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".

Now That’s More Like It

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Germany is reconsidering the deployment of troops in Iraq, should conditions ‘change’. According to the FT, Peter Struck, the German defence minister, departing from previous declared government policy stated in an interview that while ?At present I rule out the deployment of German troops in Iraq. In general, however, there is no one who can predict developments in Iraq in such a way that he could make a such a binding statement [about the future].”

The FT also informs us that Struck welcomed Kerry?s proposal that he would convene an international conference on Iraq including countries that opposed the war if he were to win next month’s election. Now I have already suggested that I think EU leaders would be ill advised to get involved in the US presidential elections (not least because I think any such intervention might well boomerang). I see no harm whatever, however, in indicating that national policies would change under changing circumstances.

No continent is an island, and the EU cannot afford to sit back and watch a disintegration of Iraq. It may seem a long way off, but it could rapidly come to feel like it was a lot nearer.

Perhaps the most significant comments came from an unnamed ‘official’

A senior official said: ?When the situation in Iraq changes, when elections have been held, or there are other developments, then we will make decisions on this basis.? If a democratically-elected Iraqi government were to ask the UN for support, the international community, including Germany, must be in a position to respond, the official added.

Full Disclosure: I am British, I now think the invasion was a mistake, but I think Britain has an absolute obligation to maintain the troop presence. I also think that the debate about who was right and who was wrong is better left for history, since, in the light of what has subsequently happened we now have more pressing concerns. I personally welcome the Kerry proposal, and would also welcome increasing UN and other international involvement. We cannot afford to let this one go wrong.

Addendum: Spain is also reconsidering. Jos? Bono – Spain’s Defence Minister -issued a statement to that effect last week, and then a lightening retraction in the wake of the ensuing controversy. This sort of thing is not unusual in Spain. My reading is that Spanish troops would once more be there, under the right circumstances.

Mama Mia

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Here’s an audio link for a change. NPR’s Sylvia Poggioli reports on changing family patterns in Italy. The report I would suggest is pretty ‘fair and balanced’. As a side issue I think she nicely draws attention to the way ‘gender equality issues’ and unequal family caring responsibilities may impact the ability of Southern european societies to meet the ‘new’ female participation objectives I posted about yesterday.

Recession on the Horizon?

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Morgan Stanley (among many others) have been busy cutting their 2004 and 2005 growth outooks. With Oil prices continuosly hitting new highs this all has some sort of inevitability about it. Whilst it is probable that the slowdown in growth will bring oil back from its current peaks, MS estimate that “the new equilibrium for oil prices is now somewhere in the $30-40 range — well above the $20 average of the 1990s”.

Obviously the oil ‘spike’ is well short of the magnitude of the 1970’s shocks, it is, however, no mere trifle. All of which leads MS’s Eric Chaney to conclude:

If, as we think, the barrel of Brent remains above $40 until the end of this year, the maximum impact of the shock will occur in the first months of 2005, where we see only 0.25%Q GDP growth. Because uncertainties surrounding consumers? and companies? reactions to oil prices are high, we reckon that the odds for a technical recession, i.e., two consecutive declines in quarterly GDP, have become significant despite assurances given by policy-makers.
Source: Morgan Stanley Global Economic Forum

Take care, you have been warned!

Update: this impression is only confirmed by the latest reading on the German-based he ZEW Center for European Economic Research’s index of institutional and analyst sentiment: down to 31.83 from 38.4, and by the decline in French industrial production in August.

Gloomy, or Just More Realistic?

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One of the problems of being a ‘dissenting voice’ is that it is hard for others to get a grip on a yardstick for evaluating what you are saying. Normally I am considered ‘gloomy’. But if what I am arguing against is a concoction of all the ‘best case’ scenarios rolled meticulously into one, it might be fair for me to ask, aren’t those who point the finger really guilty of presenting an excessively rosy panorama.

Latest case in point are the consensus projections for life expectancy, as highlighted by the forthcoming UK pensions Commission interim report, details of which are ‘leaked’ in today’s FT:
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Hardly Breaking News

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That the US jobs report last Friday showed continuing weakness in the labour market is certainly by now far from breaking news. I wouldn’t however want to let it pass by without comment. I think it is now abundantly clear that there is a pattern in all this somewhere (what that pattern is precisely, and what is causing it may be another matter). The US is not creating the quantity of new employment it needs. This means that the output gap (the gap between potential and actual output) is unlikely to reduce, and that the Fed will in all probability be unable to raise interest rates as vigourously as it had anticipated. This is also likely produce downward pressure on the dollar (with a consequent upward pressure on the Euro) and all sorts of other weird and wonderful things which should preoccupy those given to thinking about these matters. I think the debate is effectively over though: this is more than just a ‘soft spot’.
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Arrivederci Lisbon?

