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How Valencia reflects Spain’s economic crisis

Posted by Admin on May 19, 2012

http://in.finance.yahoo.com/photos/recession-in-spain-seen-through-pictures-slideshow/to-match-feature-spain-valencia–photo-1336628003.html

To match Feature SPAIN-VALENCIA/
A view of the City of Arts and Sciences, by architect Santiago Calatrava, is pictured in Valencia. The complex’s cost escalated from an initial 625 million euros ($808.93m) up to 1280 million euros, according to local media. ( REUTERS/Heino Kalis)
A panoramic view of the City of Arts and Sciences, by architect Santiago Calatrava, is seen in Valencia
Once the beacon of Spain’s new economic grandeur, the Mediterranean region of Valencia has become a symbol of all that is wrong with the country. (REUTERS/Heino Kalis)
The Palace of Arts Reina Sofia at the City of Arts and Ciences is pictured in Valencia is pictured in Valencia
The Palace of Arts Reina Sofia at the City of Arts and Sciences, by architect Santiago Calatrava. The palace’s cost escalated up to around 380 million euros, according to local media. (Heino Kalis/ Reuters)
A pedestrian walks past the Agora building and the Azud D'or bridge at the City of Arts and Sciences, designed by architect Calatrava, in Valencia
Agora building and the Azud D’or bridge at the City of Arts and Sciences.The cost of both structures escalated up to 150 million euros, according local media. (REUTERS/Heino Kalis)
A view of the City of Arts and Sciences, by architect Santiago Calatrava, is pictured in Valencia
A view of the City of Arts and Sciences. Years of free spending, coupled with a hangover from a burst real estate bubble and the collapse of local banks, have put Valencia on the brink of being bailed out by the central government – which has huge budget problems of its own. (REUTERS/Heino Kalis)
The Agora building at the City of Arts and Ciences is pictured in Valencia
The Agora building at the City of Arts and Sciences. The building’s cost escalated up to 86 million euros, according to local media. (REUTERS/Heino Kalis)
A view of the University and Polytechnic Hospital La Fe is seen in Valencia
A view of the University and Polytechnic Hospital La Fe is seen in Valencia April 25, 2012. The complex’s cost escalated up to 300 million euros. (REUTERS/Heino Kalis)
A building of the Universidad Politecnica de Valencia is seen in Valencia
A building of the Universidad Politecnica de Valencia is seen in Valencia April 25, 2012. (REUTERS/Heino Kalis)
To match Feature SPAIN-VALENCIA/
The control tower of the Costa Azahar airport is seen, one year after its official inauguration, near Castellon, in this April 24, 2012 file photo. The airport, whose cost escalated up to around 150 million euros, remains inactive due to construction failures, lack of permits and insufficient commercial interest from international airlines, according to local media. (REUTERS/Heino Kalis/Files)
Apartments for sale are seen, beside an unfinished block, in Valencia
Apartments for sale are seen, beside an unfinished block (back), in Valencia. The building sector’s implosion has forced into the open allegations that corrupt Valencian politicians, developers and bankers were in cahoots during a decade of easy money at low interest rates after Spain joined the euro in 1999. (REUTERS/Heino Kalis)
Demonstrators Protest European Central Bank Meeting
Thousands of Spaniards are protesting against austerity measures that politicians have proposed to ease the country’s economic crisis. (Left) A woman passes as police officers stand guard at Paseo de Gracia in the city centre as the European Central Bank (ECB) meeting is held at the Hotel Arts on May 3, 2012 in Barcelona, Spain. (Photo by Jasper Juinen/Getty Images).
A man rides his bicycle between policemen in riot gear who are guarding the venue of a meeting of the ECB in Barcelona
Click on Next to see images of daily life in Spain and public demonstrations across the country over the past year, protesting against the government’s spending cuts, labour market reforms, recession and overall economic crisis. (Image: Reuters)
People wait at a bus stop in front of an Asian shop after shopping in Malaga
People wait at a bus stop in front of an Asian shop after shopping in downtown Malaga, southern Spain May 4, 2012. The euro zone economy worsened markedly in April, according to business surveys. (REUTERS/Jon Nazca)
Homeless man walks at the financial district in Madrid
A homeless man walks at the financial district in Madrid April 19, 2012. France and Spain sold all the bonds they wanted at auction, though for Spain the cost was rising yields, indicating growing concerns the government will not be able to tame its deficit. After a brief respite fuelled by a trillion euros of cash the European Central Bank (ECB) lent Europe’s banks in December and February, markets are becoming nervous again about euro zone debt loads, with fears that Spain might follow Greece, Ireland and Portugal in needing a bailout from international lenders. (REUTERS/Andrea Comas)
Daily Life In Madrid Ahead Of General Elections
An unemployed man, Enrique, writes poems in return for a cash handout on the eve of the Spanish general elections on November 19, 2011 in the center of Madrid, Spain. (Photo by Jasper Juinen/Getty Images)
Demonstrations Against Eurozone Leaders' Agreed Pact For The Euro
Thousand of ‘indignants’ hold banners and shout slogans against the Euro zone leaders’s agreed ‘Pact For The Euro’ on June 19, 2011 in Barcelona, Spain. Thousands of Spaniards joined marches across Spain to protest against how the country’s economic crisis is being handled and the so-called “Euro Pact”, aimed at increasing the bloc’s competitiveness and economic stability. (Photo by David Ramos/Getty Images)
Economic Crisis In Spain Worsens As A General Election Looms
People queue up outside the Ave Maria charity food centre on November 9, 2011 in Madrid, Spain. Poor people and homeless are given a free breakfast at the centre run by the Fundacion Real Congregacion de Esclavos del Dulce Nombre de Maria. (Photo by Denis Doyle/Getty Images)
A protester, wearing an anonymous mask, protests after being prevented by police from gathering in Puerta del Sol square on August 2, 2011 in Madrid, Spain. The indignants were protesting high levels of unemployment, the austerity measures and what they consider a stagnant and corrupt political system. (Photo by Denis Doyle/Getty Images)
General Strike Hits Spain
A demonstrators sets fire to a barricade during rioting as a 24-hour strike is called, on March 29, 2012 in Barcelona, Spain. Spanish workers staged a general strike to protest the government’s latest labour reforms, which are designed to help Spain lower its deficit within EU limits. (Photo by David Ramos/Getty Images)
General Strike Hits Spain
Riot police walk past burning garbage containers during heavy clashes with demonstrators during a 24-hour strike on March 29, 2012 in Barcelona, Spain. (Photo by David Ramos/Getty Images)
Spanish Unions Protests Planned Government Cutbacks
People attend a demonstration organized by Unions against the financial cuts in health and education on April 29, 2012 in Madrid. Trade Unions CCOO and UGT called for a demonstration against the severe austerity plans of the Spanish government. In April, unemployment reached a record rate and the government has announced that immigrants with no legal status will not be covered by the health public services. The government aims to get the deficit down to 5.3 percent this year and 3.0 percent in 2013. (Photo by Pablo Blazquez Dominguez/Getty Images)
Spanish Unions Protests Planned Government Cutbacks
MADRID, SPAIN – APRIL 29: A girl carries a vuvuzela during a demonstration organized by Unions against the financial cuts in health and education on April 29, 2012 in Madrid. (Photo by Pablo Blazquez Dominguez/Getty Images)

