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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‘Volatilty’ is Back

After a series of posts on the rise of the euro earlier in the year, I’ve been relatively quiet on this front of late. This doesn’t mean that the problem has gone away. The growing feeling that the US economy was taking off certainly eased the pressure, and the euro has hovered around the low 1.20s. Now it seems that with growing awareness that growth may be slowing large scale ‘currency trading’ is coming back on the agenda.

Trading on the world’s foreign exchange markets has leapt to a record $1,900bn a day, driven by renewed interest in currencies as an asset class and the return of hedge funds specialising in currency bets.

Turnover in currency and interest rate derivatives sold by banks also soared to new record levels, according to a three-yearly survey by the Bank for International Settlements……

After slumping amid the introduction of the euro, which eliminated the currencies of some of the world’s biggest economies, trade in foreign exchange bounced back between 2001 and 2004.
Source: Financial Times

There is once more a lot of talk around about the need to float the Chinese renmimbi (which is a move which should come in gradually, but which won’t have sufficient impact to resolve the problem IMHO).

Trying to see into the future is a pretty fruitless endeavour, but we should all be aware that any sustained weakening in the yen and the US dollar would almost kneejerk style bring the issue of a rising euro straight back on the agenda. Definitely one to watch.


CDU chief Angela Merkel’s strong opposition to Turkish EU accession faces criticism from her own side, reports the FT Deutschland. Volker R?he, the CDU chairman of the parliamentary foreign affairs committee and one-time defence minister, has lambasted Merkel’s position as ‘populism’, especially in its menacing vision of a Europe ‘flooded’ by Turks. ‘When Europe comes to Anatolia,’ say R?he, ‘Anatolia won’t need to come to Gelsenkirchen.’ Unless, of course, it wants to watch Schalke ’04…

Downbeat on Iraq?

Colin Powell has been making the headlines over the weekend for his seemingly more realistic appraisal of the difficulties facing current US policy in Iraq when compared to the view emmanating from other members of the Bush administration. Again Juan Cole has been offering some informed comment on the topic here.

All of which makes the current consensus view from France and Germany pretty preoccupying in its own way.

“I cannot imagine that there will be any change in our decision not to send troops, whoever becomes president,” Gert Weisskirchen, member of parliament and foreign policy expert for Germany’s ruling Social Democratic Party, said in an interview.

Michel Barnier, the French foreign minister, said last week that France, which has tense relations with interim prime minister Iyad Allawi, had no plans to send troops “either now or later”.
Source: Financial Times

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Turkish Accession Back On The Slow Track?

Despite the recent revival of optimism about the forthcoming Turkey negotiations following the apparent resolution of the ‘adultery ban’ issue, it is clear to everyone that significant hurdles still remain to be overcome. Among these may now need to be added a referendum on Turkish membership in France.

Turkey will not join the European Union for at least 15 years and could only do so once France had held a referendum on the issue, French Finance Minister Nicolas Sarkozy said on Sunday.

?The membership of Turkey, in the best of cases, will not happen for 15 years,? he told LCI television. ?A decision as important as the membership of Turkey in Europe could only be taken after there had been a referendum in France.?…….

He was sceptical about the idea ?not because it is a Muslim country but because Turkey alone represents the membership of the 10 countries (mainly) from eastern Europe?, he said, referring to the countries that joined the bloc this year.

Sarkozy made his comments after French Prime Minister Jean-Pierre Raffarin voiced misgivings on Thursday about Turkey joining the bloc, asking if Europe really wanted ?the river of Islam to enter the riverbed of secularism?.

