GENEVA, SWITZERLAND – US President Barack Obama told congressional leaders Monday 11 July that they will have to meet for daily talks to resolve the impasse over the US budget, as he pushes for a long-term agreement with Republicans that would raise the national debt ceiling. The budget has already overshot the ceiling of $14.3 trillion and the US is currently running an annual budget deficit of $1.5t.
Republicans are unhappy with Obama’s call for tax increases and his fellow Democrats are unhappy with his insistence on cutting social welfare programmes. But Obama told reporters in Washington Monday that he won’t back off on his demand for a longer term deal rather than a quick fix to the ceiling issue before 2 August. If the budget is not passed by then, the day the budget runs out, the US will risk defaulting on its debt.
Meanwhile, as the budget debate heats up, 15 states in the Midwest are under heat wave advisories, meaning temperatures are expected to rise above 105F (41C), coupled with high humidity in some areas, such as Kansas City and St Louis, Missouri. CNN cites specialists who recommend that people avoid caffeine and alcohol in these areas.
Links to other sites: BBC, CNN, Washington Post
photo: Xavier Haepe / wikipedia (flickr.com/people/vier)
Geneva, Switzerland (GenevaLunch) – The European Union’s frayed edges were showing Tuesday 26 April as governments and their citizens absorbed the newly published figures for sovereign debt and deficits, some worse than expected, while Italy and France called for reforms of Schengen rules in the face of massive immigration from North Africa.
Eurostat, the statistical office for the European Union, published 2010 figures for the euro area and the 27-member area, showing the five countries with the largest deficits (budget spending outstripping revenues) in terms of percentages of GDP (gross domestic product) to be: Ireland (32.4%), Greece (10.5%), the United Kingdom (10.4%), Spain (9.2%) and Portugal (9.1%). Greece had agreed not to let its deficit go deeper than 9 percent, the BBC points out.
Deficits on the whole decreased in 2010 compared to 2009 while debt and GDP increased, says Eurostat.
Five countries above 90%, debt ratio to GDP
Government debt (amount owed long-term by the government) declined as a whole but the debt ratio to GDP remained at significantly high levels for several countries.
“Fourteen Member States had government debt ratios higher than 60% of GDP in 2010: Greece (142.8%), Italy (119.0%), Belgium (96.8%), Ireland (96.2%), Portugal (93.0%), Germany (83.2%), France (81.7%), Hungary (80.2%), the United Kingdom (80.0%), Austria (72.3%), Malta (68.0%), the Netherlands (62.7%), Cyprus (60.8%) and Spain (60.1%).”
US, Swiss debt ratio compared to European ratios
The US debt, by comparison, is about 97 percent of GDP, a fact emphasized by the warning issued by S&P’s 18 April on the federal debt.
Switzerland’s federal debt was about 20 percent of GDP in early 2010, and with communal and cantonal debt added in, it stood at about 40 percent, well below the G20 average (closer to 100) and the average of most of Europe. Reuters, in December 2010, reported that Bern “expects Switzerland’s overall public debt to fall to around 37 percent of gross domestic product according to international standards next year [2011], less then half of the rate predicted by the OECD for the euro zone.”
Government spending decreased in 2010 in the two zones as a whole, while revenues were essentially static: “Government expenditure in the euro area was equivalent to 50.4% of GDP and government revenue to 44.4%. The figures for the EU27 were 50.3% and 44.0% respectively. In both zones, the government expenditure ratio decreased between 2009 and 2010, while the government revenue ratio remained almost unchanged.”
British military spending data questioned
Two countries prompted “reservations”, Romania and Great Britain, the latter for concerns over its reporting of military spending: “Eurostat is expressing a reservation on the quality of the data reported by the United Kingdom, due to uncertainties on the time of recording of military expenditure. The United Kingdom does not record military expenditure on a delivery basis, as required by the relevant Eurostat Decision of 9 March 2006.”
EU figures compared to Switzerland, USA
The warning by S&P’s 18 April on the US federal debt underscored it’s
Schengen rules don’t fit current situation, France and Italy argue
France and Italy, which have been at odds over how to handle large numbers of North Africans flowing across Europe’s southern borders, joined forces Tuesday on the occasion of a French-Italian summit. Leaders Nicolas Sarkozy and Silvio Berlusconi have jointly sent off a letter to Brussels, they said, underscoring their commitment to the Schengen agreement on the free movement of people but insisting that the agreement needs to be reformed.
They did not specify what this would involve, but they cited the exceptional circumstances caused by events in North Africa, according to Le Monde (Fr).
Complete table, by country, from Eurostat
The Greek dilemma, Economist, 26 April 2011
©2011 Chappatte, distributed by Globe Cartoon. More cartoons on Chappatte’s web site. Geneva-based Patrick Chappatte works for the International Herald Tribune, for Geneva newspaper Le Temps, and for NZZ am Sonntag. All cartoons reproduced with permission.
