Eszter Zalan writes:   Top German politicians have expressed frustration with Greece, the main entry point to the EU for the 1 million migrants and refugees who arrived in Europe this year, most of whom end up in Germany.

Germany’s finance minister Wolfgang Schaeuble, who has often been on collision course with Greek politicians over the last years of the country’s debt crisis, said Athens has for years ignored the rules that oblige migrants to file for asylum in the EU country they arrive in first.

He recalled that German courts decided that refugees were being treated inhumanely in Greece, therefore it is not possible to send asylum seekers back there.

Greece has come under increasing pressure from fellow European countries, as the bloc faces its biggest migration wave since the second world war.

Athens has been pushed to accept EU help to patrol its islands, where most migrants land from Turkey, and additional EU staff to help with fingerprinting new arrivals.

Greece’s reluctance to accept EU assistance has also given birth to an EU Commission proposal to be able to send European border guards to a country in crisis at the external border area of the passport-free Schengen travel zone, even without that country’s consent.

Joachim Herrmann, the interior minister of the southern state of Bavaria, which has taken in most of the refugee arrivals in Germany, also criticized the way Greece handles borders.

Herrmann also warned that it is important to prop up border security at the Slovenian-Croatian border, so that all people entering Schengen from Croatia could be registered and potential terrorists spotted.

“If this is not guaranteed within a few weeks, we will have to become active on our own borders,” Herrmann said, repeating earlier warnings that Schengen, one of the main achievements of the EU, could crumble under the weight of the refugee crisis.

Schaeuble also said, the refugee influx meant that European countries will have to increase spending on defence.

Earlier this year, EU Commission president Jean-Claude Juncker also called for the gradual establishment of an EU army.

Faced with refugees from war torn areas in the Middle East and Asia, Germany has also stepped up efforts to play a more visible role in international affairs..

Germany stepped up efforts at home too to accommodate the unprecedented number of new arrivals, many of whom are children in need of education.

The country has recruited 8,500 people to teach child refugees German.  With some 196,000 children fleeing war and poverty entering the German school system this year, 8,264 “special classes” have been created to help the new arrivals catch up with their peers, AFP reported.

According to Germany’s education authority, 325,000 school-age children reached the EU country in 2015.

by Marian Kamensky

Chris Morris writes:  The European Union has often taken its boldest steps at moments of crisis. But although the political impulse to “keep the show on the road” remains strong, 2015 feels a little different.

Even among those countries that have integrated most closely, a number of competing visions of Europe have emerged during the year.

A broadly north-south split on how to strengthen the eurozone has been mirrored by a broadly east-west split on how to begin to cope with a million arriving migrants.

Dominating debate and dividing opinion – on these and other issues – is a Germany that seems to have put its historical baggage behind it, and is now Europe’s clear leader.

Berlin appears determined to build a stronger EU, often in its own image, but it will not have everything its own way.

Proposals from the European Commission focus on more integration: creating the post of a eurozone finance minister, for example, or an EU border guard force, with the power to intervene against the wishes of an individual member state.

Big problems do need big solutions. But finding detailed agreement in 28 different capitals, on such far-reaching issues of national sovereignty, is proving extremely difficult.

One obvious weakness is structural. That is partly because the EU is an experiment in shared sovereignty, which has never quite been tried before.

The clear-cut solution to many of its problems would be to go the whole hog, and create something approaching a federal state. Or to transfer many powers back to nation states that still co-operate, but have far fewer institutional links.

But the current dispensation – muddling along in the middle – is perhaps the most difficult of all to get right.

In part, the EU has only itself to blame. Two of its most prominent creations – the euro and the Schengen passport-free zone – are incomplete constructions.

In both cases, the big ideas were put into practice without all the building blocks properly in place.

And when they have come under unexpected pressure, systems created in the spirit of compromise have proven to be barely fit for purpose.

It has all led to an atmosphere of gathering gloom, some of it unwarranted.

For all its problems, Europe is still one of the most attractive places in the world to live. Why else would a million people have risked everything to get there?

But the relative decline of Europe as a global power has generated anxiety, as high unemployment and low growth in many countries have sapped confidence in existing political structures.

Anti-establishment parties of the radical left and right have made gains throughout the year.

As 2016 approaches though, this may not be a time for mulling over long-term trends. It is all set to be another year with short-term crisis management to the fore.

And if there is one thing the EU needs above all else, it is clear political leadership, to help Europe navigate through the storms to come.

Global economic growth will be “disappointing” next year, the head of the International Monetary Fund (IMF) said in a guest article for German newspaper Handelsblatt published on Dec. 30.

