And no, it isn’t gout, though plenty of port and fine stilton are to be recommended in any event.

No, the ailment here is an economic one. The EU Commission has just been lenient with Portugal: she has three years, not two, to put the deficit straight.

It has become conventional to distinguish between two groups of countries within the eurozone. On the one hand there are the older, relatively richer countries, who tend of late to have been suffering from ‘sub par’ growth. On the other hand we have the more recent, and relatively poorer, members like Spain and Ireland, where growth (and inflation) have been notably stronger.

In a letter to the Financial Times published last week, Michael Woolfolk of the Bank of New York makes a curious contrast:

It may end up that signing on to the euro currency will require the move to a market-based economy. This will certainly not be easy for welfare-based economies, and it may not ultimately be possible politically.

(See EuroPolyphony for the link and more info on the letter).

Now this paragraph has me scratching my head: what exactly is the difference between a market-based and a welfare-based economy?

There is a consensus view emerging that the economic impact of last Thursday’s terrorist attack will be minimal. I beg to disagree: it *may* not be. The reasoning behind this is economic not WoT/political. The apparent stylised fact we are being offered is that “a look at previous terrorist attacks… suggests that any impact on the economy tends to be small and short-lived”. We are dealing with a class of incidents basically containing two prior members: New York, and Madrid. Now circumstances alter cases. No one will deny that these attacks constitute a *potential* shock to the economic system. The stock market impact is not the important one (this may well be described as ‘bounce’), the really important issue is consumer confidence. Now the US was in September 2001 bottoming out of a recession (the NBER officially declared the recession over in November 2001). Spain was in the middle of an ongoing housing driven boom of some magnitude, and this had sufficient momentum not to be driven off course. But the UK is on the edge of a possible precipice, one good shove can push it over, the risks here are much higher.

The starting point for a consideration of the issues raised would be Paul Krugman’s 2001 article: The Fear Economy. Let me be clear, I am not saying that anything is, or is not going to happen. I am saying that the risks of an economic consequence this time are greater. A lot depends on how quickly the culprits are caught, and how convincingly the ‘forces of order’ can persuade people that the situation is under control.