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  • Germany IS About To Have Its Worst Recession Since WWII

    The German economy is about to suffer its deepest recession since World War II according to economics Minister Michael Glos speaking in an interview with the German newspaper Welt am Sonntag due to be published tomorrow (Sunday). Glos said growth in Europe’s largest economy is now expected to drop by as much as 2.5 percent this year (and there is still downside risk here). Earlier government estimates had been for slight positive growth (0.2 percent). This suggests that the miracle export-driven-recovery in German economic performance that so many were enthusing about in 2007 has actually been a short lived, one-off, affair, driven largely by an unsustainable lending boom in the UK, and Southern and Eastern Europe. If we take as good this year’s government estimate, it gives us average growth for the German economy over the last 10 years of 1.07%, hardly changed from the supposedly “correctional” pace attained between 1995 and 2005 (see chart below) – or is Germany’s lost decade now surreptitiously going to convert itself (like its Japanese equivalent) into the lost decade and a half?

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  • Italy Slips Slowly But Steadily Into Its Worst Recession In Over 30 Years

    The Italian economy continued to contract sharply in the third quarter of 2008 as exports fell sharply – declining at the fastest rate in three years – under the impact of a global slump which weighed down on foreign demand for Italian products, and pushed the Italian economy into its worst recession since at least 1975. Sales of Italian goods abroad fell 1.6 percent from the previous quarter, their biggest decline since 2005.

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  • Will All Be Well, And End Well, In Estonia?

    Well, there doesn’t seem to much room for doubt at this point does there, the Baltic Economies are in the van of the European economic slowdown for 2009, just as they were leading the charge up in 2007, and all that debate about whether we were going to get a hard landing or a soft one seems now so out of date and and old hat as we watch how Estonia’s economy contracts almost faster than the body of the incredible shrinking man (by an annual 3.5% in the third quarter of 2008), while Latvia’s seems to be rivalling Harry Houdini in the expert art of staged disappearance (dropping as it did by an annual 4.6% in Q3). Even Lithuania’s economy – which like a half drunken man still manages to stagger forward before it finally gets to fall over – is now expected by IMF regional representative Christoph Rosenberg to be set to contract an annual 2% in 2009. As Rosenberg so pointedly says “Latvia had the highest growth rate in the EU for several years, but it was a bubble.”

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  • S&P’s Puts Spanish Sovereign Debt On Ratings Watch Negative

    Spain yesterday became the third euro zone country within a week to be warned by rating agency Standard & Poor’s that its credit rating (currently the highest – AAA) is under threat from the deterioration in public finances being produced by the government’s attempt to support the banking system and put a brake on the dramatic decline in the domestic economy. As in the case of Ireland and Greece last Friday, S&P said Spain faces a painful process of rebalancing of its economy and a consequent marked deterioration in its public finances.

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  • Portugal Sustains

    “Art has a function of teaching about the human condition. We live in hope, hope is fundamental” – Manoel de Oliveira
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    Manoel de Oliveira (photo and quote above) is a living example for the Potuguese people of how to force their way out of the low growth/low per capita income trap into which they have steadily stuck their neck. Oliveira celebrated his 100th last December – and how did he celebrate it: by starting work on a new film. Traditional productivity theory suggests most people slow down with age, but Oliveira seems to have done just the opposite – and since 1990, he has made at least one film a year. His secret for longevity, work much and rest little (oh yes, and also remember that living in hope is fundamental, it’s funny, but my father who lived to be 84 and worked to 80 gave me the same sort of message). Indeed far from implementing a 35 hour week he seems to only stop on Saturdays – “This is the only day of the week that I rest,” he told journalists back in December when he interrupted shooting on his latest film to give them a rare press conference. So in a country where the average age of leaving the labour force is currently 63, and where raising employment participation rates is a national priority, what better example of a “local hero” than Manoel. What follows will be an attempt to reveal just what it was he was so meticulously trying to capture with his camera in the photo above. Just call me an inveterate “peeping tom”, lookout Portugal all is now going to be revealed!

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  • Putting Out Fires During Noah’s Flood, Or Eyeless In Gaza Part II

    Paul Krugman had a short post recently drawing attention to a rather foolish and ill-thought-outstatement originating in the mouth of German Finance Minister Peer Steinbrueck.

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  • As The Labour Market Turns German Exports And New Orders Tumble

    Unemployment in Germany rose last month for the first time since February 2006, thus bringing inauspiciously to an end an unprecedented 34 month labour-market recovery. Figures released by the Federal Labour Agency today show that the number of those seeking employment in Germany rose by a seasonally-adjusted 18,000 in December. The change is small, but the significance is great, since this is obviously but the first month of many when unemployment will rise in Germany, and this rising unemployment will now, in its turn, feed back into the industrial slowdown which is already underway. The seasonally adjusted unemployment rate remained unchanged (following data revisions for previous months) at 7.6 percent.

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  • Why Spain’s Economic Crisis Is Something More Than A “Housing Slump”

    Spain’s inflation (as measured by the EU HICP methodology) was around 1.5% (year on year) in December 2008, according to the flash estimate issued by the stats office (INE) earlier this week.

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  • December’s JPMorgan Global PMI Shows Just How Far The Infection Has Spread

    Well, here’s the chart I think everyone really need to see (below). The JPMorgan Global Manufacturing PMI hit 33.2 in December, a series record. More to the point you can get a comparison between what is happening now and the 2001 “recession lite” with only a swift glance, and, of course, the 2009 long recession is only just getting started.

    jp+morgan+PMI.png

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  • What Are The Chances That We Just Hit The Second Great Depression Out In Ukraine?

    Well, one good turn deserves another. So if, like Paul Krugman (and me, I think, though I hadn’t gotten as far as thinking through all the implications of what was happening when I posted the original piece) you take the view the Ukraine industrial output chart I put up yesterday could be the smoking gun (or starter’s pistol, or line judge flag, or whichever metaphor works for you) that tells us that the second great global depression in the history of modern industrial capitalism may now have begun, then here are some more of those tell-tale charts to put in you pipe and smoke – or if , like Huck Finn that is your preference, to chew on.

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Otaviano Canuto

Otaviano Canuto is Senior Advisor on BRICS Economies in the Development Economics Department, World Bank, a new position established by President Kim to bring a fresh research focus to this increasingly critical area. He also has an extensive academic background, serving as Professor of Economics at the University of Sao Paulo and University of Campinas (UNICAMP) in Brazil.

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