

    Business will be hit with measures including a cut in the amount of loan interest which is tax-deductible and the cutting of an existing tax break on capital gains from certain share sales - moves worth around four billion and two billion euros each.

    "The government is impeding investment and so will block innovation," Entrepreneurs Club head Guillaume Cairou said of the preference for raising taxes rather than cutting spending.

    "France is sick because of the model it has ... but is choosing to preserve it."

    Four months after he defeated Nicolas Sarkozy, Hollande's approval ratings are in free-fall as many French feel he has been slow to get to grips with the economic slow-down and unemployment at a 10-year high and rising.

    Finance Minister Pierre Moscovici defended next year's growth target on French radio. But, highlighting the bet on growth underpinning the entire budget, he added that it was achievable "if Europe steadies".

    Data on Friday confirmed France posted zero growth in the second quarter, marking nine months of stagnation, as a pickup in business investment and government spending was offset by a worsening trade balance and sluggish consumer expenditure.

    Despite a rise in wages, consumers - traditionally the motor of France's growth - increased their savings to 16.4 percent of income from 16.0 percent a year earlier. In another setback, other data showed consumer spending dropped 0.8 percent in August.

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    963 comments

    The French are a disgusting lot looking for something for nothing.

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    Explore related topics: economy, taxes, france, eurozone
  • 21
    Sep
    2012
    8:34am, EDT

    Joblessness strikes more young people in Europe's wealthy north

    Eric Vidal / Reuters

    The face of northern Europe's jobless. Youth worker Mostafa Ameziane (L), 31, and unemployed Hamza Ahmadoun, 25, pose for a photograph in Antwerp.

    By Robin Emmott and Robert-Jan Bartunek, Reuters

    ANTWERP, Belgium — At 29, Samira Ahidar just got a permanent job, her first.

    Ahidar, who still lives with her parents, dropped out of school a decade ago and her adult life has been dominated by the search for work. She would still be jobless if it were not for a job creation scheme that employs her at an elderly care home.

    "I've no idea where I'll be in five years time," said Ahidar, dressed in an orange apron that comes with her new role. "It is so hard to find work, you feel like giving up."

    Ahidar does not live in Greece or Spain, countries where as many as one in two young people are without work, but in the wealthy Belgian port city of Antwerp. With its stunning 16th-century Gothic houses, the city is a world centre for diamond trading and boasts a cutting-edge fashion industry. It also has a fast-growing number of unemployed twentysomethings.


    Youth unemployment is notoriously a problem of southern Europe. What is less obvious, as the euro zone slips into its second recession in just three years, is the scale of the problem in the north.

    A quarter of 18-to-25 year olds in Antwerp are now jobless, up from 19 percent in 2008. In some parts of Brussels, the Belgian and European capital and the third-richest region in the European Union, youth joblessness is as high as 40 percent. In France, Britain and Sweden, as many as one in five young people are now out of work.

    The rising pool of jobless youth is fuelling class and racial divisions, according to youth workers and some politicians. Many experts blame joblessness for outbursts of violence such as last year's riots in Britain.

    And today's problem could have a big impact on Europe's future. The continent's labour force is set to decline by 50 million people over the next 50 years, according to the World Bank. Skilled, experienced new workers will be needed to support an ageing population.

    "Young people are being marginalised with major economic consequences," said Francois Robert, a social worker at the employment institute Bruxelles Formation. "The problems people are talking about in Greece and Spain are right outside the European Commission's door in Brussels."

    Vacancies, but no work
    Southern Europe has long struggled with youth unemployment. In Italy, the rate has not dropped below 20 percent in more than two decades, according to the EU's statistics office Eurostat. In Spain, the rate has averaged 30 percent since 1990.

    By contrast, in the United States, youth unemployment is 17 percent, up from just under 12 percent in December 2007. The European exception is Germany, where only 8 percent of young people aged 15 to 24 are out of work, according to the Organisation for Economic Co-operation and Development (OECD).

    It is normal that unemployment goes up in tough times. But worryingly, some of the problems, even in northern Europe, are structural. In Belgium as elsewhere, these include a lack of skills, discrimination and the cushion of welfare payments that approach the minimum wage.

