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".

The Choke Point

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Well following my speculation yesterday that the suggested de-coupling of the UK rebate issue from agricultural reform might be connected to the implications of the Doha round, news is in today that France last night called for an emergency meeting of European Union ministers to discuss “growing concerns in Paris that Europe will concede too much ground in the Doha round of trade talks“. The FT quotes Mandelson as saying:

“We are rapidly approaching the choke point where the different pieces either fall together or fall apart”

Avian Flu

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It has been confirmed that the variant of avian flu found in Turkey is the H5N1 high pathogenic virus. Obviously on reading this one is caught between a feeling of panic and a desire to stay calm. Frankly the stay calm bit should win out, in all of us. Panic only makes things worse.

Clearly were some of the worst fears to be realised this would be a grave situation, but hopefully they won’t. One key point which needs to be made is that there still isn’t a H5N1 strain that is readily transmitted among humans, hopefully there won’t be, even if this may be hope against hope.

The WHO have an informative update on the Geographical spread of H5N1 avian influenza in birds. If you look at this report from the WHO on the situation in Indonesia (where three people have died) or in Vietnam (where 21 of the 64 cases proved fatal) you will see that even when the virus does cross species it is containable. So while the possibility of a pandemic exists we are not there yet, and possibly never will be. It’s quantifying the *possibly* part that is difficult. Basically I have put this post up in case any one else wants to voice an opinion. Clearly we at Afoe will try and monitor this situation from now on.

UPDATE (by Doug Merrill): Good sense from a biologist on what is likely to be helpful and what not can be found here.

Go West Young Man

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My preocupations about the impact of demographic change on German society are already pretty well known. Well if Germany as a whole has a sizeable problem, the former East German Lande have a huge one. The state-owned KfW development bank project in a report out today (German only unfortunately, an English version of the press release is here) that the while the population of the old West Germany will drop by six percent between 2002 and 2050, that of the six eastern states will decline by a whopping 25%. Not to mention the fact that those who remain are likely to be even older on average than their Western counterparts. As a consequence the available workforce is likely to fall by a staggering 55%.

The issues raised by this research are large and important. Is, for example, East Germany now in irreversible decline? Can this process repeat itself elsewhere (including between rather than within nation states) as younger, more highly skilled and more mobile workers leave ageing and relatively more depressed areas etc?

The issue of migration from East to West Germany been receiving attention for some time now. Frank Heiland in a survey “Trends in East-West German Migration from 1989 to 2002” (follow the link and go to Volume 11 article 7) argues that there have been two waves of East-West migration The first one, 1989-1990, was triggered by the opportunities and uncertainties before the Reunification; the second one, since 1997, coincides with economic stagnation in the East and improving job prospects in the West.
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UK Rebate ‘On The Table’?

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EU Politix is reporting UK Deputy Prime Minister John Prescott as telling a plenary session of the EU’s Committee of the Regions that London is “strongly committed” to finding agreement on the EU budget before the end of 2005. He is quoted as saying “We can not change agriculture in the short term.” and “We have put our abatement on the table. It is not the best way to spend European money”. If confirmed at the actual summit this would be news. This is also being linked to the establishment of some kind of fund to offset the industrial impact of globalisation and offshoring.

However I remain sceptical both on whether there is this dis-connect between the budget and agricultural reform in reality (remember opening talks with Croatia was not – *definitely not* – linked with the agreement to start negotiations with Turkey) and about the advisability of the UK taking this approach. Still, maybe this has something to do with it.

EU Common Circus Policy?

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MEPs are soon scheduled to debate a new ‘Common Circus Policy’. This is following the publication of a report: “new challenges for the circus as part of European culture”. Apparently MEPs agree that circuses should be referred to as part of Europe’s cultural heritage, but tend to disagree on whether they should include presentation of animals or not:
At the moment, Austria does not allow circuses to use any wild animals (even in the parliament?), while the Scandinavian countries ban some kinds of animals, such as lions and tigers (hence the more touchy-feely approach to politics there I imagine).

UK Jobless Upward Trend Continues

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U.K. jobless claims rose for an eighth consecutive month in September, extending the longest period of increases in almost 13 years, “as growth in Europe’s second- biggest economy slows”. This adds just a little more evidence to the fact that all is not necessarily currently all for the best in the land of John Stuart Mill. However as NTC research point out, not all is totally bad either:

Meanwhile, annual average earnings growth held steady at 4.2 percent in the three months to August, signalling that higher inflation is still not feeding through to wages.

So earnings continue upwards at a healthy clip, but not above trend. No evidence of ‘secondary effects’ here then. Which makes you wonder why the normally reasonable Mervyn King is currently being so evidently unreasonable. You can find my explanation for this here (and in the comments).

