Category Archives: A Few Euros More

All AFEM Blog Posts

To Whom It May Concern

Posted on by

The euro is now currently (11.38 CET) at $1.2045.

Update: Ah, now I’ve found the reason for todays move:

The euro fell to a nine-month low against the dollar after European Central Bank Chief Economist Otmar Issing spurred speculation the bank may reduce interest rates for the first time since 2003.

Asked in an interview with Germany’s Der Spiegel magazine whether investors’ expectations of a rate cut in coming months are justified, Issing said: “In the past, financial markets almost always anticipated ECB policy decisions correctly.”

“He is preparing investors for a rate cut and the market is responding to that by selling euros and buying dollars,” said Neil Jones, a director of foreign-exchange sales at BNP Paribas SA in London.

I hasten to add that I consider Otmar Issing to be perfectly authorised to steer the euro down in this way. This is a much more considered move than Jean-Claude Junker’s recent outburst. Basically I agree with it, I am just waiting to see whether Greenspan will in fact be able to continue raising US rates. If he does it once, I can’t see him continuing for long.

The Forint Is Not The Swiss Frank

Posted on by

Interesting to note, following our discussion of the state of play of the Hungarian economy, that Hungary’s finance minister is not a euro pessimist. Janos Veres said in an interview with the Financial Times that he did not foresee a wider crisis for the single currency and that Hungary had ‘no option’ but to continue aiming to join the eurozone in 2010:

“I do not think Hungary has any other playing field,” said Mr Veres. “The Hungarian forint is not the Swiss franc. It cannot be maintained independently for decades.”

But Mr Veres, whose left-liberal government faces elections next spring, rejected calls for deep spending cuts that many economists view as necessary to keep Hungary on track for joining the single currency.

Instead, he outlined a plan for moderate spending cuts and the introduction of a simplified tax system designed to increase revenues next year. “We will not do anything that represents a radical, structural change,” he said.

Obviously the attraction is those nice low interest rates, to help pay for all that extra debt. But seriously, with the economically healthier Czech Republic now questioning whether it will join the euro, isn’t there a danger of the eurozone becoming a club for those structurally incapable of walking alone. “Oh when you walk, through the storm, hold your head up high,……….”

World Class Model Services

Posted on by

“Ufff”, my partner said as she put to rest a bunch of plastic bags she had just managed to drag from the supermarket, “so many things to buy”. I was pealing the spuds at the kitchen sink at the time, preparing the lunch, but I still managed to lean over, give her a kiss, and remind her that not everything can be bought: as the Beatles used to say “money can’t buy you love”. Then I remembered this headline.

Cabins designed in the Netherlands, (made in China no-doubt), sex workers from Eastern Europe (some 40,000 of them apparently), (capital possibly kindly provided by hedge funds), and customers from Western Europe, the US and Japan. Well, comparative advantage triumphs again. I imagine the terms of the Bolkestein directive will not be applied.

Lithuania To Take Decision on Euro Referendum

Posted on by

The Lituanian parliament is to debate a motion which proposes holding a referendum on euro membership. Lithuania is scheduled to join the euro in 2007. The Prague Daily Monitor also has an article which draws attention to the growing ‘euro’ scepticism in the Czech republic.

“The Lithuanian parliament will vote on whether or not to hold a referendum on the introduction of the single currency to the country, according to news agency AFP.

The Lithuanian opposition Liberal Democrat party has gathered the necessary 36 signatures required for the parliament to vote on the matter. It has now to do so within a month, as under Lithuanian law, lawmakers have to vote within one month after a proposal is introduced, says the press agency. After the EU Constitution was rejected by France and the Netherlands, the euro has found itself at the centre of debates.”

Euro Debate Roundup

Posted on by

EurActiv is an extremely useful source of information and analysis (much better eg that EU Observer or Eupolitix, for example). Today they have an interesting survey of the recent debate about the efficacy of the euro. They also have a link to a recent report which seems interesting.

“The rejection of the Constitution by two of the EU’s founding members – France and the Netherlands – has raised concerns about the long-term future of European Monetary Union. But other comments have also led to some extra market volatility for the single currency. Arguably, French and Dutch voters did, in 48 hours, what the European Central Bank has been trying to do for six months – namely reduce the value of the euro.”

Bolivia Has A New President

Posted on by

His name is Eduardo Rodriguez Veltze, he has been a judge in the supreme court, and he appears, at this stage at least, as an interim, compromise candidate:

The action came after lawmakers gathered following a day of demonstrations and under a warning by the military of possible intervention if the spreading chaos isn’t quelled.

Congress rapidly accepted the resignation of President Carlos Mesa. Then both the Senate and House leaders rejected the job, automatically giving it to Supreme Court Justice Eduardo Rodriguez Veltze, who had been third in the line for the presidency.

“Bolivia deserves better days,” Rodriguez told lawmakers after swearing in. “I’m convinced that one of my tasks will be to begin an electoral process to renew and continue building a democratic system that is more just.”

Publius Pundit has another good Bolivian blogs roundup. In particular Mabb has a good on the spot account of the tension involved.

Interestingly enough Miguel at Ciao and Eduardo Barrio Flores are arguing that opposition leader Evo Morales should resign too, in order to reduce the dangers of this conflict exploding.

Surplus Bicycles

Posted on by

I don’t suppose that there is any connection with the recent Chinese appetite for purchasing cars, but apparently China and Vietnam are about to be accused of dumping their unwanted bicycles on Europe:

The European Union is expected to levy next month swingeing anti-dumping tariffs on bicycle imports from China and Vietnam in an attempt to put the brake on cheap imports. European manufacturers claim imports from Vietnam have risen from 150,000 five years ago to 1.5m in 2004, while China exported up to 2m bicycles to the the EU last year, despite a tariff of 30.6 per cent already in place.

T-shirts, pants, slippers, sandles and push-bikes, are these really strategically important industries for the EU?

Germany: Exports and Inflation Revised Down

Posted on by

According to NTCResearch:

Inflation in Germany rose less than previously thought in May, the Federal Statistics Office reported on Thursday. Germany’s harmonised index of consumer prices rose 0.2 percent month-on-month and 1.4 percent year on year, compared with initially reported rates of 0.3 percent and 1.5 percent, the Office said. Meanwhile, it was revealed today that Germany?s trade surplus narrowed in April as imports surged. After accounting for expected seasonal factors, the surplus declined from 14.7 billion euros to 12.6 billion. The smaller surplus reflected a 0.4 percent fall in exports and a 3.8 percent jump in imports, the data showed.

The downward drift in inflation needs careful monitoring. I’ve got a deflation alert call out on Germany remember. If Germany goes through the inflation wall, then the proverbial s*** really will hit the fan, since I can’t see the ECB doing non-conventional monetary policy. Come to think of it, maybe that’s what the meeting with Fels was all about.

Czech GDP Growing Nicely

Posted on by

According to data released today the Czech economy is still growing at a fair clip – by 4.4% year on year. Inflation is low at 1.3% (incredibly low, and his marks already an important difference with the Southern Europe countries). Unemployment is coming down too, although it is still pretty high at 9.4%. Exports to the rest of the EU are the main driving force, there is no mystery here. But *note*, Spain (eg) is consistently loosing competitiveness (due to the inflation differential) as the Czech republic pulls steadily up towards average EU per capita GDP. (Personal note: must follow this more closely).