    Belgium has an open, high-tech economy and the world's 12th highest per capita income, but "the education we offer is not always in tune with what the market needs," says Pascal Smet, education minister for Flanders, the northern, Dutch-speaking half of the country.

    The shortcomings have important consequences. The gap between young people's skills and those required by employers means Belgium has one of the highest percentages in the industrialised world of young people who are not in employment, education or training, according to the OECD.

    It's not as if there are no jobs. Flanders, which is home to Antwerp, has a trade-friendly location between Germany's industrial belt and the North Sea that attracts multinationals. In 2011, the number of jobs on offer in the region - excluding temporary agency work — rose 17 percent from the year before. But there were only about three job seekers for every vacancy in March, according to the latest data available - the lowest level since 2000.

    Entrepreneur Frederic Bulcaen says he cannot find the staff he needs for his industrial ventilation company Typhoon, which deploys teams of engineers across Europe to install equipment to keep factories clean.

    "I just hired somebody with a master's in industrial engineering who was able to choose from 10 different companies that all wanted him," said Bulcaen, in an office overlooking stacks of shiny steel pipes and giant motors. "It is very, very difficult."

    Materials engineers are needed in industries such as aerospace and chemicals, but only about 15 of them graduate in Belgium every year, forcing companies to look abroad.

    Wanted: English speakers
    For some young people, basic education is the problem. To work in Brussels, for instance, English is a must-have: the city, often likened to Washington D.C., is packed with embassies, international organisations and industry lobbyists.

    About 36 percent of people in Brussels come from outside the European Union, and there's not much opportunity for monolingual French-speaking children of immigrants. The car plants and factories where they would have found work two decades ago have closed.

    Twenty-four-year-old Michel Ayim is a second-generation immigrant who spends his days with his friend Pierre Bello, smoking cigarettes and listening to French rap in front of the paint-flaked warehouses along Brussels' industrial-era canal. Just a few stops away on the metro are the shiny complexes of the EU institutions, where members of the European Parliament earn 95,000 euros ($120,000) a year plus benefits.

    "I go to a temping agency, but I get turned away because I don't speak good English," said Ayim, who has not had a permanent job since leaving school. "So maybe I work as a waiter for a day, but I can only dream of a good salary."

    Children of immigrants - who mostly came from North Africa - face particular hurdles. One in five people in Belgium are of immigrant origin but people from outside Europe are often poorly integrated, and immigrants rarely fill professional jobs.

    Fewer than half the non-EU immigrants who have yet to obtain Belgian nationality were in a job in May this year, according to a study by the Flanders job agency VDAB.

    "They should have told our parents how important education is and that you have to push your children to get a qualification," said Ahidar, whose parents came from North Africa in the 1960s to work in Belgian industry.

    Some children of immigrants say they are dissuaded from gaining useful skills. Jobless 26-year-old Rashid, whose parents came from Morocco, said his "teachers at primary school used to tell my parents I was a talented and creative student."

    "But when I moved to secondary education, they immediately started telling them I should follow a career in manual labour," he said, sipping mint tea and watching Latin American football in a Moroccan cafe in Antwerp.

    Some Belgian employers also discriminate on race despite laws against it. An investigation by recruitment agency federation Federgon found a third of agencies agreed to send only white Belgians to fill vacancies during the past year.

    One 25-year-old, Hamza Ahmadoun, said he had done around 60 jobs from security to telesales in the six years since leaving school. "I speak Dutch, English and Arabic, but I don't get a chance, it is pure discrimination," he said. "In the morning I get up, I pray and see what the day brings."

    But it is not just the children of immigrants who are struggling.

    Anna De Cock, 24, a white Belgian born in the Netherlands, works sweeping Antwerp's tree-lined avenues as part of another job creation scheme. "I am lucky to be here," she said, dressed in a bulky jump suit and carrying a black broom.

    De Cock wanted to become a chef and took jobs washing dishes in dark, back-alley kitchens, but was unable to find steady work, lost interest and stopped showing up.

    Stuck on welfare
    Then there's the issue of unemployment benefits in northern Europe, which for a single young person are more than double that of the United States. Belgium is even more generous than that.

    A Belgian school leaver with a diploma can receive benefits of around 900 euros ($1,200) a month after a year of unemployment. The minimum wage of 1,400 euros a month before tax, which De Cock earns, is one of the world's highest.

