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".

Madrid Bombing: Evidence So Far

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Ok: it’s just gone half past six, and demonstrations all over Spain are getting ready to go. Meantime I will leave you with the following thoughts:

I think it must be difficult for anyone outside Spain to understand just how complicated this situation here is. As everyone by now knows, the Spanish police are following two leads: one that of Eta, and the other that of Al Qaeda. On the one hand the difference between the two – since in either case the question is one of terrorism – is minimal, on the other it couldn’t be greater.

In assessing the impact and consequences of the attack, perhaps the first of the major questions which strikes you is the quantity of immigrants – both documented and undocumented – who were involved. Just looking for five minutes at the TV images of the relatives filing past the cameras in the hospitals and mortuaries makes this abundantly clear. There are in fact victims from 11 countries, many of these countries surely being in Latin America. In fact so important is this question that Jos? Maria Aznar spent a significant part of his public appearance this morning underlining that any person among the victims who was found to be ‘undocumented’ would automatically be ‘regularised’. In addition any immigrants who have died in the attack and who had not been naturalised are automatically to be conceded the status of Spanish citizens, for themselves (posthumously) and for their families. What this decision highlights is the quantity of recently arrived immigrants that there are now here in Spain, and confronting some of the all too evident implications of this reality will undoubtedly now be one of the first priorities of the incoming government.

This brings me to my first ‘correction’: yesterday morning I said.. “and the victims are a total cross-section of Spanish society: from executives to recently arrived illegal immigrants”….. in fact this is wrong. There are relatively few executives, the majority of the victims it is now obvious come from poor families.
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Madrid Bombing: Update But Not Yet A Retraction

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Update: Friday morning 8:30 CET. The uncertainty about the authors of this crime continues. I think having been fairly forthright at the start, prudence on my part is now what is called for while the investigation continues. Meanwhile I think it is important we don’t lose sight of the magnitude of what has happened: 198 dead, and 1,430 injured according to the latest government figures. It is with the victims and their families that our first thoughts should go. I will post again if and when there is meaningful news, and in any event around 19.00 CET when the demonstrations will be assembling.

Now: Just to follow up on my Madrid bombing post. I have to recognise that the evidence is now more contradictory than it was this morning when I first posted. First we have the case of the van with the tape: the van in fact contained seven detonators and a tape in Arabic. The Spanish Interior Minister Angel Acebes said the tape had recordings of verses from the Koran.

And then there is the letter to the London based al-Quds newspaper.

A letter purporting to come from Osama bin Laden’s al Qaeda network has claimed responsibility for the train bombings in Spain, calling them strikes against “crusaders”, according to a London-based Arabic newspaper.

“We have succeeded in infiltrating the heart of crusader Europe and struck one of the bases of the crusader alliance,” said the letter which called the attacks “Operation Death Trains”. There was no way of authenticating the letter, a copy of which was faxed to Reuters’ office in Dubai by the London-based al-Quds al-Arabi newspaper.

So I have to recognise that I may have got it wrong. The emphasis here is on may. If I do have it wrong I seem to be in good company, the UN itself just reached the same conclusion and the first version edition of the Spanish left-of-centre newspaper El Pais has run with a headline similar to that of my original post . One additional question which concerns me is how it was that Batasuna were themselves so rapidly on the Islamic trail. I mean if this isn’t Eta, there has been a terrible failing in international security. The CIA has no information, but Batasuna apparently sees ‘indications’: I don’t quite know what to make of that. Since I’ve presented my own views sufficiently before, and since I may have misjudged things, I present below some alternative hypotheses.
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Eta Massacre in Madrid

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It is still too early to be able to count the toll with any accuracy. The link I post below speaks of 50 dead, others speak of more, and others less. Let us only hope the lower estimates are the accurate ones!

(Update 15 minutes after first post: the official death toll has now risen to 72 according to Ministry of the Interior figures just released on TV. Of course this is still far from definitive. I have been watching the live images on TV and they are among the most horrendous I have seen. I don’t know if the statistics will bear me out, but I have the feeling that this is the worst ever incident of its kind in the history of Spanish terrorism. The previous ‘low’ in this context was the Hypercor hypermarket bombing here in Barcelona – 1987, with 21 fatal victims. The wounded are being attended lying on blankets in the Atocha station in Madrid. Blood is everywhere, and the victims are a total cross-section of Spanish society: from executives to recently arrived illegal immigrants).

(Second Update: 11:44 CET: Spanish TV have just quoted Interior Ministry sources giving a figure of 131 dead. Words ecsapeme, and I fear it may get worse. The number of seriously injured also appears to be high).

I have no hesitation in attributing this heinous act to Eta. Official sources are, naturally, more circumspect. If time should prove me wrong I will, of course, on this as on so many other topics, gladly and willingly accept the fact. But for the time being: I have no doubt.

I have decided to post this immediately since I feel after my recent post on Spain and dialogue that it is behoven on me to say something. In fact I was preparing yet another of those euro related posts (this time on Volkswagen) when I went out to buy the family vegetables for the week. It was listening to the women with me in the shop (Spain is still a pretty traditional and ‘macho’ country in this sense unfortunately) that made me realise I had to make this post: to at least say something. I am aware that after so many years of this interminable killing the pure law of survival means that you tend to put a certain distance between yourself and the insanity of what surrounds you.

