Author Archives: Edward Hugh

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

US Trade Numbers Are In

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So are the China trade surplus ones. Dave at MacroBlog has the details on China. I’m waiting for Brad Setser to post, but he must be either doing his sums, or having a late breakfast :). Before we get some blog analysis (even Brad Delong is quiet today) you can get the basics here. In fact the rise in the April CA deficit to $57bn, from $53.6bn in March, is supposed to be good news, since the increase wasn’t as big as expected.

Essentially I am outside the Atlantic blog consensus here, since I think the US dollar will hold, and that it is the euro which is in trouble. I have a little post on this here. Logically if the other major alternative as a reserve currency is in trouble under Bretton Woods Mark I, everyone goes home to Daddy. I think that is how it will be.

Update: Well Brad still isn’t there but Stephen Roach is. I think his view is the dominant one on the US blogging scene, and shared by non-blogging economists like Paul Krugman. I’m sorry, I think it’s wrong, and by a long way.

Update 2 I’m getting a little tired of waiting (incidentally General Glut has just passed by in comments, and he *does* have a post on the topic). Now the politically sensitive US trade gap with China widened $14.0 percent in April to $14.7 billion. This means it was $12 billion in March, or that it rose $2.7 billion. Now China’s surplus widened to $8.99 billion from $4.59 billion. Doing the arithmetic the surplus rose $4.4 billion. $4.4 billion minus $2.7 billion gives $1.7 billion, a hell of a big chunk of which was probably with Europe. I wish someone who really knew about this would write something, but my educated guess is that Chinese import penetration in Europe is now big and getting bigger by the month. Hence the row about globalisation in the French referendum. Basically what I am saying is that having this kind of issue in the Free Trade US of A is one thing, having it in the more anti-globalisation European core is going to be quite another. China the global imbalance to end all (im)balances.

Now if you want to understand something about China:
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Lithuania To Take Decision on Euro Referendum

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The Lituanian parliament is to debate a motion which proposes holding a referendum on euro membership. Lithuania is scheduled to join the euro in 2007. The Prague Daily Monitor also has an article which draws attention to the growing ‘euro’ scepticism in the Czech republic.

“The Lithuanian parliament will vote on whether or not to hold a referendum on the introduction of the single currency to the country, according to news agency AFP.

The Lithuanian opposition Liberal Democrat party has gathered the necessary 36 signatures required for the parliament to vote on the matter. It has now to do so within a month, as under Lithuanian law, lawmakers have to vote within one month after a proposal is introduced, says the press agency. After the EU Constitution was rejected by France and the Netherlands, the euro has found itself at the centre of debates.”

Visegrad Group Meeting

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Now this is interesting. The prime ministers of the Czech Republic, Hungary, Poland and Slovakia are meeting in Poland to talk about a common response to the constitution and enlargement issues following the rejection by French and Dutch voters of the proposed treaty. Also in attendance will be Ukrainian pm Yulia Tymoshenko. They are expected to issue a declaration of support for Ukraine’s campaign to become an EU member.

Obviously they will not be following Chirac’s advice that the best policy for them would be silence.

Euro Debate Roundup

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EurActiv is an extremely useful source of information and analysis (much better eg that EU Observer or Eupolitix, for example). Today they have an interesting survey of the recent debate about the efficacy of the euro. They also have a link to a recent report which seems interesting.

“The rejection of the Constitution by two of the EU’s founding members – France and the Netherlands – has raised concerns about the long-term future of European Monetary Union. But other comments have also led to some extra market volatility for the single currency. Arguably, French and Dutch voters did, in 48 hours, what the European Central Bank has been trying to do for six months – namely reduce the value of the euro.”

Bolivia Has A New President

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His name is Eduardo Rodriguez Veltze, he has been a judge in the supreme court, and he appears, at this stage at least, as an interim, compromise candidate:

The action came after lawmakers gathered following a day of demonstrations and under a warning by the military of possible intervention if the spreading chaos isn’t quelled.

