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Italy’s Coming Credit Crunch

Sounds a lot like what Edward’s been describing. Glad BW agrees.

China is the Talk of Davos

If Europe can’t manage domestically driven growth, maybe China will. Or will American demand have to drive the world economy forever?

Have a look at the inside.

A Global Demographic Time Bomb

“A shocking report released at the World Economic Forum lays out how aging and falling populations could slam world growth”

Europe’s Hidden Champions

Apparently there’s still life on the Old Continent.

Parmalat Update

Well, well, what do you know: Paramalat’s real debt is much bigger than was first thought. What a surprise. According to the Financial Times Parmalat’s gross debt now stands between ?14.5bn and ?14.8bn ($18.08bn-$18.46bn). At the same time its main Italian operations barely made a gross operating profit last year. Meantime Italy’s unions are threatening a strike iif the government reduces the regulatory role of the central bank. The dispute has arisen as a result of the Parmalat scandal, which the government blames partly on a failure of oversight at the central bank. As a solution the finance ministry wants to reform financial market regulation in Italy so that the central bank would no longer supervise corporate bond issuance and competition in Italy’s banking sector. The unions object to this.

Actually this was meant to be a quick post, but while writing it I cannot help reaching the conclusion that Italy may be begining to fall apart. Just wait till you read this.
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This Is One To Keep An Eye On

2003 was a good year for the Spanish banks, with interest rates at historic lows, lending boomed. News has it today that net profits at Santander Central Hispano, Spain’s largest bank, rose 29.6 per cent in the fourth quarter to ?681m ($857m) mainly on strong mortgage lending in Spain and growth in its consumer finance business in Germany and Portugal. Net profits totalled ?2.61bn for the full year, a 16 per cent increase over 2002 and the best year on record, while credit inside Spain was up 16.2 per cent as the housing boom continued on its relentless path hence generating strong demand for mortgages.

So good luck to the bank, and that’s it. Well again, not exactly. Why is there a boom in consumer credit and mortgage lending right now in Spain? That really should be the question.
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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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Flirting on the west-?stlichen Divan

Joschka Fischer, visiting Ankara, comes out strongly for (eventual) Turkish accession to the EU, reports the S?ddeutsche:

Europa werde ?einen hohen Preis? daf?r zahlen, wenn es die T?rkei aus der Europ?ischen Union heraushalten wolle. F?r Europas Sicherheit sei die T?rkei wichtiger als ein ?Raketenabwehrsystem?…

[Europe will pay a high price if it wants to keep Turkey out of the European Union. For European security, Turkey is more important than a missile defence system]

But there are not a few hurdles in the way. In an interview with H?rriyet, the German foreign minister noted that, in Germany as well as other EU lands, there are ‘rational as well as emotional objections’ to a Turkish accession, and that these will need some serious wrestling.
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