    After deductions, there's only about a 150-euro difference between unemployment benefit and the pay for low-skilled work, said Peter Stappaerts, director of Werkhaven, a job scheme in Antwerp. "So unfortunately it is easier to stay home and collect benefits." On top of this, young mothers have an added disincentive: to work, they have to pay for childcare.

    Over the past year, riots in Britain and France have been linked with the frustration of unemployment. There has also been rioting in Antwerp and Brussels. Earlier this year, protesters hurled bins and metal barriers at a police station in a poor area of Brussels after a Muslim woman was arrested for refusing to remove a face veil, banned in Belgium.

    "We are looking at the emergence of a generation of young people who have always been unemployed," said Patrick Manelickx, the head of Brussels-based youth centre JES that trains youngsters and tries to get them into work.

    "There is a feeling of frustration, of anger among many of them, that they don't have a future," he said.

    The European Commission is pushing the bloc's 27 countries to set up schemes to offer training or further study to any young person who does not find a job within four months of leaving school. Some countries have set aside funds to support this.

    Governments elsewhere have moved to reform benefits or education, and encourage youth employment with lower taxes and less job security. In France, the government is fast-tracking a job-creation scheme.

    But Belgium is forcing through around 13 billion euros in budget cuts this year and says it cannot afford such a plan, although it may reform its education system. Flanders' education minister Smet wants to make unemployment benefits dependent on trying to find work or study. "I am all for solidarity in our society," he said. "But you can't have something for nothing."

    Ahidar's new job as a driver gives her hope of starting her own taxi business ferrying Antwerp's elderly about. But she cannot get bank financing.

    "I had the character to keep looking for work," Ahidar said. "Others didn't and ended up in crime, and the job situation is so bad that you start to understand why."

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    46 comments

    thats the problem, people use safety nets as you speak and they get out. why! because why should you work when the government will pay you, no brainer!

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  • 16
    Aug
    2012
    6:05am, EDT

    Spain's 'Robin Hood' mayor on march, sparks outrage after supermarket heists

    Jon Nazca / Reuters

    Marinaleda's Mayor and Izquierda Unida parliamentarian, Juan Manuel Sanchez Gordillo, 59, gestures as he speaks during a popular assembly in Marinaleda, southern Spain, Thursday.

    By NBC News and wire reports

    A Spanish mayor who became a cult hero for staging supermarket robberies and giving stolen groceries to the poor on Thursday began a three-week march that looks set to embarrass the government and energize anti-austerity campaigners. 

    Juan Manuel Sanchez Gordillo, regional lawmaker and mayor of the town of Marinaleda -- population 2,645 -- in the southern region of Andalusia, said food stolen last week in the robberies went to families hit hardest by Spain's economic crisis. 


    About 1,000 marchers set out from the town of Jodar - the town with Andalusia's highest unemployment rate - intending to walk across the region in blistering summer heat to persuade other local leaders to refuse to comply with government reforms, deputy mayor Esperanze Saavedra told NBC News.

    "We want the government to be sensitive to us and think more about those who are suffering than about the banks," Saavedra said.

    He plans to tell mayors to skip debt payments, stop layoffs, cease home evictions and ignore central government demands for budget cuts, a message that infuriates Prime Minister Mariano Rajoy's government as it tries to convince investors in Spanish bonds that he can fix the battered economy. 

    Sanchez Gordillo and those working with him say they wants to draw attention to the human face of Spain's economic mess - poverty levels have risen by over 15 percent since 2007, a quarter of workers are jobless and tens of thousands have been evicted from their homes. 

    Spain's economic crisis turns middle-class families into illegal squatters

    Media coverage of the supermarket stunt has made Sanchez Gordillo a national celebrity. While talking to Reuters he was approached by supporters who shook his hand and thanked him for his stand against the conservative government.

    "There are people who don't have enough to eat. In the 21st century, this is an absolute disgrace," he told Reuters this week in an interview in the Atocha train station in Madrid, tugging on his graying Fidel Castro-style beard. 

    Seven people have already been arrested for participating in the two supermarket raids, in which labor unionists, cheered on by supporters, piled food into supermarket carts and walked out without paying while Sanchez Gordillo, 59, stood outside. 

