Tag Archives: countries

Something Worries Me About Peter Bofinger

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Really I realise I have been remiss in another important sense. I have long assumed that in fact the decision to reduce deficits was taken due to the coming fiscal pressure from ageing. This certainly was the background to the discussion. However now I look at the details of the SPG this area is not mentioned (as far as I can see) and the other – the free rider and associated – is the principal consideration.

So those who criticize the bureaucratic and infexible nature of the ECB are in the right to this extent. Of course the underlying demographics *should* be part of the pact, but that is another story.

I find myself in a tricky situation, since I am deeply sceptical that the euro can work, and now after the French vote even more so, but since it has been set in motion, the best thing is obviously to try and make it work (even while doubting). So I am thinking about all this. Obviously I should try and write a longer post making this clearer.

The SGP was adopted at the Amsterdam Council 1997. A history of the implementation of the pact, and a summary of the debate over the new pact can be found here. The Stability and Growth Pact was designed as a framework to prevent inflationary processes at the national level. For this purpose it obliges national governments to follow the simple rule of a balanced budget or a slight surplus.

Now if we go back to the origins of the pact, to the communication of the European Commission on 3 September 2004, you will find the following:

“As regards the debt criterion, the revised Stability and Growth Pact could clarify the basis for assessing the “satisfactory pace” of debt reduction provided for in Article 104(2)(b) of the Treaty. In defining this “satisfactory pace”, account should be taken of the need to bring debt levels back down to prudent levels before demographic ageing has an impact on economic and social developments in Member States. Member States’ initial debt levels and their potential growth levels should also be considered. Annual assessments could be made relative to this reference pace of reduction, taking into account country-specific growth conditions.”

Now curiously I have found nothing in Bofingers argument which seems even to vaguely recognise this background.

A good starting point for this topic would be the conference “Economic and Budgetary Implications of Global Ageing held by the Commission in March 2003.

The European Council in Stockholm of March 2001
agreed that ?the Council should regularly review the
long-term sustainability of public finances, including the
expected strains caused by the demographic changes
ahead. This should be done both under the guidelines
(BEPGs) and in the context of the stability and
convergence programmes.?

This document on the history of EU thinking on ageing and sustainability is incredible.
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The Low-Fertility Trap

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I suppose by-now every right thinking and reasonably well read adult knows what the ‘poverty-trap’ is, even if most of us aren’t too clear about what there is to do about it. Being stuck in one of these traps could be thought to be like being stuck in a (not necessarily very deep) well with a slimy surround wall. The more you struggle to get out, the harder it gets: your strength disippates, and the walls get to be even more slippery. This could also be called a negative feedback loop.

Well now there is the suggestion that something similar may exist in the world of fertility. As Wolfgang Lutz suggests in this power point presentation, the critical level may be 1.5. No society which has fallen below this level has -to date – returned above it. (Many thanks here to commenter CapTvK who sent me the link).
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Two on Turkey

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With Turkish accession one of the most important issues facing the European Union, people interested in the question could do much worse than read these two recent, and reasonably short, books that focus on the country: Crescent and Star, by Stephen Kinzer, and The Turks Today, by Andrew Mango. Both illustrate and explain contemporary Turkey, and both have accession as a theme throughout their books.
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More Theories

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Very hard to interpret the information we are receiving right now. Much of it may well be aimed at the terrorists themselves so it is also perhaps better not to dig too deeply.

There are, however, a number of rival (but possibly) compatible theories. One of these, and it is the one I am following most closely (possibly for obvious reasons) is that of the Spanish connection. Now following this along the road a little (and just in a kind of ‘what if’ sense) it may not be entirely without relevance that raids were carried out in Italy on Saturday. (The FT today also also has a piece on the Italian raids. What stands out is the ‘cover’ provided by mass illegal immigration for such groups. I am in favour of increasing economic migration to meet demographic needs, but this process needs to be regulated and orderly, here we can see one more reason why). It is just me speculating, but the rapidity of the raids in Italy may relate more to the fact that there are ties between the Spain-based Jihadists and the Italian-based ones than to the immediate threat of an attack in Italy. This article contains the following information sourced from the Italian newspaper Corriere della Serra:

“In 2003, the Italian Police and the carabinieri from the Special Operations Unit uncovered a link between the alleged Italian cell and its extremist associates in a number of European countries, primarily Germany, Spain, and the Netherlands. The Milan probe revealed that “young North Africans were ?trawled for’ in the European mosques, given money, and supplied with a visa?” to travel to Iraq to conduct suicide operations.”

This connection is loose, but is one possible route. Those who feel there might be an Iraq connection (and the lack of any explicit information about the explosives might point to this: this origin would be politically sensitive) would do well to note that the Italian net appears to have close links with Ansar Al-Islam which is based in the Kurdish zone, and was once host to none other than Abu Musab Al-Zarqawi. As I say, I wouldn’t even call this a conjecture, just some isolated pieces of information which are worth keeping track on, irrespective of whether or not the people mentioned were implicated last Thursday.

Finally, the NYT highlights the way in which the kind of terror we are seeing is in fact bringing Europe closer together:
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Fears

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A quote from a Johann Hari post, via Digby:

But another fight began yesterday: to defend our civil liberties ? and especially those of the decent, democratic Muslim majority ? in an age of terror. I headed for the East London Mosque ? a few minutes? walk away from the bomb in Aldgate ? to watch afternoon prayers. Chairman Mohammed Bari said, ?Only yesterday, we celebrated getting the Olympics for our city and our country. But a terrible thing happened in our country this morning? Whoever has done this is a friend of no-one and certainly not a friend of Muslims. The whole world will be watching us now. We must give a message of peace.? Everybody in attendance agreed; many headed off to the Royal London Hospital to give blood. But they were afraid the message would not get out: several people were expecting attacks on the mosque tonight.

