Whoever said economists are people who don’t ever get anything right?
“Economic growth in Germany probably stagnated in the fourth quarter from the previous three months, the Federal Statistics office said. Still, the figure is “surrounded by uncertainty,†Norbert Raeth, an economist at the office, said in a press conference in Wiesbaden today.”
Well the wires are really alive this morning. Greece is receiving a visit from the IMF today. The meeting was scheduled well in advance, but that doesn’t mean the agenda was.
A team of International Monetary Fund officials arrive in Greece today to aid the government in its efforts to tame Europe’s biggest budget deficit. The mission, “within the context of the regular surveillance that the IMF provides to its membership,†will help the government with “pension reform, tax policy, tax administration and budget management,†a spokeswoman for the Washington-based lender said in an e-mailed statement yesterday.
Last Wednesday was Epiphany. In Spain it is also a public holiday – Los Reyes Magos – a festival which celebrates the visit of the three wise men who came from the East to find the infant Jesus. Coincidentally on the eve of Epiphany this year the Moncloa did receive a visit from three wise men, although it is not clear whether they came (as tradition would have it) bearing gifts, or whether they brought with them a list of demands from further East in Europe about what Spain’s government ought to be doing to stop its economy falling apart.
Unfortunately, due to a technical fault (some say the website was hacked) there to meet them as they entered the gateway and fired up the browsers on their xmas-new I-Phones was not the Spanish Prime Minister, but a strange interloper, otherwise known as Mr Bean. Continue reading
In November of last year, an economic research paper appeared on the website of the European Commission’s Economic and Financial Affairs section entitled The euro: It can’t happen, It’s a bad idea, It won’t last. US economists on the EMU, 1989-2002. It’s by Lars Jonung and Eoin Drea. There are 2 ways to read it.
Not necessarily, but he is causing one hell of a fuss today. The Stark in question here is, of course, ECB Executive Board member Juergen Stark, who stated in an interview with the Italian Newspaper Il Sole 24 Ore that, in his opionion, the European Union would not help bail out Greece if the need were to arise. Certainly the initial reports of his statements sent shock waves round the globe. The euro dropped as much as 0.5 percent to $1.4282 after the remarks before laterrecouping its losses, and the yield on Greece’s 10-year government bond rose 4 basis points to 5.672 percent. Essentially it is hardly surprising that this should be the case, since following what happened in Dubai, two questions seem to have been in the forefront of investors’ minds: i) who is going to pay for all that surplus second residence property that has been built all along Europe’s periphery (from Ireland, to the Baltics, to Hungary, to Bulgaria, to Greece, to Sovenia, to Spain, and to Portugal); and ii) are the core European states really going to prop up the peripheral ones (in extremis) or will they follow the example of Abu Dhabi, and pick and chose what they will support and what they won’t. More than anything else it is uncertainty on these two points which lies behind all the earth tremors currently shaking the monetary union. Continue reading
This is really a follow-up to the earlier piece I wrote on my own blog today and my last piece on Eurozone imbalances and internal devaluation. In particular, I want to point you towards two things. Continue reading
A bizarre story from Dublin. Short version: A Slovak agency was running a covert security check at an airport, which is presumably Bratislava. The test involves planting explosive materials in the bags of unsuspecting passengers. 8 packages in total. 7 found. One made it on to a plane to Dublin, and was brought home by the Slovak migrant who now lives there. Apparently this was 3 days ago. It’s not clear whether embarassment or delay in figuring out what had happened got us to today, when Irish police located the explosives and presumably various diplomatic notes are now being exchanged. The timing suggests that the test was run into response to the Detroit bomb. One wonders how much of this stuff goes on — perhaps the “someone must have put it there” excuse needs more credibility.
UPDATE: Initial word was sent by telex to the baggage handlers and not the Dublin airport authority. Who uses telex anymore?
“The EU should create a mechanism to help out countries which found themselves in Greece’s shoes. But one has to believe Greece will solve its problems by itself.” This is the view expressed by Marek Belka Director of the IMF’s European Officein an interview with Reuters last week. Asked whether the IMF would be ready to help bail out Greece, Belka said: “Yes, we are ready. But it depends on whether the EU or Greece will request it.”
In a separate interiew with IMF Survey Magazine (worth reading in its entirety) Belka cites Ireland and Spain as “good examples†of countries with “homemade imbalances†based primarily on “real estate and asset price bubblesâ€. As he points out, Ireland and Spain (unlike Greece) entered the financial crisis with “relatively low levels of public debtâ€, something which has enabled them “to react to the crisis by using the fiscal space that they had accumulated in good timesâ€. “Now of course, both countries have been forced to start fiscal consolidation”. And since, “In a monetary union, depreciating your economy out of the crisis is not an option…countries must rebuild their competitiveness through factory-price adjustment, which often means unfortunately, cutting wages.†He thus essentially reiterates the central point that Paul Krugman, I and numerous others have been making about this situation. Continue reading
This not unreasonable question was asked today by Ralph Atkins on the FT’s Money Supply Blog:
The economic news from Spain has turned more worrisome. Eurozone purchasing managers’ indices for manufacturing showed the region’s recovery humming along nicely (December’s final index reading at 51.6, up from 51.2 in November, was in line with the preliminary estimate released last month).
But Spain is heading in the opposite direction. Activity in its manufacturing sector continued to fall, and the pace of contraction in the fourth quarter was faster than in the third quarter, according to Markit, which produces the survey. Spain’s manufacturers are also reporting far steeper job losses than in other large eurozone economies, according to Chris Williamson, Markit’s chief economist.
Ralph certainly has a point here. Spain’s December PMI results are shocking, it posted 45.2 in December, just below the 45.3 posted in November, indicating a still substantial rate of contraction. Even more to the point this is the third month running where Spain has turned in the worst reading of any of the 26 countries included in JPMorgan’s Global Manufacturing Survey. Continue reading
Global manufacturing industry ended 2009 on what seems to be a fairly positive footing, with the JPMorgan Global Manufacturing PMI posting a comfortable 55.0 in December, up from 53.7 in November, significantly above that critical 50 growth/contraction dividing line. December’s was the highest reading for 44 months, and the headline Global PMI has now remained in expansion territory for each of the past six months. So this is not a fluke, and growth is being sustained, even if it is not evenly distributed, and is far from being that much hoped for “V” recovery. But of course, what happens to all of this as the stimulus is gradually withdrawn?