    He has political immunity as an elected member of Andalusia's regional parliament, but says he would be happy to renounce it and be arrested himself. 

    Economic troubles
    Unemployment in Spain is the highest in at least 30 years, with almost one in four of the population out of work, with one worker in three in Andalusia being jobless. Over half of young people are out of work.

    Meanwhile, Rajoy has sought a 100-billion-euro ($125 billion) bailout for the country's banking system. In mid-July, the government also unveiled a new round of cuts intended to trim 65 billion euros from the public deficit by 2014 and help Spain avoid seeking the kind of full-scale bailout that Greece, Ireland and Portugal have taken in the last two years.

    Cristina Quicler / AFP - Getty Images

    Juan Manuel Sanchez Gordillo (C), mayor of Marinaleda and member of the regional Andalusian parliament representing the United Left (IU) party, talks with activists on August 8.

    The EU has demanded Spain shrink one of Europe's highest budget deficits to prevent the continent's debt crisis from spreading. Rajoy, in power since December, has ordered spending cuts and tax hikes. With poverty rising at one the fastest rates in Europe, protests have gained momentum.  

    Sanchez Gordillo's activities have garnered praise from some who in Spain, but prompted a storm of criticism from other quarters. 

    The conservative government says an official has no business flouting the law. 

    "You can't be Robin Hood and the Sheriff of Nottingham," said Alfonso Alonso, spokesman for the ruling People's Party (PP) in the national Parliament. "This man is just searching for publicity at the cost of everyone else." 

    Despite the small size of the town where he has been mayor for 30 years, Sanchez Gordillo has long been a fringe figure on the national stage, known for criticism of the mainstream political parties. 

    He has introduced a cooperative farming system in Marinaleda and has repeatedly tried to take over land for farming, the latest target being 1,200 hectares of land owned by the Ministry of Defense. 

    His message used to draw only a small following during Spain's boom years when many farm workers, especially in agricultural Andalusia, abandoned fields to work in the profitable construction sector. 

    But now he has won far more attention as the collapse of a housing bubble forced thousands of unskilled workers back onto farms, while the government sank billions of euros of taxpayer funds into weak banks. 

    "They say I'm dangerous. And the bankers who are let off for fraud? That's not dangerous? The banks which borrow from the ECB for 1 percent then resell that debt to Spaniards for 6 percent - they're not dangerous?" he said.

    Reuters contributed to this report.

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    142 comments

    Socialism does not work. It never has worked and it never WILL work. What is going on in Europe is the end result of years and years of a socialistic mindset. You just cannot operate a country based on the notion that the government will take care of you no matter what. If you do, eventually, people …

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  • 26
    Jul
    2012
    2:50pm, EDT

    Spanish leader says country can cover its bills

    By Blanca Rodriguez, Reuters

     MADRID -- Spain's Economy Minister Luis de Guindos said on Thursday the Treasury would meet debt redemption payments and said that government coffers were in the same liquidity position as last year.

    "In the medium and long term. Spain is solvent and able to pay its high debts. In the short-term, we have the capacity to meet our obligations," de Guindos said at an event in Madrid.

    The economy minister also said he had never believed there was even the remotest possibility that Spain would need a bailout.

    Comments by the European Central Bank President Mario Draghi's that the bank would do whatever necessary to protect the euro zone from collapse were well timed, de Guindos said.

    Draghi's pledge on Thursday fuelled expectations the ECB was ready to take bolder action to combat the euro zone debt crisis and brought Spanish 10-year bond yields down by 40 basis points on the day.

    11 comments

    Sounds to me there was a secret bailout involved. Sounds to me like you are in desperate need of the mental health services that fortunately will be covered under ObamaCare. Question is was it US tax payer money.

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  • 11
    Jul
    2012
    6:37am, EDT

    'This is reality': Spain slashes spending, raises taxes in $79B austerity plan

    Paul Hanna / Reuters

    An injured protester shouts as she is detained by riot police during clashes between supporters of Spanish coal miners and riot police in Madrid on Wednesday.

    By msnbc.com staff and news services

    MADRID -- Spain announced a 65 billion euro ($79.85 billion) austerity package that includes tax hikes and spending cuts on Wednesday, a day after it won approval from its euro partners for a huge bailout of the country's stricken banks.

