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".

Migration And Reform

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Well today is obviously immigration day, as thousands of Latinos take to the streets in the United States to demand some kind of ‘regularisation’. I have been posting on Demography Matters about the changing pattern of Latino migration in the US, and on the not entirely unrelated topic of whether it is the arrival of the Latinos or the presence of religious belief which is primarily responsible for the fact that US fertility is still hovering round the replacement mark (especially the comments, and here, and here and here).

But this post is not about migration in the United States. Rather it is about migration inside the frontiers of the EU itself. As populations age, and our economies come under increasing strain, some societies will prove more able to reform than others. Now one conjecture I have been making is that in this process some societies will attract population (and get that famous win-win dynamic going) while others will lose even that which they have (sounds a bit like the biblical parable now doesn’t it). Actually economists have terms for all this. You might say that the ones who attract are experiencing an increasing returns process, while those who lose are suffering from negative feedback.

Claus has already touched on how Denmark is suffering from a lack of immigration (and me here), in the sense that more people are now leaving than are arriving, but perhaps more importantly for the future of the entire EU, Germany is very near to becoming a net exporter of people (and here).

Pperhaps a bit more spice was added to this already simmering cooking-pot last week by a sudden, and rather unexpected, bout of finger pointing from Peer Steinbrück, Germany’s finance minister, in the general direction of Vienna. Now according to Steinbrück, Vienna’s recent decision to cut corporate tax rates from 34 per cent to 25 per cent has led to an increasing number of German companies investing across the border in Austria. In other words, not only are people leaving, companies are now also leaving, and to less than anticipated destinations, and of course, on the backs of the companies will go even more people. Are we really so sure that that recently heralded sustainable recovery is as sustainable as some are suggesting? Morgan Stanley’s Eric Chaney understandably still has his doubts.

The real issue is this: as the FT says “Mr Steinbrück has limited room for manoeuvre in the tax field because of Germany’s high budget deficit”. All these issues interlock. So, on a day when Jaques Chirac seems to have taken a step backwards in the French reform process, it might be just worth asking ourselves whether, at the end of the day, there won’t be a price to pay for all this ‘no rush now is there’ style delay.

The Czech Car Growth-Engine?

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News today which is of more than passing interest from the Czech Republic. The South Korean industrial group Hyundai has announced that it is going to build its first European car plant at Nosovice. The factory – which is scheduled to cost around one billion euros – should begin production in October 2008 with full capacity of 300,000 vehicles a year being reached in 2009. This new output, when added to added to the 600,000 cars or so produced annually by Volkswagen’s Skoda Auto and the Franco-Japanese joint venture, TPCA, will bring the Czech Republic into the front line – along with Germany, France and Italy – of the European automotive industry.

As elsewhere this will have its good and its bad side.
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ETA ‘Calls Permanent Ceasefire’

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Now this is news (even if it not entirely unexpected).

The Basque separatist group ETA on Tuesday announced a permanent cease-fire, apparently bringing a dramatic end to nearly four decades of violence that claimed more than 800 lives, Basque television reported following a communique from the group.

The authenticity of the announcement could not immediately be verified, but ETA often uses local Basque media outlets to issue statements. The group said the cease-fire would start Saturday, and that it would be “permanent.”

Speculation about an end to ETA’s armed campaign has been building for months, despite a recent wave of small-scale bombings against Basque businesses.
Source Reuters

The origin of this report is the Basque Newsd Agency EITB24, and the english version of this site does seem to does seem to be collapsed by all the traffic at the moment. However, if you can access, this thread is the one to watch (and this review of ETA statements, and this history of ETA ceasefires, are obviously highly relevant).

I don’t have time for much in depth commentary and analysis about all this right now, so please consider this post an open thread for any comments or questions, which I will try and answer if I can.

Italian Elections 2006 IIIa

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Well we’re having a fairly lively discussion on the original post about the future of Italian democracy, so I thought it might be useful, as a sort of side plate, to link to this analysis from Morgan Stanley’s Vincenzo Guzzo. He highlights the recent changes in Italian election law, and the impact they may have on the final outcome of this year’s poll. In particular he suggests that:

“these new rules have encouraged the main parties on both fronts to seek alliances with a large number of miniscule formations, thus exacerbating the risk of political fragmentation within each of the two coalitions and possibly diluting the content of the two platforms“.

