Van modder naar goud?

Uit puinhopen herrijzen*, modder wordt goud

Begin 2025 is de eurocrisis eindelijk achter de rug. Na de mislukte Lissabon en EU2020 strategieën is het tijd vooruit te zien. De Europese Commissie gaat op zoek naar een nieuwe slogan.

Het crisismanagement van de afgelopen vijftien jaren stond in het teken van doormodderen. Geen snelle beslissingen, maar tastend uit de crisis. Een doormodderstrategie op twee sporen: een structureel herstel van de weeffouten van de monetaire unie en tegelijkertijd het opruimen van het puin uit het verleden.

De Eurozone kreeg uiteindelijk geen “total make-over” met plastische chirurgie, maar een herstel met beademing, infuus en pijnlijke operaties. Na deze ingrepen staat er in 2025 geen centralistische Europese superstaat, maar een ingewikkelde constructie van een ex ante beleidscoördinatie. De Europese Commissie heeft weer meer, maar geen alomvattende, macht gekregen. Angelsaksische waarnemers snappen de besluitvorming en machtsverdeling in Europa nog altijd niet en denken bij six- en two-packs eerder aan buikspieren of rappers dan aan een preventief doorgrijpende centrale instelling. Een recht-toe-recht-aan alternatief met zichtbaar nationaal soevereiniteitsverlies konden politici thuis echter niet verkopen.

De nieuwe hoofdrolspeler in de Eurozone is het Europees Stabiliteits Mechanisme (ESM). Na lange onderhandelingen is het ESM niet louter een noodfonds meer voor landen, maar ook verantwoordelijk voor de afwikkelingen van banken. Het ESM is de onafhankelijke, analytische waakhond geworden, die de Europese Commissie nooit mocht zijn. In combinatie met nationale schuldenremmen zorgt het ESM soeverein voor houdbare overheidsfinanciën in alle Eurozone landen.

De make-over van de monetaire unie was alleen mogelijk omdat de crisis hardnekkig aanhield, anders dan veel Europese politici in 2012 hun kiezers voorhielden. Sneller dan verwacht stonden de regeringsleiders van Duitsland, Nederland en Finland voor de keuze “break-it-or-pay-it”. De mix van langdurige recessies, hoge werkloosheid en pijnlijke structurele hervormingen bleek explosief en kon zelfs niet door een gemeenschappelijk bankentoezicht noch door ingrepen van de ECB worden bestreden. Door de sociale onrust en het toegenomen nationalisme gleed de Eurozone meermaals langs de rand van de afgrond en werd het betaaldag. Schuldkwijtscheldingen en een systeem van sociale transfers waren het gevolg. Toch zijn de meeste periferielanden ook na vijftien jaar, gelijk Oost-Duitsland na de eenwording, nog steeds achterstandsregio’s met hoge werkloosheid en een “brain drain”.

De Eurozone is in het jaar 2025 stabiel, maar vergrijzing, het tekort aan eigen grondstoffen en economische machtsverschuiving naar opkomende landen maken van Europa eerder een toeristische bestemming dan een trots industriecontinent. Maar weer eens een nieuw groeitstrategietje doen, denkt de nieuwe president van de Eurozone, de 71-jarige Angela Merkel en presenteert de nieuwe toekomstvisie voor Europa: uit puinhopen herrijzen, modder wordt goud.

Dit stuk verscheen eerder in het Nederlandse NRC Handelsblad

Ifo adds to evidence of green shoots in the winter

The year ends on a positive note. Germany’s most prominent leading indicator, the Ifo index, increased in December for the second month in a row and stands now at 102.4; its highest level since July. While the current assessment component dropped to its lowest level since June 2010, the expectation component increased for the second consecutive month. In fact, expectations recorded the strongest monthly increase since July 2010.


The German economy is still in the course of its soft landing. With the sharp drop of industrial production and the narrowing of the trade surplus in October, a contraction of the economy in the fourth quarter has become almost inevitable. It is hard to believe that private consumption, particularly Christmas shopping (which in Germany actually almost always disappoints, after hopeful expectations), can be strong enough to offset weaker exports and industrial activity

However, looking into 2013. the biggest trump card the German economy holds is the gradual decoupling from the rest of the Eurozone throughout the crisis. The decoupling can be identified in several areas. First of all, and the most obvious, is the shift of exports from Eurozone countries towards non-Eurozone countries. Over the last years, the share of German exports to other Eurozone countries has continuously dropped from almost 45% in 2008 to roughly 35% this year. This enables the economy to benefit quickly from any rebound of the global economy and leave Eurozone worries behind. Secondly, the reforms of the early 2000s and the lack of qualified workers due to ageing have decoupled the labour market from its Eurozone peers. Currently, less growth is needed to create jobs. Thirdly, the investment cycle could be the next area of decoupling. In 2012, investment had been the strongest disappointment of the economy. However, with a pick-up in global activity, capacity utilisation should increase again, bringing back earlier investment plans which had been shelved due to increased uncertainty. As German companies can still benefit from record low interest rates, investment could be the next element of German decoupling from the rest of the Eurozone. Sound fundamentals and the gradual decoupling from the rest of the Eurozone offer a solid warranty for a quick rebound.