    Prime Minister Mariano Rajoy told parliament the country's future was at stake as Spain grapples with recession, a bloated deficit and investor wariness of its sovereign debt. He said the nearly $80 billion in savings will be achieved through 2015 by a hike in sales taxes and a series of spending cuts through 2015.

    "We are living in a crucial moment which will determine our future and that of our families, that of our youth, of our welfare state," Rajoy said. 


    "This is the reality. There is no other and we have to get out of this hole and we have to do it as soon as possible and there is no room for fantasies or off-the cuff improvisations because there is no choice," he added.

    Spain's economic crisis turns middle-class families into illegal squatters

    Spain's unemployment rate is more than 24 percent overall and 50 percent for young people. 

    "What motivates us is the five million people out of work," the BBC News quoted Rajoy as saying.

    Wednesday's increases in sales tax include a hike to 21 percent on products and services like clothing, cars, cigarettes and telephone services to 21 percent, and increase to 10 percent on goods such as public transport fares, processed foods and bar and hotel services. The sales tax on basic goods like bread, medicine and books stays at four percent.

    The increases were widely expected but go against campaign pledges Rajoy made before he was elected in November and since he came to power.

    PhotoBlog: Spanish miners converge on Madrid after long march over cuts

    Other measures outlined Wednesday included:

    • further cuts in government spending beyond the reductions already outlined in the 2012 budget
    • wage cuts for civil servants and members of the national parliament
    • further closures of state-owned companies
    • tax deductions for homeowners to be scrapped
    • a 30 percent cut in the number of town councilors
    • changes to unemployment benefits designed to encourage jobless people to seek work quickly.
    • 20 percent cut in government subsidies to political parties and labor unions.

    Spain issued $3.2 billion in bonds today, at the top end of the country's targeted amount. Still, that isn't enough to calm global fears about a European crisis domino effect. Lorenzo Bill Smaghi, former member of the ECB executive board, offers insight.

    Deadline to meet targets extended
    On Tuesday, eurozone ministers agreed to grant Spain an extra year until 2014 to reach its deficit reduction targets in exchange for further budget savings and set the parameters of an aid package for Madrid's ailing banks.


    Follow @msnbc_world

    The decisions were aimed at preventing the currency area's fourth largest economy, mired in a worsening recession, from needing a full state bailout which would stretch the limits of Europe's rescue fund and plunge it deeper into a debt crisis.

    "The Eurogroup supports the recently adopted Commission recommendation to extend the deadline for the correction of the excessive deficit in Spain by one year to 2014," ministers said in a statement.

    Emotions run high as eviction leads to protest in northern Spain

    No final figure was agreed for aid to ailing Spanish lenders, weighed down by bad debts due to a housing crash and recession, but the EU has set a maximum of 100 billion euros ($123 billion) and some 30 billion euros would be available by the end of July if there was an urgent need.

    A final loan agreement will be signed on or around July 20, Eurogroup chairman Jean-Claude Juncker told a news conference.

    PhotoBlog: Faces of Spain's economic crisis

    In one key decision closely watched by investors, ministers agreed that once a single European banking supervisor is set up next year, Spanish banks could be directly recapitalized from the euro zone rescue fund without requiring a state guarantee.

    That fulfils an EU summit mandate to try to break a so-called "doom loop" of mutual dependency between weak banks and over indebted sovereigns, but represented a climb-down for hard-line north European creditor countries.

    The Eurozone remains in a delicate balance as the financial crisis in both Greece and Spain threaten to take down their European partners. How will the financial troubles abroad affect the presidential election in November? Parag Khanna, co-author of "Hybrid Reality," joins the Melissa Harris-Perry panel to discuss.

    In a nine-hour marathon meeting ministers of the 17-nation eurozone also settled a series of long-delayed appointments.

    As ministers were meeting, a top ECB policymaker warned that Europe's debt crisis was now more acute than the 2008 financial turmoil that felled U.S. investment bank Lehman Brothers.

    "The eurozone crisis is now much more profound and more fundamental than at the time of Lehman," ECB Executive Board member Peter Praet told a conference in Lisbon.

    The Eurogroup ministers were tasked with fleshing out a bare-bones agreement reached by EU leaders at a summit last month on establishing a European banking supervisor and using the bloc's rescue funds to stabilize bond markets.