People wait at a bus stop in front of an Asian shop after shopping in downtown Malaga, southern Spain May 4, 2012. The euro zone economy worsened markedly in April, according to business surveys. (REUTERS/Jon Nazca)

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Fiscal Crises Threaten Europe’s Generous Benefits

Posted by Admin on May 26, 2010

Fiscal crises threaten Europe’s generous benefits

LONDON — Six weeks of vacation a year. Retirement at 60. Thousands of euros for having a baby. A good university education for less than the cost of a laptop.

The system known as the European welfare state was built after World War II as the keystone of a shared prosperity meant to prevent future conflict. Generous lifelong benefits have since become a defining feature of modern Europe.

Now the welfare state — cherished by many Europeans as an alternative to what they see as dog-eat-dog American capitalism — is coming under its most serious threat in decades: Europe’s sovereign debt crisis.

Deep budget cuts are under way across Europe. Although the first round is focused mostly on government payrolls — the least politically explosive target — welfare benefits are looking increasingly vulnerable.

“The current welfare state is unaffordable,” said Uri Dadush, director of the Carnegie Endowment’s International Economics Program. “The crisis has made the day of reckoning closer by several years in virtually all the industrial countries.”

Germany will decide next month just how to cut at least 3 billion euros ($3.75 billion) from the budget. The government is suggesting for the first time that it could make fresh cuts to unemployment benefits that include giving Germans under 50 about 60 percent of their last salary before taxes for up to a year. That benefit itself emerged after cuts to an even more generous package about five years ago.

“We have to adjust our social security systems in a way that they motivate people to accept regular work and do not give counterproductive incentives,” German Finance Minister Wolfgang Schaeuble told news weekly Frankfurter Allgemeine Sonntagszeitung on Saturday.

The uncertainty over the future of the welfare state is undermining the continent’s self-image at a time when other key elements of post-war European identity are fraying.

Large-scale immigration from outside Europe is challenging the continent’s assumptions about its dedication to tolerance and liberty as countries move to control individual clothing — the Islamic veil — in the name of freedom and equality.

Deeply wary of military conflict, many nations now find themselves nonetheless mired in Afghanistan on behalf of what was supposed to be a North Atlantic alliance, shying away from wholesale pullout while doing their utmost to keep troops from actual combat.

Demographers and economists began warning decades ago that social welfare was doomed by the aging of Europe’s baby boomers. Some governments had been trimming and reforming, but now almost all are scrambling to close deficits in order to prevent a wider collapse of confidence in the euro.

“We need to change, to adapt … for the sake of the protection of our social model,” European Union Commissioner Joaquin Almunia of Spain told reporters in Stockholm Thursday.