With a worsening current assessment but improving expectations, today’s Ifo sends a clear message: things will go worse before they get better. It looks as if any contraction of the economy should be short-lived.

EU Summit - all is calm but not all is bright

The last EU summit of the year turned out to be a tranquil pre-Christmas meeting. After finance ministers’ decisions on Greece and bank supervision, EU leaders slowed down their reform efforts. The famous roadmap towards further integration of the Eurozone has been delayed once again. In the tranquil pre-Christmas mood, some EU leaders might have started singing Christmas carols last night. However, unlike in the Christmas song “Silent night, holy night”, all is calm but not all is bright.


What initially was meant to be the big break-through for the Eurozone and course-setter towards a “genuine economic and monetary union”, turned out to be a tranquil year-end summit. Already ahead of government leaders’ arrival to Brussels last night, finance ministers had cleared the way towards a sunshine and roses evening. The EU and the Eurozone have ended the year with the typical mixture of delivering the bare minimum without overachieving a single tiny bit.

The first bare minimum was the break-through on Eurozone bank supervision. After another long meeting, European finance ministers agreed on a single supervisory mechanism for the Eurozone. Non-Eurozone countries can join on a voluntary basis. Supervision of the biggest banks (with balance sheets above 30bn euro or above 20% of a country’s GDP) will be conducted by the ECB, in cooperation with national supervisors. This new Single Supervisory Mechanism (SSM) will become effective in March 2014 at the earliest. Further delays cannot be excluded.

The SSM is meant to be the first step towards a fully-fledged banking union which should break the vicious link between sovereigns and financials. Remember that officially the ESM will be allowed to directly recapitalize banks once the SSM has become effective. Obviously, this will now have to wait at least until March 2014. A time line which clearly pleases the German and other core countries’ governments which still are opposing direct bank recapitalisation for legacy assets, or in other words: core Eurozone countries are not yet willing to put taxpayers’ money on the table to pay the bill of peripheral countries’ financial mistakes of the past. Further steps to complete a real banking union, in theory, would have to be a bank resolution mechanism and a deposit guarantee scheme. Up to now, Eurozone countries are still far off from any agreement on these two issues. Next year, the European Commission will present a first proposal for a bank resolution mechanism. All of this means that after the usual post-marathon meeting euphoria, the decision on the SSM is clearly not a game changer for the Eurozone.

The second bare minimum finance ministers delivered was the final green light to pay the next loan tranche for Greece, amounting to 49.1bn euro. The disbursement will be made in several tranches. The first 34.3bn euro will be paid out in the next days. The rest in the course of the first quarter, partly conditional to further Troika assessments. As we have often said in the past, yesterday’s green light for Greece clears another hurdle but it was not the last hurdle.

Agreement on Greece and the SSM, however, masks that there still is lots of disagreement on other crucial topics, not only on direct bank recapitalisation. Let’s not forget that this week’s summit was intended to even go further and to deliver a roadmap towards more or “genuine” integration. However, last night, EU leaders did not agree on anything else. EU president Van Rompuy’s roadmap had been downgraded to a background document. Binding contracts between countries and institutions to ensure structural reforms, financial incentives for structural reforms, a mechanism to absorb asymmetric shocks, harmonization of tax policies and labour markets? All these issues have been postponed until at least the summer of 2013. More visionary ideas which could have strengthened prevention by reducing national sovereignty like a Eurozone finance minister have disappeared entirely.

The crisis year 2012 comes to a close. It is a tranquil, almost conciliatory, year-end.Yesterday’s agreements on Greece and the SSM are already an achievement. Particularly the SSM is something no one had on the radar screen at the beginning of the year. Within the last year, next to the never-ending fire fighting in Greece, the Eurozone has managed to agree on a fiscal compact with mandatory national debt breaks, start the ESM and set up a Eurozone-wide banking supervision. Even if this week’s summit clearly disappointed on the vision thing, showing that there still is lots of disagreement, let’s try to be mild and not too critical: the Eurozone is still alive and it is moving into the right direction, even if it sometimes moves at a very slow speed. Enjoy the summit-free time, it won’t last for long.