    But differences persisted between north European countries such as Finland and the Netherlands and southern states led by Italy and Spain.

    Msnbc.com staff, Reuters and The Associated Press contributed to this report.

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    772 comments

    socialism DOESN'T work

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  • 25
    Jun
    2012
    1:35pm, EDT

    Designated Greek finance minister resigns

    Louisa Gouliamaki / AFP - Getty Images

    This file photo taken on June 21, 2012 shows newly appointed Greek Finance Minister Vassilis Rapanos attending the new Government's first cabinet meeting at the Greek Parliament in Athens.

    By msnbc.com staff and news wires

    Vassilis Rapanos, Greece's finance minister-designate, resigned Monday after being hospitalized for several days even before he could be sworn in to what would likely be one of the more thankless jobs in international finance.

    The office of Greek Prime Minister Antonis Samaris said it accepted Rapanos' resignation after receiving a letter from the ailing official, who is 64. Rapanos had been rushed to the hospital Friday after complaining about dizziness and abdominal pains. He was to be released from hospital on Tuesday, but no further details were available.

    His resignation tosses a monkey wrench, for now, into Greek plans to renegotiate the crippling austerity program it agreed to in exchange for aid to prop up its debt-burdened economy. 

    Samaras himself was released from hospital Monday after undergoing eye surgery to repair a detached retina over the weekend, but will have to stay home for several days.

    Rapanos' resignation came as Germany tamped down expectations that this week's European Union summit Thursday and Friday would emerge with any significant action on Greece.

    The EU summit comes just a week after Greece's new coalition government was formed following months of political turmoil and two inconclusive elections. It was to have been a key test of Athens' hopes of renegotiating some of the austerity measures it has agreed to in return for billions of euros in rescue loans from the International Monetary Fund and other European Union nations that use the joint euro currency.

    It was to have been preceded by a visit to Athens starting Monday of Greece's debt inspectors, known as the Troika — representatives from the European Commission, the European Central Bank and the IMF. But that visit was postponed until Samaras can recover.

    Without the troika report on Greece's progress in economic reforms required by its international bailout, Germany said it would be premature to expect any new decisions this week. Samaras has been pressing Greece's creditors to revise the bailout deal, which is despised by many ordinary Greeks.

    Greece will still be present at the EU summit, sending a delegation with outgoing Finance Minister Giorgos Zanias, one of the key negotiators in Greece's bailout agreement. As Rapanos fell ill before he could be sworn in, Zanias still holds the title.

    And the delegation will be led by the country's president, 83-year-old Karolos Papoulias, the government announced Monday. While the presidency in Greece is a largely ceremonial post, his presence would adhere to EU regulations about summits.

    It was unclear when the postponed troika visit would take place.

    "First, our concern is for the health of the prime minister and finance minister," European Commission spokesman Amadeu Altafaj Tardio said in Brussels, adding that debt inspectors would head to Greece "as soon as possible."

    Samaras' government, comprised of his New Democracy conservatives, their long-time socialist rivals PASOK and the small Democratic Left party, has issued a policy statement outlining changes it would like to make to the terms of its international bailout. Those include repealing certain tax hikes, freezing public sector layoffs and extending by two years the mid-2014 deadline for tough austerity measures.

    Whether Greece can amend the terms of its loan agreement will depend on how the proposals are viewed by its international creditors. Germany, the largest single contributor to eurozone bailouts, has repeatedly said Athens must stick to its austerity pledges.

    "One thing is clear," German Foreign Minister Guido Westerwelle said from Luxembourg. "We cannot allow everything to be negotiated again. We can also not allow discounts to be granted. What has been decided upon stands. That the (Greek) election campaigns have cost time is obvious. That's the situation and we have to deal with it. But the fact remains that the agreements must be implemented."

    Seibert also stressed that Greece must stick to its commitments.

    "A program has been agreed upon, a program goes for every government, no matter if it's a new government, and the program is the best way to see Greece return to economic health," he said.

    In Brussels, Altafaj Tardio also stressed that "Greece has to face its financial obligations," adding that before any further funds can be disbursed "there has to be a thorough analysis."

    "It's no secret that there have been delays in several areas of implementation," he added.

