Billions for Japan tsunami recovery went elsewhere, reports find

TADANOUMI, Japan -- Billions of dollars meant to help Japan recover from its devastating tsunami went to government projects that had little or nothing to do with the disaster, a new spending review shows.

Japanese politicians have questioned why millions went to a factory that makes contact lenses, or why money was spent to fend off  environmental activists opposed to whaling, or other projects in areas far removed from the tsunami. Local media have dug up numerous  examples of dubious spending, from renovating government buildings outside the disaster zones to job training in  prisons.

All in all, government documents show roughly one out of every four dollars budgeted for reconstruction went to unrelated projects, and more than half has not been allocated at all, the Associated Press reported Tuesday. An outside analysis by recovery expert Yoshimitsu Shiozaki found the same pattern of spending on projects outside the disaster zones.

PHOTOS: Japan hit by magnitude 9.0 earthquake

The funds were originally earmarked solely for the stricken areas, but the government ultimately loosened the rules, saying the money could also be used to bolster the economy and prepare for future disasters nationwide. The reconstruction money was up for grabs at a time when government agencies were downsizing, making it a tempting spigot of cash.

Sanctions, currency chaos igniting unrest in outcast Iran

Soaring prices at Tehran's cavernous Grand Bazaar have ignited violence this week as money traders and vendors clashed with riot police over the plummeting value of the Iranian currency, which is being gutted by international sanctions and mismanagement by the Islamic regime.

What for most Iranians has been an abstract political dispute between their leaders and Western countries concerned about Tehran's nuclear ambitions has suddenly hit them in their wallets and pushed them to lash out. The rial has lost 80% of its value against the U.S. dollar in the last year, a decline accelerated by tightened U.S. and European Union sanctions now depriving the regime of half the hard currency it was earning from oil exports.

Iranian President Mahmoud Ahmadinejad blamed the deepening economic chaos on foreign enemies, contending there is "no economic justification" for the public scramble to dump rials in favor of dollars, euros and gold. Supreme leader Ayatollah Ali Khamenei also struck a defiant pose, reasserting Tehran's right to enrich uranium and vowing that Iranians "will never surrender to pressure."

But Iranian exiles and scholars see the angry outbursts in the marketplace as a sign that ordinary Iranians are finally fed up with a regime that has brought them isolation, insecurity and eroding living standards. They see a population, resentful of a crackdown on dissent three years ago, now edging toward rebellion.

The unrest also demonstrates that the U.S. policy of letting sanctions and diplomacy undermine popular support for the regime is having the desired effect, confronting Tehran with its gravest challenge since Islamic clerics came to power in a  1979 revolution, the experts say.

The street value of the rial has dropped by half in the last two months and plunged 18% on Monday alone. The unofficial exchange rate for the dollar -- more than 35,000 before back-alley trading halted -- is almost three times the official rate of 12,260. But that subsidized exchange rate is available only from state banks to a limited and shrinking number of key importers.

Money traders stopped selling dollars Tuesday, confused over how to price the swiftly deteriorating rial. Some vendors closed their shops in protest of the government's failure to intervene and prop up the currency; others boosted prices beyond what many shoppers can or will pay.  

Before harsher sanctions kicked in three months ago, Iran's government had been using a sizable share of its $100-billion annual oil earnings to subsidize dollar-denominated food and consumer goods, to keep prices stable and placate the population, said Abbas Milani, a Tehran-born academic who directs Iranian studies at Stanford University.

Milani said he suspects the government was initially using the economic downturn brought on by the sanctions to put an end to the costly dollar subsidies. But he now concludes that the regime has been forced to let the rial tumble because it has run out of the hard currency needed to stop the slide.

"We're not talking about a billion dollars or 2 billion to stabilize a currency that has gone down so far. The government would have to find enormous sums of money to pour in, and if they had it they would have done it by now," Milani said.

"I don't think the regime can survive this one," he said, unless Khamenei does the unthinkable and meets Western demands that Iran cease enriching uranium beyond levels needed for civilian nuclear programs.

Tehran officials recently told the International Monetary Fund that they had $50 billion on hand, enough to see Iran through the sanctions bite for at least four or five months, Milani said. He calculates that the regime should have saved about $300 billion in a rainy-day fund over the last eight years. That no intervention in the currency crisis has been forthcoming tells him that much of the oil windfall has been squandered or siphoned off into private accounts of the Revolutionary Guards and government leaders.

