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".

Bolivia In Crisis

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The situation in Bolivia seems to get more complicated by the day.

“Thousands streamed into the Bolivian capital, La Paz, on Tuesday as Indian protests against the ruling elite gained force even after President Carlos Mesa offered his resignation.

The critical highway to the highlands, where the international airport is situated, remained cut off by roadblocks, and the city of one million people was hit by food shortages and a transport strike.

Demanding that the government expropriate foreign energy installations and call new elections, miners in hard hats and indigenous women in derby hats and colorful, multi-layer skirts marched into La Paz in a show of force punctuated by blasts of dynamite that demonstrated the depth of the crisis buffeting the government. ”

Publius Pundit is covering the blogging side. Eduardo Alvarez is giving a good running commentary, Miguel Centellas worries about his mum and other issues from the comparative safety of the United States, and Nick Buxton has photos and good narrative description of the anecdotal details. And a good reflective analysis of what is going on comes from Miguel Buitrago at Mabb.

Update. This seems to be a fairly good summary of where things stand late afternoon CET.

Germany: An Optimistic Note From The IMF

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Michael Deppler, Director, European Department of the International Monetary Fund, said in a conference call on the economic outlook for the eurozone, that all was not as bleak as it seemed for the German economy:

“Then, you know, coming back to Germany, no question but that the past decade has been a very difficult one for Germany, but it’s one where it has registered strong improvements in competitiveness, and that you can see it clearly in the behavior of its exports. And just as, you know, strong improvements in competitiveness in France during–from the mid-eighties to the mid-nineties led to quite strong performance from the mid-nineties to now in France, well, basically we would expect the same thing to happen in Germany over the next five to ten years.

So in our view, the longer-term developments are, you know, not buoyant, but they’re certainly not things to be as negative about as seems to be the prevailing mood in Europe today.“

Necessary and Sufficient Conditions For The Euro

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Martin Wolf is at it again.

“Which part of the word “no” do Gerhard Schr?der, Germany’s chancellor, and Jacques Chirac, the French president, fail to understand? France and the Netherlands have rejected the constitutional treaty: it is dead. But the rejection of the treaty by two of the original six members raises profound questions about the future of Europe and, above all, about the monetary union. A rising tide of integrationist ambition swept the single currency on to the European shore in the 1990s. Now, it is in danger of becoming a beached whale.

Economists argue about the necessary and sufficient conditions for a successful single currency. But the majority would agree that it helps if the area in question is subject to common shocks, markets for goods, services, capital and labour are flexible, the overall economy is dynamic and, not least, there is a shared identity embedded in common political institutions. Not one of these conditions is either necessary or sufficient. But the absence of all four creates a huge challenge. Yet this is precisely where the eurozone now finds itself: economies have diverged; growth is disappointing; markets are proving dysfunctional; and the movement towards further political integration is now in peril.”

The Economist, which curiously enough seems to have suddenly abandoned its PPV Global Agenda policy (something wasn’t working) says similar things here.

And a simple graphical illustration of why one size doesn’t fit can also be found here.

Italy: Third Minister Joins Referendum Call

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Of course they are all in the Lega del Norte. This time it is the turn of Reform Minister Roberto Calderoli.

Earlier Justice Minister Roberto Castelli entered the fray:

“Does the sterling pound not have economic foundations? Does Denmark live in poverty because it is outside the euro? Are the Swedes poor?” With these three questions Justice Minister Roberto Castelli replied to journalists, on the sidelines of a convention in Milan, which expressed the perplexities regarding the economic foundation of the proposal launched by the League to go back to the lira. “It is about making a choice: looking powerlessly at the continuous closure of our businesses that are not absolutely competitive at the moment or taking the risk of change. The League, since its foundation, has always said things that government does not like, only to find out years later that they were right.” When asked about the scenarios that will arise from the traditional, imminent League meeting in Pontida, Castelli ensured that it will be “a great event that will mark the return of Umberto Bossi. In that occasion the proposals on the lira-euro issue will be specified better.”

If you want to know more about what these people actually think about other things, read this, and this, and this: I imagine you will be amazed that people with such views could be in the government of an EU member state, well, there’s a reason for this, it’s called Silvio Berlusconi.

Italy: Excess Deficit Procedure Begins

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Economics Commissioner Joaquim Almunia presented a report to the Commission in Strasbourg yesterday. (The report is here: pdf). Essentially Almunia argued that Italy’s deficit at 106% of GDP was way above the target 60% set by the new version SGP. He also argued that it was neither temporary, nor the product of exceptional circumstances (the two other criteria). The document will now go the rounds for two weeks of ‘technical consultation’ before a final decision is taken at the next Ecofin meeting.

“The Italian economy minister, Domenico Siniscalco, signalled a fight against the commission, saying he disputed its assessment and would seek support among finance ministers this weekend.”

EU Budget Reform

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Jean Claude Junker is working away trying to get a deal before next weeks summit. Next on the list: Tony Blair:

“Tony Blair, prime minister, is coming under intense pressure to give up part of Britain’s rebate to the EU budget as part of a deal that would see big cuts to European rural subsidies………..Luxembourg, which currently holds the EU presidency, knows that Mr Blair will only move on the rebate if Mr Chirac agrees to cuts in subsidies for his country’s farmers.”

Difficult to say what will happen. It is clearly important for the credibility of the EU to have a rapid ‘success’ somewhere. Perhaps a deal on the budget would help. Plus, if Blair puts this behind him, he will be able to take a much stronger line on other issues during the UK presidency.

Czech Republic Cancels Referendum Plans

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The Czech Republic, which hadn’t taken a final decision about how to implement the ratification process, will now not be organising a referendum. At least that is what the PM Jiri Paroubek is saying:

“Czech Prime Minister Jiri Paroubek said a decision by the UK to suspend a referendum on the EU constitution coupled with the French and Dutch rejections made a vote in his country ‘impossible’ for now.

In an interview with the BBC, broadcast Monday night, Paroubek — an advocate of the landmark treaty — also said he was ‘disappointed’ with the British move.”

Referendum in Italy

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Fooled you, it’s not about the euro :). Italy is about to have a referendum (next Sunday in fact), the topic: artificial insemination and embryo research. Benedict XVI has just spoken out against. In fact this has started me looking into the referendum situation in Italy. It seems they have quite a lot. Constitutionally they need 500,000 signatures, or 5 regional councils to back the call. Maroni is about to start collecting signatures.

Britain’s Referendum Postponed ‘Indefinitely’

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Well, now it’s official:

Britain, which takes over the presidency of the European Union next month, has postponed indefinitely a troubled referendum on the bloc’s constitution following its rejection in France and the Netherlands, Prime Minister Tony Blair’s office said Monday. Blair’s official spokesman said the failure of the French and Dutch referendums on the charter had to be discussed at the European Council summit later this month. The referendum faced likely defeat in Britain.