The OECD has a new country report out on France:
“France’s rising government debt threatens the sustainability of public finances in the eurozone’s second biggest economy, the Organisation for Economic Co-operation and Development has warned in its latest country report.
The Paris-based OECD said that a lack of control over public spending could leave France unprepared to deal with the financial consequences of an ageing society.”
I rest my case.
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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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…. what you can usefully put-off till tomorrow. There is still a lot of confusion surrounding what has, and what hasn’t been decided in Brussels. On the Constitution Treaty it seems there will now be an open-ended ratification period. What this will mean in practice is hard to see. The answer you give to this question seems to depend on whether or not you think that the French might change their minds after 2007. I wouldn’t be very optimistic on this front. Amongst economists the winds of globalisation are now reaching gale force, but on the political front, amongst voters, protectionism (both in the EU and the USA) is clearly gaining ground. Since I think this latter issue is every bit as important as the remoteness of the politicians when it comes to how people vote, and since I think the calls for protectionism may grow louder, I don’t anticipate that 2 years from now the general climate will be any more favourable to a ‘Treaty-like’ project, in fact, in all probability, quite the contrary will be the case. Globalisation will not be ‘rolled back’, it has already gone beyond the point of that being a viable possibility, but the process off its ‘ratification’, or if you like extension, may well take a “time out”.
The EU is to ?pause for reflection? for up to two years in a bid to resolve Europe?s constitution crisis. Europe?s leaders will next revisit the issue in Spring 2006 as the EU?s constitution deadline of November next year gets kicked into the long grass. Luxembourg?s Prime Minister and EU presidency holder Jean-Claude Juncker hinted that a new constitution deadline could be over two years away. ?After the ?non? and the ?nee?? the November 1 date? is no longer tenable. Those that haven?t ratified won?t be able to do anything until mid-2007,? he said late on Thursday night.
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.
It’s a bit too early to draw any hard and fast conclusions about this weeks summit, but this early snippet of news doesn’t look too promising:
“European leaders plunged into a full-blown crisis at a summit, with a battle raging over long-term EU financing and their lofty plans for an EU constitution nearly in tatters………..French President Jacques Chirac called for an emergency meeting to extricate the bloc from the mess created by deep splits over the bloc’s budget and by a growing popular revolt against the proposed EU treaty….
Leaders had hoped a deal on the 2007-2013 EU budget would let them show a united front after French and Dutch voters delivered stinging rejections of their constitition, meant to lay the ground rules for an enlarged 25-nation alliance.
Instead, the summit was overwhelmed by an embarassing squabble over money, with British Prime Minister Tony Blair refusing demands by the other 24 EU nations, led by France, that he surrender an annual budget rebate.
Italy posted a trade deficit with the rest of the world of 1.354 billion euros in April, widening sharply from a deficit of 155 million euros in the same month of 2004, national statistics office ISTAT said on Thursday. The deficit also increased from March, when it stood at 845 million euros.
Trade with European Union countries alone showed an April deficit of 368 million euros, compared with a 109 million euro deficit in April last year.
A 5.854 billion euro cumulative trade deficit with the rest of the world in the first four months of this year was the largest Jan-April deficit since at least 1991.
Italian imports from the rest of the world rose 6.5 percent year-on-year in April, far outstripping a 1.6 percent increase in exports. Imports from the EU in April were up 1.8 percent on the year, while exports were flat compared with the year before.
Source: Reuters via NTC Research
I don’t think I am being too alarmist if I say that something nasty is happening to the international competitiveness of Spain, Italy, Greece and Portugal.
Well I’ve been reading about the Germans, the Italians, now apparently it is the turn of the French to feel naustalgic:
“Three out of five French people miss their old currency, replaced by the euro in 2002, a survey for Valeurs Actuelles magazine showed on Wednesday. In February 2002 that figure was just 39 percent.
While the rising tide of nostalgia seemed to chime with French voters’ rejection last month of theEuropean Union constitution, a breakdown showed longing for the franc was widespread even among those who support the EU project.”
I like that bit, “longing was widespread even among those who support the EU project”. This highlights the fact that it is perfectly consistent to feel pro EU and yet not want the common currency. Out of the wardrobe everyone.
Update: The Financial Times this morning also mentions the emergence of Philippe de Villiers, the leader of the nationalist Movement for France, as the champion of a referendum in France on continued use of the euro. According to the FT de Villiers, who is a leading anti-constitution campaigner, said a debate about Europe’s single currency was already under way in Germany, the Netherlands and Italy but had not properly started in France. ?Everybody notes today that the adoption of the euro was a technical success but its economic, political, and human toll is incontestable,?. Now much of the recent ‘ referendum euro’ talk comes from those who would predictably say what they are saying. They are normally not people with any special knowledge of the economics behind it, and I think no great significance should be attached, except the fact that these kind of comments are becoming commonplace, where they weren’t before. My guess is that debate about the euro will increase with time.
Far away from the hassle and turbulence of Turkey’s EU membership application is that other Turkey, the one that is growing and expanding, the economic Turkey. This time it’s cars:
“With a cluster of carmakers and part suppliers, the Turkish automotive sector has reached a critical mass and become an integral part of the global network of production bases. The country?s geographic location and demographics make it an ideal production (and distribution) centre for the mature European market as well as emerging markets in the Middle East and North Africa. Not surprisingly, the annual growth rate of automotive exports accelerated from 6.7% in the 1980s to 30.8% in the 1990s and to 42.6% in the last five years. Accordingly, Turkey now exports over US$10 billion worth of motor vehicles and parts to 170 countries, and there is no sign of a slowdown in the near future. The sector raised its international sales by 53.7% in 2004 and 43.9% in the first five months of this year, generating 20% of the country?s total export earnings. “
This news needs careful watching:
Spanish police arrested 16 suspected Islamist militants on Wednesday, including followers of Abu Musab al-Zarqawi and men preparing to become suicide bombers in Iraq, the Interior Ministry said. t was the second European swoop in two days against suspected backers of the Iraqi insurgency, following Germany’s arrest of three Iraqis on Tuesday.
Eleven of the suspects in Spain were followers of Zarqawi, al Qaeda’s leader in Iraq, the Interior Ministry said.
“Many of them expressed their will to become martyrs for Islam, demonstrating they are extremely radical and dangerous,” the ministry said in a statement.
Assuming that this information is well founded (that they are followers of Zarqawi , and they are potential suicide terrorists – we do in the end need a judge to confirm this) the situation is preoccupying. This article doesn’t have the story entirely straight, according to the TV news the people arrested are mainly logistical in the sense that they are fund-raisers and recruiters who send potential suicide bombers to Zarqawi in Iraq. In addition some of the people seem to have been part of the 11 March network.
This news will suit the propaganda angle of neither of the main political parties here in Spain (PP and PSOE). PP are still in denial over the importance of 11 March, and principally occupy themselves with trying to find an Eta connection, whilst the PSOE had placed some hope on the idea that a withdrawal of the troops from Iraq would get Spain out of the middle of something. For geographical and historic reasons this is likely to prove impossible.
“People are concerned. They would rather it was happening on an aircraft carrier stuck in the middle of the Atlantic than in Auchterarder”
Peter Everett, Chairman of the Community Council, Auchterarder, Scotland on the up-coming G8 meet.
“The rapid rise of China as a trading economy is unprecedented, but inevitable due to its size.”
Morgan Stanley Economist Andy Xie.