    The latest figures released by the finance ministry Monday showed that Greece's budget deficit for the first five months of the year was better than expected, standing at €10.87 billion ($13.63 billion) instead of the target of €12.89 billion ($16.17 billion) on a modified cash basis.

    Revenue, however, was below target with the state budget net revenue standing at €19.67 billion ($24.56 billion), €926 million ($1.15 billion) short of the targeted €20.6 billion ($25.73 billion), due in part to lower domestic consumer demand and lower tax revenues.

    The ministry said "this revenue shortfall was more than compensated for by the savings in State Budget expenditures for the first five months of 2012."

    Reuters contributed to this report.  

    CNBC's Michelle Caruso-Cabrera reports that Greece's finance minister will resign. And Greece hopes to name a new finance minister today or tomorrow.

    21 comments

    Of course he resigned. He looked at the books and got sick. He doesn't want to be in charge of that mess. Expect more to come, like rats from a sinking ship.

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  • 11
    Jun
    2012
    2:11pm, EDT

    Germany grows weary of being Europe's crutch

    John Schoen / msnbc.com

    "Everyone is ready to help the big banks. For small people like me there is nothing," Janusz Michalak, a carriage drver in Berlin, says.

    By John W. Schoen, NBC News

    BERLIN -- It’s a busy day on the Pariser Platz, except for the carriage drivers who ply their trade taking tourists for rides through Berlin's central park.

    While throngs of out-of-towners are having their pictures taken in front of the Brandenberg Gate in the heart of Germany’s capital, business is slow for drivers like Janusz Michalak.

    The tourists from Spain, Portugal and Greece, he said, haven’t got five euros to spare for a ride through the Tiergarten. But somehow, he said in disgust, the German government has money to bail out banks in Spain.

    “It’s a black hole,” he said, as his horses stood in a line of carriages that weren’t moving. “Everyone is ready to help the big banks. For small people like me there is nothing. But it’s the people’s money.”

    Is the global economy at risk, and how can we avoid a financial tsunami? Robert Zoellick, World Bank president, shares his opinions.

    For the fourth time since the euro crisis began unwinding three years ago, Germany is playing the lead role and providing critical support for the latest -- and by the far the largest -- European bailout plan. This time, European finance officials have agreed to put up 100 billion euros ($125.1 billion) to backstop Spain’s banks after investors and depositors began fleeing several weeks ago and new sources of funding dried up.

    As Europe’s largest -- and still growing -- economy, German support is essential for the latest in a three-year series of stopgap measures to stem the widening debt crisis and deepening recession. 

    But Germany seems on the verge of catching a bad case of bailout fatigue. Opinion polls are beginning to show waning support from voters and taxpayers for their reluctant role as the defender of the 20-year experiment in monetary union known as the euro. Now, as the common currency is producing increased pressure along multiple economic fault lines in the weaker southern economies, the German people are growing weary.

    German newspapers reacted skeptically to the latest stopgap measure to help Spain. The mass-circulation Bild tabloid warned "the Spanish patient will also need more help than a one-off capital injection." The Mitteldeutsche Zeitung called it a costly "sedative" and highbrow Die Welt expressed similar doubts that the Spanish aid would stop the rot in the eurozone, despite a positive initial response in financial markets.

    "Politicians are once again showing such great optimism that they are closer to solving the problems that the citizens, most of whom have already become skeptics, are even more suspicious," Die Welt wrote.

    After two years of multiple rounds of haggling between Germany and Greece, austerity measures imposed by Berlin as a condition for aid brought down the Athens government that agreed to those terms. The looming Greek elections June 17 have heightened fears that Greek voters will again reject Germany’s terms and leave the monetary union. Opinion polls show voters deadlocked on the issue.

    European financial officials and economists generally believe the effects of such a departure, though extremely painful for Greeks, could be manageable for the eurozone at large. But Spain’s banking system, which holds hundreds of billions of euros worth of debt issued by Madrid and other European governments, would create a financial shock an order of magnitude larger than the collapse of Greece.

    The scope of the recent aid proposal for Spain, the fourth-largest economy in the 17-country eurozone, has heightened concerns voiced by rank-and-file Germans that the plan may be simply throwing good money after bad. There is no mechanism like the U.S.'s Federal Deposit Insurance Corporation's "resolution" powers, for example, to close down a bleeding bank to stem the losses. The risk is that the aid package simply keeps insolvent “zombie“  banks on indefinite and costly life support.