Merkiavelli

Cubaanse toestanden in Duitsland. Afgelopen week werd bondskanselier Angela Merkel met bijna 98 procent van de stemmen herverkozen als leider van haar partij, de christendemocratische CDU. Geen charisma, geen speechtalent en geen visie. Maar toch staat Angela Merkel nu al twaalf jaar aan de leiding van de grootste partij van Duitsland en is ze zeven jaar bondskanselier. Zoals de oude mannen van de CDU nog steeds verbaasd en hoofdschuddend applaudisseren voor hun leidster, zal het vandaag en morgen ook de Europese leiders vergaan. Ook zij zijn slachtoffer geworden van Merkiavelli.


Merkel blijft een fenomeen. Vaak onderschat en belachelijk gemaakt, maar uiteindelijk staat ze er nog steeds en zijn haar politieke tegenstanders in binnen- en buitenland verdwenen. Ook de ster van de nieuwste uitdager, François Hollande, is snel getaand. De Europese top van vandaag en morgen zal duidelijk maken dat de vaak bekritiseerde politiek van aarzelen en kleine stappen, het aanmodderen, zegeviert.

Ondanks alle kritiek op en soms ook minachting voor Merkel zullen de Europese regeringsleiders groen licht geven voor een monetaire unie met een Duitse signatuur. Het tijdschema blijft onduidelijk, maar de verschillende elementen van de verbeterde eurozone worden steeds zichtbaarder. Europees bankentoezicht, maar dan alleen maar (beginnen met) de grote banken, en geen Europese depositogarantiestelsels. Meer macht voor de Europese Commissie. Bindende afspraken over structurele hervormingen, maar geen euro-obligaties. Financiële stimuli voor hervormingen, maar geen groei-initiatieven met meer schulden. Officieel is het een plan van Europees president Herman Van Rompuy, maar de stempel van Angela Merkel valt niet te ontkennen.

De aard van de eurocrisis maakt dat de Merkeliaanse politiek van aarzelen, draaien en onderwerpen afpakken van de oppositie ook in Europa zo succesvol is. De eurocrisis kon niet opgelost worden met snelle machoacties of met een Duitse blanco cheque voor noodlijdende landen. Het probleem in de eurozone is immers niet de aarzeling van Merkel, maar de aarzelende politiek in veel Zuid-Europese landen. Structurele hervormingen kwamen amper zelfstandig of vrijwillig tot stand, maar alleen onder extreme druk van buitenaf. Eerst in de gedaante van de financiële markten, nu in de gedaante van Angela Merkel. De terugkeer van een ander politiek fenomeen, Silvio Berlusconi, lijkt het beeld te bevestigen dat de hervormingswil zonder externe druk weer snel kan verdwijnen.

Aan het einde van een veelbewogen jaar lijkt Angela Merkel sterker dan ooit. De eurozone wordt meer Duits. Voor de monetaire unie is dat een zegen, voor de populariteit van Angela Merkel en Duitsland in de rest van Europa echter niet. Misschien zijn het de noodzakelijke negatieve neveneffecten van Merkiavelli in Europa. Maar Cubaanse verkiezingsuitslagen zal Merkel in Europa niet halen.

Deze column verscheen vandaag in het Belgische dagblad "De Tijd".

German IP crashes in October

Heading towards contraction. German industrial production dropped by a sharp 2.6% MoM in October, from -1.3% in September, providing further evidence that the economy’s backbone is quickly losing steam. In annual growth terms, industrial production is down by 3.7%. The drop was driven by all sectors except for non-durable consumer goods. Production in the construction sector fell sharply by 5.3% MoM.

The German decoupling from the rest of the Eurozone has come to an end. Strong trading ties with non-Eurozone countries had shielded the economy against the euro crisis. Now, with the global economic cooling in the second half of the year, this immunity is quickly fading away. The thinning out of order books throughout the year is finally feeding through to the real economy.

There are currently two opposing trends in the German economy. In the short term, the “deflating” of order books on the back of the euro crisis and a weaker global economy should continue to feed through to activity. With today’s industrial production data, a contraction of the economy in the fourth quarter has almost become inevitable. Even a technical recession of two consecutive quarters cannot be excluded entirely, particularly if the fiscal cliff negotiations in the US disappoint and hamper the US recovery. Looking beyond the next one or two quarters, however, the German economy should be able to pick up speed relatively quickly. The latest improvement in confidence indicators and new orders clearly indicate that the current industrial slump should be rather short-lived.

Our general take on the German economy remains positive. However, today’s industrial data shows that unfortunately things first have to get worse before they get better.
 

Draghi refuses to play Santa Claus this year

At today’s meeting, despite a surprisingly downbeat economic outlook, the ECB kept interest rates on hold. For the first time since the start of the crisis, the December meeting was no early gift giving for financial markets and the Eurozone economy.


