Don't Shoot the Messenger

  • Italy Needs EU Bonds And It Needs Them Now!

    You see, this isn’t a brainstorming session — it’s a collision of fundamentally incompatible world views. Paul Krugman

    As a wise man recently said, failure to act effectively risks turning this slump into a catastrophe. Yet there’s a sense, watching the process so far, of low energy. What’s going on? Paul Krugman

    First, focus all attention on reversing the collapse in demand now, rather than on the global architecture. Second, employ overwhelming force. The time for “shock and awe” in economic policymaking is now. Martin Wolf

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  • The (Credit) Drought In Spain Falls Mainly On The Plane

    Maybe many people outside (or even inside for that matter) Spain didn’t especially notice the fact, but last Sunday’s Barça match with Racing de Santander did not go out on regional TV as planned. This caused a few eyebrows to be raised among football supporters and commentators, but little in the way of serious analysis or comment. But the reason the match wasn’t broadcast is perhaps rather more interesting than many imagine, since behind Saturday’s blackout lies a dispute between the Catalan regional TV station and Barcelona football club which goes well beyond that sport where 22 able bodied men run up and down a pitch for 90 minutes and the Germans always win. The details of the present dispute are obscure, and this is not the place to go into them, but the nitty gritty is that Barça are asking local channel TV3 for 30 million euros, and the TV people quite simply aren’t coughing up. Which is in itself unusual, since it wasn’t all that long ago that the then President of the Spanish government, José Maria Aznar, was arguing that football was a question of national strategic interest in Spain. So it is clear (to me at least) that TV3 would pay (at least part of the quantity being asked for) if they could, but they obviously can’t. So why can’t they pay? This is when it all gets interesting, I think.

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  • Eurozone Manufacturing Contraction Continues To Be Severe

    The pace of the industrial contraction eased up a little in January, and manufacturing shrank at a slightly slower pace in January while factory prices tumbled at their fastest rate in at least six years, according to the latest report from Markit economics.

    The survey of around 3,000 manufacturers showed only Germany among the euro zone’s leading four economies registing a deeper contraction in January, while France, Italy, and Spain all saw some slowing in the pace of decline. The Markit Eurozone Manufacturing purchasing managers’ index for January rose to 34.4 from 33.9 in December, the eighth month in a row the index has been below the 50.0 mark that separates growth from contraction.

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  • Central Europe’s Manufacturing And Consumers In A State Of Shock

    Central Europe’s economies continued to contract in January – lead by their manufacturing industries – under the combined weight of a credit crunch and a slump in demand for their exports. My feeling as all three economies – Poland, the Czech Republic and Hungary – are now in recession. Hungary’s is clearly the worst case, and events are moving rapidly and negatively there, but the slowdown in the Czech Economy is also very pronounced, and Poland seems finally to be falling into line, following some internal financial chaos back in October.

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  • China’s Manufacturing Sector Continued To Contract In January

    China’s manufacturing contracted for a sixth consecutive month in January as shrinking global demand hit the country’s export-driven economy. The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 42.2 from 41.2 in December. Since any reading below 50 indicates contraction, even though the rate of contraction dropped (and has been dropping since November, see chart below) China’s manufacturing sector (and hence China’s economy) is still contracting. What we don’t know at this point is how quickly China GDP is contracting, we won’t know that till someone with the time and ingenuity devises a way to calculate a rough and ready quarter on quarter (seasonally adjusted) output indicator. Come on, be famous for a day, go out and do it (since the Chinese statistics office apparently have no interest in the matter), I would, but I simply don’t have the time, since Europe, not China, is my focus. However, on a rough and ready, back of the envelope, basis my guess is that this months Chinese reading may be equivalent to something like a quarter on quarter contraction rate of around 0.5%, which means that what we have at this point is a 2% annual contraction rate, but we really need to see some actual data to calibrate all this a bit better I think.

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  • Why Latvia Needs To Devalue Soon – A Reply To Christoph Rosenberg

    IMF Senior Regional Representative For Central Europe and the Baltics, Christoph Rosenberg, recently took me to task on RGE Monitor about my Latvian devaluation proposal (as did RGE’s own Mary Stokes), and I would like now to take a closer look at some of the points they raise.

    In the first place, I would like to say that I obviously regard both Chrisoph and Mary as excellent economists, and I was in no way refering to them when I said that arguing in favour of sticking to the present currency peg constitutes trying to justify “virtually the unjustifiable” according to “the implicit consensus among thinking economists.” I do still hold that the consensus is with me, but that certainly does not mean I regard those who differ from me as “unthinking”, and certainly hope I didn’t give the impression that I was. And with that little “mea culpa”, let combat begin.

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  • Spain’s Recession Deepens

    Spain’s economy is now most evidently, and totally and completely officially, in its first recession since 1993. The final confirmation of this came yesterday when the Bank of Spain released its quarterly report on the Spanish economy. According to the bank, gross domestic product fell by 1.1% in the final quarter of 2008 (over the previous quarter), following a 0.2% decline in the third quarter. GDP fell year on year by 0.8%.

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  • Germany’s Economic Woes Continue In January

    Germany’s economy continued to contract in January, and even more rapidly (slightly) than in December, according to the latest flash estimates for the Markit PMI.

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  • The Long And Difficult Road To Wage Cuts As An Alternative To Devaluation

    Well it’s pretty clear to me at least that there is now one, and only one, major and outsanding topic towering head and shoulders above all those other pressing and important problems those of us following the EU economies currently find lying in our macro-policy in-trays: the issue of wage cuts. Not since the 1930s [...]

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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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Håvard Halland Håvard Halland

PHåvard Halland is a natural resource economist at the World Bank, where he leads research and policy agendas in the fields of resource-backed infrastructure finance, sovereign wealth fund policy, extractive industries revenue management, and public financial management for the extractive industries sector. Prior to joining the World Bank, he was a delegate and program manager for the International Committee of the Red Cross (ICRC) in the Democratic Republic of the Congo and Colombia. He earned a PhD in economics from the University of Cambridge.