"Social and political cohesion in Iran will be deeply disturbed by this economic crisis," predicted Alireza Nader, senior policy analyst on Iran for Rand Corp. "And it's not just the economic crisis -- you saw Iranians take to the streets in 2009 for a number of reasons, and those tensions have been simmering below the surface. We see them coming up now."

Nader pointed out that protesters at the bazaar this week have shouted denunciation of the regime's politics as well as soaring inflation. Shouts of "Leave Syria alone and think about us!" could be heard in clandestinely shot video footage of the angry crowds, he said.

 The Iranian government has been the sole regional supporter of Syrian President Bashar Assad and his brutal suppression of a rebellion now in its 19th month.

"Eventually this is going to put enormous pressure on the Iranian government to concede on a number of issues, not just the nuclear programs but domestic political issues as well," Nader said. "It's already gotten to the point where people's livelihoods are at stake and they're not going to tolerate that situation. We can definitely expect to see more unrest in the coming months."

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Photo: An Iranian shopper on Wednesday pays a fruit seller at the Grand Bazaar in Tehran with 50,000-rial banknotes. The sanctions-battered Iranian currency has lost 80% of its value in the last year, spurring inflation and social unrest. Credit: Abedin Taherkenareh / European Pressphoto Agency

Insert: Riot police block an approach to the Grand Bazaar on Wednesday after arresting money traders and dousing fires lighted in protest of the falling rial currency. Credit: European Pressphoto Agency

Latest threat to the Eurozone: Catalonia independence quest

Just when it seemed stability was on the horizon for the tumultuous Eurozone, with Spain getting a grip on its debt financing and a plan to bail out insolvent banks, a fresh threat to the common currency has emerged with Catalonia's reignited drive to secede from the Spanish kingdom.

More than a million residents of the country's most prosperous region rallied for independence in a protest of historic proportions on Sept. 11, Catalonia's National Day. Some  estimates put the crowd as high as 2 million, or more than a quarter of the 7.5 million who live in the northeast region including Barcelona. This week, after Madrid rebuffed Catalonia leader Artur Mas’ demand for more control over his region’s tax revenues, the regional parliament set a Nov. 25 date for polling Catalans on "self-determination."

Spain’s constitution doesn’t empower the regions to call votes on sovereignty and questions of national integrity. But Mas has said his region will go ahead with a referendum without the central authorities’ approval to address what Catalans consider a grave injustice: They pay as much as $20 billion more into national coffers each year than they get back in public services.

The prospect of a national breakup, no matter how remote and fraught with procedural complications, spurred Spanish King Juan Carlos into rare action on a political matter.

“In these circumstances, the worst thing we can do is divide our forces, encourage dissent, chase chimeras and deepen wounds," the king warned in a letter posted on a new palace website, the daily El Pais reported. It was an apparent allusion to the nationalist stirrings that spurred the Spanish Civil War in the 1930s and a dictatorship under Gen. Francisco Franco that endured until his death in 1975. It was the first time the Spanish monarch weighed in on a political issue in more than 30 years.

Other influential Spaniards have also stepped forward to propose compromise, such as a looser federal structure that would give rebellious regions like Catalonia more autonomy without fracturing a country that has also dealt with a Basque separatist movement for decades. Juan Luis Cebrián, media mogul and author, warned last week that all the secession talk threatened to unleash the “wild beast” of right-wing nationalism that shackled Spain’s development for much of the 20^th century.

Catalonia secession is neither a sure thing nor an imminent one, analysts note. Catalans for centuries have been bandying about the idea of independence for their thriving bastion of manufacturing, shipping, tourism and culture. The conservative government of Spanish Prime Minister Mariano Rajoy has made clear that it opposes Catalonia’s bailing on the rest of the kingdom, and it holds what  essentially could be a veto if the region envisions moving into statehood and taking its Eurozone membership with it. By charter, the Eurozone’s 17 members would have to unanimously approve induction of any new euro currency user.

