Monthly Archives: January 2006

The WHO and Avian Flu

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Well the WHO certainly isn’t thinking of taking half measures. The debate is now surely divided between those who say ‘don’t panic’, and those who want to be able to argue ‘don’t say you weren’t warned’.

The World Health Organisation on Thursday predicted governments would need to quarantine about 120,000 people to contain an initial pandemic flu outbreak of just 19 cases……Not only would such aggressive quarantining raise legal and human rights concerns, he said, but knowledge about how to use antiviral drugs as a preventative measure was limited.

Meantime the virus seems to have undergone a small mutation, while the firus itself seems in danger of becoming endemic in Turkey and spreading.

Benjamin Harvey seems to be blogging the situation from inside Turkey, but I can’t find his blog. Anyone got the link?

Is The ECB Measured-Pace Cycle Over?

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Well, not unexpectedly, the ECB decided to leave its main refinancing rate unchanged at 2.25% yesterday. Rather more surprisingly (for some at least) the German Federal Statistical agency reported that German economic growth ground to a halt at the end of 2005.

According to the Financial Times:

Johann Hahlen, president of the federal statistics office, said that growth last year had been based largely on exports, with domestic demand remaining weak. “Broad and self-supporting growth is still not being observed”.

Again according to the FT, Herr Hahlen’s comments “surprised economists, who had expected growth to continue and have become increasingly upbeat about the outlook in 2006”. I’m surpised the FT can be so blazé in saying ‘economists’: they certainly didn’t surprise me. I think it was reasonably clear that this was coming. If I am surprised by anything it is that it has come so quickly.

So where do we go from here? Well Jean-Claude Trichet, the ECB president, has been trotting out the party line to the effect “we have to be vigilant as regards inflation”, but with inflation now falling back (in December the harmonised rate slipped back a fraction to 2.2% from the 2.3% in the year to November) and with virtually no ‘second round oil rise’ effects in evidence this argument is going to sound increasingly hollow. Couple this with the ongoing ‘low- growth’ environment in the Eurozone (we’re still awaiting the sort of news from Italy which will again I imagine surprise ‘economists’) and you can see that there will be few reasons to justify any serious interest rate rises. At the limit we may just see one more quarter point rise squeezed-in before year’s end. Aside from that the ECB tightening cycle is, as I suggest, just about done.

Since it has recently become fashionableto try to predict the future, below the fold are my 2006 forecasts.
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Picking Cherries or Dead As A Duck?

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There are opinions to suit all taste this week. According to EurActiv:

EU leaders have almost all declined a proposal by French President Jacques Chirac to save the EU Constitution by splitting it up into single chapters and integrating those into the existing EU framework.

The EU observer puts it more bluntly – The Hague says constitution is ‘dead’:

The Dutch foreign minister Bernard Bot has said the EU constitution is “dead” for the Netherlands, rejecting EU leaders’ recent pleas for a resuscitation of the charter.

So it seems, at the end of the day, there will be no low-lying fruit, like cherries, just there for the pickin. Time to start building some ladders I think.

The Moldova Issue Rumbles On

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Little known Moldova has been in the news at Afoe recently (here, and here), and today the story continues:

Russia’s use of energy as a political tool was in the spotlight again on Wednesday as the European Union expressed concern about Moscow’s dispute with Moldova over gas prices…….On Wednesday the European Commission urged Russia and Moldova to return totalks over their gas price dispute.

“Like in the case of Ukraine and Russia, we very strongly encourage the sides to sit down again at the table to continue discussions and to reach an agreement,” said Commission official Hilde Hardeman.

Her remarks followed concerns this week from the Austrian presidency of the EU over the continuing interruption in supplies to Moldova, which has left it dependent on gas imports from neighbouring Ukraine. The EU stepped up its involvement in Moscow’s former domain last year when it signed a deal to help oversee a border between Ukraine and Moldova’s break- away region of Transdnestria…

The continuing interruption in supplies to Moldova is likely to add to concern in Brussels and EU member states over Europe’s growing dependence on Russian energy supplies.

The gas issue is far from over, it looks like all roads lead to the March summit, and it also seems that EU political debate is about to get a good shot of political realism:

Energy commissioner Andris Piebalgs said energy supply has begun to play a key role in EU foreign policy in the past nine months, responding to criticisms of inaction from Polish MEP Bronislaw Geremek on Wednesday (11 January).

