Roubini Topic Archive: Advanced Economies
-
Mr. Zapatero Said What……..?
Spain’s Tinsa Price Index was out last week, and showed Spanish property prices fell again in September, and at an accelerating rate. As Tinsa point out in their report, both “Metropolitan Areas and municipalities on the Mediterranean Coast,” whose rates experienced a significant drop from the previous month, have contributed decisively to this steep decline”.
-
Bubble Trouble in Finland?
According to an intriguing article I read in Bloomberg recently an alert signal has been sounded due to the fact that house prices in the Scandinavian countries have been rising very rapidly of late. Judging by what they explain what is now going on in the housing markets of Norway, Sweden and Finland would seem to have all the hallmarks of a “mini-bubble”, one which is all the more perplexing given the lowish level of economic activity which characterises the current environment. But then I asked myself, and those whopping German export numbers we saw in the second quarter, weren’t they also some kind of “mini bubble” which was quite out of keeping with what we should expect to be seeing.
-
And Then There Were None
According to Spanish Prime Minister José Luis Rodríguez Zapatero speaking in an interview with the Wall Street Journal last Tuesday the European sovereign debt crisis is over. “I believe that the debt crisis affecting Spain, and the euro zone in general, has passed,” Mr. Zapatero said.
-
The Odd Couple
The modern world moves at a breathtaking pace, even when most of us find ourselves on holiday. No sooner do we receive, read and start to digest one set of economic data then we find ourselves pushed to think about what the next set will look like. The clearest recent illustration of this undoubted reality is to be found in peculiar twist of events which meant that just as the news reached us that the German economy had expanded at a record rate in the second quarter, at almost the very same moment Federal Reserve officials meeting in Washington decided to significantly downgrade their economic outlook for the United States, saying the “pace of recovery in output and employment had slowed in recent months” and was likely to be “more modest” than anticipated in the near term. But this followed a month of May when it seemed Europe’s economies were on the brink of disaster, while over in the United States some sort of recovery was on the cards.
-
The Baron Münchhausen Effect
Karl Friedrich Hieronymus, Freiherr von Münchhausen was a German baron born in Bodenwerder in the eighteenth century. Made famous by the Hollywood director Terrence Gilliam, the baron first came to public attention for his ability to recount outrageously tall tales about his adventures while fighting abroad in the Russian army. Among the astounding feats which legend attributes to him are riding cannonballs and travelling to the Moon. But perhaps his best known marvel is the story of how he managed to escape from a swamp by pulling himself out by his own hair (or by his bootstraps, depending on who tells the story). Which puts me directly in mind of the way some people are now expecting an export-dependent German economy to drag the rest of Europe – and with it the whole global train – up and out of the ditch in which it is currently sunk, simply by exporting to everbody else. Sounds just like one of those tall tales, doesn’t it. A very tall one.
-
Controlling the Uncontrollable: Spain’s National Addiction to the Use of “Dinero B”
Well, before we go any further, I would like to make clear that what I am going to talk about in this post is not anything illegal, or even irregular (things like this must be going on in almost all Euro Area countries even as I write). Bending of the rules? Perhaps. Taking them to their limit? Certainly.
What Spain’s central, local and regional government does is take advantage of loopholes in Eurostat accounting regulations to generate debt that really is debt, but is not classified as such according to the Eurostat excess deficit criteria. Key areas involved are debts on the balance sheets of state (or regionally, or locally) owned companies, overdue payments for receivables (very common practice in Spain), and public-private-partnership-type leaseback-arrangements. None of these are (typically) classified as debt, though they do all have to be paid at some point, which means there is a stream of revenue (flow) impact rather than a debt (stock) one (unless and until Eurostat changes the rules). Which means that while they do not impact that critical debt to GDP number, servicing these liabilities does exaccerbate the annual fiscal deficit one. Which is why ultimately bringing Spain’s fiscal deficit under control will almost certainly prove to be much harder work than it seems.
-
Do the Latest European Bank Lending Numbers Reveal a Major Headache Looming For the ECB?
According to Ralph Atkins, writing in the Financial Times:
“Eurozone mortgage borrowing grew last month at the fastest pace in almost two years in a sign that bank lending across the 16-country region may be flickering back to life. Lending for house purchases rose at an annual rate of 3.4 per cent in June – the fastest since September 2008, according to European Central Bank data published on Tuesday. The acceleration pointed to a revival in consumer confidence and an increased willingness by banks to fuel the economic recovery with loans to the private sector.”
-
Is There a Global Economic Slowdown in the Works?
According to Ralph Atkins writing in the Financial Times last week, “the pace of Germany’s recovery is helping dispel fears of a “double dip” recession across the continent as a result of the crisis over public finances in southern European countries”. Coincidentally, however, on the very same day, Alan Beattie writing from Washington informed us that the IMF feel “the risk of a slowdown in the global economic recovery has risen sharply”. This left me asking myself which is it: is the global recovery a question of up up and away, or are we at the start of a renewed slowdown (whether or not you wish to term this a “double-dip”)? So I thought I would take a look through some of the most recent data (both hard and soft) to see if I could make any sense of the situation.
-
What a Difference a Day Made!
According to a once famous statement by the British Prime Minister Harold Wilson, a week is often a long time in politics. But when it comes to financial market crises we seem to follow a pattern more reminiscent of a line from the Dinah Washington version of an old María Méndez Grever song: “What a difference a day made”. The day in this case was last Wednesday, at least for those of us here in Spain, since it was on Wednesday that the ratings agency Standard & Poor’s downgraded Spanish Sovereign debt to AA from AA+. As a result the cost of insuring such debt using credit default swaps (CDS) surged at one point to a record 211 basis points according to CMA DataVision prices. Contracts on Greece and Portugal also rose sharply, with Greece climbing 42 basis points to hit 865.5, while Portugal jumped 20 to 406.
-
The Greek Tragedy Continues
The future of the Eurozone is decidedly hanging in the balance at the moment. As I said earlier in the week, the problem isn’t a simple question economics anymore: everything now is all about credibility, about who does what, and when, and how everyone else reacts. As the crisis trundles on and on, news that Greek bond spreads have hit ever higher post European Monetary Union records has become such a regular event that the process now seems almost a monotonous one. However, what happened on what we could now call this week’s Greek “Black Thursday” certainly marked a new, and more worrying milestone in the ever evolving crisis. The news the other day that Greece has demanded the activation of the EU-IMF loan – news which apparently took even the EU Commission itself by surprise it seems – only adds to the general sense of confusion that abounds.
