Funny, it doesn’t look like Kansas…

Though creationism does rear its ugly head from time to time in Europe, it is largely a fringe phenomenon. Unlike in America, even most religious Europeans accept evolution as an obvious fact, viewing the biblical creation stories (yes, there’s more than one) as, at most, poetic metaphor. So it’s easy for us over here to indulge in a superior smile when we observe the antics of those primitive American bible-thumpers.

At least in Germany, we shouldn’t be so quick to smile. Continue reading

And Over to You, Too, Mr Socrates

Portuguese Prime Minister José Sócrates Carvalho Pinto de Sousa will need all of his namesake’s wisdom, and none of his taste in last drinks, as he takes over the rotating presidency (careful, the page has an annoying soundtrack) of the European Council this weekend.

Chancellor Merkel’s quiet persuasion has brought the EU much closer to a renovation of its institutions than seemed likely at the beginning of 2007. The governments now have a mandate to negotiate the details and prepare, by the end of the year, a treaty revision that can be ratified in 2008, or at the very latest in early 2009.

This half-year will also be a test of the “trio” approach to the rotating presidency. Starting this year, groups of three presidencies will work together to present a common agenda for the 18 months of their collective tenure. Anything increasing continuity in an office that countries can expect to hold about once every two decades (a far cry from the period when the rotation principle was established) is good news. Germany, Portugal and Slovenia worked together to set things up; now is the first actual transition within a trio.

The Portuguese don’t plan on wasting any time, and the intergovernmental conference will begin in late July. Coming just three weeks after the mandate, this is something like record time for the EU. And the plan is to wind it up by the end of the year. Given that past IGCs have tended to sprawl over about 18 months, this would be quite the accomplishment as well. Coming up with a Treaty text will, of course, be no small task, even with the former constitutional draft to serve as a basis.

On the other hand, there’s this “In addition, other priorities urgently deserve our attention.” That’s the horse’s nose under the tent. There follows a long list of things Portugal wants to do, including summits with Africa and Brazil, to say nothing of following up on the Lisbon Agenda (which to my thinking is what one should say at this point). The country’s leadership has limited personnel and resources. Taking their collective eye off the ball of institutional reform is asking for trouble on the Treaty front. It’s an accident of the calendar that Portugal has ended up with this responsibility for the Union, and that its more self-interested topics ought to take a back seat, but on the other hand, it’s an opportunity for a small state to have a historic achievement. Word to the wise, Mr S.

Over to You, Mr Brown

Remember when Labour couldn’t win an election and the UK’s Conservatives made much of their reputation as “the natural party of Government”? Remember when all that changed? Eppur si muove.

Daniel Davies got the timing almost exactly right when his model showed that the greatest gap between the incentive for MPs to keep Blair and to push him out in favor of Brown would be in July 2007. For the record, DD made the prediction in April 2006. You’ll have to ask him whether he jiggered the model to max the value close to the ten-year anniversary. Economists can be that way sometimes. (Josh Marshall asked today whether there’s a similar time frame for Republicans to abandon Bush over Iraq. Maybe DD could gin up a new model? Or maybe another economist will?)

The BBC, as one would expect, are all over the changeover story. Links by the metric boatload at that page.

Now, none of the governments in the EU’s three largest countries is more than two years old. It’s a new era.

PwC Makes a Funny

PwC was auditor for what was then one of Russia’s largest oil companies, Yukos. The Russian government took a serious disliking to Yukos and its then-president Mikhail Khodorkovsky, eventually putting the company effectively out of business (with key bits sold off to state-owned or state-controlled companies) and Khodorkovsky in jail. Now the Russian government is pursuing another case against Khodorkovsky, and it does not want PwC’s audits to be usable in his defense. So the Russian authorities claim that PwC has not been diligent in paying its own taxes. It has raided various offices and threatened to pull the company’s license to operate within the country.

