Positive perception of the EU in Slovakia

Slovaks are glad that Slovakia is a member of the European Union and five years after joining the EU most Slovaks trust its institutions, but do not want to engage in its activities or express their opinion on EU issues, according to a survey by the Focus agency, the main reason seems that most slovaks want more information and they don't feel knowledgeable enough.

Almost 80 percent of Slovaks think that we are profiting from being in the EU. They are interested in how much they get from EU funds, but also issues like social problems, health legislation and pension legislation of the EU states. Andrea Elschekova-Matisova, head of the Slovak representation of the European Commission to Slovakia, said that the survey shows that Slovaks feel like euro citizens and they would appreciate more information.

Eight out of ten respondents suggested information about the EU to be a part of teaching curriculum at high schools, while seven out of ten respondents were convinced that public media, mainly Slovak television, should report more on the situation in other EU states. Only 14 percent of respondents claimed that the situation in the EU does not interest them, while 61 percent of respondents could

Tax changes coming - budget neutral

Robert Fico seems to want to change how the weight of funding the budget are spread among taxpayers. He seems to want to reduce retail taxes and shift the burden onto the banks who have had record profits.

Tentative signs of a reduction in VAT (retail taxes/indirect taxes) along with the abolition of one tax rate fits all were discussed by the Prime Minister of Slovakia Robert Fico recently.

The very rough translation is that he favours a reduction of value added tax (VAT), but with the condition that a progressive income tax would replace the current flat rate.

"I am ready to do so," said the Prime Minister on Thursday in a speech.

Fico also agrees with the reduction in excise duty on fuel, subject to the introduction of additional taxes on banks and the privatized companies.

"The only way to combat the world financial crisis is solidarity - international and domestic. Everyone must contribute in some way and we will do everything possible to maintain a civilised social standard in 2009"Fico noted.

The government he will not tax benefits, contributions or gifts at birth of a child (tradition in Slovakia), or impose other such burdens.

"I'm sorry to say there that there is no way to change the Labour Code, to reduce labour taxes and levies given the situation" said Fico. The government of Robert Fico is ready if necessary to allocate additional resources to mitigate the impact of economic crisis on the Slovak economy, and is continuing the checks of public spending for areas of additional cuts.

"I am glad that our people are no longer just cheap workforce. I am glad that there are other factors we can offer foreign investors. Slovakia's notable political stability, Schengen membership, the euro, the good business environment, a skilled workforce with progressive values and a strong work ethic, are important for attracting investors to the territory of Slovakia," said Fico .

Meanwhile in Obama's USA...

Poverty as a mass phenomenon is back. The statistics are starkly different to europe.

About 50 million Americans have no health insurance, and more people are added to their ranks every day.

More than 32 million people receive food stamps

13 million are unemployed

The homeless population is growing in tandem with a rapid rise in the rate of foreclosures, which were 45 percent higher in March 2009 than they were in the same month of the previous year.

steps necessary to solve the crisis

The following are the steps regarded as necessary by Germany's top governmental economic adviser Herr Sinn to get out of the mess we are in.

The necessary steps are as follows:

  1. The USA must finally participate in international agreements on the harmonisation of banking supervision. These agreements can be based on the Basel-II system, which must be under government control.
  2. Europe needs a common system of financial supervision. Every state must pay for the losses of its own banks.
  3. Investment banks, hedge funds and private equity firms must be subjected to the same rules as commercial banks.
  4. Personal liability limitations for mortgages and other real-estate loans must be lifted in the US and wherever else they exist.
  5. Conduits and other constructs for the shifting of investment banking business from the bank balance sheets should be limited in such a way that the risks that the banks take on are transparent in the bank balance sheets.

Free market advocates that argue against these remedies, without which a market economy cannot survive, confuse the market economy with anarchy. The market economy can only function when it is subjected to traffic regulations. Civil codes in many countries are full of rules that limit private contracts. Only a portion of the contracts that an uncontrolled market economy would develop is allowed, and because of this the system functions. Europe and the world need stricter rules for financial traffic. Such rules do not constitute a systemic break. They are vital for the functioning of the financial capital markets.

we are all this bear, we need to turn much more to cooperation rather than competition for future prosperity

The spending power of Slovak citizens rises by 20%

The spending power of Slovak citizens rose by 20 percent for the whole of 2008,far more than in its three Visegrad. Four neighbours, according to the GfK research company. The figure in euros was 6,102 euros per person, or 184,000 Slovak crowns, including state benefits and pensions. The figures place Slovakia in 26th position out of all 41 European states, the agency said. Poland saw an increase in its citizens’ spending power of 13 percent, the Czech Republic 12 percent, and Hungary just two percent.

