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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
    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.


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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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  • What Is The Level Of Deflation Risk In Germany?

    Only one thing is really clear about the Germany economy at the present time, and that is that it is shrinking rapidly. In fact it contracted far more than most analysts and observers expected in the third quarter (although I, for one, was not especially surprised), entering what now appears to be its worst recession in at least 12 years as both exports and domestic spending continue to fall. German gross domestic product in Q3 dropped by a seasonally adjusted 0.5 percent from the second quarter, when it fell by a quarterly 0.4 percent, according to revised data from the Federal Statistics Office. The Germany economy last had a two quarter contraction of this magnitude back in 1996.

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  • Did (or Didn’t) Japan Just Re-introduce Quantitative Easing?

    With the US Federal Reserve now adopting what is widely regarded as some variant of quantitative easing (QE), and with the Bank of Japan cutting interest rates amidst economic conditions which BoJ Governor Masaaki Shirakawa describes as “severe”, perhaps it is worth taking time out to have a looking at some of the earlier experience of quantitative easing in Japan, in order to ask ourselves why it is that central banks may favour this particular approach this time round, and why it is that with monetary policy at very low levels in a number of countries we are not seeing a simple knee-jerk return to/introduction of some form of Zero Interest Rate Policy (ZIRP). In order to answer such questions we will also need to look at the (none to evident) issue of whether or not it is the case that this week’s decisions at the BoJ to all effect and purpose do actually constitute a return to QE.

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  • Why The IMF’s Decision To Agree A Latvian Bailout Programme Without Devaluation Is A Mistake

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    The IMF finally announced it’s Latvia “bailout” plan on Friday. The plan involves lending about €1.7 billion ($2.4 billion) to Latvia to stabilise the currency and financial support while the government implements its economic adjustment plan. The loan, which will be in the form of a 27-month stand-by arrangement, is still subject to final approval by the IMF’s Executive Board but is likely to be discussed before the end of this year under the Fund’s fast-track emergency financing procedures, and it is not anticipated that there will be any last minute hitches (although I do imagine some eyebrow raising over the decision to support the continuation of the Lat peg). The Latvian government admits that some of the IMF economists involved in the negotiations advocated a devaluation of the lat as a way of ammeliorating the intense economic pain involved in the now inevitable economic adjustment. But the government in Riga stuck to its guns (supported by the Nordic banks who evidently had a lot to lose in the event of devaluation), arguing that the peg was a major credibility issue, and the cornerstone of their plan to adopt the euro in 2012.

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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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