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".

German Unemployment Remains At 11.8%

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Despite the recent surge in German GDP and export growth, and the ongoing structural reforms, German unemployment remains stubbornly high.

German unemployment was unchanged in May at close to a post-World War II high, dealing a blow to Chancellor Gerhard Schroeder’s chances of re-election.

The jobless rate, adjusted for seasonal swings, held at 11.8 percent, close to the postwar record of 12 percent recorded in March, the Nuremberg-based Federal Labor Agency said today. That was in line with the median of 31 forecasts by economists in a Bloomberg survey.

Divided Opinions in the Czech Republic

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the Czech president has become the first prominent EU politician to call for the ratification process to stop after the French vote.

According to the Czech news agency CTK, Vaclav Klaus, a well-known eurosceptic, said that to carry on the ratification process would be useless, although the Czech prime minister has said he is in favour of continuing.

“The decision has been made and I hope everybody understands it”, Mr Klaus is reported as saying.

In fact, were the ratification process to continue, the Czech Republic has still not decided the actual method of the ratification and the government has admitted it will consider limiting the procedure to a parliamentary vote after all, since the constitutionional change necessary for holding a referendum has proved difficult to agree on among the different parliamentary parties.

If The Netherlands Vote No………

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If the Netherlands vote ‘no’ tomorrow (and the opinion polls don’t seem to leave much room for doubt), then according to the FT Jack Straw will tell the House of Commons next Monday that the UK government is immediately suspending parliamentary passage of the European treaty bill. This means the ratification process will be dead, not just in theory (which I think it is now) but in practice. This announcement leaves me with a strange feeling. These days I don’t feel especially British, I am not a great admirer of Tony Blair and Jack Straw, but somehow they seem to have drawn the obvious conclusions, conclusions which clearly are not obvious to many other EU politicians. I can’t help thinking that if we could get to the bottom of why this is, we would understand a bit better why there is such a communication problem between the UK and other parts of the EU.

Britain is to suspend plans to put the European Union constitution to the vote if the Netherlands follows France and rejects the treaty in a referendum on Wednesday.

As the shockwaves of the French vote were resounding on Monday, it emerged that Tony Blair and Jack Straw, foreign secretary, have decided immediately to freeze plans for a UK referendum if, as expected, the Dutch vote No.

The government hopes other EU states would at once declare that rejection in France and the Netherlands meant ratification in all countries must be suspended. Even without consensus the prime minister and foreign secretary believe it would be politically impossible for the UK to carry on with its own ratification.

Incidentally, Jaques Chirac is to make a formal statement about the future French government and his interpretation of the vote on French TV tonight.

The Euro Continues Its Decline

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The euro fell to a seven-month low in Asia and had the biggest fluctuation of any currency on concern the rejection of a proposed European Union constitution will slow the region’s economic integration…………

Against the dollar, the euro fell to $1.2370, the lowest since Oct. 14. It bought $1.2390 at 2:05 p.m. in Tokyo from $1.2475 late in Asia yesterday, according to electronic currency- dealing system EBS. The euro will probably decline toward $1.22, Jacobs said.

Update I: Now it’s hit $1.2371.

The euro’s initially muted reaction to the French vote on a holiday-thinned Monday turned into a sharp fall when it broke below key $1.2450 levels, pushing as low as $1.2371.

Now it’s at 1.2315, and this is also becoming a dollar rise story as the yen is also begining to fall against the USD.

“The Euro lost support at 1.2450 in Asia on Tuesday and this pushed the Euro down to a low of 1.2315. The convincing break below 1.25 against the US currency will reinforce negative Euro sentiment and will raise speculation over a move towards the 1.20 level in the medium term.”

To be continued.

Angela Merkel Promises…….