Paris, France (GenevaLunch) – “We’re not exactly proud” of the first trade deficit France has had with China, Christine Lagarde, France’s foreign minister told reporters during the second day of a visit by China’s leader Hu Jintao. France’s negative trade balance with China grew from €5.7 billion in 2000 to €20b in 2010, bypassing the trade deficit France has with Germany.
Clothing is the largest import but electronic equipment accounts for a significant part of the trade deficit.
The European economy will grow by 1 percent in 2010 and the 16–country Eurozone economy by 0.9 percent, according to new forecasts released by the European Commission Wednesday 5 May. The figures are higher than previous forecasts and show that Europe is recovering, Olli Rehn, finance commissioner told a press conference in Brussels. Rehn, in addressing problems of individual European countries, said that Britain’s new government must focus on reducing its high budget deficit and the national debt. He encouraged Ireland to increase its austerity measures, while nevertheless agreeing with Irish Finance Minister Brian Lenihan that Ireland’s economy is over the worst.
Links to other sites: Business Week, Irish Times, Xinhua
Country not yet out of the woods from the crisis, Bern warns
Bern, Switzerland (GenevaLunch) – The Swiss government Thursday published its financial report for 2009, showing a budget surplus of CHF2.7 billion, with the national debt reduced by CHF11b to CHF111. The figures were made known in February, but Bern has taken advantage of a change in the way it reports government revenues and spending to point out that the situation in 2009 was worse than in 2008, but that Switzerland weathered the economic crisis relatively well.
It warns that the full impact of the crisis will be felt only in 2011, with government revenues having a two-year lag because of the tax collection system. The report comes as several other European countries grapple with severe economic problems provoked or aggravated by the global economic situation in 2008-2009.
The good news is that the national debt is now CHF20b lower than in 2005, the year when Switzerland put into effect a spending brakes system. The impact of this will be felt next year, when spending will most likely not be increased because of lower revenues, with Bern budgeting a CHF2b deficit.
Bern, Switzerland (GenevaLunch) – The Swiss federal government Tuesday afternoon 24 November approved a 2010 budget deficit of CHF2.68 billion, going into the red for the first time in several years. The total budget approved is CHF58.2b. The drop in revenues due to the economic crisis is behind the shortfall, but even if the economy picks up it appears unlikely that Switzerland will finish the year in the black, observers quoted by Swiss media say.
The chicken could cost a little more after 27 September
Geneva/Lausanne, Switzerland (GenevaLunch) - The latest and second poll taken for Swiss television, TSR, two weeks before Swiss voters head for the polls, shows 50 percent ready to say yes to a temporary sales tax increase to finance the deficit of the federal disability insurance programme, the AI. Far fewer, 32 percent, are clearly opposed, but the remaining 18 percent are undecided.
Voters decide 27 September on a 0.4 percent increase to the sales tax from 2011 to 2017. The current rate varies but most items are taxed at a rate of 7.6 percent. Cantons and communes, the two other levels of Swiss government, do not charge sales tax.
The largest state budget in the US and the world’s eighth largest economy, that of California, has been saved in a last-ditch effort compromise between Governor Arnold Schwartzenegger and state legislators: the $26.3 billion deficit will be closed by deep spending cuts of $15.5 billion, but taxes will not be raised. The state began its fiscal year 1 July 2009 without an approved budget and the threat of having to write IOUs to pay its bills. Los Angeles Times, Reuters
The controller for the state of California in the US has said he will have to issue IOUs to pay the state’s bills starting 2 July if legislators cannot agree on urgent measures to reduce the state’s crippling deficit of $24 billion. Reuters
Bern, Switzerland (GenevaLunch) – SSR, the Swiss Broadcasting Company, is freezing salaries effective the end of 2009, as well as new hires, part of a series of measures to economize in the face of a growing deficit. The company announced Tuesday 23 June that the state-supported system will see its deficit grow from CHF200-790 million by 2014 without larger subsidies or revenues.
The salary freeze will allow the company to save CHF30 million a year, but it still needs to find another CHF40m a year to remain financially healthy.
California legislators in the US were battling to keep the state from defaulting on its debts, unable to pay its bills, and from slashing many programmes. Governor Arnold Schwarzenegger has proposed $16 billion in cuts in order to close a $24b deficit. Democratic legislators have proposed tax increases, spurned by Republicans. The Obama administration has refused to bail the state out for fear of sending a wrong signal to other states in difficulties. California is the world’s eighth-largest economy, and has been particularly hurt by the downturn. Its revenues are heavily dependent on income taxes. Reuters, WP, Bloomberg
