Turkey recommended for EU accession talks

The European Commission has recommended that accession talks for Turkey should begin, but hasn’t laid out any dates for the process:

Commission officials are reporting on the progress Turkey has already made, along with Bulgaria and Romania.

The final decision on Turkey rests with the leaders of all 25 EU member states in December – with accession years off.

The Commission’s recommendation is a milestone in an increasingly impassioned debate.

The decision was reached by a “large consensus” among commissioners, one EU official said, but no vote was taken.

There was also no recommended date to start negotiations with Turkey.

More from The Scotsman/PA, EU Business, Reuters and EU Observer.

Update: The full text of Romano Prodi’s speech can be found here and I’ve copied it below, so you can click on the ‘continue reading’ link to see it as the English HTML link on the site doesn’t seem to be working (pdf and doc links are).
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Housing Review

My out-of-consensus speculation that the Bank of England’s round of interest rate rises may be pretty much done looks sounder by the day. There may be one more rate increase, but it wouldn’t surprise me at all if they were pretty much over with it, and even if the next move (the end of this year?) wasn’t downwards. The reason? Growing evidence that the UK housing boom is bottoming out, and with this, UK consumption starting to take a hit.

U.K. mortgage lending growth probably slowed in August and consumer confidence may have weakened in September, suggesting economic growth peaked in the second quarter amid rising interest rates, surveys of economists showed……

House prices fell 0.6 percent in August from July, the first drop since August 2002, according to Edinburgh-based HBOS Plc, the U.K.’s largest mortgage lender. It was the biggest decline since December 2000.

Bank of England Governor Mervyn King and his rate-setting committee said they may have underestimated the effect of any decline in home values on consumer spending, according to minutes of the Bank of England’s Sept. 8-9 meeting.

“We’ve just come through a very slow holiday period and there is a general agreement that September is no improvement,” said Richard Hair, president of the National Association of Estate Agents. “We’re getting geared up for what may be a difficult market in the autumn.”
Source: Bloomberg

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It’s Deficit Time Again

There’s a fair amount of talk again this week about the various government deficits and what to do with them. Earlier in the week the FT had a piece about the current state of play with the US deficit whilst the Economist is busy musing one more time over the ongoing saga of the EU growth and stability pact.

These two situations appear, on the surface, to be somewhat similar, but in reality it may be more interesting to consider how they differ.
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ECB: German Plea Falls On Deaf Ears

When this is all over, and we come to look back at the when and the where, maybe we will remember today’s decision as just one more of those missed opportunities. Certainly not much notice seems to have been taken of Gerard Schroeders request for a helping hand on the interest rate front. Is there any significance in the fact that on the day the ECB decided to stand firm, German unemployment turned upward again to 10.3%, while it was also revealed that German factory orders fell unexpectedly by 2% in January: just for good measure I suppose.
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Italy’s No-Growth Update

OK I’m on a roll, so I’m going to stick my neck out. This slide in the Italian confidence index apparently surprised the ‘experts’. Well it shouldn’t have surprised Fistful readers who have been following what I have been saying. Clearly these confidence indexes are not the last word in sliced bread. But they do mean something, and Germany’s Ifo index just turned in another bad reading too.

Ever since Parmalat, I have been asking one simple question: will Italy ever grow again? Of course, the simple answer is possibly it will: never say never. But will it ever get back to vigorous growth: this I doubt. I am even half asking myself if we will see positive numbers in more than say 50% of the forthcoming quaters. Remember, if my demographic thesis has any predictive power it should be precisely here in Italy that the Titanic starts to take in water. Parmalat was simply the iceberg. Of course my thesis could always be wrong. Any takers?
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Book Review: “European Integration 1950-2003: Superstate or New Market Economy?”

Once upon a time, there was a large, intellectually hegemonic, somewhat totalising ideology rooted in a heterodox school of economics. Its advocates proposed to make massive changes to the structure of society and claimed that only such a revolutionary realignment could alleviate the contradictions and failures of the existing order and save the world from stagnation and misery. They claimed that their programme would produce immediate results, and that the only reason it wasn’t immediately implemented was because entrenched interests were manipulating the public against them.