Mas may be stirring the secession quest to force Madrid to cede more power to Catalonia over its own finances. But in an environment of deep public spending cuts, the second bout of recession in four years and unemployment afflicting 1 in every 4 Spaniards, the notion of sheering off the northeastern corner flanked by Andorra, France and the Mediterranean Sea is clearly appealing to many. Catalonia accounts for 20% of the Spanish gross domestic product and a quarter of its exports.

Catalonia secession has long been part of the political landscape in Spain and has just entered a more active phase because of the tough living conditions resulting from European Union austerity measures demanded to keep euro users' national deficits in check, said Fabian Zuleeg, chief economist at the Brussels-based European Policy Center.

"This is potentially more serious, as it reflects a real conflict between the national and regional levels," Zuleeg said. "The way Catalonia sees it, they've been paying in excessively into the national coffers and, because they have their own deficit, they have to go cap in hand to the Spanish government," only to be denied latitude to keep the regional economy on track.

The 2013 budget unveiled Thursday requires all regions to cut back further on already pared public spending and to generate more tax revenue to service staggering national debts. The piled-on austerity measures are fomenting unrest throughout the country, as seen this week in angry protests demanding job creation and investment in growth, which had to be dispersed with tear gas and mass arrests.

The Catalans' reignited campaign for independence "is an escalation but by no means the last act," said Uri Dadush, director of the international economics program at the Carnegie Endowment for International Peace. "But it's another source of tension in Spain, a complicating factor and another way that things could unravel."

Hit by bailouts, failing banks, unsustainable interest rates and mounting public resentment of the severe belt-tightening across the European periphery from Ireland to Greece, the common currency is at risk, Dadush said, of "death by a thousand cuts."

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Photo: More than a million supporters of independence for Catalonia rallied in Barcelona and other cities on Catalonia National Day, Sept. 11, pressing secession as a means of controlling their own finances and preserving their language and culture. Credit: Stefano Buonamici / Bloomberg

Spain says its banks need $76 billion to return to health

MADRID -- Spain's ailing banks need $76 billion to return to health after being hammered by the country's spectacular real estate collapse, independent auditors and the Bank of Spain said Friday.

The long-awaited estimate came after an examination by hundreds of auditors that showed half of the 14 banks under review failing so-called stress tests. The grim result confirmed suspicion about the strength of Spain's financial sector, but did not prompt Madrid to immediately request outside help, despite a line of credit on offer from its European partners.

Nearly half of the overall sum -- about $32 billion -- was needed by a single financial institution:  Bankia, Spain's largest real-estate lender, whose bankruptcy last spring threatened to drag down the country's entire financial system. Bankia, the fourth-largest Spanish bank overall, is a conglomerate of seven regional lenders that together have dangerously high exposure to bad real-estate loans.

In July, European leaders signed an agreement to lend Spain up to $129 billion to recapitalize its banks. Madrid said it would wait to see the outcome of independent audits of the banks before determining how much of the bailout fund it would tap.

After the audit results were published Friday, Spanish officials again declined to specify how much aid they would request.

"With all the nuances, it's difficult to estimate in the end how much help will be necessary," Fernando Jimenez Latorre, secretary of state for the economy, told reporters.

Latorre said the amount could be a third less than that contained in the audit, or about $51 billion. He also left open the possibility that Spanish banks might choose to raise the necessary funds on their own rather than tap public money.

His comments prompted gasps from reporters, who expected Spain to immediately declare how much of the European bailout money it would take. Putting the bank rescue in motion is thought to be a key step toward fortifying the entire Spanish economy against collapse.

Nevertheless, Jean-Claude Juncker, head of the finance ministers' group in the 17-nation Eurozone, said he was "comforted" by the audit results.

"The final state aid provided to Spanish banks will be lower than the reported capital shortfall, given measures to be taken by the banks in accordance [with] their recapitalization and restructuring plans," Juncker said in a statement.

For months, 400 auditors reviewed transactions in 90% of Spain's banking sector, said Fernando Restoy, deputy governor of the Bank of Spain. Seven of the 14 banks under review failed stress tests.

The $76-billion estimate is a pre-tax figure, the auditors said. After factoring in tax payments and bank mergers that are part of an overhaul of Spain's financial sector, the amount necessary to cover the banks' shortfall is $69 billion.

The first batch of loans is scheduled to be sent to the banks in November after approval by Spanish and European officials.

