Jean Claude Trichet Seeks Veto Power Over Britain’s Tax Policies

Financial Market Report for June 6, 2010

1) … Open Europe reports on the loss sovereignty
Socialist party loses at Portuguese ballot box amid austerity blues: Portugal’s centre-right PSD party defeated the Socialist PS government by 38.6% to 28.1% at yesterday’s general election, the lowest result for the Socialist party in 20 years. Pedro Passos Coelho, PSD leader, will now initiate negotiations to form a majority coalition government with its traditional allies, the conservative CDS-PP, who won 11.7% of the vote, reports Público. A record 41% of the electorate abstained from voting.

The new government will have less than a month to implement harsh austerity measures in order to receive the second tranche of the EU/IMF bail-out. Passos Coelho guaranteed that his government is committed to implementing the measures. An article in i informação notes that the election result was a failure for anti-IMF/anti-troika rhetoric as “the votes secured by the PSD and the CDS … gave a clear mandate to fulfil the troika’s programme”. Expresso Expresso 2 Independent EUobserver FT Jornal de Negocios Jornal de Negocios Guardian Euractiv European Voice Irish Independent El Pais i informação i informação 2 Expresso: Raposo Público

In response to ECB President Jean-Claude Trichet’s calls for a single EU finance ministry, Open Europe’s Stephen Booth was quoted in Saturday’s Mail article Give Brussels power to veto Britain’s tax policies, urges Euro bank chief: saying, “Greater fiscal union in the Eurozone would have a big impact on the UK if decisions on competition or specific sectors were made in Europe, it would affect us”.

On the NYT Economix blog, former IMF Chief Economist Simon Johnson discusses France’s “determination” to run the IMF and notes, “The managing director of the IMF is the impresario of any bail-out and oversees the big decisions that must be negotiated with all significant stakeholders. This leaves enormous scope for discretion.” He argues: “The goal of these various [eurozone] bail-outs is to ensure that German and French taxpayers do not realise the full extent of their losses or appreciate the ways in which their banks have been mismanaged.”

In a comment piece, former chief editor of Handelsblatt Bernd Ziesemer laments the “steady loss of powers of the German Parliament “Whether it concerns the eurozone bailout fund, the aid to Greece, the moratorium on nuclear power plants”. He notes that “one could speak of a new kind of mentality of ‘emergency decrees’, if that concept wasn’t so historically burdened.”

Writing in the Sunday Telegraph, Peter Oborne argued that “far from pursuing a rigorous policy of Euroscepticism, Prime Minister [David Cameron] has consistently conducted himself as Pro European. Although Cameron still articulates the language of Euroscepticism, he is in practice the most pro-European prime minister since Edward Heath”.

The FT reports that concerns about the real size of Spain’s budget deficit are deepening after the incoming local administration of the centre-right Partido Popular revealed that the Castilla La Mancha region is “totally bankrupt” and that it will be hard to find the money to pay the salaries of the region’s 76,000 civil servants next month. FT El Pais

The Guardian reports that EU plans to include airlines in the emissions trading scheme as of next year would cost the industry €1.1bn, leading to a potential trade war with China, Russia and the US. Guardian FT Reuters EUobserver

Euractiv reports that a mammoth deadline looms on European Economic Governance. European Parliament and EU member states remain divided over the economic governance package, particularly as to who should hold decision-making power for policing public debt. On 7 June the Commission will adopt draft recommendations and a final decision is expected on 20 June.

Austrian daily Kronen Zeitung reports on a new poll revealing that more than 70% of Austrians are dissatisfied with the EU, complaining that Austrian interests in the EU “are insufficiently being met”.

El Pais reports An opinion poll in Spain gives the conservative opposition party PP a nation-wide overall margin of 13.8% over the ruling Socialists ahead of next year’s elections,  

The Sunday Times reports that the EU is subsidising a European action hero ‘Captain Euro’, created to teach children about the European federal idea.

The chart of the Euro, FXE, shows a turn lower today.

2) … CNBC reports on Neoliberalism’s seigniorage.
Taxpayers Dollars Still Bailing Out Banks. None of America’s largest banks raise money on the free market. Every single one of them is propped up by an implicit taxpayer guarantee that is very similar to the backstops provided to Fannie Mae and Freddie Mac. It is a huge subsidy by taxpayers to the banks, enabling them to be far more profitable than they would be otherwise.

3) … European Financials, EUFN fall 2.0% lower taking world stocks, ACWI, 1.0% lower

20 Yr Treasury Bull 3X Shares —TMF -1.0%

Basic Materials: Copper: Southern Copper Corporation, SCCO, -11.6%

Financial Firms: European Financials, EUFN, -2.0%

Financial Firms: The Too Big To Fail Banks, RWW, -0.9

Peru traded down 12% today; chart of Peru, EPU, ECH, LATM, and EWZ. Business Week reports Peru Stocks Fall Most in Two Decades as Humala Claims Ballot Win

Gold mining stocks, GDX, turned down 2.6% today; chart of gdx, gdxj, iez, psce,

Brazil shares, EWZ, turned 2.6 lower on falling Brazil Financials, BRAF. such as ITUB, BBD, and BSBR.

Airlines, turned down 2.0% today; chart of Airlines, FAA,  Bloomberg reports Airline Profits Forecast Cut 54% by IATA on Japan Quake, Rising Fuel Costs.

Chile. ECH, turned 1.5 lower today.

4) … Business Insider reports on Inflation Destruction
Here’s What Happens When US Energy Spending Passes 9% of GDP: The energy limit model o economic growth is working beautifully, having come into play prior to the 2008 crisis and now nce again forcing another global slowdown.

5) …  Keywords and Symbols: Jean Claude Trichet, European Economic Governance, Sovereignty, Captain Euro, Seigniorage, Inflation Destruction. RWW, EUFN, FXE, EPU, SCCO, TMF,  FAA, GDX, GDXJ, IEZ, PSCE, EWZ, BRAF, ECH,

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