Mish's Global Economic Trend Analysis

Wave of New EU Border Controls: Austria, Slovakia, Netherlands; Austria Dispatches Army to Border; Hungary Blames Greece
Illinois Halts Payments to Dentists, Threatens to Stop All Health Insurance Payments
Germany Pushes for Financial Transaction Tax; Will Cameron Face Reality?

Wave of New EU Border Controls: Austria, Slovakia, Netherlands; Austria Dispatches Army to Border; Hungary Blames Greece

Posted: 14 Sep 2015 05:59 PM PDT

Border Controls in Austria, Slovakia, Netherlands

After twice upping the number of refugees it would accept, the German pot is overflowing.

12,000 arrived in Munich on Saturday alone. Germany was forced to institute border controls. It can no longer handle its safe-haven status.

In response to German controls, More EU Members Impose Emergency Border Controls.

A wave of EU member states imposed emergency border controls on Monday as fallout from the refugee crisis put the bloc's free movement area under increasing strain.

Austria and Slovakia imposed tighter border checks on migrants, while The Netherlands also announced that police would carry out spot border checks.

The moves were a response to Germany's clampdown on its own borders, which involved temporarily disrupting both rail and road routes from Austria and caused reverberations throughout Europe.

Germany's reintroduction of border controls have stoked fears in Vienna that Austria will be overwhelmed by thousands of refugees trying to reach Germany.

Officials in Austria on Monday said the country's decision to increase checks on refugees travelling from Hungary — including dispatching the army to the border — remained in line with Schengen rules on free movement across EU borders.

Migrant Sharing Plan Hits Rocks of Reality

Also consider EU Discord Over Migrant Sharing Plan.

EU efforts to agree a binding plan to share out 120,000 refugees fell apart after a minority of countries led by Czech Republic and Hungary objected to a heavily watered down proposal.

After six hours of argument, member states failed to reach unanimous agreement on the plan, although a majority — including France and Germany — supported the scheme.

Countries in favour of the plan will now try to force through a deal with a qualified majority at another meeting in October, setting the stage for a bitter diplomatic fight in the intervening period.

Although qualified majority votes are acceptable under EU law, they are rarely used to force through decisions on politically sensitive topics against vocal opposition.

Hungary was supposed to be one of the beneficiaries of the scheme but has opposed it, arguing that it is not a front-line country and that it has only suffered a huge influx of migrants because Greece has failed to manage its borders.

The Czech Republic also refused to sign up to the proposals, saying that it would oppose efforts to introduce an automatic relocation scheme. Romania and Slovakia were also against the scheme.

Britain, which has an opt-out, outlined its opposition to the plan originally put forward by the commission's president Jean-Claude Juncker.

Plans to allow countries to duck out of the scheme in exchange for a fee were discussed for less than one minute, according to one diplomat.

Major Warning to Cameron

The UK has an "opt-out" on immigration but does it have one on the Financial Transaction Tax proposal? Even if the UK does have that opt-out, the next Prime Minister may give it away. And Labour supports the transaction tax.

There are numerous items that are not in the UK's best interest that it will have to accept sooner or later if it stays in the EU.

When this reality hits prime minister David Cameron is anyone's guess, but my best guess is never.

The best hope for the UK is for British voters to wake up to the reality that EU nannycrats will never give up on horrendous ideas, and therefore the UK is better off alone, just as Switzerland is.

Yes to Europe

Switzerland is not a member of the EU. The last "Yes to Europe " vote was in 2001. Swiss voters rejected joining the EU by 76.8%.

All the horrors attributed to the UK leaving the EU are clear falsehoods.

Quotas: Answer or Problem?

Curiously, although Switzerland is not a member of the EU, in a referendum on 5 June 2005, Swiss voters agreed, by a 55% majority, to join the Schengen Area.

Switzerland has since had second thoughts. Wikipedia explains:

"In February 2014, the Swiss voted in a referendum to introduce quotas for all migrants in Switzerland. Such a quota system would, if implemented, violate the agreement between Switzerland and the European Union on the free movement of persons, and require the renegotiation of the various bilateral agreements between Switzerland and the European Union if they are to remain in force."

Germany now wants a quota system. Apparently, a quota system is now what's best for the EU, even though a quota system is not compatible with the Schengen Treaty!

Schengen is Dead

The Schengen Treaty is indeed dead. The treaty was ill-formed in the first place. It should not apply to places outside central Europe, nor should benefits vary so widely between member states.

In addition, entry concerns are a huge issue. The peripheral countries bear the front line costs as under the treaty, the initial country of entry needs to certify and register the migrants.

Some realistic measures as to who is a genuine political refugee vs. an economic refugee are in serious need of implementation.

The obvious problem with solely depending on a determination as to who is or is not an economic refugee is that such a determination can take years, and great expense, to prove.

Finally, if someone is really an economic refugee, do you take them for a year, then send them back to Syria or wherever, or is it better to close the borders in the first place?

Mike "Mish" Shedlock

Illinois Halts Payments to Dentists, Threatens to Stop All Health Insurance Payments

Posted: 14 Sep 2015 11:27 AM PDT

Illinois Threatens to Halt All Health Insurance Payments

Unpaid bills in Illinois now stand at $8.5 billion. Some project the total will reach an all-time high of $10.5 billion by December. Total accumulated liabilities counting pensions are on the order of $163 billion.

Illinois is flat out broke, and without a budget cannot legally pay some bills. In what I see as a sideshow, Illinois has not been paying lotto winners.

Far more serious issues are on the horizon. For example, the State Journal-Register reports Gov. Rauner threatens to halt health insurance payments to providers for state workers.