The audit results were published a day after Spain slashed about $50 billion from its budget for next year. By recapitalizing its banks with European help, and cutting spending at home, Spain hopes to avoid having to ask for a second, larger bailout for the government as a whole.

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Photo: A bank is closed during a strike Wednesday in San Sebastian, in northwestern Spain. Credit: Alvaro Barrientos / Associated Press

Deepening recession heats up talk of Greece exiting Eurozone

When the euro hit wallets and bank accounts on New Year’s Day a decade ago, champagne and fireworks greeted the Europeans' embarking on what was touted as an irrevocable course for prosperity and economic integration.

Over the years, though, as the economies of Greece, Spain and other Eurozone nations became mired in debt, expectations of a happy commune of affluence have given way to thoughts of breaking off the laggards to save the herd. What the Economist and other journals have referred to as a kind of "Hotel California that you can never leave" now looks to some to be exactly the hellish trap evoked by the Eagles in their 1970s ballad.

Greek officials disclosed this week that their economy shrunk 6.2% from April through June and that unemployment is close to 24% and rising. The shaky coalition government, confronted by strikes and protests against earlier austerity measures, has yet to identify the last $5 billion or so in budget cuts it must make to qualify for the next tranche of bailout funds due in September.

The bad news came as little surprise to the Eurozone’s better-off members, Germany first among them, which have complained for months that Athens has repeatedly failed to demonstrate the will to pare its bloated government payroll and get serious about collecting taxes.

A delegation of the so-called troika of creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- visited Athens last month and is expected to issue a critical report on the Greek balance sheet in September. That has shifted the conversation from whether Greece will exit the Eurozone to how many other common currency users might follow.

Even Greek analysts have become dubious of the country’s prospects for living up to the commitments made to get triple-digit billions in bailout funds. They have been issuing gloomy forecasts of an inevitable Greek exit -- or Grexit, as it has come to be called -- perhaps preparing the public for an eventual return to the drachma.

“The political system once more showed how counterproductive it is. Instead of designing a workable state, it tries to reproduce the one that already exists,” the Greek daily Kathimerini’s columnist Paschos Mandravelis groused Monday. In his analysis, titled “On another planet,” he accused the government of protecting well-connected allies and unproductive state jobs.

A week ago, Greek Finance Minister Yannis Stournaras said the government was still looking for about a third of the $15 billion in cuts to the 2013-14 budgets demanded by the troika in exchange for vital cash infusions. Debt inspectors are due back next month for a final review of whether Athens has gotten its finances in order, a judgment expected to be negative unless the government forces through deeply unpopular budget cuts and privatization plans in the final few weeks.

Elsewhere in the common currency club, the mood has changed from one of steadfast commitment to keeping the 17-nation Eurozone intact to mounting resignation that at least Greece will have to go.

Athens’ potential departure "has long since lost its horrors," German Economy Minister Philipp Roesler told ARD television recently. Luxembourg Prime Minister Jean-Claude Juncker, who chairs Eurozone finance ministers’ meetings, observed last week that a Greek exit would be “manageable.” On Monday, when German Chancellor Angela Merkel returned from a hiking vacation in the Italian Alps, she was confronted with even more dismissive comments by her coalition partners.

“An example must be made of Athens that the Eurozone can also show teeth,” Markus Soeder, Bavarian finance minister and member of a conservative sister party to Merkel’s Christian Democratic Union, told the Bild am Sonntag newspaper. He contended that Germany can ill afford to keep bailing out spendthrift euro members and that “further help to Greece is like pouring water into the desert.”

In the Economist cover story this week, a mock memo to Merkel on a possible Plan B advises her to consider two options to her current course of scrambling to hold the Eurozone together. One envisions Greece's departure, which alone could cost the euro area $398 billion in debt write-offs and transitional aid. The other scenario, in which Portugal, Ireland, Cyprus and Spain would also leave, could cost the rump Eurozone $1.4 trillion but halt the slow bleeding of bailouts to the struggling periphery, the respected London-based publication calculated.

Charles A. Kupchan, a professor of international affairs at Georgetown University and former European affairs director on the National Security Council under President Clinton, attributes the growing Grexit talk to an emerging consensus among economists that Athens' departure is a question of when, not if.

"Behind the scenes the European Union is making preparations for a Greek exit to contain the damage," he said of the latest assessments of the Eurozone's integrity.