From the media, it seems to representative of British muslim reactions in general. And quite understandably so.

There ar really several questions here: a) will there be harassment and violence now, in the wake of the attack, b) the long term negative impact n inter-ethic relations, b) will civil liberties be (further) curtailed.

As for b and c, based on the admirably non-hysterical response by the public so far, I’m cautiously optimistic. Cautiously. As for a, it only takes a few racist scumbags, doesn’t it? Regardless of how decent the general population may hypothetically be. But maybe it won’t get really horrifically bad, seeing as I haven’t seen any really serious incidents serious happened in the first night. Or did I miss them.

Guardian reports on the backlash:

At the Finsbury Park mosque in north London, worshippers said passersby had shouted abuse and rattled the entrance gates in the hours after yesterday’s bombings.

Within hours of the attacks police forces across the country were sent advice from the Association of Chief Police Officers on how to counter any backlash.

Forces are supposed to make contact with “vulnerable communities”, in this case Muslims, and react quickly and robustly to incidents of hate crime.

There are two fundamental aims, to keep Muslims safe, then to ensure there is the maximum chance that those with information about the planning of the attacks have the confidence and trust in the police to come forward.

Input from people who know what they’re talking about would be good.

(I’d also like to hear what the long term and short term reaction was after 3/11. It’s not necessarily hugely relevant, but interesting in itself.)

It’s perhaps a phrase that’s lost all meaning, or never had one, but I’d say if bigotry prevails, the terrorism will in some real sense have won.

The First Chink of Light

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There is a very interesting article in todays Financial Times. For the first time an executive board member of the ECB – Lucas Papademos – has spoken openly about the difficulties presented by having a single monetary policy for such a diverse set of economies. In fact these comments take on more significance in the light of the fact that Papademos is vice President of the ECB, and widely tipped to replace Otmar Issing as Chief Economist when Issing retires.
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Naive musings

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I have been trying to write something informative on the current budgetary crisis in the EU. After reading countless articles I have come to the conclusion that there is nothing worthwhile I could add to the discussion. Confusion reigns supreme in this little European?s head and economics have never been my forte – certainly not when mixed with politics. Just check out some of the comments made by readers of BBC News. Anyhow, I deleted everything I had written so far and decided to bring your attention to this (from New Europe):

Each year, more than a billon Euro worth of funds transferred by the European Union to its 25 member states are either misspent or lost, according to a European Parliament (EP) report cited by INEP last week. (?) Asked which countries are the most prone to fraud and irregularities, Buttice failed to give a clear-cut answer. But based on number of cases of fraud and irregularity reported by EU member states for 1999-2003, big EU countries such as Italy, Germany, Spain, France and the United Kingdom are the prominent ones.

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No Answers Only Questions

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One person who could rightly claim to know more about global ageing and its possible consequences than anyone else in the business is the German Director of the Manheim Research Institute for the Economics of Ageing Axel B?rsch-Supan. If there’s a conference being organised, he seems to be there. Actually his comments at both these meet-ups are well worth reading in and of themselves (here, and here).

In a sense B?rsch-Supan is almost uniquely qualified to express opinions on the topic since he has both devoted a large part of his professional career to studying the question, and he lives and works in a society which is already reeling under the impact. As he says:

“Today?s Germany has essentially the demographic structure that the United States will reach in a quarter of a century. The dependency ratio (the ratio of persons aged 65 and over to those aged from 20 to 59) is at 28 percent, and it will reach 75 percent in 2075, if we dare project that far. Almost one-fifth of the German population today are aged 65 and over. One quarter are aged 60 and over, which is relevant because the average retirement age in Germany is 59.5 years. Thus, in this sense the United States is not ?entering largely uncharted territory,? …. Rather, they can look to Europe?in particular to Germany and Italy?to see what will happen in the United States.”

I mention B?rsch-Supan because he serves as a good pretext for going over where we are to date with the issue. As he says himself. watching demography change is rather like watching a glacier melt, on a day-to-day basis it’s hard to see that anything is happening, but over time the impact is important.

One of his recent papers has the intriguing title: “Global Ageing: Issues, Answers, More Questions“. It is a good up-to-date review of the ‘state of the art’, and a quick examination of the points he makes probably serves as a good starting point, since I can’t help thinking, in the case of global ageing, it isn’t so much what we know that matters, it’s what we don’t know.

So here we go, a review of what we “know”, what we think we know, and what we don’t know:
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China Trade With EU

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I’m not very happy with the ‘US Trade Figures‘ post I put up last Friday. I think it’s a glorious mess. The key to the problem is that I tried to deal with two – interrelated but disinct – topics at once: the euro and China trade. So today lets ignore the euro (which has once more resumed the downwards drift, even as I write) and take a bit of a closer look at where we are – in trade terms – with China. (Btw: the planet has finally returned to its orbit, and Brad Setser has an analysis of the US trade data here).

The big item in this weekend’s news is, of course, the agreement reached with Beijing on textiles. The EU textile industry will now have three years to adapt, but since textile manufacturers don’t appear to have taken too much advantage of the ten previous years, it is hard to know whether this will serve any useful purpose. Doubly so, since it is not yet clear how the calculations will be made, and I have the distinct impression that much of the recent surge in imports will now, in effect, be consolidated.

Be that as it may, what about the broader issue?
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