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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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  • 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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