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Angela Merkel, the German opposition Christian Democrat leader, has promised that initiatives to cut unemployment would ?be at the centre of my thoughts and actions?. Laudible ideals, delivering on them may prove rather more difficult than Ms Merkel imagines. Still, she is focusing the debate on the relevant areas:

Mrs Merkel acknowledged that Germany was one of the most expensive countries to do business. ?We have to be better [than competitors] to the same extent that we are more expensive [than them]?, by being ?quicker and more flexible?. She said ?globalisation is now the context in which our ideas of democracy and of a social market economy must prove themselves?.

Policy priorities would include measures to reduce government debt and to cut non-wage labour costs paid by employers as social security contributions, in part by introducing a new tax-funded health insurance system. Labour market measures would include a loosening of job protection rules and more decentralised collective bargaining.

In fact they are so relevant and to the point that it is hard to see Schr?der disagreeing with them. Interesting campaign in prospect.

French Referendum: Italian Bonds Hit

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What, you may ask, has Italian government debt got to do with the French ‘no’ vote: everything would be my answer. (If you want to know more about this, thumb down my euro posts). The lack of a convincing advance towards political union makes Italian government debt riskier, so they have to pay more interest. This is, at present just a small breach, but it is one which is widening, and I fear this is the point at which the euro dyke will eventually breach:

“The euro hit a fresh 7-month low against the dollar and Italian government bonds came under strain on Monday after French voters gave a decisive thumbs-down to the proposed European Union constitution…………….The strains the French vote could have on the euro zone were reflected in government bonds. The spread on Italian BTP bonds over German debt touched 23 basis points, the highest level since November 2002, as so-called peripheral euro zone bonds suffered.”

The problem is that the markets have now ‘wised up’ to the problem, and will now be tracking Italian government debt as an issue in itself.

Mandelson Calls For Reflection

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Wow, I seem to be agreeing with Mandelson. Hardly surprising, apart from all the sleeze rows, I have the feeling he is the most competent politician working out of Brussels:

Striking a different tone from European Commission President Jos? Manuel Barroso, Mandelson appears to be suggesting a ?plan B?.

He argues that should the French ?non? be an obstacle to the EU constitution Europe should seek a ?new consensus?.

EU leaders could set out a vision of Europe?s policy direction and then draw up a fresh institutional blueprint.

?I think that consensus on the centre ground is there to be mobilised. One that rejects the populism of left and right,? he said.

Mandelson noted that future ratifications ? including a British vote ? would depend on whether the EU constitution was still viable.

?There will be a period of reflection,? he said early on Monday morning.

?If there is a constitutional treaty to ratify, I am confident it will be put to British people in a referendum.?

Now For The Double Whammy

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Actually with the critical ECB meeting looming on Thursday, it could in fact be more like a ‘trifecta’ than a ‘double whammy’. Anyway, however you classify things, on Wednesday it will be the turn of the Netherlands. My impression is that the politicians don’t know quite how to respond.

Incidentally, with so much news coming in so fast, we will be directing most referendum information posts to our other page: A Few Euros More.

According to De Telegraaf Dutch Prime Minister is ‘disappointed’:

Prime Balkenende “has been disappointed” by the French ‘ no ‘ against the European constitution. He stated he had rather expected a positive result on Sunday evening. Balkenende called Dutch voters to vote ‘yes’. We should not our laws to be made by the French.

Frans draws our attention to an interesting post on the Dutch blog Steeph, and also writes:
Continue reading →

Denmark, Sweden and Finland to Continue With Ratification

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For now, at any rate, the Nordic countries are to continue with the ratification process. We will see how this eveolves as the days pass.

We naturally respect the decision of the French people but it is crucial that Danes be allowed make their own decision in the autumn,” Anders Fogh Rasmussen, Denmark’s prime minister said.

There would be no change of plans should Dutch voters also reject the treaty on Wednesday, he added

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Goran Persson, Sweden’s prime minister, described the French result as “a severe setback for the treaty” but pledged to continue the Swedish ratification process.

Matti Vanhanen, the Finnish prime minister, said he would proceed with the ratification process and expressed hope that other EU states would do likewise.