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So what’s the plan, Mr Rehn?

This article first appeared in El Pais. It was translated by Press Europ

Perplexity. That's what’s conveyed by the clash over austerity going on between the European Commission and the International Monetary Fund (IMF).

The debate is as extremely technical as it is profoundly political. In essence, it’s about how much national GDP falls with every point of tax cut. While it may seem rather complex, it’s actually rather simple: depending on the extent of the so-termed "fiscal multiplier", tax cuts can pump an economy back to life – or deflate it.

National and international blogs where economists debate these matters are abuzz with analyses and counter-analyses that attack and defend the austerity policies pursued by the EU. The problem is not just that the discussion about the fiscal multipliers has reached levels of complexity that delight only academics. The issue is that,

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Rome view: Napolitano stays; Berlusconi wins


Deaf, inconsistent, and reckless: with these words a furious and tired Giorgio Napolitano, 87, referred to the parliament in his inaugural address on Monday as the reconfirmed (for the first time in Italy history) Italian head of state. He threatened to leave if politicians continue to act with “irresponsibility.” “I have a duty to be frank. If I find myself once again facing the kind of deafness I ran into in the past, I will not hesitate to draw the consequences,” he said, sounding like a teacher scolding his pupils. The warning was welcomed with warm and prolonged applause. It was a public admonishment over continued negligence that had hurt the country just as it had benefitted the political parties for many years. 

The reconfirmation of Napolitano came after days of uncertainty and division. Notwithstanding his age and his stated desire to retire, Napolitano had no choice:

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Madrid view: Zero foreign policy

Spain’s foreign policy is in a critical state. Due to the crisis, true; but also due to decisions made in recent years. We need only take a close look at the three pillars that sustain the exterior action of any country: diplomacy, defence and development. As for diplomacy there are a number of elements that have combined to create the present situation. Most obvious of these is the crisis, which has had a serious impact on Spain’s capacity for international action. Spain, which always had to jockey for elbow room between the big states of the EU, now has a hard time not just being influential but merely being heard in Europe, not to mention outside it.

The crisis has also relegated the Foreign Ministry to a back seat in favor of Economy and Finance, whose decisions are now the ones that count internationally. This tendency, which is general in Europe, means that foreign ministers,

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The imbroglio in Cyprus

Like Ireland, Iceland and the UK, Cyprus epitomises an economic model that favours the expansion of the financial sector at the expense of others. As we’ve just seen, once crisis hits the fragility of the model is clear for all to see. For Cyprus a downsizing of the sector makes sense (despite the opposition of vested interests), with other opportunities presented by off-shore gas reserves. But the situation in Cypriot has also provided us with some important lessons about how the EU and its members should deal with their financial sectors in this time of crisis.

Cyprus has fuelled the discussion about whether tax havens (and off-shore banking) should be accepted in the eurozone (or in the EU), even beyond considerations about money laundering and tax evasion. Arguably, they should not be. The argument that money in general would move elsewhere in the world is not convincing.

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The clock is ticking on Cyprus


An island on the edge of Europe with an outsize banking sector, lots of offshore investors flocking in, and an external economic shock leading to a financial crash of dramatic proportions: it’s not like we have never been there. But this time around it’s Cyprus, not Ireland or Iceland. This is yet more proof that no country is an island spared amidst the pan-European storm which is unlikely to go away. The restructuring of Greek debt and the ‘haircut” imposed on institutional investors has taken toll on the banks in next-door Cyprus (the Bank of Cyprus alone took losses worth €1.3 billion a year ago). The situation is pretty dire: the two largest banks – the Bank of Cyprus and Laiki (Popular) Bank are practically bankrupt. And Cyprus, with bank assets eight times its GDP and deposits four times, outdoes both Ireland in 2010 and Iceland in 2008. But nonetheless the déjà vu

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