Well rather than diluting, the word hijacking comes more to mind, expecially if I think about the influence Esquerra Republicana de Catalunya has been able to have on the implementation of the Zapatero programme here in Spain. I don’t know if anyone indside Italy has any views on how the new balance could affect political agendas?

Update: Hans Suter has just mailed me making this point (which is also partly touched on by Guzzo):

It’s usually forgotten that there aren’t only political elections, a month later there will be administrative elections (mayors etc). There will at the same moment the election for a new head of state, and shortly after there will be a referendum about the changes the center right government has made to the constitution. For rest:the coffers are empty and the mess immense. Wish us good luck.

Italian Elections 2006 III

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Well Romano Prodi and Silvio Berlusconi finally got to meet up in front of the TV cameras last night, even if they didn’t exactly enter into face to face combat. The poll consensus seems to be that Prodi won it on points.

The debate seems to have centred around economic themes, and Euractiv has a summary of it here. Surprisingly, or unsurprisingly, Finance Minister Giulio Tremonti has been trying to put a brave face on things, by claiming that Italy is now “on the right tracks” and that the situation of Italy’s “public finances is good”. Mario Draghi, the new governor over at the Italian central bank does not seem especially convinced, since he was claiming only last week that the Italian economy had run aground.

Again unsurprisingly a poll held shortly before the debate showed that a large number of Italians are still undecided about how they will cast their vote, even if there is some evidence that the Prodi coalition may be hanging on to their lead.

Roberto over at Wind Rose Hotel has the third of his election posts now up. He draws our attention to the latest contributor to the ‘great debate’, semiologist and erstwhile novelist Umberto Eco (link in Italian). Eco has indicated he might consider leaving Italy were Berlusconi to be re-elected. Democracy, according to Eco, is in danger in Italy. Angelo Panebianco, writing in Corriere della Sera (which has remember endorsed the Prodi coalition), takes issue with Eco and asks: why so much theatrical drama?:

For two reasons, I think. The first is that such dramatisation is exactly what attracts the kind of ‘intellectual’ audience which has chosen Umberto Eco, and especially Umberto Eco, as its very own champion and reference point. The hate for Berlusconi among this section of the public is palpable and evident, we have surely all of us found this in recent years in scores of private conversations and in the fascinating phenomenon of collective psychology. …..

The second reason for the dramatisation, I think, is to do with a problem which is typical of our (Italian) culture. It is an ancient legacy here, for many, to mistake democracy, which is a method of resolving conflicts by counting heads instead of breaking heads them……..(to mistake this process) forthe realisation of their own ideals. To mistake the victory or defeat of their political views for the victory and defeat of democracy: this is a kind of childhood illness of democracy.

Well it seems that Italy is a society which is rapidly ageing but where ‘childhood illnesses’ abound. Reading the piece by Panebianco I could not help but think, not of Umberto Eco, but of Nanni Moretti, whose films I thoroughly enjoy, but whose perceptions of contemporary Italian society have always struck me as being ‘warped’ to say the least. Democracy is not in danger in Italy in this election, it is not even in doubt. What is in danger, and about this there should be no doubt, is the Italian pension system and the mid-term economic well-being of Italian society. Far from the Italian pension system having been reformed and fine-tuned to the extent which Tremonti alleges, the necessary adjustment has only recently started on the road, and this small step was taken only after the last minute tussle and haggling (in part with represantatives of Berlusconi’s insurance industry interests) which was needed to salvage at least one piece of reforming legislation from 5 years of a decidedly ‘reform unfriendly’ government. What Italy needs at this point in time is a government which is serious about introducing the Lisbon agenda in Italy. This would not be a Berlusconi-lead government. Will it be a Prodi-lead one? This is what remains to be seen. If it turns out that neitherof the alternatives are up to the task, then Eco may well, in a certain sense be right: Italy will then have a crisis of democracy, but not, I think, the one he has in mind.

Breaking Up The Power Giants?