Grexit would be manageable because of Greece's small economy and the fact that its finances are unlikely to ever meet Eurozone standards, Kupchan said. But he sees other departures as potentially destabilizing for the whole monetary union experiment.

"When you start talking about the Spanish or the Portuguese or the Irish leaving, that's a new ballgame," he said. "That's not a controlled exit of a member or two; it's a complete overhaul of the Eurozone."

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Photo: Mario Draghi, president of the European Central Bank, has pledged to do whatever it takes to protect the euro common currency. But mounting debts and persistent recession in some of the peripheral countries of the Eurozone have turned the conversation to managing the departure of Greece, instead of preventing it. Credit:  Hannelore Foerster / Bloomberg

Confidence teetering in Eurozone, economists warn

It's been more than two decades since the Iron Curtain fell and Europeans embarked on an ambitious mission to build a powerful economic, political and social union in place of the Cold War divide. And for more than two decades, Germans have been footing most of the integration bill.

Compassion fatigue set in long ago among the continent's most prosperous people, and the mounting costs of keeping the Eurozone intact a decade after the common currency was introduced have all but exhausted Germans' generosity toward their needy neighbors.

In this summer of economic discontent that is rattling financial markets worldwide, commitment to the 17-nation Eurozone has been a hard sell for German politicians whose constituents see only more expense and uncertainty with the wobbly fiscal union. Investors, too, seem to have increasing doubts about the euro's future and European Union leaders' ability to forge a viable plan for managing collective finances.

All eyes are on the European Central Bank this week following the vow of its president, Mario Draghi, to do whatever is necessary to keep Spain and Italy in the Eurozone despite skyrocketing interest costs for servicing their massive debts. The bank is constrained by European Union treaty provisions from loaning money directly to governments, and Germany has staunchly opposed proposals for funneling bank funds to needy member states through mechanisms meant to provide strictly supervised bailouts, not to bankroll loans.

The ECB “is ready to do what it takes to preserve the euro. Believe me, it will be enough,” Draghi assured investors last week, bringing about a short-lived reprieve in the interest rates demanded by lenders for 10-year bonds to finance Spanish and Italian debt.

"After Draghi's comments, expectations are quite high that the central bank will take action Thursday. But at the end of the day, the ECB cannot solve this problem," said Keith Savard, senior managing economist at the Milken Institute in Santa Monica.

The ECB can fiddle with collateral requirements and the refinance rate for some short-term relief, but what is needed to restore confidence in the euro is coordinated fiscal strategy and collective guarantees that new loans will be repaid, Savard said. It will take years, he noted, to execute the necessary legislation and treaty revisions once agreement is reached, which appears far from imminent as Germany and other Northern European euro users resist exposing their own good credit to the dodgy finances of some of their neighbors.

Uri Dadush, director of the international economics program at the Carnegie Endowment for International Peace in Washington, sees some progress -- "glacial," he said -- toward stabilizing the euro since May, when Greeks voted out the political coalition committed to the euro. Greeks managed to seat a pro-euro government in a second election in June, but they have yet to adopt the belt-tightening measures needed to get vital bailout funds due in August.

"There is urgency -- you see this in the volatility of the markets. But is catastrophe imminent? I don't think so. People know the ECB is there and, when push comes to shove, that the ECB will intervene," said Dadush.

Despite the barriers to direct lending to governments by the central bank, Dadush said it has managed to buy up at least $246 billion in government bonds at below-market interest for heavily indebted euro countries.

"Rules are there to be broken once the politicians decide this is what needs to be done," he said.

German resistance may also be broken, if the crisis escalates and threatens to further damage the market for Germany's cars, technology and other exports, said Fabian Zuleeg, chief economist at the European Policy Center in Brussels.

He is critical, though, of the German government's failure to make a strong case to its citizens about the benefits of preserving the currency union and moving forward with deeper financial integration.

"It's not a very positive way of engaging your citizens when you are scaring them into a situation where you say they don't have a choice," Zuleeg said.

All three economists interviewed Tuesday observed that Washington could help stabilize the euro if it were to buy the bonds of struggling states, demonstrating confidence in the currency that would inspire China, Japan, Brazil and other big economies to do likewise. They also agree there is virtually no chance that will happen, given the United States' own debt issues and a presidential election underway.

