Lafontaine Muddies The Waters

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Any opinions from Germany on this?

“Chancellor Gerhard Schr?der’s re-election hopes were dealt a fresh blow on Tuesday after a charismatic political rival said he would join leftwing groupings to run against the German leader.

Oskar Lafontaine, former chairman of Mr Schr?der’s Social Democratic party, said he would give up his party membership and enter the electoral battle if other SPD dissidents and neo-communists ran on a joint ticket.”

Is this a real issue, or a media event?

And this is also being floated:

Should the umbrella group win in sufficient numbers, it could rob both centre-right and centre-left of an outright majority, forcing the opposition Christian Democratic Union into a grand coalition with the SPD.

The Mysteries of Growth: France & Germany

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The latest data on French household spending show that it rose rather faster than expected in April. This suggests that consumer spending is still supporting economic growth in sharp contrast with the pattern in Germany. In Germany the domestic economy actually *contracted* in the first quarter. True the German economy grew, but this was due exclusively to the export sector. So while the German domestic economy has been struggling France has been one of the eurozone’s best performing economies, with consumer spending and a booming housing market supporting growth. The French consumer is, it seems, considerably more robust than the German one.

So the big question is why the difference? They are both economies which according to the criteria of the Lisbon agenda are badly in need of reform. My own view, almost inevitably, is that this might well have something to do with the differing demographies of the two countries. Fertility is much higher in France – at nearly replacement rate – and over the years France has had a lot more long term immigration. Surely other factors are important: but which ones are they? Any constructive suggestions anyone?

Putin Ups the Anti On Latvia

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Tensions between Russia and Latvia have been escalating since escalated during the Moscow to mark the 60th anniversary of the end of the war. In particular the two countries have an outstanding territorial dispute. The war of words is now on the rise with Putin today resorting to what Mosnews calls a Soviet-era jibe: warning the Latvians that if they press any territorial demands they will get not land but ?a dead donkey?s ears.? Alex at All About Latvia has some background.

Spain and the Upcoming Budget Reform

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As efforts continue to resolve the deadlock over the forthcoming reform of the EU budget, this article from reuters give some background on what the impact on Spain might be.

“Spain is set to be the big loser in tough negotiations on the EU’s 2007-2013 budget as the bloc’s paymasters led by cash-strapped Germany seek to limit their contributions and divert scarce resources to poorer new members in eastern Europe. Madrid has received a net 93 billion euros in EU funds since joining the EU in 1986, a cash injection that Spanish officials say surpasses U.S. aid to other European countries received under the Marshall Plan after World War Two”.

OECD Recommends Reducing Eurozone Interest Rates

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The Federal Reserve should continue to raise U.S. interest rates but the European Central Bank should ease euro zone monetary policy, the OECD says in its semi-annual Economic Outlook out today. Euro zone growth forecasts of 1.2 % for 2005 and 2.0% for 2006 are based on the assumption that the ECB, which has maintained its core refinancing rate at 2.0% since June 2003, will cut rates by half a percentage point in mid-2005.

?With domestic demand sluggish, resilience feeble and possible upward pressures on the euro looming ahead, the balance of risks on growth and inflation is clearly tilted to the downside, calling for an early easing of monetary policy?.

A Question of Credibility

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Here’s the link to the Eurostat report on Italy’s deficit revisions. The language is very formal, but between the lines it isn’t hard to see the frustration with the kind of data they’ve been getting.

It is recalled that Eurostat was not in a position to validate the figures for Italy in the context of the March 2005 EDP notification. Apart from the three issues mentioned above, this was mainly due to the recording of transactions with the EU budget, to inconsistencies between data on cash and accrual bases and to statistical discrepancies in government accounts. It is expected that Eurostat will shortly receive from the Italian authorities the information requested on these issues and will then be able to clarify these issues in co-operation with ISTAT. Depending on the outcome of the examination, this could lead to a further upward revision in the government deficit for the period between 2001 and 2004.

Almunia’s Test Case

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Economics Commisioner Joaquim Almunia is reportedly rolling his sleeves up. He is apparently preparing to use Italy’s continuing excess deficit as a test case, to show the way the new SGP will be applied. Forgive me if I am a little skeptical, but then again a French no on Sunday may leave him with little alternative.

“Revisions to Italian data by Eurostat, the European Commission’s statistical agency, showed the country breaching the 3 per cent limit on budget deficits (in 2003 and 2004 Edward). The changes will be used by Joaquin Almunia, EU monetary affairs commissioner, to underpin a recommendation that action be taken against Italy under the stability and pact“.

The Country Where I Quite Want to Be

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The Washington Post has sent a correspondent and a photographer to Finland for three weeks to “figure the place out.”

“Finland just might be the world’s most interesting country that Americans know least about. It has the best school system in the world, some of the most liberated women (the president is female), more cell phones per capita than anyone else, one of the world’s best high-tech companies (Nokia), remarkable information technology of many kinds, …”

Their report is bloglike and relatively interesting. The photos are great. The whole enterprise is a little odd, but hey, why not Finland?

All together Finnophiles!