The ECB’s macro-economic assessment remains cautious. Risks to the economic outlook are still to the downside, while risks to the outlook are seen as broadly balanced. According to Draghi, the ECB expects economic activity in the Eurozone to gradually recover “later in 2013”. This trajectory is also reflected in the latest ECB’s staff projections. In these projections, GDP growth forecasts for 2013 have been revised downwards significantly. The new mid-point projection is now -0.3%, from +0.5% in September. For 2014, ECB staff expects GDP growth of 1.2%. As regards inflation, the projections were revised slightly downwards. For 2013, ECB staff now expects inflation to come in at 1.6%, from 1.9% in September, and 1.4% in 2014.

It looks as if there are diverging views on the economic outlook within the ECB. At face value, the sharp downward revision of the growth outlook for 2013 and lower inflation could have been an ideal invitation for another rate cut. Draghi’s comment that there was a “prevailing consensus” to leave rates unchanged indicates that some ECB members must have been in favour of a rate cut. The decision to keep rates on hold, at the same time, shows that currently more ECB members believe in green shoots sprouting in the winter and half-empty glasses turning half-full rather than in their own staff’s projections.

The fact that the ECB kept rates on hold even after these strong downward revisions for growth and inflation in our view shows that the ECB prefers to stimulate the economy with non-standard measures and not with additional rate cuts. This view is supported by the ECB’s decision to continue the main refinancing operations with full allotment at least until early July 2013. A rate cut might not entirely be off the table but would require an even worse weakening of the economy.

Since the start of the crisis, ECB meetings in December had been early gift givings for financial markets and the Eurozone economy: a 75bp rate cut in 2008, generous liquidity provisions in 2009 and 2010 and a rate cut and the LTRO bazooka last year. It looks as if at least this year, Mario Draghi quit his job as early Santa Claus.

German new orders surge in October

Lubricating oil for German growth engine is running again. German new orders increased by 3.9% MoM in October, from a 2.4% drop in September. This is the strongest monthly increase since January 2011. On the year, new orders are still down by 2.4%. The increase came from both domestic and foreign orders. Interestingly, even new orders from other Eurozone countries posted their second strongest monthly increase since the beginning of the year (+3.5% MoM).

During the summer months, the German economy’s safety net against the euro crisis had become dangerously thinner. Order books had become smaller and at the same time companies increased their inventories. The negative impact of the summer developments should still be felt in the industrial sector in the coming months. However, today’s increase in new orders indicates that the safety net is stabilising again. At least in Germany, green shoots seem to sprouting during the winter. If this trend continues, the current growth worries for the Eurozone’s biggest economy could turn out to just be a tempest in a teacup.

Letter from Brussels - Die schiefe Achse

Ohne Französisch geht in Brüssel fast gar nichts. Ob nun im Café oder in den Gängen der Europäischen Kommission. Ohne französische Sprachkenntnisse kann man schon mal verdursten oder bleiben Türen geschlossen. Jeder Neu-Brüsseler hat daher auch ein französisches Wörterbuch im Gepäck.

 

Die „Grande Nation“, Frankreich, ist auf dem besten Weg der neue kranke Mann der Eurozone zu werden. Langsam, aber sicher, hat sich Frankreich wirtschaftlich aus dem Kreis der Kernländer des Euroraums verabschiedet. Die hohe Arbeitslosigkeit, die schwindende Wettbewerbsfähigkeit der Industrie, das hohe Haushaltsdefizit und die schnell steigende Staatsschuld sind hausgemachte Probleme, die nur langsam in den Griff zu bekommen sind.

 

Mit dem wirtschaftlichen Abschwung folgt im Augenblick auch der Abgang Frankreichs von der europäischen Bühne. Während französische Ideen für die Zukunft der Eurozone Mangelware sind, hat die deutsche Regierung die Deutungshoheit übernommen. Dazu kommen regelmäßige Störfeuer. Hollande’s offene Kritik an Angela Merkel während und nach dem französischen Wahlkampf, übertriebene Siegerposen nach dem Euro-Gipfel im Sommer und der versuchte Aufbau einer Anti-Merkel Allianz aus südeuropäischen Ländern waren mehr als nur Störfeuer.

 

Die Ideen zur Zukunft des Euros liegen weit auseinander. Deutschland will bedingte Integration. Frankreich die bedingungslose Haftungsunion. Ein Kompromiss zwischen Gleichstarken wäre ein zu schwacher Kompromiss für den Euro. Was Jahrzehnte lang undenkbar war, könnte jetzt vielleicht sogar ein Segen für den Euro sein: eine schwache deutsch-französische Achse.

 

Den Kaffee wird man in Brüssel in den kommenden Monaten wohl weiterhin auf Französisch bestellen müssen. Für den weiteren Weg der Euro-Krise kann das französische Wörterbuch aber guten Gewissens weggeschmissen werden.

 

Dieser "Letter from Brussels" wurde schon in der 'Euro am Sonntag' veroeffentlicht.