U.S. Treasury Secretary Timothy F. Geithner in effect confirmed Tuesday that the euro crisis would be left to the Europeans to resolve.

"This is completely within their financial ability to solve," Geithner said at a Los Angeles World Affairs Council event, although he  acknowledged that the politics of the problem may be a more difficult sell.

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Photo: German Finance Minister Wolfgang Schaeuble, left, meets Monday with U.S. Treasury Secretary Timothy Geithner at a vacation home on the North Sea island of Sylt, where they discussed the outlook for tackling the Eurozone debt crisis. During a Los Angeles visit Tuesday, Geithner made it clear that the euro woes were a matter for Europeans to resolve. Credit: Philipp Guelland / Associated Press

U.S. moves to increase sanctions on Iran

 WASHINGTON -- The Obama administration and Congress each moved Tuesday to further pressure on Iran over its disputed nuclear program.

Scrambling on an issue that has been gaining visibility in the election campaign, House and Senate leaders prepared for a final vote this week on legislation that adds penalties on Iran’s energy, shipping and financial sectors.

Separately, the administration announced an executive order that penalizes a Chinese bank and an Iraqi bank that have helped Iran evade international sanctions. The order also expands sanctions for the purchase of Iranian petrochemical products.

It targets alternative methods Iran is using to settle oil trades and the payment channels outside the normal world financial system that it is using to obtain hard currency.

"Today's action makes it clear that we will expose any financial institution, no matter where they are located, that allows the increasingly desperate Iranian regime to retain access to the international financial system," President Obama said in a statement.

The penalties are the latest in a series that have been imposed on Tehran in hope of persuading it to accept curbs on the nuclear program, which many countries believe is aimed at acquiring  bomb-making capability. The United States has been forced to regularly add penalties as Iran finds ways around them.

House and Senate negotiators reached agreement late Monday on the legislation, which would penalize any company that sells insurance to the state-run National Iranian Tanker Co.,  provides oil tankers to Tehran, or mines uranium with the country. Congressional leaders said they hoped for a House vote  Wednesday and Senate action by the end of the week.

The moves come in a week when Republican president candidate Mitt Romney has charged that Obama hasn’t been tough enough on Iran, and Israeli Prime Minister Benjamin Netanyahu has complained that international sanctions and diplomacy have not set back the Iranian program “one iota.”

Mark Dubowitz, a sanctions advocate at the Foundation for Defense of Democracies, praised the administration’s steps.

He said  the White House faces a perception that it has been “dragged by Congress into adopting its most forceful sanctions.” The executive order “provides a flexible tool that allows the administration to go on the offensive against both the regime and its critics.”

Rep. Howard Berman (D-Calif.), ranking member of the House Foreign Affairs Committee and lead sponsor of some elements of the bill, said that unless Iran agreed to end the nuclear program “we must continue to pursue even tougher measures.”

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Israeli economic policy tugged by external, internal forces

JERUSALEM -- With one eye on troubled economies elsewhere and another on protests inside Israel, the government is walking a tightrope these days to balance economic and political needs.

Israeli Prime Minister Benjamin Netanyahu raised the deficit target to 3%, nearly double the government's original target. Netanyahu explained to his cabinet Sunday that this would adjust Israel to the European standard and minimize tax hikes.

Stanley Fischer, governor of the Bank of Israel and one of the world's renowned economists, disapproved and warned that Israel is at a dangerous turning point, partly due to the deepening financial crisis in Europe. Israel's economy weathered the last global recession well, but now, he says, it might not fare so well if the European economy deteriorates.

Nor should Israel count on falling back on the U.S. for guarantees, Fischer said recently at an economic policy planning forum. "There is a problem with our rich uncle today: He is not so rich and not as friendly" as last time," Fischer said, urging the government to set a lower deficit target, cut expenditures and pass a responsible budget.  

In recent years, Israel has adopted a two-year budget. This policy, spurred by finance minister Yuval Steinitz, was designed to streamline expenses and increase governmental stability by sparing the annual ritual of political haggling that takes place as it is prepared each summer. Opponents have complained the two-year budget stifles parliamentary discussion of related policies.

The 2013 budget will be for one year only because of uncertainty that clouds the future of the Eurozone, Stenitz said.

