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‘incomprehension’: Europe Flummoxed By Us Government Shutdown

Europe stocks drop on U.S. fears; Italy rises

The milk quota was introduced in the 1980s in response to surplus production and acts to maintain dairy prices plummeting. The measure is crucial to famers in poorer regions of Europe who rely on the market stability the quota brings. In 2015, the European Union will abolish the milk quota, sparking concerns that the move would open the door to market instability. “After the quota, there will be a tremendous impact in market. The volatility of milk price is high already, but when the quota ends, the volatility will increase further,” Paolo de Castro, chair of the European Parliament’s agriculture committee told CNBC. But five member states including Germany and Cyprus were fined a total of 46 million euros on Tuesday for exceeding their milk quotas, casting doubts over the Commission’s hopes of calm in the dairy market after the quota rules end. Agricultural experts said that the quota could be holding back production in some countries and a boost in milk production is possible after it has ended. Removing the quota in countries that have already exceeded the cap is going to help increase the supply of milk, Professor Jeremy Franks from Newcastle University’s School of Agriculture told CNBC, adding that it is “holding back production”. The scrapping of the milk production limit comes as the Common Agricultural Policy, which provides help to farmers across the continent, undergoes sweeping reform. “Areas of higher costs and more disadvantaged places, are likely to reduce production, therefore there will be winners and loser across EU,” he told CNBC. Renwick said milk prices are likely to fall with the boost in milk production after the 2015 quota lift, but global prices will play a big role. ) “What has been happening in recent years is that EU price has been closely linked to world price.

But it does add to a sense in Europe that the US is bogged down and focused elsewhere, even as discontent over governance is equallydiscernible on both sides of the Atlantic. RECOMMENDED: Think you know Europe? Take our geography quiz. It fuels an already confused debate when it comes to the future of transatlantic relations, says Ian Lesser, senior director for foreign and security policy at the German Marshall Fund of the United States in Brussels. Europe is already worried that the US is pivoting to Asia, and what this would mean for European strategic interests…. [The shutdown] will also reinforce existing European anxieties about a more inward-looking, less activist US. The Obama administration has acknowledged the global impact of the shutdown. It does have an effect on our relationships around the world and it cuts straight to the obvious question: can you rely on the United States as a reliable partner to fulfill its commitments to its allies? Defense Secretary Chuck Hagel said to reporters this week. It does cast a very significant pall over America’s credibility to our allies when this kind of thing happens. A loss of confidence in the US? While a long-term shutdown would impact the global economy and thus Europe, it doesn’t directly mar transatlantic policies, such as the trade agreement negotiations that are underway. But it is the expression of a deeper problem of failed checks and balances that will impact American ties with Europe, says Josef Braml, a transatlantic expert at the German Council on Foreign Relations in Berlin. If the superpower has no room to maneuver, it will have to shift burdens to foes and friends, he says, which will then create a wedge. “We already see it in security policy, Dr. Braml says, especially the waning US commitment to NATO and its focus on Asia. Europe and especially Germans have to think of how they take care of their own security . It’s not that Europe is a stranger to political crisis.

Europe’s Eroding Foreign Investment

GDP. In the UK, the corresponding figure is significantly higher, 54 percent, as against 40 percent in France and 21 percent in Germany. As advanced economies struggle with their debt crises and as large emerging economies are no longer immune to these crises, the typical drivers of growth consumption, government, net exports are ailing in many countries, particularly in Europe. As a result, many nations hope to rejuvenate their economies through investment. In crisis conditions, domestic investment is lingering. So countries try to attract foreign investment. Since FDI inflows can re-energize economies, the rivalry for FDI has increased rapidly. Before the debt crisis, Europe attracted much of global FDI. Last year, however, FDI in Europe plunged. Optimists believe that it was a cyclical setback. In reality, eroding investment in Europe is a structural trend. It is another reflection of the relative decline of the region. Reset of investment in Europe Before the global recession, FDI inflows peaked at more than $2 trillion in 2007. As the U.S. subprime market collapsed, the crisis spread to other major advanced economies and global FDI inflows shrank to $1.2 trillion in 2009.

Read live blog of ECB President Mario Draghis news conference Draghi did not sound as dovish as hoped for. The likelihood that the ECB will offer a new [long-term refinancing operation] or introduce other new instruments in the coming months has just gone down and a new LTRO no longer sounds like the favored instrument, said Frank land, senior economist at Danske Bank, in a note. In Italy, Prime Minister Enrico Letta won a Senate vote of confidence after a surprise move by Silvio Berlusconi to support the governing coalition. The vote was initially called after former Prime Minister Berlusconi over the weekend withdrew his support from the government and ordered five ministers representing his People of Freedom party to resign. In a Senate debate leading up to the vote, Berlusconi, however, reversed his position and said he would support Letta, after several allies in recent days expressed their dissent with the hard line on the government Bloomberg News ECB President Mario Draghi says the recovery remains weak. The FTSE MIB stock index /quotes/zigman/1482176 XX:FTSEMIB +0.68% rallied 0.7% to 18,098.44, while the yield on 10-year Italian government bonds /quotes/zigman/4869096/delayed IT:10YR_ITA +0.05% fell 10 basis points to 4.36%, according to electronic trading platform Tradeweb. Click to Play Watch BlackBerry, Monsanto John Shipman takes a look at which stocks traders are watching during market action, including BlackBerry, Monsanto, and Global Payments. Photo: Getty Images. It is positive for Italy that the government seems to be able to continue. It is even more positive for Italy if this means Berlusconis political career will come to an end. Berlusconi has been a risk factor in Italian politics for a long time. If this risk factor disappears, the Italian yield spread over Germany could move quite a bit lower. It would also be positive for the rest of the euro area and move us one step further away from the debt crisis, land said. In the U.S., the government shutdown moved into a second day as lawmakers still didnt agree on a budget for the fiscal year, which started on Tuesday. Investors are growing increasingly worried that the impasse will go on longer than expected and may impact negotiations to raise the debt-ceiling in mid-October.

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