Mervyn King on Tuesday night signalled he was not convinced of the case for lower interest rates and could see many reasons why the rise in oil prices might increase inflationary pressure.
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German Inflation Revised Down

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I like this title. I have, I unashamedly admit, lifted it straight from NTC research (where it was in any event hardly the most creatively original of headers). I like it since it seems to run counter in spirit to all those admonishing lectures we are currently getting about the dangers of ‘secondary inflation’ and pass-through. The headline refers to the fact that Germany’s EU-harmonised annual inflation rate (HICP) for September was revised down to 2.6 percent from an initial 2.7 percent, the Federal Statistics Office announced on Wednesday. Actually this revision is something of a statistical freak as the reading in question was the harmonised consumer price index for Germany, which is calculated for European purposes. In fact AP runs a different headline: German Inflation Rate Climbs in September, which doesn’t really prove that there are lies, damn lies and statistics, but rather that we have a labyrinth of statistical indices at work – AP quote the straight national CPI, and not the harmonised index. Anyway, if you can battle your way through all this, well good luck to you!

Much more to the point, however, is the detail that , not considering heating oil and motor fuel, the rate of price increase would have been just 1.6%. Inflation scare? Where? Oh yes, I forgot, in Spain and Greece.

As reported by the Federal Statistical Office, the consumer price index for Germany rose by 2.5% in September 2005 on September 2004, and by 0.4% on August 2005. That is the highest year-on-year rate of increase for more than four years (May 2001: +2.7%). In July and August 2005, the year-on-year rates of change were +2.0% and +1.9%, respectively. The estimate for September 2005 based on the results from six Länder was thus confirmed.

The year-on-year rate of price increase was strongly influenced by the sustained price increase for energy in September 2005. In that month, price increases were recorded primarily for mineral oil products again. Not considering heating oil and motor fuel, the rate of price increase would have been just 1.6%. Domestic fuel prices were up 40.0% compared with the same month a year earlier.
Source: German Federal Statistical Office

Hungary Gets A Rap On The Knuckles Too

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Hungary converted itself into the latest country to join the line of EU members awaiting chastisment for failing to enforce budgetary discipline after it became clear that its deficit for 2005 could be almost double official forecasts.

Joaquín Almunia, EU monetary affairs commissioner, told European finance ministers Hungary’s deficit this year was projected to be 6.1 per cent although some economists say it could top 7 per cent.

The state of Hungary’s public finances was only revealed after the country’s central bank blew the whistle on the government, which used creative accounting to massage down the deficit. The revelation is embarrassing for the European Commission, which reported in July that Hungary was “within reach” of achieving its targeted deficit for 2005 of 3.6 per cent.

UK and German Retirement Policies Compared

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As we all know raising the participation rates of older workers is both essential and a core component of the Lisbon Agenda, so here’s a timely report from the Anglo-German Foundation for the Study of Industrial Society comparing policies directed towards older workers in the UK and Germany. More salacious material to stimulate all you policy wonkers out there. (Hat Tip to David from North Sea Diaries). Looking at the table on page 3 the UK seems to have been a good deal more successful in acieving these objectives over the last decade. In both coutries male participation rates in the 55-64 age group has actually gone down since 1990, with the increase for the group as a whole being a matter of increasing female participation. On the other hand the UK has managed to reverse the 1990 – 2000 downward male trend and between 2000 and 2004 55-64 male participation went up, something which it noticably didn’t do in Germany.

The report concludes that the primary deficit concerning active labour market policies for older unemployed in Germany is the lack of specific targeting of this group both in active job placement and training. In the UK, the scope of active measures is rather limited both with regard to the kind of measures � New Deal 50 plus/New Deal 25 plus � and the level and duration of funding………In the UK � despite a more socially inclusive stance recently � funding of job creation and a broad application of training measures has not taken place so far, given the low intervention character of labour market policies. In Germany, in the wake of recent labour market reforms, a shift in paradigm towards a more activating approach to job placement has been implemented.

Being Right After The Event

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The FT has a piece on the growing tensions within the Republican tent over Iraq.

If we quit now, said Condoleezza Rice, the secretary of state, in a speech at Princeton University last month, we will embolden every enemy of liberty and democracy across the Middle East. We will destroy any chance that the people of this region have of building a future of hope and opportunity. And we will make America more vulnerable.

She is right. This was always the risk, that the objectives were unrealistic and that the US would come out weakened, but it seems that at the time few were willing to listen.

Kanan Makiya, an outspoken proponent of the war who is documenting the horrors of the Saddam regime in his Iraq Memory Foundation, opened the AEI meeting by admitting to many dashed dreams.

He said he and other opposition figures had seriously underestimated the powers of ethnic and sectarian self-interest, as well as the survivability of the constantly morphing and flexible Ba’ath party. He also blamed the Bush administration for poor planning and committing too few troops.

Well this seems to be another example of what at times rather than shouting it may be better from time to time to listen to what your opponents are actually saying. If you strip out the WMD argument, concern about “ethnic and sectarian self-interest” and the impact of this on any subsequent political process was always the major preoccupation of those who had doubts.