“Now, in exeternal relations, energy has moved up the agenda”, he said. “We clearly understand that energy is a priority, it’s always been a priority, but now it’s never missing off the agenda.”

Latin America’s First Woman President

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A continent renowned for its supposed machismo seems about to get its first female president, Michelle Bachelet. This in itself is interesting, but equally interesting is the divide that can be seen across the continent between a more or less pragmatic group of politicians – Bachelet herself, Kirchner in Argentina, Lula in Brazil, or, to take a name not widely mentioned, Medellin’s new mayor Sergio Fajardo Valderrama, and the more “mediatic” group – Hugo Chavez, Evo Morales and Commandante Marcos.

“Although originally from the hard-leftwing of Chile’s Socialist party, Ms Bachelet is expected to pursue broadly the same mixed economy policies as President Ricardo Lagos. She would inherit sound public finances and an economy that grew by more than 6 per cent last year. Mr Piñera is also an economic moderate, unlikely to change significantly the direction of Latin America’s most successful economy.”

Of course, my explanation for this very striking differential can be found here.

Guilty Or Not-Guilty?

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There is an interesting debate going on at present about whether or not the ‘rigours of the Stability and Growth Pact’ should apply to the UK which is, let it be remembered, (a) not member of the eurozone and (b) hardly a laggard in implementing the core of the Lisbon Agenda. New Economist is pretty blunt – Brown to EC – Sod Off – but in so doing is only following in the already well-trodden footsteps of the venerable Gordon Brown himself. Any of our readers feel in the mood to take offence?

Breaking The Seals

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Leafing through the comments on Brussels Gonzo’s last post, I can’t help getting the feeling that this news about Iran’s decision to resume its nuclear programme may well serve to focus our energy debate a little.

Britain yesterday vowed to report Iran to the United Nations Security Council, intensifying diplomatic pressure over Tehran’s nuclear programme.

Responding to Iran’s decision to resume limited uranium enrichment research, Tony Blair, the UK prime minister, told parliament: “I think the first thing to do is to secure agreement for a reference to the Security Council, [if] that is indeed what the allies jointly decide, as I think seems likely.”

British, French and German foreign ministers meeting in Berlin on Thursday are expected to call for an emergency session this month of the International Atomic Energy Agency, the United Nations’s nuclear watchdog, which would then discuss a referral of the dispute to the Security Council.

Did Russia come out ahead in the gas crisis?

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Expanding on (and slightly copying) my comments in Edward’s post below, I was really shocked to see the spin in the western coverage of the Ukrainian gas crisis. The part that didn’t shock me – just made me groan – is the spin of a western press that seems to have decided in advance that Russia must be the bad guy, so Ukraine must be the good guy. Russia may be the bad guy, but I don’t think is Ukraine is the good guy. From what I can tell from the press, Russian claims that Ukraine was siphoning off gas seem well founded – Russia had been complaining since summer about siphoning, Gazprom was willing to let third parties audit the difference between what was going into Ukraine and what was coming out, while Ukraine refused. Also, it seems that the Russians weren’t the only ones making allegations about siphoning. Yes, Russia’s intentions towards Ukraine are not honorable, nor is this some purely commercial conflict free of political meaning. But, that does not exclude the prospect that Ukraine was screwing Russia.

But what really surprised me was the claim that Russia was the loser here.
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Eurabia or Fantasyland?

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Victor David Hanson, a senior fellow at the Hoover Institution, has written an open letter to Europe asking us to “reawake, rediscover your heritage, and join with us in defending the idea of the West from this latest illiberal scourge of Islamic fascism.” It is getting some play in the usual right-wing quarters, despite his extraordinary lack of knowledge about Europe – and that’s a kind interpretation; others might suggest (as does Gary Brecher, here, analysing his take on Iraq) that he is simply making things up.
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The Perrenial Euro Story (or lack of it)

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Brad Setser has a post, the perrenial dollar story, which IMHO, has one large and significant ommission: it doesn’t really mention the euro. Personally I don’t really see how you can consider the future evolution of the dollar without taking the euro into account. This realisation provoked a rather long comment from me on Brad’s blog, and it is this comment, in a slightly modifed form, that I am now posting here. (Update: incidentally, I notice that Claus Vistessen has two highly relevant summaries of the great greenback debate (here, and here) which. among other things, serve as an excellent introdiction to the issues involved).
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