Adriatic Surprise

The International Monetary Fund has released a staff analysis of economic competitiveness in the southern Euro area — France, Greece, Italy, Portugal, and Spain.  It’s a fairly technical document – written as a series of papers with a brief overview chapter at the start, which probably means that many of its messages will be missed.  But the bottom line is that all five countries are found to have done badly in most areas of competitiveness, meaning loss of export shares in global markets, lack of specialization in rapidly growing products and markets, and only limited success in services.  

Whether you’re surprised will depend on what you expected going in but for me the main news was the relative success of Greece, which rarely merits a mention as an EU tiger.   Greece seems to have 3 factors in its favour: a trade orientation towards its northern neighbours (who have been growing while still low profile in terms of competitor countries), tourism, and transport — all that Greek-owned shipping has been in heavy use around the world.   The world may be ever more mobile, but history and location still matter.

Macedonia: more stupid

I’d like to come up with more thoughtful and respectful titles for these posts. But, well.

Stupid #1: In the wake of the NATO summit, and Greece’s veto of Macedonian membership, there’s now a boycott campaign in Macedonia against Greek goods and Greek-owned businesses. Since Greece is one of Macedonia’s largest investors and trading partners, and since Greek tourism is particularly vital to the economically weak southern part of the country, this is pure stupidity; it will cost Macedonia, one of the poorest countries in Europe, millions of euros while accomplishing exactly nothing but to further damage relations between the two countries.

N.B., this idiocy is an entirely private initiative — Macedonian citizens and NGOs are doing this on their own, without the government’s encouragement. On the other hand, the government isn’t discouraging anyone, either.

About the only good thing to say about this is that it probably won’t last long.

Stupid #2: last week, Greece’s Ministry of Transport prohibited Macedonian Airlines from landing in Greece because… wait for it… its name is “Macedonian Airlines”.

Greece has kept MA out for several years already, but this is the first time they’ve explicitly said it’s because of the name.

I’m pretty sure this is illegal under international aviation agreements, but I welcome comments from those better informed. (Alex?)

On the plus side, Greece’s Foreign Minister has said that Greece could “eventually” abolish visas for Macedonians. So, two steps back, one forward.

Macedonia: the stupid, it burns

The latest news from Macedonia: a local art gallery did a billboard showing the Greek flag with a swastika in place of the cross.

The Greeks have, of course, gone completely apeshit. Front page news, demonstrations, formal diplomatic protest.

This is one of those perfect Balkan storms where you have obnoxious and stupid behavior that leads to even more obnoxious and stupid behavior. The billboards are both obnoxious and stupid; they’re nothing but a finger in the eye to Athens, and deliberately done a few days before the NATO summit where Macedonia’s membership is on the table. The owner of the art gallery apparently is from Greek Macedonia, where the Greeks have been treating the Macedonians like dirt since they took over in 1913, but that’s neither here nor there; it’s just a really fucking stupid thing to do.

That said, the Greek response is even dumber: demands that Macedonia take the billboards down and apologize. (The billboards are paid for by a private organization, so the government can’t do much about them and isn’t responsible for them.) This accompanied by a descent into narcissistic, self-righteous outrage that’s… well, I wanted to say very Balkan, but in this case there’s something particularly Greek about it.

Anyway. This pretty much eliminates Macedonia’s chance of joining NATO this year. Which by itself is no big deal — the Greeks were probably going to veto them anyhow — but Athens has been given a wonderful gift. Now instead of being disgusted by Greek stupidity and stubbornness, the rest of NATO will be disgusted by both parties. So, a net loss for Macedonia.

There are already plenty of the usual Balkan conspiracy theories floating around, but you know? Sometimes stupidity is all.

I should probably add here that I lived in the Balkans for five years and hope to go back and live there some more. But: Jesus Christ, people. Is it something in the water?

Transparency International Strikes Again

So the new Transparency International Corruption Perceptions Index came out last week. If you are a development geek — cough, cough — this is like Beaujolais Nouveau Day.

Not that there are any /huge/ surprises. The top ten slots are dominated by the same countries, year after year — Finland, the Netherlands, Singapore. European readers can be cheered by the fact that European countries occupy 13 of the top 20 slots.

The CPI is, of course, a perceptions survey. They poll a lot of investors and NGOs and whatnot and ask what they think. There are some obvious issues with this methodology. Other hand, they try to be rigorous about it, and keep the tests constant from country to country and from year to year. If you’re trying to measure corruption — an inherently difficult task — this is probably about the best broad-guage metric we have.