As Illinois approaches its 11th week without a state budget, Gov. Bruce Rauner has threatened to take the unprecedented step of stopping all payments to doctors, hospitals and others providing health care to the almost 363,000 state workers, university employees, retirees and others covered by the state's group insurance plan.

"All health care services will continue to be paid as long as possible," said Meredith Krantz, spokeswoman for the Illinois Department of Central Management Services.

"However, in the near future, we will no longer have the legal authority to continue to pay health care vendors for their services," she wrote in an email Friday to The State Journal-Register.

"All applicable fiscal 2015 funding has now been exhausted," she said. "Without a budget in place, there is no appropriation or legal authority to continue to pay health care providers."

Dental Payments Halted

In addition to the administration's threatened shutoff of reimbursements to health care providers and health insurance companies, the state recently halted all payments to dentists for services to the 359,325 state workers, university employees, retirees and dependents with dental coverage.

The CMS notice says a few health care providers in the state's self-insured plans — which include Delta Dental, Cigna, and the HealthLink and Coventry open access plans — have asked people insured through the state plan to pay cash at the time of service to cover the total cost.

Legislature Gets Paid

No matter whether the legislators do their job or not, they get paid. Their pay is guaranteed via a bill the legislature passed last year.

And in spite of the fact the legislature would not present a balanced budget for Rauner to sign, the legislature did pass a pay hike for themselves, in yet Another Insult to Taxpayers.

Legislators had a chance to rescind the pay raise, but a bill to do that was buried by, you guessed it, Madigan.

Gov. Bruce Rauner has been using the pay raise to tweak legislators, especially Madigan. Last week, he said accepting the pay raise without solving the state's budget issues was "unfair to taxpayers and the people they represent. It is time to stop protecting the political class at the expense of the middle class."

Madigan's response to Rauner's taunt was, "I'm not going to spend a lot of time on that question.'' Madigan has said the pay issue is a "diversion,'' but in the Madigan dictionary, any issue that threatens the comfort of legislators or trial lawyers is a diversion.

Overpaid, Underworked

"Illinois legislators are already among the highest paid in the United States, earning $68,000 to $95,000 per year for part-time service, plus per diem payments and mileage reimbursement," said Rauner in an amendatory veto of the bill to hike lawmaker pay.

School Children Removed as Bargaining Chip

Budget for primary and secondary schools was not originally protected. However, in June, governor Rauner cleverly got the legislature to go along with school funding, effectively removing children as a bargaining chip.

Without that agreement, schools would now be closed, and pressure from parents for Rauner "to do something" would be intense.

Given House Speaker Mike Madigan will not deal with the governor on badly needed reforms, Rauner may have been forced to pass a tax hike.

Genuine Chance for Reform

Politically speaking, Madigan made a huge mistake. And Illinois stands to benefit if Rauner plays his cards correctly.

With no pressure from parents about schools, Rauner now has the chance to hold out for reforms. Pressure will instead fall on the legislature, as they will have to pay healthcare expenditures out of their own pocket.

Rauner has stated he would not sign off on a tax increase for FY2016 unless lawmakers approved changes to the workers' compensation laws and freeze property taxes.

Rauner should hold out for far more. Here is my list of ideas.

Reform Ideas

Pass right to work legislation
End prevailing wages
Freeze property taxes
Rewrite worker's compensation legislation
End collective bargaining of public unions
End defined benefit pension plans for new employees

It is unlikely that Madigan would agree to all of those, but Ruaner should be able to get more than two. And the longer Rauner holds out, the more he can get. Pressure is now on the legislature, not the governor.

Apocalypse Illinois

For further details on Illinois' enormous fiscal mess, please see Apocalypse Illinois: IOUs Projected to Hit $10.5 Billion, $163 Billion Total Accumulated Liabilities.

Mike "Mish" Shedlock

Germany Pushes for Financial Transaction Tax; Will Cameron Face Reality?

Posted: 14 Sep 2015 10:11 AM PDT

In a move certain to upset UK prime minister David Cameron as well as increase the odds of the UK kissing the EU goodbye, Berlin to Push for Financial Transactions Tax to Cover All of EU.

German Finance Minister Wolfgang Schäuble will push for a planned European tax on stock and bond trading to apply in all EU countries in spite of firm UK opposition to the scheme and warnings from banks it would hurt their business.

While only 11 nations — including Germany and France — are planning to participate in the financial transactions tax, Mr Schäuble said on Saturday that this should be seen only as a first stage, and that efforts should then be made to convince other nations to join.

"We made important if not decisive progress," said Pierre Moscovici, the EU's economics commissioner, who is a staunch supporter of the initiative. "This deal is possible, and more than possible, if we go on working with ambition."

The upbeat mood marked a shift from even a few months ago when the initiative seemed to be virtually dead.

Mr Schäuble told reporters after the meeting that having a tax across only 11 of the EU's 28 countries sat awkwardly with plans under development in Brussels to better integrate capital markets across the entire bloc.

Will Cameron Face Reality?

Cameron keeps stating he can get EU treaty changes in regards to immigration, agricultural subsidies, and the financial transaction tax.

If he believes what he says, he is out of his freaking mind. No one can control the beast the EU has become. That's the reality.

Perhaps this will change his mind, but most likely not. Stubborn arrogant politicians and common sense seldom mix.

Bring It On

As for the tax itself, it would likely reduce liquidity at a very inopportune time, given hugely overvalued market with high frequency trading accounting for most of the transaction volume.

But hey, bring it on, the higher the tax the better. The market needs a good crash to have decent values. And the UK certainly does not need the EU.

Mike "Mish" Shedlock

Economy News

14.9.15

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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