    It’s also far from clear whether 100 million euros will be enough to stop the bleeding from the quiet "run" recently on Spanish banks. According to the latest data available, a record 66 billion euros fled Spanish banks for safer havens in May.

    Spain’s banks are coping with two types of deteriorating assets. The first is a flood of mortgages that went bad in a U.S.-style housing bust that still hasn’t run its course.

    Spain's banks are also on the hook for a large pile of Spanish government debt that is deteriorating in value daily as investors bail out of Spanish bonds. As their assets have dwindled, the banks, once a major source of funding for the Spanish government, have pulled back. That’s left the government with fewer buyers for its fresh debt.

    Fitch Ratings cut long-term credit ratings for two of Spain's largest banks, Banco Santander and Banco Bilbao Vizcaya Argentaria, on Monday amid concerns that Spain's economy, which is in its third year of contraction, will remain in recession until 2013. The country's unemployment rate is 25 percent.

    Though Spanish officials have taken pains to insist that the latest bailout is directed toward banks, and not the government itself, many economists say the financial crisis facing the two are inextricably intertwined.

    That’s left the government and the country's lenders in a futile effort to prop each other up, Nobel Prize-winning economist Joseph Stiglitz told Reuters.

    "The system ... is the Spanish government bails out Spanish banks, and Spanish banks bail out the Spanish government," Stiglitz said.

    Initially, at least, stock markets rallied Monday on the announcement late Sunday that the bank bailout deal had been struck. But the euphoria was short-lived because it may have been less a sense of relief that the euro crisis has been averted than a belief that the coming large infusion of cash will spill over into stocks.

    The longer-term impact of the deepening recession in southern Europe is already being felt on Germany’s heavily export-driven economy, which has seen a sharp slowdown in industrial production in the past few months as demand weakens from its trading partners, including China.

    Now, as Germany’s unwelcome role as Europe’s crutch appears to be expanding once again, some economists here are questioning whether it has the financial resources to successfully “ring fence” weaker economies and continue to maintain its own prosperity.

    "If we keep shifting the capital abroad, than there is less capital to invest at home," said Steffen Henzel, an economist with the IFO Institute in Munich.

    Gemany’s reluctance to fund the continent's financial fire brigade is also deeply rooted in the flawed compact that created a common currency without the political infrastructure to enforce borrowing and spending discipline among its member states.

    “Imagine if you were to expect from the U.S. to take over a guarantee of Mexican public debt,” said Friedrich Heinemann, an economist at the Centre for European Economic Research in Mannheim. “The U.S. would never do that. In a way, southern Europe expects some of this sort of help from Germany."

    Though Merkel has recently led discussions setting forth a framework for that political union, it would take year to implement. Europe doesn’t have that much time.

    The Frankfurter Allgemeine Zeitung worried aloud that Germany was getting soft on the kind of strict conditions imposed on Greece in exchange for financial aid. "Italy will also be happy to take money without tough conditions and Ireland may demand that its conditions be softened retroactively," it said.

    Greece itself hinted Monday that it would like more lenient terms for its rescue plan. But Greece is not Spain; Spain's economic size alone gives it more leverage.

    In the end, though, loss of popular support in Germany may not alter the outcome of the eurozone crisis, according to Roger Nightingale, economist at RDN Associates

    “I don’t think it helps even if the Germans are behind it,' he said. “ I don’t think it helps if the Americans and the Chinese and the Japanese are behind it. They're tackling the wrong problem. The problem is not the Spanish banks. The problem is the weak economy.”

    538 comments

    Well, isn't this all part of the take from the rich and give to the poor that Obama calls redistribution only on a national basis? Awwww...you mean this isn't working for the rich countries? Color me shocked!

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    Explore related topics: europe, economy, germany, spain, euro, eurozone
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John W. Schoen

John W. Schoen has reported and written about business and financial news for more than 30 years. He began his career as a newspaper reporter and editor in Connecticut, moving to Dow Jones as radio newscaster and writer for The Wall Street Journal. As a reporter for the CBS Radio Network and public radio's Marketplace, he covered Wall Street's insider trading scandals and the Crash of '87. He joined CNBC several months before it went on the air i …

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