Ultimately, advocates of these principles did gain power in many places and were able to implement elements of their programme. Some came to power through revolutions of various kinds that granted them the near-dictatorial powers they needed to make the changes they believed necessary. Others were able to convince electorates and even elites that theirs was the way of the future. They turned public dissatisfaction to their advantage, especially during economic downturns when people were willing to turn to new solutions and elites feared that the masses would turn against them.

And, they had some arguable successes, but no unambiguous ones. In some places, particularly those where effectively unlimited power had shifted to them, they often maintained highly inequitable regimes which grew harder and harder to justify, faced ever growing public disaffection, and turned to more oppressive and manipulative means to sustain control. This undermined their movement, but despite the best efforts of their enemies was not quite able to kill it off.

In states where more democratic methods had been used, the need to compromise with established interests and to sustain public consent forced them to accept measures often contrary to their initial programme. Their ideological identity tended to shift over time as winning elections grew more important than ideological purity and as the drawbacks of real power became apparent. Actually being held responsible for results forced many members of this tradition to accept their enemies’ interests as at least partially legitimate, and compelled them to less radical legislative programmes.

In some of those nations, these radical parties became increasingly manipulative and difficult to distinguish from their former enemies. But, in a few places, the necessary dilution of their programme brought about an ideological synthesis that appeared successful, and this success in turn showed that the radical programmes they had once advocated were perhaps unnecessary. In the end, ideology had no real hold on them, and the models and methods that seemed to work became the political and economic programme that they were identified with. Their former allies who operated more dictatorial regimes were easily repudiated.

But others were unable to accept that option. They included dissidents who had been burned by the growing authoritarianism of their own failed revolutions, or who were simply unable to accept that their early ideological purity had become superfluous. They were isolated and powerless, only able to function in the states where their former allies had become moderates, leaving them without meaningful public support. They fumed at the world’s unwillingness to go the way they wanted, and increasingly recast the history of the world in terms of their own ideological predispositions. The past became, in their minds, an unending conflict between an ideologically pure vanguard and scheming established interests, a story of their courageous champions betrayed by back-sliding traitors. Ultimately, the world moved on and these radicals virtually disappeared outside of intellectually protected milieux like privately-funded think tanks and universities.

Of course, by the now the astute reader will have recognised that I am talking about the history of neoliberalism.
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Free Lunch!

What harm does running a European-style high-spending welfare state do to a country’s GDP? The answer, surprisingly, turns out to be “none at all”. Peter Lindert’s paper, “Why the Welfare State Looks Like A Free Lunch”, shows that a welfare state doesn’t depress GDP in the way that conventional economic analyses predict. Why not? Over to Lindert…
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Methinks We’re On The Slippery Slope

OK you may be in for a bout of solid over-posting. There seem to be some signs in the air that push may be about to come to shove. Tomorrow I will try and do something on financial architecture and the euro. Meantime this is a ‘light’ warm-up post. The efficient cause is today’s news from Portugal, which suggests that the supposed Harrod-Balassa-Samuelson free-lunch-honeymoon (which has to count as one of the worst pieces of ‘justifying what there is simply because it is’ pieces of quackery where there should have been solid science known to recent history) may be about to come to an end. One of those darned ‘catch up’ economies may have just caught up so hard that’s it’s come to a dead halt. The Bank of Portugal has predicted growth of only 0.75% this year, and even that only if there is the anticipated growth in global demand (which I doubt extremely). Those who have read my Parmalat post will have seen that I am already begining to speculate about whether we are about to see the end of growth in the Italian economy, well just remember Portugal is lined up nicely in the queue to see where lunch is going to be served.
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Parmalat: Just Another Scandal?

On a day which sees the Parmalat heat being turned up to full blast, with a looming ‘cara a cara’ between former Chief Financial Officer Fausto Tonna and Parmalat chief legal counsel Gian Paolo Zini, and while in the United States a class action law firm has named investment bank Citigroup Inc and auditing firm Deloitte & Touche Tohmatsu among defendants in a lawsuit against the food group – a lawsuit incidentally filed on behalf of a U.S. pension fund (oh when, oh when will we get class action lawsuits here in Europe) – on such a day it might well be worth asking ourselves one simple question: is this just another one-off scandal?
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The Dutch Auction

Following points made by both Frans and Elliott in the comments sections, the Netherlands may well in fact breach the 3% growth and stability pact limit next year. I bet Zalm is blogging away more furiously than ever. But who will be the object of his wrath this time?
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