Meanwhile, a few geeky comments.
Continue reading

The Czech Growth Engine?

Interesting news from the Czech Republic in this week:

The Czech republic has joined Slovenia among new member states with higher levels of wealth per capita than old member Portugal, according to European Commission statistics.

The central European country enjoyed gross income per capita of 73 percent of the EU 25 average last year compared to 71 percent in Portugal, according to the latest estimate by the commission’s statistical wing, Eurostat….

The results have left Slovenia and the Czech republic chasing Greece, on 83 percent, as the next old member state to overtake, with Slovenia set to draw level with Greece by 2007 and the Czech republic to narrow the gap further in the next two years, the study predicts.

This now raises some interesting questions. How will Slovenia’s future growth compare with that of the Czech Republic (remember Slovenia is about to join the eurozone on 1 January 2007 while the Czech Republic is in no particular hurry to join)? What is the relation between Portugal’s low-growth and eurozonemembership? Will the Czech Republic now overtake Greece?

We can also, I think, see more clearly some appropriate comparisons for testing the ‘euro has been a spectacular success’ hypothesis: we can look at the UK vs France, Finland vs Sweden and Denmark, and we can look at the Czech Republic vs Portugal.

When Chams Attack

Greece and Albania are having a small diplomatic tiff. If reading about that sort of thing interests you, read on.

So: two weeks ago, Greek President Karolos Papoulias’ was scheduled to meet with Albanian President Alfred Moisiu, in the southern Albanian town of Sarande. I’m pretty sure this was the first meeting of Greek and Albanian heads of state in a long time. So, fairly big deal by regional standards.

But it didn’t happen, because of the Chams. About 200 of them. They showed up outside the hotel in Saranda where President Papoulias was staying, waved signs, shouted, and generally made a nuisance of themselves.

President Papoulias didn’t take this at all well. He cancelled the meeting with President Moisiu and went back to Greece in a huff. A day or two later, Greece issued a demarche to Albania. (A demarche is a formal diplomatic note from one country to another. It’s about a 5 on the diplomatic hissy-fit scale, higher than merely expressing disapproval but lower than recalling your ambassador.) The demarche expressed regret that Albania did not “take the necessary precautions so that the meeting between the Greek and Albanian Presidents could take place without hindrance.” Worse yet, they did not “take the necessary measures to discourage certain familiar extremist elements which, in their effort to obstruct the normal development of bilateral relations, continue to promote unacceptable and non-existent issues, at the very moment when Albania is attempting to proceed with steps fulfilling its European ambitions”.

Got that? Okay, now comes an obvious question.

What, exactly, are Chams?
Continue reading

And speaking of Eurovision

Just a quick update on Croatia’s EU candidacy.

Eight countries have signed a letter to British PM Tony Blair supporting Croatia’s membership. The letter was presented to Blair — who currently holds the rotating EU Presidency, and will until January 1 — in the recent confence at Newport, in Wales.

The signing countries were Austria, Greece, Italy, Latvia, Luxembourg, Malta, Slovakia, and Slovenia.
Continue reading

Sovereign Bond Yields

The FT this morning discusses the state of the bond markets for the ‘weaker’ eurozone economies: Italy, Greece, Portugal. As expected interest differentials between government debt in these countries and German debt is widening, but only slowly. Italy is being evaluated at present as the weakest member. As the FT points out the temperature of the water will be tested again this week when Portugal issue a new batch of debt:

The expected launch next week of a new 10-year benchmark bond by Portugal, whose credit rating was recently downgraded by Standard & Poor?s, is set to test investors? appetite for debt issued by weaker eurozone members.

Portugal, which on Friday appointed bankers to manage the syndicated bond sale, will be competing for demand against France, which enjoys the highest credit rating available and plans to auction a new 10-year bond of its own next week.

Bond spreads of Portugal, Italy and Greece – the three weakest countries in the eurozone – widened marginally on the back of this. On the week, the spreads of bonds of Portugal, Italy and Greece, widened by just 1.3bp, 0.5bp, and 0.5bp, to stand at 8.3bp, 21.5bp, and 24.5bp, respectively against Bunds.

But they have been widening for several months. Spreads of Italian 10-year paper, for instance, have doubled from 11bp to 21.5bp against the Bund in the last four months.

China Trade With EU

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?
Continue reading