The Czech Republic ranked 23rd and Slovenia 21st. Lichtenstein
occupied first place, and Luxembourg and Switzerland second and third, with Moldova at the bottom of the ladder.

This confirms the rise of Slovakia to the status of an average EU country in terms of wealth and prosperity.

Global trends of the last year neatly summarised

This posting contains some work by Scott Adams's Dilbert which pretty much defines what has and is going on for the last year or so in the most important areas of life...

plus Nobel winning economist Paul Krugman on what happened to the middle class

on Eastern Europe (Russia, Ukraine) and Central europe (Austria, Slovakia, Czech republic etc)

The conclusion seems to be that despite the strong fundamentals and the sound underlying economy the huge disruption in western europe is oging to leave central european countries with zero or slightly negative growth... Bad but not terrible...

tellBarroso.eu! and european economic recovery in 2010

I came accross this initiative of the EU who wants to hear what you want the EU to do in the future. Its quite bried and open.
check out tellBarroso.eu!

How can the EU improve your life?

In an effort to respond to European citizens opinion and priorities, tellBarroso.eu offers you the opportunity to participate in European decision making and constructing the future.

José Manuel Barroso

European Union recovery and the likelihood of this happening soon
by the top economist of Deutsche Bank

James Baker on the crisis and how to bail banks on the USA

Some interesting quotes:

"The situation is much more serious than any other financial crisis since the end of World War II."
George Soros

"I no longer believe in the self-healing power of the market."

Josef Ackermann,
CEO of Deutsche Bank

Quotes and calls that have proven very wrong

"One thing is for certain, we're in challenging times. But another thing is certain: We've taken strong, decisive action. ... The United States is on top of the situation."
March 17, 2008

George W. Bush,
then President of the United States (and monkey extraordinaire)

"There will probably be some bank failures. There are some small ... banks that have heavily invested in real estate in locales where prices have fallen. Among the largest banks, the capital ratios remain good, and I don't expect any serious problems among the larger banks."
February 28, 2008

Ben Bernanke,
Chairman of the Federal Reserve

"The outlook for the 2008 budget is excellent."
March 19, 2008

Angela Merkel (CDU),
German Chancellor, according to a spokesperson

"I am not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years."
March 31, 2008

Henry Paulson,
then US Treasury Secretary, according to a speech manuscript

James Baker's take

How Washington can prevent ‘zombie banks’

By James Baker

Published: March 1 2009 19:38 | Last updated: March 1 2009 19:38

Beginning in 1990, Japan suffered a collapse in real estate and stock market prices that pushed major banks into insolvency. Rather than follow America’s tough recommendation – and close or recapitalise these banks – Japan took an easier approach. It kept banks marginally functional through explicit or implicit guarantees and piecemeal government bail-outs. The resulting “zombie banks” – neither alive nor dead – could not support economic growth.

A period of feeble economic performance called Japan’s “lost decade” resulted.

Unfortunately, the US may be repeating Japan’s mistake by viewing our current banking crisis as one of liquidity and not solvency. Most proposals advanced thus far assume that, once confidence in financial markets is restored, banks will recover.

But if their assumption is wrong, we risk perpetuating US zombie banks and suffering a lost American decade.

Evidence – a mountain of toxic assets, housing market declines, a sharp economic recession, rising unemployment and increasing taxpayer exposure through guarantees, loans, and infusion of capital – strongly suggests that some American banks face a solvency problem and not merely a liquidity one.

We should act decisively. First, we need to understand the scope of the problem. The Treasury department – working with the Federal Reserve – must swiftly analyse the solvency of big US banks. Treasury secretary Timothy Geithner’s proposed “stress tests” may work. Any analyses, however, should include worst-case scenarios. We can hope for the best but should be prepared for the worst.