Congress rapidly accepted the resignation of President Carlos Mesa. Then both the Senate and House leaders rejected the job, automatically giving it to Supreme Court Justice Eduardo Rodriguez Veltze, who had been third in the line for the presidency.

“Bolivia deserves better days,” Rodriguez told lawmakers after swearing in. “I’m convinced that one of my tasks will be to begin an electoral process to renew and continue building a democratic system that is more just.”

Publius Pundit has another good Bolivian blogs roundup. In particular Mabb has a good on the spot account of the tension involved.

Interestingly enough Miguel at Ciao and Eduardo Barrio Flores are arguing that opposition leader Evo Morales should resign too, in order to reduce the dangers of this conflict exploding.

Surplus Bicycles

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I don’t suppose that there is any connection with the recent Chinese appetite for purchasing cars, but apparently China and Vietnam are about to be accused of dumping their unwanted bicycles on Europe:

The European Union is expected to levy next month swingeing anti-dumping tariffs on bicycle imports from China and Vietnam in an attempt to put the brake on cheap imports. European manufacturers claim imports from Vietnam have risen from 150,000 five years ago to 1.5m in 2004, while China exported up to 2m bicycles to the the EU last year, despite a tariff of 30.6 per cent already in place.

T-shirts, pants, slippers, sandles and push-bikes, are these really strategically important industries for the EU?

EU Budget: The Plot Thickens

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Perhaps better said, the crisis deepens. Jaques Chirac started things off:

“The time has come for our British friends to understand that they must now make a gesture of solidarity”

and Tony Blair, of course, rose to the bait:

“Britain has been making a gesture, because over the past 10 years, even with the British rebate, we have been making a contribution into Europe two and half times that of France.”

“Without the rebate, it would have been 15 times as much as France. That is our gesture,”

It doesn’t look like there’s too much understanding going on here. Then there’s the nub of the matter.

According to Blair, the reason the rebate exists is because otherwise there would be a ‘quite unfair’ proportion of British contribution and:

“The reason for the unfairness is because the spending of Europe is so geared to the Common Agricultural Policy. My view is that if we want a debate on future financing, one part of that has got to be what Europe needs to spend its money on to prepare Europe for the 21st Century, which is not the same as Europe 30 or 40 years ago.”

I think at this stage it is really hard to say how this will work out at the summit. At this moment in time there seems to be little love lost between the French President and his ‘British friends’. Of course a lot of this could change when they get down to the negotiating table, but at this moment in time it isn’t easy to see how.

Prodi Strikes Back

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I think one of the topics for next years election in Italy is just being decided. Romano Prodi (former President of the EU Commission) has just spoken out against Sinascalco. He is in favour of making cuts. Prodi is quoted as saying that:

“Credit downgrades will follow if there is not quick action in fixing the situation, and I do hope Finance Minister Siniscalco makes some decision……The government lost control of current expenditure. The situation is very serious.”

Prodi is about to become the whipping boy, having to go into an election with the ‘popular’ policy of making widespread spending cuts.

Incidentally,
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Germany: Exports and Inflation Revised Down

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According to NTCResearch:

Inflation in Germany rose less than previously thought in May, the Federal Statistics Office reported on Thursday. Germany’s harmonised index of consumer prices rose 0.2 percent month-on-month and 1.4 percent year on year, compared with initially reported rates of 0.3 percent and 1.5 percent, the Office said. Meanwhile, it was revealed today that Germany?s trade surplus narrowed in April as imports surged. After accounting for expected seasonal factors, the surplus declined from 14.7 billion euros to 12.6 billion. The smaller surplus reflected a 0.4 percent fall in exports and a 3.8 percent jump in imports, the data showed.

The downward drift in inflation needs careful monitoring. I’ve got a deflation alert call out on Germany remember. If Germany goes through the inflation wall, then the proverbial s*** really will hit the fan, since I can’t see the ECB doing non-conventional monetary policy. Come to think of it, maybe that’s what the meeting with Fels was all about.