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Battle may be about to be joined. EU competition commissioner Neelie Kroes is back in the news. She made a speech yesterday, and in that speech she suggested that the golden days of the EUs unreformed energy giants may be numbered, as the European Commission is considering launching an onslaught on monopolistic energy utilities and the politicians who protect them (and here). According to The Economist Angela Merkel has recently gone for a policy of “underpromise and overdeliver”, so I do hope she has taken a leaf out of Merkel’s book, and that this won’t be yet another example of ‘overpromise and underdeliver’. The stakes, as I was suggesting yesterday, are really quite high.

Kroes principle objective seems to be those companies that control both the supply and distribution of energy, and in so doing effectively block their rivals from entering the market. But in taking on these companies she will also need to take on the political networks that support them. As Euractiv (which incidentally has a useful dossier on the energy topic) puts it “The EU considers common energy policy amid national sovereignty concerns”. My question is, just who is it who has so much vested interest in this national sovereignty idea? Can it be simply a coincidence that Kroes hails from the Netherlands, one of the smaller EU member states? Oh well, one more time onwards and upwards to the coalition of the willing.

Italian Elections 2006 Part II

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Well the election campaign in Italy trundles on, and issues are starting to emerge. One of the more curious details to have come out in recent days refers to the size and shape of the voting card. It is to be some 65 centimetres long with canditates arranged horizontally rather than vertically across the strip (if this seems like a long ticket, some US cards are up to a metre long apparently, although just why AGI online choses the US for its comparison is beyond me).

Beyond the ticket itself, Italy’s leading independent newspaper Corriere della Sera has just published an editorial coming down (for the first time I think) on the side of the centre left coalition lead by Romano Prodi (declaration of interest: CdS is my preferred reading among Italian newspapers). The reasoning for this decision seems to run something along the lines that the Berlusconi government has taken policy decisions more in the light of the need to resolve internal coalition differences than in the light of the real needs and interests of the country: to which ‘amen’.
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EU Energy Policy II

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Well the new EU energy plan has been released (and here, and you can also find the actual Commission statement here). The final product is pretty much as the leaks suggested.

As was indicated yesterday, Russia related concerns are central. The FT comments:

Russia supplies a quarter of Europe’s gas needs and the Union’s dependence on the country for energy was illustrated in January when a dispute between Moscow and Kiev disrupted gas deliveries to the EU.

All of this was I think anticipated on this blog back in January when the Gazprom/Ukraine dispute first really broke into the public arena. What wasn’t anticipated was this, and especially the gas related dimension of the Suez/Gaz de France merger.

The major changes taking shape in Europe’s energy sector at present undercut the arguments of those who have long been predicting a gradual break-up of monopolies and the disappearance of the industry’s biggest players. The planned merger of Suez and Gaz de France to counter an offensive by Enel and Veolia and the fight between Gas Natural and E.On for the hand of Endesa make it abundantly clear that concentration remains very much a watchword in the branch and that even powerful old public monopolies like Electricite de France could be forced into marriages with others in future.

None of the reasons trotted out to justify the merger between Suez and Gaz de France, to cite but that operation, dwelled on the future role of Russia in Europe’s energy landscape. True, the Russians aren’t directly involved in any of the operations underway in Western Europe. On further examination, however, Gazprom’s moves in recent months could be seen as justification for the consolidation.

The future Suez/Gaz de France grouping will become the leading buyer and the top supplier of gas in Europe. As such, it will rank as one of Gazprom’s prime customers in the world. That, however, isn’t necessarily good news for Gazprom. In its dealings with such a powerful client the Russian monopoly won’t be able to exert as much pressure upon it as upon a smaller entity, let alone bully it.

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EU Energy Policy

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Well leaks seem to abound this morning about a draft policy paper which European Commission president José Manuel Barroso is circulating prior to the March 23 summit (and here). According to the leaks the paper proposes a coordinated approach designed to achieve a new long-term partnership with Russia and the creation of a gas stockpile, which could be released as a gesture of ‘solidarity’ in times of disruption.

Some difficulties are already evident, expecially in the light of the resurgence of neo-protectionism in some important EU states which seems destined to place limits on any attempts to increase cross-border connections and competition. Another possible issue is the idea of approaching Iran as an alternative gas provider, a suggestion which seems to highlight better than anything the fragility of our present supplies, especially if Iran and Russia were ever to decide that it was in their interests to have a common policy vis-a-vis the EU.