Category Archive: Uncategorized
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Why Not Unravel the IMF Too While We’re at It?
If you’re really good at making a pigs ear of things, why not join the EU? Of course, this is not meant as a piece of solid advice, rather it is a cry of frustration at being impotently forced to watch so many things done so badly, each in turn, and one after the other. Southern Europe’s problem is essentially a competitiveness problem, and not a fiscal one, and if many states have been having growing difficulty with their negative fiscal balances, this is a symptom of the problem, and not its cause. Even in the worst of cases – countries like Greece and Portugal – the rising recourse to fiscal outlays has been a response to lack of “healthy” growth, and the root cause of this continuing difficulty in generating real growth has been the underlying lack of competitiveness, and the inability to export your way out of trouble once the burden of debt starts to rise, so simply pruning the fiscal side isn’t going to cure the problem, and by now that simple point should be obvious, I would have thought.
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Waiting for Something to Turn up: Europe’s Looming Pensions-based Sovereign Debt Crisis
As Irwin Stelzer argued in a recent opinion article in the Wall Street Journal, Spain’s Prime Minister José Luis Rodríguez Zapatero seems to be an admirer of Charles Dickens’s character Mr. Micawber. When asked what he plans to do about Spain’s 11.4% fiscal deficit, first he promises to extend the retirement age, only to later tell us the measure may not be necessary. Then he promises a public-sector wage freeze, only to have his Economy Minister, Elena Salgado, say he really doesn’t mean exactly what he seems to say. And in any event, we shouldn’t worry too much, since given that Spain is a serious country, somehow or other the fiscal deficit will be cut to 3% by 2013, even though most serious analysts consider the economic growth numbers on which the budget plans are based to have their origins more in the dreams of an Alice long lost in Wonderland than in any kind of sobre analysis of real possibilities. “We do have a plan,” deputy prime minister, Maria Teresa Fernandez de la Vega assures us, but to many that plan now seems to be little better than hoping, like the proverbial Mr. Micawber, that “something will turn up.”
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Serious Problems Emerge for the F-UK-De Group of Countries
Well, I for one can’t help thinking that it’s now well time we all stopped getting carried away with the use of so many acronyms. Not only may one man’s meat easily prove to be another’s poison, it may even be that for some the entire meal will be so distasteful as to prove totally indigestable. And so it is with the latest set of proposals to appear on that diagnostic lab bench which has been hastily erected in the search for that magic “cure all” for the eurozone’s many ills.
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The German Economy Is Essentially “Intact”
According to Bundesbank President Axel Weber, Germany’s economic recovery is “essentially intact”, and is now set to benefit from stronger demand in countries outside the euro region.
“I firmly believe that the recovery process that began in summer 2009 is essentially intact, and that it will continue despite the slower growth dynamic in the winter semester. An additional factor in this context is that the German labor market continues to be in extremely robust shape.”
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Hanging in the Balance over at the ECB
It’s not often that I await the ECB after-meeting press conference statements of Jean Claude Trichet with such an intense feeling of anxiety and bated breath. But this time, as the song goes, it will be different. This time there are plenty of reasons to think that, having been the first off the mark in looking for the exit, Europe’s monetary leaders may sound a note of caution at tomorrow’s meeting, and indeed indicate there may well be solid grounds for at least taking a time out, if not engaging in a longer process of pausing for extended thought. My advice: if you don’t actually have any pressing need to hit the eject button, then don’t do it.
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The “Three Speed” Global Manufacturing Recovery Continues in February
Global manufacturing activity continued to expand in February, albeit at a slightly weaker pace than in January. At 55.2, down slightly from 56.1 in January, the JPMorgan Global Manufacturing PMI posted its second highest reading in almost four years. The average reading so far in Q1 2010 (55.7) is above that for Q4 of last year (54.2). The headline Manufacturing PMI has now remained above the no-change mark of 50.0 for eight successive months.
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Too Soon to Cry “Victory” on Latvia
“Doom-mongers” – the Economist tells us – “are licking their wounds”. And why exactly are they licking their wounds? Well for two years now (apparently) they have been telling us that “the struggle to save the lat’s peg to the euro was bound to end in tears”. As you could imagine right in the very forefront of these so called doom-mongers is to be found yours very truly (and here), and of course Nobel Economist Paul Krugman (and here).
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Just what is the Real Level of Government Debt in Europe?
“If you don’t fully understand an instrument, don’t buy it.”
To the above advice from Emilio Botín, Executive Chairman of Spain’s Grupo Santander, I would simply add one small rider: Don’t sell it either, especially if you are a national government trying to structure your country’s debt.
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Greek Bailout News (1)
“British or German taxpayers cannot finance the failures of others,” German Economy Minister Rainer Bruederle said at the World Economic Forum in Davos, Switzerland, according to the Associated Press. “Solidarity also means everybody adheres to common rules.”
France is not working with Germany or other countries on a support package for Greece which is managing to handle its problems on its own, a French government source said on Thursday. “I am not aware of a support plan. There is not a plan. We’re not discussing one (with Germany or others),” the source told Reuters. “They are managing themselves. They are finding financing support on the market. There is no plan for a support plan. We are not working on one. Le Monde newspaper said earlier that euro zone countries were studying ways of helping Greece resolve its budget problems.”
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After Greece, and Portugal, Does Spain Come Next?
Well, the Spanish government are due to announce their 2009 fiscal deficit number this morning, together with their adjustment plan for reducing the annual fiscal deficit to below 3% of GDP by 2013. This rather distasteful news will be presented to the Spanish people later in the same day on which they opened their morning newspapers to discover that they were all going to have to work two years longer – no crisis comes free – since the Labour Minister Celestino Corbacho has announced that the retirement age will be raised from 65 to 67 (in two-month-per-year installments) between now and 2025.