Next, we should divide the banks into three groups: the healthy, the hopeless and the needy. Leave the healthy alone and quickly close the hopeless. The needy should be reorganised and recapitalised, preferably through private investment or debt-to-equity swaps but, if necessary, through public funds. It is time for triage.

To prevent a bank run, all depositors of recapitalised banks should be fully guaranteed, even if their deposit exceeds the Federal Deposit Insurance Corporation maximum of $250,000 (€197,000, £175,000). But bank boards of directors and senior management should be replaced and, unfortunately, shareholders will lose their investment. Optimally, bondholders would be wiped out, too. But the risk of a crash in the bond market means that bondholders may receive only a haircut. All of this is harsh, but required if we are ultimately to return market discipline to our financial sector.

This is not a call for nationalisation but rather for a temporary injection of public funds to clean up problem banks and return them to private ownership as soon as possible. As president Ronald Reagan’s secretary of the Treasury, I abhor the idea of government ownership – either partial or full – even if only temporary. Unfortunately, we may have no choice. But we must be very careful. The government should hold equity no longer than necessary to restructure the banks, resume normal lending and recoup at least a portion of taxpayer investment.

After replacing bank management with new private managers, the government should have no say in banks’ day-to-day operations.

The FDIC can assist. Just this year, it has placed more than a dozen American banks – admittedly all small – into receivership. We might also consider setting up something akin to the Resolution Trust Corporation, created in 1989 to liquidate the assets of failed savings and loans. The RTC eventually disposed of almost $400bn in assets of more than 700 insolvent thrifts.

To avoid bank runs and contain market disruption, the Treasury should announce its decisions at one time. Washington will also need to co-ordinate its actions with other major capitals, especially in western Europe and east Asia. At best, this will encourage other countries to take similar steps with their own banking systems. At a minimum, other governments can prepare for the financial turmoil associated with the announcement.

This approach is not pretty or easy. It will cost a lot of money, with the lion’s share coming from US taxpayers, at least in the short to medium term. But the alternative – a piecemeal pumping of more public money into insolvent banks in the vague hope that things will improve down the road – could truly be historic folly.

Eventually our banks and economy will start to recover. When they do, we would be wise to avoid another Japanese mistake – raising taxes. To counter mounting debt created by government stimulus packages, Japan increased taxes in 1997. Consumption dropped and the country’s economy collapsed.

Our ad hoc approach to the banking crisis has helped financial institutions conceal losses, favoured shareholders over taxpayers, and protected senior bank managers from the consequences of their mistakes. Worst of all, it has crippled our credit system just at a time when the US and the world need to see it healthy.

Many are to blame for the current situation. But we have no time for finger-pointing or partisan posturing. This crisis demands a pragmatic, comprehensive plan. We simply cannot continue to muddle through it with a Band-Aid approach.

During the 1990s, American officials routinely urged their Japanese counterparts to kill their zombie banks before they could do more damage to Japan’s economy. Today, it would be irresponsible if we did not heed our own advice.

The writer was chief of staff and Treasury secretary for President Ronald Reagan and secretary of state for President George H.W. Bush

Soviet posters: Capitalist parliament: lies, violence, bribes

Translation: Capitalist parliament: lies, violence, bribes

Soviet posters: Chamberlain and Daladieu offer Czechoslovakia to Hitler and shows him to the east

Soviet posters:
Chamberlain and Daladieu offer Czechoslovakia to Hitler and shows him to the east

Soviet poster titled Freedom in America

some stuff still has some relevance...

Why is Germany not willing to spend so much to stimulate the economy?

Many people reading US financial press are aghast as to why the europeans are not stepping on the accelerator of funding the banks to keep them solvent. However there is a hidden grand game/drama being played out in all of this. The elite in the USA and the UK is more concerned to maintain the financial elite and the control of the governmental agenda by the priorities of business as well as achieve reflation, but only if the first condition is met, and they are seem to be prepared to risk everything in pursuing no harm comes to shareholders or the pecking order in US politics and economics.

