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".

Blowing The Mole?

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This doesn’t look like it’s going to be a good week for GWB, with the Valerie Plame affair far from resolved, some blog attention is now moving back to the issues raised at the time of the arrest of Mohammed Naeem Noor Khan (any connection with Mohammed Barbar?) in the Pakistan more or less exactly a year ago.

Juan Cole has picked up a story initially explored by John Aravosis at AmericaBlog. There are a lot of twists and turns in the story, but it does appear that excessive eagerness to catch the headlines around the time of the Democratic Convention may have inadvertently set off a chain reaction that finally exploded itself in London last Thursday. The suggestion is that when Noor Khan’s name broke in the press, the British police were forced to acted in haste, and that Muhammad Sadique Khan, one of the July 7 bombers, was apparently connected – by a telephone link – to one of the people under surveillance. If this is the case, this would explain Sarkozy’s behaviour at the EU Interior Minister’s summit on Wednesday.

As the IHT article shows, the London bombing was a complex operation, and plenty of details are still unclear. I wouldn’t rule out a Spanish connection at this stage, not in the least:

“Spain has also begun to confront Pakistani-born radicals operating there since the terrorist train bombings in Madrid on March 11, 2004.

After 10 Pakistanis were arrested in September on suspicion of belonging to an Islamic radical support network, the Spanish police discovered a video showing details of a number of buildings in Barcelona.

In November, two more Pakistanis were arrested, and in April, 11 suspects were indicted on terrorism charges.

No direct link has been established between the Barcelona plot and the London bombings, a senior Spanish official said. But the official added that there was every possibility some members of cell were still at large and that Spain and British were pooling their information on the London bombing investigation.”

Update: this piece gives some of the background at the Pakistan end.

Economy and Elections in Italy

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Of course the accidental is important in history. The latest example would be how electoralist needs are going to impinge on Italy’s attempts to turn its economic crisis round. A year, at least, may well be lost on false promises and inaction. And as if that weren’t enough, the trifecta may be delivered by ‘terrorist-attack psychosis‘.

Italy aims to reduce its deficit to less than 3 per cent of gross domestic product by the end of 2007 ? a target described by Silvio Berlusconi, prime minister, as ?manageable? and which is in line with commitments given this week to the European Union.

However, Mr Berlusconi?s six-party coalition, trailing behind the centre-left opposition in the opinion polls, is planning a relatively mild 2006 budget to save itself from electoral defeat.

Italy?s economy fell into recession between October 2004 and last March and is plagued by low productivity growth, high unit labour costs, falling international competitiveness and an enormous public debt.

Italy’s Inflation Dropping

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Despite warnings from Otmar Issing that “The outlook for price developments has got decidedly gloomier since June”, the situation is far from uniform and far from clear. Yesterday Italy’s national statistical office, ISTAT, announced that annual inflation dropped in June to 1.8%, from 1.9% in May. This was Italy’s lowest annual reading since 1999. Is deflation starting to raise its ugly head? It is too soon to know, but the Italian economy is certainly in its deepest crisis in a generation, and nothing is excluded. Brad Delong posted yesterday about ‘Dials Moving into the Red Zone‘, right now Italy has no shortage of these.

The Human Costs Of War

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Controversy continues to surround the problem of assessing non-combatant casualties in time of war. The Swiss based Graduate Institute of International Studies has just published its latest annual small arms survey where it suggests some 39,000 Iraqis have been killed as a direct result of combat or armed violence since the start of the war.

The most relevant part of the report is probably chapter nine “Behind the Numbers: Small Arms and Conflict Deaths” – where, in addition to Iraq, other recent warzones like Guatemala, Peru, the Democratic Republic of the Congo (DRC), Kosovo, Afghanistan, and Sudan are also assessed. (A chapter summary is available here).
Continue reading →

Suspects Update

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Well the Times seems to have the main scoop today. As suggested in my post on suicide bombers yesterday, it is important that they have been identified, but much of the ‘upstream work’ may not be so immediately productive. Police do seem to have a lead from the CCTV images at Luton in that there is apparently a fifth man identified there (which suggests that the station may have been more than a convenient rendez-vous). This ‘fifth man’ would seem to be additional to the ‘mastermind’ and the ‘chemist’. The ‘mastermind is – according to the Times – a Pakistani national, who entered and left the UK before the bombings took place. The ‘chemist’ is alleged to be Egyptian-born chemistry lecturer (or biochemistry PhD according to who you read) Magdi El-Nashar who is is “understood to have rented one of the Leeds addresses where explosives were found”. He is now reported to be back in Egypt. (Egypt rings a bell, since Juan Cole’s lexical analysis of the initial claim from a group calling itself ‘Secret Organisation of al-Qaeda Jihad in Europe’ suggested that the author of the text might be of Egyptian origin). The idea that this group might be the ‘intellectual authors’ of the bombing is given some credence by the ‘burning cross’ theory. (This supposes that the bus-bomber in fact wanted to board the Northern Line). The original claim statement said “Britain is now burning with fear, terror and panic in its northern, southern, eastern and western quarters.”

