Really, when I saw this I had a hard time believing it.
The UK’s case for staying out of Europe’s single currency “is becoming weakerâ€, European Trade Commissioner Peter Mandelson has argued in a bid to reopen Britain’s euro debate……The British economy has prospered outside of the single currency but with increasing harmonisation in other areas of financial services, the long term case for staying outside is becoming weaker.
Which world is he living in?
Not content with simply being the ‘Energy Presidency’, Austria it seems is hell bent on also moving forward the Consitution issue, even if this is only in the rather tame form of a Brussels debate among Europe’s leaders on the way forward for the new treaty. Actually rather than a constitution per-se, what we may see is the consolidation of the “Cherry Picking” model:
One option is to “cherry pick†key institutional aspects of the text such as the creation of an EU foreign minister or greater openness at councils of ministers.
This is the first really concrete piece of news we’ve had on the UK housing situation. George Wimpey Plc, Britain’s second-biggest homebuilder by revenue have just announced that full-year pretax profit probably fell for the first time in a decade:
U.K. sales slipped 1 percent to 12,100 homes, with the average selling price dropping 4 percent, more than analysts had expected. Pretax profit was as much as 22 percent below 2004’s record level and at the lower end of estimates, Chief Executive Officer Peter Johnson said in an interview today.
Prospective buyers shunned purchases as Britain’s benchmark interest rate reached 4.75 percent last year, making mortgage payments more expensive. A quarter-point cut by the Bank of England on Aug. 4 has yet to revive prices. Wimpey last reported a decline in annual pretax profit in 1995. The second-half figure also fell, Johnson said today.
Well, as we say in Spain: one hot one and one cold one. Last Friday I posted about how Turkey may well be making progress in modernising its legal system thanks to EU pressure. Today the worry is that the information system in Turkey may well still be extremely deficient. This is highlighted by the death of Muhammet Ali Kocyigit and the fact that three more of his siblings were admitted to hospital with symptoms which sound suspiciously similar to flu.
News.com.au suggests that Muhammet died of flu, but the Turkish Health Ministry is at pains to assert that even if the cause of death is to date unknown, it wasn’t avian flu. Let’s just hope they’re levelling with us!
According to the Turkish news agency Hürriet Turkish Deputy prime Minister and Foreign Minister Abdullah Gul spoke last night to the NTV news channel regarding:
“the recent wave of legal battles being held against Turkish intellectuals and a senior member of the European Parliament. Gul criticized the actions that were being taken under the controversial article of the country’s new penal code and said, “There seems to be a chain of systematic complaints. There appears to be a mentality deliberately aiming to create chaos.”
The FT quotes Mr Gul as saying:
“There may need to be a new law. As a government we’re watching closely how the existing laws are being implemented.â€
The law in question is the one which makes it an offence to insult “Turkishnessâ€. This law has been highlighted recently by the Orhan Pamuk case and now by the strange threat to prosecute Joost Lagendijk, a Dutch member of the European parliament, for suggesting the Turkish army provoked Kurdish rebels in the hope of extending its influence. Interestingly enough Joost Lagendijk supports Turkish membership of the EU. State prosecutors are reportedly studying the complaint against Lagendjik.
Now I have to say that not of this surprises me. Turkey is a society in transition. Fortunately the transition is from a bad equilibrium to a batter one, and we in the EU are doing our bit. I feel that Gul’s statement confounds the fears of the sceptics. In this case EU pressure will be rigourous, and change will be far reaching, but the process will, obviously, have its ups and downs.
So I was really surprised to read in the FT:
“Turkey knows that gaining entry to the EU will become an increasingly arduous task in the coming years, because of widespread antipathy inside the 25-member club towards future enlargement. “
No! Turkey gaining entry to the EU will be an arduous task because it is good for Turkey and good for the EU that it be so. If some people are using their ‘enlargement fatigue’ as an excuse for trying to make things more difficult, then they are the ones who will end up even more fatigued (and frustrated) as time after time Turkey complies with their demands.
This could be another example of shooting-yourself-in the-footism as in complying with the demands Turkey will become an increasingly modern and economically competitive society, which means, of course, that when it does join in 2014 it will, as the largest member state, have even more influence :).
It is surely welcome news to find the German citizenry content with Angela Merkel, and that this new found contentment is feeding into more positive views about immediate economic prospects. But oughtn’t we to remember that there is a thing called the first hundred days, and a phenomenon known as the ‘honeymoon period’.
There is also – thank you Nietzsche – something called the ‘will to believe’.
I therefore think, along the lines of ‘one swallow doesn’t make a summer’ that it is a bit too early to be saying that the latest bounce in consumer confidence:
“is the latest indication that a broad-based recovery in Europe’s largest economy could finally be around the corner”.
I think we should wait for a broad-based and sustained recovery in confidence first. What we have is another indication that people are feeling rather better, and that is always good news. But lets just see how they feel when the first ‘reform’ package is unveiled, shall we.
The good news, however, was eclipsed by warnings from economists and politicians that Germany’s new government should not let rising opinion polls and improving economic prospects get in the way of much needed labour market and social security reforms.