Analysts say it is also because it is an election year, and some have criticized Netanyahu's deficit move as "election economics."

A year ago, socioeconomic protests rocked Israel for months. The protests began with a specific call for affordable housing but rapidly morphed into a movement demanding overall "social justice,"   a more egalitarian distribution of wealth and resources, and reductions in the cost of living.

The government responded with steps that included the expansion of public childcare, government dental care for children, stepped up construction of affordable apartments and increased competition in telecommunications. 

Now, social protesters are  emerging from hibernation, claiming nothing has changed. The early attempts to recapture last year's energy faltered until a series of missteps on part of the authorities, including violent arrests and police summons for activists, brought protesters back to the streets.

The protests are gaining in numbers but still lacking in cohesion. Key activists profess they are split between "reformists," who seek to improve the system, and all-out "revolutionists," who want the entire system and government out.

Activists have set up a discussion tent in Tel-Aviv, where debates will be held with hopes of clarifying the agenda. The municipality that supported the tent-town last year is less cooperative, strictly forbidding activists to camp out in the streets.

While activists seek to define their demands, a recent study shows people's feelings that they work mainly to pay taxes and bills are not unfounded.  According to the Jerusalem Institute for Market Studies, an economic policy think-tank, Israelis will work more for paying taxes than for themselves this year.

Israeli citizens will celebrate "Tax Freedom Day" on July 9, after working 192 days just to pay taxes. According to the report, Israelis have worked more days for the government than for themselves every year since 1990, with the exception of 2010-11. This year, U.S. citizens reached the turning point on April 17. 

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Photo: Israeli Prime Minister Benjamin Netanyahu attends the weekly cabinet meeting in his Jerusalem office on Sunday. Credit: Abir Sultan / Associated Press

EU summit stirs little hope of curing what ails the euro

Economic gurus have called on the European Union for bold and swift action at its Brussels summit to restore confidence in the euro by creating a banking union and collectively guaranteeing struggling members' wobbly debts.

But all indications from the key players in Europe's troubled integration project suggested investors and analysts should curb their enthusiasm, as little is expected to come out of the Thursday-Friday gathering of leaders deeply divided over the path forward.

German Chancellor Angela Merkel reiterated Wednesday that pooling debts and merging banking operations without centralized regulation would be “economically wrong and counterproductive.” Subjecting countries like Germany to the consequences of other euro users' spendthrift ways also raises constitutional issues, she told the German Parliament on the eve of the summit.

“Because I know the expectations and hopes that are pinned on this summit, I will repeat right at the start what cannot be said often enough,” Merkel said. “There is no quick solution and no simple solution."

Her view that bloc-wide structural changes are needed first to stabilize the euro were reflected in a blueprint  issued Tuesday by European Council President Herman Van Rompuy in which the continent's leaders laid out a vision for a "stage-based process" for economic and monetary union. It speaks of "building blocks" and "a working method" to be identified by December for integration that would be accomplished over a decade.

Greeks observe preelection ritual of tax dodging

While Europeans breathlessly wait to see if Greece can seat a government, get its fiscal act together and commit to staying in the euro currency club, some citizens of the heavily indebted Balkan state have been engaging in a time-honored tradition ahead of their June 17 election: tax evasion.

Greek media report that interim Finance Minister Giorgios Zanias called tax collectors on the carpet recently and ordered them to target the most egregious evaders to prevent a worsening of the risk that state coffers will run dry by the end of this month. The reports alluded to about $56 billion in uncollected taxes.

On the same day that Zanias pressured tax authorities to step up collections, the Kathimerini newspaper of Athens reported that Greek police had arrested 500 of the worst offenders who collectively owe $844 million.

According to a study published last year by the Athens University of Economics and Business, tax-dodging ahead of elections goes back as far as the modern democratic ritual of voting itself, reestablished after the end of military dictatorship in 1974. Two economic scholars, including a former finance minister, who reviewed tax records for the months preceding 13 national elections found a marked drop in taxpayer compliance when government officials are focused on political campaigns and fewer audits are carried out. 

"May has been a particularly bad month for state revenues as in the first 20 days of the month, which included a general election, the inflow to public coffers was at least 20% lower than in the same period last year," Athens' Kathimerini reported last week, calculating the shortfall at more than $1.6 billion.