In europe the germans disagree with this approach and they favour a european approach that punishes those that took huge risks tehrefore it does not bail out irresponsible behaviour.
This was tried successfully in Sweden in the early 90s.
It is described below:
(by Hans-Werner Sinn
Professor of Economics and Public Finance at the University of Munich, President of Ifo Institute for Economic Research and Director of CES)

Governments must control the banks during the cure

Keynes must save the banks and the economy. To do this, the state needs to have ownership rights in the afflicted banks. The banks cannot be allowed to shrink themselves back to health (rather than accepting money from the state) because the economy would shrink to death.

My proposal is that any bank that does not find enough capital from the market to shore up its balance sheet with at least 4% equity capital and a tier-one ratio of 8% (core capital relative to risk weighted assets), on average for the past three years, must let the state supply the required capital and become a partner. I call this the stuffing-of-the-goose strategy.

Long-term and short-run goals coincide here, because only with fresh capital will the banks begin to trust each other again. As things now stand, the capital can only come from the state, there is no alternative to partial nationalisation. Partial nationalisation is not expropriation but a forced issue of new shares to increase the bank’s capital. There is no objection to the old stockholders remaining on board. But the bank must sell the state so many new shares, at prevailing market rates, until the required equity ratios are reached. The old shareholders should not have the right to block this if the conditions do not suit them. What their investment is still worth will be seen in the stock market and not in the balance sheet. And before the state is awarded its share, the new stocks should be offered on the stock market at the planned price. Then no one can claim to have been treated unfairly.
Governments make poor bankers

Of course, banks should not become government agencies. The state has deeper pockets, to be sure, but it is a bad banker. The private legal form must be maintained because the state will have to sell back its shares when the crisis is over, hopefully at some profit.

The bad bank, however, is a bad idea. It only makes sense if the state pays more for assets than the market is willing, but then the state would be giving away taxpayers’ money. To prevent taxpayers from being cheated, nationalisation must precede the creation of a bad bank. That was the Swedish remedy, and it worked. President Obama’s plan also amounts to giving money to the stockholders. The $1 trillion that is to be paid as a “scrapping” bonus for toxic assets is about as high as the capital reserves of the entire US banking system. Hedge funds will receive a sizeable portion. No wonder the stock market rallied. Wall Street has managed to prevail again.
After the banks are saved

When the banks are saved, Eucken can take over. The most important ordoliberal rule would be to require considerably higher capital reserves. This ought to be the key strategy for the recovery of the banks, because it would increase the liability of the stockholders. Higher capital reserve requirements help better cushion shocks and induce a more cautious approach to risk-taking. They would also bring about a change in management compensation systems.

Basel II also needs to be overhauled. Today the banks’ assets are reduced computationally to a fraction of the balance sheet total, and the core capital ratio leads us to believe that the equity-asset ratio is up to five times larger than it actually is. This institutional monkey business has to stop. Basel III must mandate fair weights for risk-weighted assets that make the banks’ risk-weighted assets on average as large as the balance-sheet total. Only then will we again have a sound banking system. And we need not fear that capital will be lacking if more capital reserves must be held. The savings in an economy are always sufficient to finance investments, whether they are transferred to the firms in the form of owner’s equity or loan capital.
The need for international harmonisation

All of the regulations for the new banking system must be harmonised internationally, because otherwise countries will relax their regulations to undercut each other. Without harmonisation, there would again be a race to the bottom for where banks decide to do business. Then we would be right back where we started.

In Europe, the ECB must take over banking supervision. In Germany, BaFin, the Federal Financial Supervisory Authority, must be subject to the Bundesbank and not the Finance Ministry. This is the only alternative. The necessary international umbrella organisation can be formed by the IMF or the UN. This is a solution that the Anglo-Americans should also be able to accept at the World Financial Summit, since both organisations are headquartered in America.

Editor-in-Chief’s note: This was first published in German as “Stragegie der Stopfgans” , WirtschaftsWoche, No.14, 30 March 2009, p. 40. Reposted with permission.

Marx has partially won

We live in a time that there is a chaotic thud from the collapse of free marketism which is going the way of communism

this fantastic advert advertises a firm of insovency consultants here :) the victory signal by Marx is obviously photoshopped :)

"Remember that there is nothing stable in human affairs; therefore avoid undue elation in prosperity, or undue depression in adversity."