IMF Managing Director Christine Lagarde said the prospect of rising interest rates in the United States and an economic slowdown in China were contributing to uncertainty and a higher risk of economic vulnerability worldwide.

In addition, growth in global trade has slowed considerably and a decline in raw material prices is posing problems for economies based on these, while the financial sector in many countries still has weaknesses and financial risks are rising in emerging markets, Lagarde added.

“All of that means global growth will be disappointing and uneven in 2016,” Lagarde said, adding that low productivity, ageing populations and the effects of the global financial crisis were putting the brakes on growth.

She said the start of normalization of U.S. monetary policy and China’s shift towards consumption-led growth were “necessary and healthy” changes but needed to be carried out as efficiently and smoothly as possible.

The U.S. Federal Reserve (fed) hiked interest rates for the first time in nearly a decade earlier this month and made clear that was a tentative beginning to a “gradual” tightening cycle.

There are “potential spillover effects,” with the prospect of increasing interest rates there already having contributed to higher financing costs for some borrowers, including in emerging and developing markets, Lagarde said.

She added that while countries other than highly developed economies were generally better prepared for higher interest rates than they had been in the past, she was concerned about their ability to absorb shocks.

“Most highly developed economies except the USA and possibly Britain will continue to need loose monetary policy but all countries in this category should comprehensively factor spillover effects into their decision-making,” Lagarde said.

She warned that rising U.S. interest rates and a stronger dollar could lead to firms defaulting on their payments and that this could then “infect” banks and states.

At the dawn of the 20th century, Argentina outperformed Germany and France in per-capita Gross Domestic Product, and the country was growing at a faster pace than the United States. Yet, state-led economic meddling, and the lavish public spending introduced in the 1940s by General Juan Domingo Peron – a political icon whose party still pervades Argentina’s life and way of thinking – thwarted that upward trend.

The country’s economic trajectory has since been one of decline. In the stream of economic erosion runs deep a shared anti-market vision – represented by Peronism.

The result thereof is that – apart from some ephemeral bouts of market-friendly policy stances – political leaders hardly dare to stand up against conventional wisdom. In order to stay popular, they eschew badly needed supply-side reforms and public-budget streamlining. In both countries, governments tend to bequeath to their successors problems they have the possibility, and responsibility, of tackling and solving.

The art of procrastination attained recent peaks during the presidential terms of of Jacques Chirac in France (1995-2007) and the Peronist Kirchner couple – Nestor and Cristina – in Argentina (2003-2015).

Under the Kirchners the budget deficit is equivalent to 6-7 percent of GDP, and welfare programs have reached unsustainable levels: Forty percent of Argentinians receive a pension, a salary or a social-welfare benefit from the government – a proportion that doubled during the three-term reign of the Kirchner family.

Taxes, including on exports, and capital controls have put a break on productivity growth, thereby hampering Argentina’s international competitiveness.

Ms. Kirchner, whose mandate expired Dec. 10, thus leaves an economy in shambles to her successor.

A few days before her departure, Ms. Kirchner pushed a Peronist-controlled Congress to approve a further expansion of public spending and the issuance of $1.15 billion of public debt.

Had she wished to make the task of her successor still more difficult, she would not have behaved in a different manner.

However strong Macri’s intention to carry out pro-market reforms may be, the constraints he will be facing are anything but negligible.

For starters, Macri won by a narrow margin of less than 3 percent, which shows the public’s limited approval to his reform program. In addition, more provinces voted for the Peronist candidate than for Macri – and Macri will lack a majority in the Congress.

Does this mean that Macri’s presidency is doomed to procrastination as usual? Not necessarily, for there are a few glimmers of hope.

First of all, the fact that Macri does not come from the political establishment makes him an atypical president, less prone to the traditional procrastination game.

Add to this the fact that, under Kirchnerismo, state dirigisme has wreaked havoc on the economy. Argentinians may therefore be more willing than in the past to give a try to the pro-market policies advocated by their new president.

The defeat of the Peronist candidate is expected to create turmoil and scapegoating within Peronism. That could make it easier for Mr. Macri to strike deals with the less ideological or more pragmatic factions of the opposition in Congress.

To succeed, President Macri must deploy not only political determination, but also the shrewdness needed to negotiate with Congress, and the pedagogic skills necessary to galvanize public support to his reforms.

Though not impossible, the mission is colossal.

As the European Union prepares to enter the new year, it faces an almost perfect storm of political challenges. The strategy it has used in the past – barely muddling through a series of calamities – may no longer be enough.

Carl Bildt writes:  Of course, the EU is no stranger to crisis management. The euro crisis, for example, was widely expected to destroy the EU; but the issue was more or less handled. Greece remains in poor shape, but it has retained its EU and eurozone membership. And the EU now has stronger mechanisms for economic-policy coordination.

