In the Morning, In the Evening, and at Night

Just following up briefly on Dougs recent post on Hungary, a right royal poitical scandal now seems to be brewing there since Prime Minister Ferenc Gyurcsany has accepted that a tape recording which was made public over the weekend and which contained comments he made to deputies of his Socialist Party is authentic. The extracts quoted in the AP aritcle which describes the outcry surrounding these revelations are as follows:

Gyurcsany said that Hungary had managed to keep its economy afloat only thanks to “divine providence, the abundance of cash in the world economy and hundreds of tricks……I almost died because for a year and a half, we had to pretend that we were governing. Instead, we lied in the morning, in the evening and at night. I don’t want to do this anymore,”

As the article concludes by saying “Hungary’s 2006 budget deficit is now forecast to reach 10.1 percent of gross domestic product, compared with the government’s pre-election target of 4.7 percent.”

The Gay Chancellor?

In Mecklenburg-Vorpommern, the governing Social Democrat (SPD)s got whipped, to the tune of a 10 percent drop at the polls. In Berlin, by contrast, the SPD picked up 1.1 percent, received the most votes of any party, and now has the option of continuing its coalition with the Left (PDS) or forming a new one with the Greens. (Behind the SPD, the big winners in Berlin were the Greens — up to 13.1 percent from 9.1 percent — and “other” — parties that did not top the 5-percent hurdle collectively accounted for 13.8 percent of the vote.) Like its northern neighbor, Berlin has high unemployment. It also has a crushing debt that is slowly being worked out through budget consolidation and deals with the national government. It also still has lingering constraints from the old days (personnel appointed for life, pensions for former GDR bureaucrats, possibly some remaining double institutions). In short, economically Berlin is the kind of place that turfs out governments on a regular basis, particularly given voter volatility in postcommunist societies. Yet, the SPD-led government was not only re-elected, its share of votes even increased modestly. Why?
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Sandy Brown Baltic Shores

Sweden wasn’t the only Baltic area with an election yesterday. The voters of Mecklenburg-Vorpommern, in Germany’s northeastern corner, dealt a heavy blow to the ruling Social Democrat-postcommunist (SPD-Left) coalition. The SPD dropped 10 percent, but still received the largest share of votes, topping the Christian Democrats (CDU) 30.2 percent to 28.8 percent. The postcommunist (or possibly post-postcommunist, depending on how you look at these things) party, now known as the Left, rose marginally from 16.4 percent to 16.8 percent. The SPD can either attempt to continue the current coalition, which would then have a one-seat majority, or it can try to forge a grand coalition with the CDU, with all of the pluses and minuses currently on display at the national level.

But relatively mundane state politics are not what today’s headlines are about.
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Of Population Pyramids and Value Chains

It is by now well known that the main hope for developed societies subject to rapid population ageing who wish to maintain their relative standard of living lies in increasing their collective productivity more rapidly than they increase their dependency ratio via-a-vis the older age groups. Now in the comments thread on the recent ‘Reform is a Dirty Word‘ post I ventured to say that I found it obvious that at some stage we would reach a point where the rate of population ageing was going to outstrip the rate of productivity increase (in which case relative income per capita would inevitaby start to fall). David, unsurprisingly, asked me why I thought this to be the case. I was not happy with the response I offered (which was essentially some ‘rigmarole’ about the biology of ageing which is coming in a separate post), and since that time I have been scratching my head trying to find a simple way to get this point across. Perhaps I now have one.

All you need to get to grips with what follows is a basic understanding of geometry and a vague interest in football.
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So, we have a new government, and Göran Persson is resigning as party leader. I ended up voting for the Center party, the most inoffensive of the rightwing parties. I was a little tempted to vote a blank ballot. I know this new government will do all kinds of bad things, and now I’ll be responsible. I’ve never had to vote for a party that I thought would be on the winning team before.

I can’t really think of any particular issues that defined the campaign. That might be a little troubling I guess, but there weren’t any particular non-issues either , so to speak, or a great deal of “politics as spectacle”. People weren’t too riled up, there was just a general feeling of twelve years being enough. Well, good for the voters. 16 years of uninterrupted rule by one party wouldn’t have been healthy, especially this party in this country.

More Sweden, less tidbits

Well, I just lost a long post about the so-called Swedish model due to my own stupid carelessness the combined malevolence of Windows XP and MS Word.

Anyway, the main point was to say that the article on the subject (free for non-subscribers) in last week’s issue of The Economist was really a dishonest hack job. And my critique went roughly like this :
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Swedish Tidbits

Nobody has stepped up to write a big piece for us on the Swedish election, which is bound to be close, but below the fold are a few potential topics from our internal discussion. Bullet points for that party conversation you’re bound to have this weekend about the election in Sweden. (And if anyone from the afoe team does write a post, or objects to publishing the bits, feel free to take this post down.)
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Risk Premium

Think that guaranteeing depositors’ money is a dull topic? In Russia, it’s exciting enough to get the central bank’s first deputy chairman gunned down on the way from a recreational soccer game to his armored Mercedes. It’s the highest-level assassination since President Putin took office.

Andrei Kozlov, 41, was the Central Bank of Russia‘s number two official, and had spearheaded banking reform on many fronts. Just this year, he had overseen the closure of 44 banks that were accused of improprieties. He was also at the forefront of deciding which banks could purchase deposit insurance (dubiously financed institutions could not), and he was pushing to make such insurance mandatory, as I understand it is in almost every advanced economy.

In working to bring Russia into line with international standards, Kozlov made a lot of enemies. Contract killings in Moscow are almost never solved.

Inherently Left of Center?

Romano Prodi, writing in Le Monde, claims that the European Union is inherently a left-of-center project. It’s an interesting claim–certainly one that Konrad Adenauer and Helmut Kohl would probably dispute. But certainly the European institutions have changed since either of those Chancellors’ days, and a contemporary view might lend more strength to Prodi’s views and explain the relative prevalence of anti-EU sentiment on the right side of the political spectrum.

I’m of course relying on the summary from the estimable folks at Eurotopics, but it’s an interesting thought.

Italy and the Eurozone

John Kay had an article in the Financial Times earlier in the week, and this seems to have caused quite a ripple around the blogsphere (Eurozone Watch, Economonitor, Claus Vistesen at Alpha Sources). The article was about whether or not it was technically possible for Italy to leave the Eurozone. (Update: Sebastian has a fresh post over at Eurozone Watch Blog continuing the discussion).

John Kay’s conclusion, and it is supported by a very reasoned commentary by Sebastien Dullien at Eurozone Watch Blog (welcome Sebastain and Daniela), is that there is no in-principle technical difficulty in exit. The most authoritative piece of work on this topic that I know of comes from Harvard International financial law specialist Hal Scott. The paper was written back in 1998, and was provocatively entitled “When the Euro Falls Apart“. Despite the title the paper is a tightly reasoned piece of work whose main conclusion is that not only is euro-exit technically perfectly feasibe, in fact the mechanisms which would make this possible were incorporated from the start (in particular keeping independent central banks with their own reserves). I think those who were able to think clearly back then – and were able to use some emotional intelligence – were always aware that there were question marks over Italy’s ability to go the distance.

So the problem is not a technical one. But as John Kay indicates it *is* a political one:
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