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The Financial Times reports today that the team lead by Wim Kok, set up after the March economics summit, and charged with carrying out a review of the Lisbon process, is likely to find that we are badly behind schedule. This is hardly surprising since the Lisbon agenda was rather stronger on rhetorical nicety (including the now famous objective of turning Europe into the ?most competitive and dynamic knowledge-based economy in the world? by 2010) and rather weaker on concrete policies and objectives.

The intention is now to change this balance:
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Turkey and the Constitution

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Ohhhhhh, I can’t resist this. Anatole Kaletsky writing in the Times:

Turkey is likely to scupper the strongest argument in favour of ratifying the European constitution: the claim that voting rights among the EU member nations must be reformed to accommodate past and future enlargements. The fact is that, far from preparing the EU for the future, the constitution will have to be torn up if Turkey joins. Turkey?s rapidly growing population, which will overtake Germany?s by 2015, would give it more votes under the new constitution than any other nation. Since an EU with Turkey as the single most powerful member would make no sense to anyone, including even the Turks, enlargement would mean completely rewriting the constitution just five years after the new arrangements are supposed to come into force. While conspiracy theorists suspect that the constitution was drafted to block Turkey?s accession, it looks increasingly like Turkey will sabotage the new constitution.

We do seem to be creating something of a muddle here. Many thanks to Dave at North Sea Diaries for the link and extract.

This summary of yesterday’s Commission discussion on Turkish entry also makes interesting reading.

Google Book Search

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Whilst speculation abounds in the weblog world that Google is about to launch its own browser tchnology, more traditional media seem to be enthusing about the possibility of Google book search:

Google, beset by a growing number of competitors in the internet search business, will shortly unveil a number of new features to its own search engine, according to one of the company’s directors.

It has also started testing a service that lets users read book excerpts online, echoing the popular ?Search Inside the Book? service created by Amazon.com.

The book excerpt service, called Google Print, aims to give users links to relevant books among the other search results they receive. Clicking on the link will then lead to the book excerpt, where users can read two pages forward or back from the relevant page and also click on another link to an online store to buy the book.
Source: Financial Times

Obviously the internet war is hotting up. Meantime I’m having fun playing round with Amazon’s A9.

What You Look For Is What You Get?

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Ok, I’m feeling in a wicked mood today, so how about something really controversial (just for a change). It’s now as near to official as we’re going to get it that Sadam Hussein wasn’t making any serious advance towards the development of WMDs.

So, this being the case, what exactly is going on in Iraq?
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Bulgaria and Romania to Enter in 2007?

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Amidst all the fanfare about negotiations opening on Turkey’s membership, we shouldn’t lose sight of other things that are in the pipeline. EU enlargement commissioner G?nter Verhuegen has just given Bulgaria and Romania the green light for a January 2007 target date.

?For the year 2007 we feel that accession may be appropriate and these two countries will be ready by then,? Verhuegen said.

?Negotiations with Bulgaria are technically speaking closed. We wish to conclude negotiations with Romania by the end of the year, we are aware that this will be difficult.?

Now I wouldn’t want to be misunderstood here. I am perfectly happy with Bulgaria and Romania as EU members, under the right conditions, just as I am happy with Turkish membership. But I do think that Turkey’s point about the same standards being applied is a valid one. I personally – and based among other things on extensive converstaions with migrants from these countries – have plenty of reservations about just how ‘ready’ these societies are if we are using the yardstick currently (correctly) being applied to Turkey. Corruption and lawlessness would be among the issues that immediately spring to mind. So, if there is a time to ‘turn the screw’, it is now.

Mid-term I am still convinced that Turkey will have much more to offer economically. Both Rumania and Bulgaria already suffer from many of the major problems facing existing EU member states – low fertility, rapid ageing, serious problems in paying pensions moving forward – and they have the added problem of the meaningful functioning of their democratic processes. Turkey is already making important steps forward, it would be nice to feel re-assured that the other two were.

Addendum: North Sea Diaries has a spoof text of a speech Erdogan might have made to the Turkish parliament explaining how the EU meets Turkey’s criteria as a suitable place to be. As our diarist wryly puts it “he made it clear the EU would be allowed to join Turkey”. You can find a summary of the speech he actually made in Strasbourg here.