But the situation today is far more demanding than anything the EU has seen so far – not least because of the sheer number of serious challenges that Europe faces. Far from the “ring of friends” that EU leaders once envisioned, the European neighborhood has turned into a “ring of fire,” fueled largely by the combination of Islamist terrorism and Russian aggression in eastern Ukraine.

One of the challenges is the surging refugee crisis, fueled by conflict in the Middle East, especially Syria. To be sure, only a tiny fraction of those who have been displaced are currently seeking to enter the EU, and the million refugees expected to arrive this year represent only about 0.2% of the EU’s population. But when so many arrive in so short a time in just a few countries, the EU’s capacity to manage the influx has been overwhelmed, and controls at some borders within the Schengen Area have been restored.

In 2016, EU countries can be expected to get a handle on the immediate challenge, agreeing to key steps to control borders and share the burden of migration more equitably. But the longer-term challenges – integrating the refugees into European society and countering the rise of xenophobic political parties – will be far more difficult.

Progress on both the Transatlantic Trade and Investment Partnership and a single digital market are central to the EU global competitiveness.  A new “global foreign and security strategy,” to replace the one that was developed during the more optimistic days of 2003, must be in place by June.

Danes have voted on whether to modify their country’s opt-out on EU home and justice matters to an opt-in (which would allow Europe-wide rules to be adopted on a case-by-case basis). Very few predicted that the change would be rejected – and even fewer that it would be defeated so soundly, with 53% voting no.

Dealing with the consequences of a UK exit would consume too much political oxygen in the succeeding years to address the myriad other challenges Europe faces.

A year or two from now, the EU will look very different. It might be a fractured union, so preoccupied with arresting its breakdown, spurred by the UK’s withdrawal, that it stumbles on virtually every other issue it faces. Or it could be a vigorous union that includes the UK and has gotten its act together on refugee, border, and asylum issues and is finalizing the TTIP and the digital single market.

In this sense, whether the new year is a happy one for Europe may well determine whether the next decade is a happy one – both for Europe and those, including the United States, that depend on it.

CHina is not implementing long-term solutions.  The country’s extraordinary economic difficulties will result in a collapse or a long-term decline, and either outcome suggests China will return to the ranks of weak states if they don’t face facts.

Gordon G. Chang writes:  As an initial matter, China’s current situation is far worse than the official National Bureau of Statistics reports. The NBS maintains that the country’s gross domestic product rose 6.9 percent during the third calendar quarter of this year after increases of 7.0 percent during each of the first two quarters.

Willem Buiter, Citigroup’s chief economist, suggests the rate was closer to 4 percent, and growth could be as low as the 2.2 percent that people in Beijing were privately talking about mid-year. The most reliable indicator of Chinese economic activity remains the consumption of electricity, and for the first eleven months of the year electricity consumption increased by only 0.7 percent according to China’s National Energy Administration.

Other statistics confirm extremely slow growth. For instance, imports, a sign of both manufacturing and consumption trends, fell 8.7 percent in November in dollar terms, marking a record thirteen straight months of decline. Exports were down 6.8 percent, the fifth straight month in the red.

Especially disturbing is price data. In Q3, nominal GDP growth of 6.2 percent was less than the officially reported real growth of 6.9 percent. China, therefore, looks like it is now caught in the deflationary trap of falling prices. Deflation, in turn, suggests a 1930s-style crash is increasingly possible. China has too much debt—perhaps as much as 350 percent of GDP at the moment—which becomes impossible to service in an era of rapidly declining prices. The country over the last year has seen a number of “first” defaults. So far, the central and provincial authorities have managed rescues for many of the obligors, but at some point they will have no choice but to let failing borrowers go under in far greater numbers.

In these circumstances, the best case scenario for China is several decades of recession or recession-like stagnation, much like Japan experienced in the 1990s and the first decade of this century. China’s leaders won’t say the goal of the just-completed Work Conference was to avoid the sudden adjustment of a collapse, but that appears to be the case.

To their credit, however, Beijing has been more candid. Chinese technocrats see consumption saving the economy, but that’s unlikely to be the case. Consumer demand is not high, despite what unnamed officials told the media at the conclusion of the Work Conference. Indicators, such as the corporate earnings of retailers and consumer products companies, paint a picture of spending in China growing at an anemic pace.

At the same time, manufacturing, the heart of the economy for decades, looks like it is contracting quickly, and services growth, despite official numbers, is low. Both these developments have implications for consumption. In China, consumption has been the result of growth, not the cause of it, and it is unlikely spending can power the economy on its own for long.   What’s Up with the Chinese Economy