Obviously much of the above is still at the conjecture stage, but it does suggest a fairly complex network behind the four suicide bombers, and it also suggests that there is much more relevant information to come before we will get anything like a full picture.

BTW: if you are having trouble with our comments facility, worry not, you are not alone. We are working to try and fix it even while you read.

France Suspends Schengen

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French interior minister Nicolas Sarkozy has announced that in the light of what has happened in London France is reintroducing European Union border controls. There is a clause within the Schengen Agreement which allows for controls to be reinstated and Sarkozy said that this had been activated by France. The decision is described as temporary. Such suspensions have occured in the past for sporting events (or in the case of Spain for EU summits), but this idea of ‘temporary’ might be a little longer.

There is suggestion in the Italian press that the Netherlands may also have done so, but I still can’t find confirmation. Italy has explicitly said it isn’t going to suspend. The UK of course isn’t party to the Schengen agreement.

Suicide Bombers

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Well a consensus seems to have been reached that some at least of the bombers were ‘suicides’ (the probability seems to be that they all were). So what do we know about suicide bombing? Well reading around I came across this document from the Rand Corporation which contains a chapter from terrorism specialist Bruce Hoffman entitled “Defending America Against Suicide Terrorism” which seems quite to the point. This paragraph seems especially prescient about ‘Why is suicide bombing so attractive to terrorists?’.

“To answer these questions, we conducted extensive research and interviews with foreign police/security forces with prior experience with suicide terrorism. The following conclusions emerged.

First, from a tactical standpoint, suicide attacks are attractive to terrorists because they are inexpensive and effective?with an extremely favorable per-casualty cost benefit for the terrorists. Moreover, they are less complicated and compromising than other lethal operations. No escape plan is needed because, if successful, there will be no assailant to capture and interrogate. Suicide attacks are perhaps the ultimate ?smart bombs.? They can cleverly
employ disguise and deception and effect last-minute changes in timing, access, and choice of target. Finally, suicide attacks guarantee media coverage. They offer the irresistible combination of savagery and bloodshed.”

And for those who are interested in points from the ‘oh why do we keep making the same mistakes department’ this (pdf) file from Hoffman on Insurgency and Counter Insurgency in Iraq (written in June 2004, but still largely valid) makes an interesting read.

Italy Remains On Red Alert

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The danger that Italy could be the next country to be attacked is certainly being taken very seriously there. Corriera della Sera leads with “Blitz antiterrorismo in tutta Italia” (which I imagine I don’t need to translate). For english language readers AFP are carrying this story:

Italian police were carrying out a country-wide anti-terrorism operation early Wednesday, a day after the government announced a series of measures aimed at preventing a London-style attack, the ANSA news agency reported.

Hundreds of police and paramilitary Carabinieri officers were searching homes and buildings in several cities in northern Italy as well as in the southern port of Naples and on the island of Sicily, the agency said.

Just returning briefly to the economic implications of terrorism, I want to re-iterate that stock market reactions form only part of the picture, there is also a ‘real economy’ to think about, and here consumer confidence will be important. What will be the impact in the UK of the fact they were suicide bombers (for example). The jury is still out, and will be till late autumn at the earliest. Italy is another case in point. An attack now might well have serious economic consequences, indeed even the threat of one (which is where we are now) complicates the economic picture significantly.

Update 20:15 CET

The Italian Interior Minister has announced that 174 people have been arrested.

Germany’s Structural Budget Problems

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Bloomberg (didn’t I once promise not to have anything more to do with them, oh well, needs must) have obtained a copy of German Finance Minister Hans Eichel’s budget plans for 2006. The problem is a serious one since the big problems are structural not cyclical:

“Given the availability of financial resources, an adequate public infrastructure and a sound education system with everything that accounts for Germany’s future viability can no longer be guaranteed”

The room for manouevre – whoever is elected in the autumn – is extremely limited since “nearly two thirds of next year’s 256 billion-euro budget are slated for debt-servicing, state pensions and unemployment benefits as well as jobless-placement costs”…(while)..”Germany’s three-year economic slump and near-record joblessness have eroded tax revenue”.

The ECB And Rate Reductions

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Bloombergs Mathew Lynn on why we need a rate cut regardless of fluctuations in the value of the euro. (Also see the Liquidity Trap post on Afoe yesterday, I, like Lynn, don’t agree we have reached the point where monetary policy is useless, at least not yet we haven’t).

“The ECB appears to have little comprehension of the task it faces right now. With the rejection of the European Union constitution by the French and Dutch electorates, and with Italian politicians openly calling for the return of the lira, the future of the single currency is no longer assured.”

“This isn’t the moment for small-minded technical arguments about how far exchange-rate changes boost or depress an economy. It is the moment for bold action. At some point, people will tire of permanently low growth. If the euro area can’t perform better in the next five years, there may not be a euro for the ECB to defend”.