Don't Shoot the Messenger

  • The EU Bonds Story Rumbles On

    Wolfgan Munchau was complaining only last weekend about the extraordinary narrow-mindedness of Europe’s economic and political leadership in the face of the current financial and economic crisis, from Ireland in the West to Hungary in the East, and from Greece in the South to Sweden in the North. But more than narrow mindedness what we are faced with is innocence and inability to react, and frankly I am not sure which is worst. I say “innocence” because it is by now abundantly clear that they simply haven’t yet grasped the severity of the problems we face (in countries like Spain, or even Germany itself, let alone in the East), and I say inability to react, since they are always and forever moving too little and too late. The initial response to the banking crisis last October was one example (where we saw a landshift-style volte face in the space of only one week) and the way we are now confronting the need to live up to the promises then made about guaranteeing the banking sector, and in particular the “systemic” banks, would be another.

    More ›

  • Santander’s Banif Fund Suspends Payments

    “I would now expect several eurozone countries with weak banking sectors to get into serious difficulties as the crisis continues. There is a risk of cascading sovereign defaults. If this was limited to countries of the size of Ireland or Greece, one could solve this problem through a bail-out. But solvency risk is not a problem confined to small countries. The banking sectors in Italy, Spain and Germany are increasingly vulnerable.” Wolfgang Munchau, Financial Times, 15 February 2009.

    More ›

  • Japan’s “Unimaginable” Contraction

    Well last week Kazuo Momma, head of the Bank of Japan’s research and statistics department, warned that Japan’s economy now faced an “unimaginable” contraction, and today we can begin to see just what the unimaginable might look like, since the preliminary data are for fourth quarter GDP are now out. What we find is when we come to stare the unimaginable in the face is that Japan’s economy contracted by 3.3 per cent in the three months to December when compared with the previous quarter, effectively the country’s worst economic performance in 35 years.

    More ›

  • Germany’s Incredible Shrinking Economy

    The FT says this is worse than feared, and I say it is just what I was expecting (see here, I do hope that doesn’t make me one of those “visionaries” you are all so busy talking about).

    Germany’s economic slump in the final quarter of 2008 proved worse than feared, official figures showed on Friday, with the country posting the sharpest fall in gross domestic product since the country was reunified in 1990.The larger-than-expected 2.1 per cent plunge in GDP in the final three months of the year showed Europe’s largest economy contracting at a faster pace than the UK in the same period and threatening to drag down the performance of the 16-country eurozone.

    More ›

  • China – The Begining Of The End, Or The End Of The Beginnining?

    Is China about to lead the charge out of the current slump, or is the Chinese economy about to succumb to it? This appears to be one of the most interesting and most hotly debated questions of the moment. On the one hand the latest manufacturers PurchasingManufacturers Index seemed to suggest the contraction in China’s economy slowed in January, while other data, in particular producer price inflation, loan growth, employment figures and movements in external trade seem to give a rather different impression.

    More ›

  • Russian Debt And The Euro

    Keynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge. Martin Wolf, Financial Times

    The euro fell again yesterday, by 1.1 percent against the dollar (to $1.2860) and by 1.2 percent against the yen (to 117.52 yen). The change, even if quite large in a short space of time, is hardly dramatic, but what is of more interest is the why. Russian companies announced yesterday that they were thinking of opening negotiations to “restructure” their debt. Bloomberg:

    More ›

  • 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

    More ›

  • 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.

    More ›

  • 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.

    More ›

  • 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.

    More ›

Most Read | Featured | Popular

Blogger Spotlight

Richard Wood Richard Wood

Richard has published papers on wages policy, the taxation of financial arrangements and macroeconomic issues in Pacific island countries. Views expressed in these articles are his own and may not be shared by his employing agency. He is the author of How to Solve the European Economic Crisis: Challenging orthodoxy and creating new policy paradigms