The move is risky: experts warn the cuts could undermine the growth needed to pull budgets back on a sustainable path.

On Monday, Britain unveils 6 billion pounds ($8.6 billion) in cuts — mostly to government payrolls and expenses. The government has promised to raise the age at which citizens receive a state pension — up from 60 to 65 for women, and from 65 to 66 for men. It also plans to toughen the welfare regime, requiring the unemployed to try to find jobs in order to collect benefits.

Britain says it will limit child tax credits and scrap a 250-pound ($360) payment to the families of every newborn. Ministers are reviewing the long-term affordability of the country’s generous public sector pensions.

Funding for Britain’s nationalized health care service will be protected under the new government, however, and should rise each year to 2015.

France’s conservative government is focusing on raising the retirement age. Many workers can now retire at 60 with 50 percent of their average salary. Extra funds are available for retired civil servants, those with three or more children, military veterans and others.

A parliamentary debate is planned for September. Unions in France are organizing a national day of protest marches and strikes on Thursday to demand protection of wages and the retirement age.

In Spain, billions in cuts to state salaries go into effect next month, and the Socialist government has frozen increases in pensions meant to compensate for inflation for at least two years.

“They’ve hit us really hard,” said Federico Carbonero, 92, a retired soldier. He said he was unlikely to live long enough to see the worst of the pension freeze, but had no doubts he would have to start relying on savings to maintain his lifestyle.

Spain is cutting assistance payments for disabled people by 300 million euros ($375 million) and did away with a three-year-old bonus of 2,500 euros ($3,124.25) per new baby. It also has proposed hiking the retirement age for men from 65 to 67.

Countries in northern Europe have done a far better of reforming social welfare and have unemployment systems that focus on re-employing people instead of making their unemployment comfortable, said Gayle Allard, a professor of economic environment and country analysis at the Instituto de Empresa in Madrid.

Denmark and other Nordic countries are known for the world’s highest taxes and most generous cradle-to-grave benefits. Denmark has implemented a system known broadly as “flexicurity,” which combines flexibility for employers to hire and fire workers with financial security and training to prepare for new jobs.

Denmark had a 7.5 percent unemployment rate in the first quarter of this year, well below the EU average of 9.6 percent. Swedish and Finnish unemployment stood at 8.9 percent. Norway, with some of the world’s most generous unemployment benefits fully funded by oil for the forseeable future, has Europe’s lowest jobless rate, just 3 percent in April.

Southern European countries that have not moved toward reforming welfare in the same ways are paying a steep price.

After sharp cutbacks imposed as the condition of an international bailout this month, Greeks must now contribute to pension funds for 40 instead of 37 years before retiring, and the age of early retirement is set to 60 at the earliest.

Civil servants with monthly salaries of above 3,000 euros ($3,750) will lose two extra months of salary — one paid at Christmas, the other split between Easter and summer vacation.

In Portugal, seen as another potential candidate for bailout, the government is focusing on hikes in income, corporate and sales taxes and has avoided drastic changes to welfare entitlements. Unemployment benefits will be cut somewhat and the out-of-work will have to accept any job paying more than 10 percent more than what they would receive in unemployment benefits.

The government is also stepping up checks on welfare claims, freezing public sector pay and slicing public investment.

“There’s been a lack of willingness to shift away from welfare as purely social protection towards an approach which has been in much of northern Europe in recent years, which is welfare as social investment,” said Iain Begg, a professor at the London School of Economics and Political Science’s European Institute.

Otto Fricke, a budget expert for the Free Democrats, the coalition partner of German Chancellor Angela Merkel’s Christian Democratic Union, told The Associated Press that no decisions on cuts have been made, but everything is on the table except education, pension funds and financial aid to developing countries. At least one high-ranking CDU member has called for the idea of protecting education to be re-examined, however.

German public education, which was virtually free until 2005, when some of Germany’s 16 states started charging tuition fees of 1000 euros ($1,250) a year.

Virtually all Germany’s students pay that much or less to attend state-funded universities, including elite institutions. Education isn’t as cheap elsewhere in Europe but the 3,290 pounds ($4,720) per year paid by British students at Cambridge is still far less than Americans pay at comparable schools like Harvard, where annual tuition comes in just shy of $35,000.

The idea of cutting education is proving hard to swallow in the face of Germany’s promise to contribute up to 147.6 billion euros ($184.5 billion) in loan guarantees to protect Greece and other countries that use the euro from bankruptcy.

“I am worried that this crisis will also affect me on a personal level, for example, that universities in Germany will raise the tuition in order to pay the loan they give to Greece,” said Karoline Daederich, a 22-year-old university student from Berlin.

Associated Press writers Juergen Baetz and Kirsten Grieshaber in Berlin, Malin Rising and Karl Ritter in Stockholm, David Stringer in London, Veronika Oleksyn in Vienna, Harold Heckle in Madrid, Elaine Ganley in Paris, Elena Becatoros in Athens and Barry Hatton in Lisbon contributed to this report.

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