But what has happened today passes the bounds of even what one has become accustomed to. It reminds me so much of those dreadful Birmingham pub bombings in the UK in the mid 70’s. So whilst much could be said on the background to, and future implications of, this outrage: I will refrain. This is not the time or the place.

It is purely and simply the time and the place to condemn all such acts of terrorism as barbaric, and of lacking any kind of possible justification within the known frontiers of human reason. It is also the place to say that, inconsequential as this is, my heart goes out to all those who have lost loved ones, family or friends (or simply fellow citizens) as a result of this appauling crime against humanity.
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Rodrigo Rato: Wagging The Finger, Or Wagging The Dog?

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I have already posted on my own blog about what I see as the surreal consequences which might follow from this wish becoming a reality. If what I think happens next to the Spanish economy really does happen – and I have no doubt whatsoever that the housing bubble will crash one or other of these days – then the situation will be a bit like having Menem at the head of an IMFwhich is telling Argentina that they should have thought about the consequences before getting into all that trouble……..

My interest here today, however, is more the European dimension of this process. Firstly, if it is true, as the FT seems to contend, that the European candidature will carry the field, what does this tell us about the IMF? Secondly, maybe focussing on the IMF managing directorship is to miss the point. Maybe the real horse-trading is over future control at the ECB. In other words: will this be a case of wagging the finger, or wagging the dog?
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Time To Smell The Coffee

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You can smell the coffee now: this is the opinion of Morgan Stanley’s Serhan Cevik referring to the nearest thing to an ‘economic miracle’ that we have in or around the EU at the present time:

“It?s time to smell the coffee ? Turkey?s disinflation process is not a temporary phenomenon. Though currency movements play a notable role in driving inflation mechanics of highly dollarised economies, disinflation in Turkey has not been just a by-product of exchange-rate valuation. We believe that it is unfair to take currency appreciation for granted and overlook fundamental factors driving both exchange-rate and inflation dynamics. First, the favourable pass-through effect is a result of fundamental improvements such as a rebalancing of residents? portfolio allocations and productivity-driven export growth. Second, monetary discipline assisted by fiscal consolidation and structural reforms has played a critical part in improving institutional credibility. Third, productivity gains that have resulted in a remarkable drop in unit labour costs help lower the rate of price increases. And last, but not least, economic slack as manifested by the cumulative output gap and labour-market developments has accelerated the pace of disinflation.”

But if this is how things look to some (even if the looking is done not from Turkey but from Serhan’s London window) this is not the way they seem to EU single market commissioner Frits Bolkestein:
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It’s Election Time in Europe

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So Greece has a new government, Haider seems to be staging a comeback and next Sunday Spain is going to the polls. On this latter I will post something during the week, meantime, since I confess to knowing next to nothing at all about the significance of the Greek results, or the real state of play with Haider: anyone out there feel willing and able to give us some insight? Especially with those tricky and potentially significant Cyprus negotiations looming right in front of us.
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What’s It All About Alfie?

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Well I suppose it’s better to end the week on a bang rather than a whimper, so here I go with another of those posts. What really ended the week on a high note (or should I say a low one) was the US labour market. And since I am arguing that the euro-dollar parity is being driven at the moment by US labour market data, this news can only mean one thing: more upward pressure on the euro. Which makes me only want to re-iterate, and even more strongly, that an important opportunity was wasted yesterday to take some remedial action by lowering the interest rate. Remedial action which would also have supplied a much needed lifeline to Germany’s beleagured economy. But this, like so many things, was not to be.
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Hyundai Goes to Slovakia

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South Korean manufacturing giant Hyundai has picked Slovakia as the site for a new $870m (?466m) car plant, one of the biggest deals in the car sector this year. The factory, which will open in 2006, is intended to produce up to 200,000 vehicles a year under Hyundai’s Kia brand. The north Slovak city of Zilina beat a Polish location in what had been a long-running contest to get the plant. Both countries offered incentives for the investment, but Slovakia boasts slightly lower costs for manufacturers. In fact Slovakia has arguably the lowest business cost base of any of this year’s new EU members, and enjoys a strategic location on the border with Austria. All of which means that it is rapidly converting itself into an auto manufacturing hub since this is the second big car project that Poland has recently lost to Slovakia: last year, France’s PSA Peugeot Citroen said labour costs had persuaded it to pick Slovakia for a new plant roughly the same size as Kia’s.

This of course is neither outsourcing, nor is it job-migration. But it certainly is a news item which doesn’t go down too well here in Spain, which feels it is rapidly losing its pride of place as the European car components centre.
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ECB: German Plea Falls On Deaf Ears

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When this is all over, and we come to look back at the when and the where, maybe we will remember today’s decision as just one more of those missed opportunities. Certainly not much notice seems to have been taken of Gerard Schroeders request for a helping hand on the interest rate front. Is there any significance in the fact that on the day the ECB decided to stand firm, German unemployment turned upward again to 10.3%, while it was also revealed that German factory orders fell unexpectedly by 2% in January: just for good measure I suppose.
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