Raffarin said Turkey had made progress in adjusting its laws and institutions to EU standards under Prime Minister Tayyip Erdogan, but queried the overwhelmingly Muslim but secular state?s ability to stay the course.
Source: Financial Times

Clearly everyone involved in the debate is aware of the problem of Turkey staying ‘on course’. Clearly also it is difficult for any democrat to object to the principle of ‘citizen consultation’ about important issues, still it is important to note the growing recourse to the referendum as the means of making such consultation (this process will probably reach a climax with next year’s votes on the proposed EU constitution). This would seem to be an additional hurdle for Turkey, given that such a procedure was not followed in the case of the recent round of accession.
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Perspective, lads; perspective

Further to that business about the Turkish government advancing, and then as quickly aborting, plans to criminalise adultery, the very valuable ?????????? (Histologion) notes that:

It’s a good thing that the state of Virginia won’t be applying for EU membership anytime soon, since it is one of the 23 US states, where adultery is considered a crime (while having sex out of wedlock is considered a crime in ten)! In the American Bible Belt Erdogan’s Islamic party would be considered way too permissive I fear…

Which only goes to show what I have always said: comincia il paese di Deliverance venti kilometri al’ovest dell’ Hudson.

If I may lapse into pedantry for a moment, though, I believe it’s safe to say the state of Virginia will never be in a position to apply for EU membership, for Virginia is not a state but a commonwealth.

The Mediterranean Diet?

This should come as a shock, but somehow I am not exactly surprised. Mediterranean cooking evidently isn’t always as benign and healthy as it seems.

Greece was warned on Thursday that it could face legal action for grossly under-reporting its national deficit and debt figures but was told it would not be ejected from the 12-country eurozone.

Revised figures revealed Greece broke the single currency’s 3 per cent of GDP deficit ceiling every year in the 2000-3 period.

The European Union will launch an inquiry to check the veracity of the figures it provided before 2000, the year Greece qualified to join the single currency.

The scale of the inaccuracies has sent shockwaves across the single currency area, which relies on member states to provide sound economic data.

…………Eurostat, the EU’s statistical arm, could start legal proceedings against Athens for breaching accounting rules.

Greece, however, is unlikely to be ejected from the eurozone, even though there are now doubts about whether it complied with the membership rules before 2000.

The new data revised the Greek 2000 deficit to 4.1 per cent from a prior estimate of 2 per cent.

The 2001 and 2002 deficits now stand at 3.7 per cent compared with 1.4 per cent previously. The 2003 deficit, which had already been revised up in May to 3.2 per cent from 1.7 per cent, is now shown to be even higher – at 4.6 per cent of GDP.

Cost-overruns on the building of venues and transport systems for last month’s Athens Olympics games, estimated at more than ?2.5bn ($3bn, ?1.7bn), contributed to a projected deficit of 5.3 per cent of GDP this year.
Source: Financial Times

It is also worth bearing in mind that the accumulated Greek deficit currently is one of the highest in the EU and stands at around 100% of GDP. The interesting question now is what happens next.

Opening the Sublime Porte just a crack

The European Commission won’t release its report on the possibility of opening accesion talks with Turkey until 6 October. But after expansion commissioner G?nter Verheugen’s comments yesterday, the report will not be much of a surprise. ‘There are’, said Verheugen, ‘no further barriers‘ to beginning talks.

(All the links to outside sources in this post, incidentally, are to German-language sites. At the moment there’s nothing about this on the FAZ English-language site, but you might check there later in the day if you can’t read German.)

In the comments to my recent post on the NPD’s electoral gains in Brandenburg, Otto suggests that the German CDU step up its resistance to a possible Turkish entry. Apparently the Union is paying attention to Otto, for party chief Angela Merkel was prompt to announce that she will seek allies elsewhere in Europe to keep the Turks draussen vor der T?r. And taking up most of the front page of the print edition of today’s Die Welt — the reliably right-wing sister paper to the Bild-Zeitung, but unlike Bild intended for those who can read words of more than one syllable — are ‘Ten Reasons Why Turkey Should Not Be Allowed to Join’.

Strangely enough my first reaction to this all-out onslaught by the Union was one of compassion and concern. ‘Bloss keine Panik, Leute!’, I wanted to say, giving their well-coiffed heads a reassuring pat. For you see, Turkey is not about to join the EU after all. All that the Commission has done (and indeed, officially it hasn’t even done that yet) is to say it’s all right to start talking with the Turks about the possibility of an eventual accession. In those talks Europe will, among other things, negotiate with the Turks the conditions and timeline for a possible entry. There is no guarantee that Turkey will accept (or fulfil) the EU’s conditions. And accession, if it comes at all, will not be for many years.
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