“There is a lot more to be done,†Horst Köhler, Germany’s president, told the Stern weekly in an interview published on Wednesday. “I remain convinced the republic is facing a formidable task that will require decisive action and an enormous amount of staying power.â€
I have just read this (don’t miss the photo):
Constitution, enlargement and budget: Austria hopes to revive Europe with these themes and infuse it with “energy and confidence” when it takes over the rotating presidency of the European Union on January 1
Am I reading this aright, he says, scratching the dust from his sleep-ridden eyes. Aren’t the constitution, enlargement and the budget three themes which are absolutely guaranteed not to inspire enthusiasm just at the moment (unfortunately)?
As usual the FT takes me back to the hard world of reality:
Austria intends to make the fight against fraud in value added tax a cornerstone of its European Union presidency, in an effort to end billions of euros of losses in annual revenues at a time of stretched national budgets.
Ah, yes, this sounds much more like it.
Two bits of news this week appear to be unrelated. The interesting question is whether appearances are once more deceptive.
Firstly the US Treasury note situation:
At 6:23 am ET. the 10-year note yielded 4.393 percent while the two-year note yielded 4.396 percent.
Yields on 10-year US Treasuries briefly fell below those on two-year notes on Tuesday for the first time in five years – a rare event that in the past has often heralded a recession.
Now there is – more or less – a consensus of opinion that this is not a harbinger of imminent recession this time round. So what then does it mean? Aha, would that we knew! There has however been another curve inversion was officially announced during the last week. According to this AFP report:
“
Japan’s population fell for the first time in 2005, the government said, calling it a “turning point” that will force the world’s second largest economy to adapt to a rapidly aging society….Deaths are likely to outnumber births by about 10,000 this year, the first decline since 1899 when Japan began compiling the data, health ministry figures showed
.”
The data suggest that Japan’s population may actually have been falling since October 2004.So where might the connection be? Well, back in April the soon-to-be Fed Chairman Ben Bernanke made his now notorious Global Savings Glut speech. In that speech he said the following:
one well-understood source of the saving glut is the strong saving motive of rich countries with aging populations, which must make provision for an impending sharp increase in the number of retirees relative to the number of workers. With slowly growing or declining workforces, as well as high capital-labor ratios, many advanced economies outside the United States also face an apparent dearth of domestic investment opportunities. As a consequence of high desired saving and the low prospective returns to domestic investment, the mature industrial economies as a group seek to run current account surpluses and thus to lend abroad
So he was arguing that ageing populations tend to increase the savings motive and produce an investment dearth. This flow of savings looking for investment tends to nudge down global interest rates. Perhaps the best discussion I have seen anywhere of the inversion phenomenon is this one from the Morgan Stanley GEF team. Clearly this is a complex problem, and they themselves have no consensus, but I did note this point from the Japan-based Robert Feldman:
“
In how many of the eight inversions over the last 40 years were international markets as closely intertwined as they are today? My point is that, as long as Bank of Japan still has huge quantitative easing in place and the yen carry trade is alive and well, part of the yield curve flattening in the US will be due to international factors and doesn’t necessarily signal a recession
.”
Here there are two points, the increasing efficiency and integration of global capital markets, and the special situation in countries like Japan. So to return to where I started, are the two inversions related. My answer would be a qualified yes. There is some relation. The hard part is to determine the nature and extent of the relation.
China’s Huawei Technologies, one of the world’s leading networking and telecommunications equipment suppliers (and big Cisco rival), has just announced that it has signed a contract with British Telecom for the deployment of its multi-service access network (MSAN) and Transmission equipment for the BT 21CN network. This seems to be an important step forward for Huawei.
The contract is signed today after going through a two year rigorous procurement and authentication process. This is one of the single largest procurement programs undertaken in the communications industry, to underpin BT’s GBP10 billion 21st Century Network programme over the next five years. This rigorous authentication process was used to assess Huawei’s capabilities, which included the quality of Huawei’s products and solutions, direction of Huawei’s corporate development strategy, management system, quality control system, project management capability and corporate social responsibility.
Huawei believes that the 21CN project and BT’s investment in Huawei’s innovation will spearhead the development of more new products and services for the British telecommunications industry and is of strategic importance to both UK businesses and economy. This will not only generate more new job opportunities within Huawei UK but also for our local service partners.
An intereresting piece in the FT today about 3g standards and China. Basically there are three competing technologies: the European-backed WCDMA and US-supported CDMA-2000 standards, and the Chinese TD-SCDMA technology. There is a wikipedia entry on TD-SCDMA. Basically the Chinese system doesn’t imply the payment of license and patent fees (what a surprise) and it offers an asymmetrical data rate, i.e. it offers different speeds for downlink and uplink. The interesting isssue is, I suppose, after all the talk about China soon being the number one market in this, and the number one market in that, to ask the question just how much “upstream standards clout” will all this scale advantage eventually imply. Normally, third world economies would be expected to conform to first world standards eventually, but will the Chinese case be different?