Yesterday, PwC said that it was withdrawing its audits of Yukos from 1995 to 2004, after “new information came to light.” New information provided by the government. Will PwC say what that information is? It will not. Its management did offer an opinion on a related question:

PwC’s management said yesterday the decision to withdraw the audits had nothing to do with this pressure

That’s from the first page of the second section in yesterday’s FT. (Electronic version is in pay-per-view.) The reporter did not indicate whether it was said with a straight face or not. More here here here and here.

At any rate, the message is clear: Audits of businesses that are important to the Russian state will say what the state wants them to say. Caveat lector.

The Latvian Economy

Something is afoot in Latvia. According to the latest Eurostat data on annual wage costs, in the first quarter of 2007 wages in Latvia were up by an astonishing 32.7% when compared with the first quarter of 2006 (for a simple graph of the course of Latvian wages since 2001 try this) . Without knowing anything more about Latvia it is obvious that something important is happening here, and that the situation as it stands is clearly unsustainable.

And it isn’t only wages that seem to be spiraling out of control. Consumer price inflation has been steadily increasing, and now runs at an annual rate of around 9% (graph here), while the current account deficit (currently around 25% of GDP, chart here, graph here, also see the chart comparing Latvia with the other EU8 countries here) has also shot up, while domestic consumption is rocketing, fueled by an inward flow of bank funds and remittances (see table) and this rapid growth in domestic consumption is producing an upward spiral in house prices (see graph) – Latvia (Riga) was number one in the most recent Knight Frank global housing index at a staggering annual increase rate of 62.1% – and this spiral may well constitute a bubble.

Worse, there is some sort of consensus among experts and analysts that there may be no easy policy remedy available, that the problem may be structural, and guess what, despite all the protests from the Economist that demographic changes don’t have important visible economic impacts, the key to the Latvian problem is a demographic one: essentially they are running out of people. Running out of people that is if they wish to sustain their current high levels of economic growth and experience “catch up” growth to bring their living standards alongside those of their Western European EU neighbours. A simple example should suffice: during 2006 Latvian employment was increasing at an annual rate of around 70,000, but if we look for a moment at live births – see chart – we will see that since the early 1990s Latvia has been producing children at an annual rate of under 40,000 and that by 2006 this number is down to 21,000.

What follows below the fold are a series of observations and policy proposals which are based on a much more extensive economic analysis I carried out for Global Economy Matters, which can be found here.

Meantime Latvian Prime Minister Aigars Kalvitis seems to have come up with his own solution:

Prime Minister Aigars Kalvitis, speaking in a radio interview over the weekend, appealed to Latvians to do their part in bringing down inflation and stop spending so much money. Kalvitis asked Latvians to be more thoughtful about borrowing money to buy big-ticket items, warning them that the future generation may be forced to foot the bill. Continue reading

Birds of a feather

Germany has tossed a Holocaust denier into prison, and the American Christianist right is all outraged about it. Or so PZ Myers tells me; it’s telling that I had to learn about this from him, as this hasn’t been a big story here at all.

As you probably know, it is illegal in Germany to deny the Holocaust. Lutheran pastor Johannes Lerle denied it publicly; he was tried, found guilty and sentenced to a year behind bars. So far, so yawn. Germany has its share of reactionaries, but any of them stupid enough to deny the Holocaust publicly are punished; end of story as far as the Germans are concerned.

Not in the USA, though. For some on that side of the Atlantic, Pastor Lerle is a Christian martyr. Continue reading


The treaty is basically the constitution minus some symbolic things (and an exemption from the Fundamental Rights for the Brits.) Henry Farrell had it right a couple of days ago.

This is a quite substantial set of changes. It should be presented to people so that they can vote on it (and taken off the table if they don’t want it). It’s a shame and a disgrace that the EU member states have responded to the 2005 defeat by going back to their old practice of seeking to achieve integration by boring the general public into submission, and a very substantial backward step. If people aren’t willing to sign up to major changes in the EU system of governance, then too bad for the EU system of governance.

Questions You Don’t Want to Hear in Financial Markets

From Bloomberg, via Calculated Risk and Brad DeLong:

“How many other hedge funds are holding similar, illiquid, esoteric securities? What are their true prices? What will happen if more blow up?”

When London owes its place as financial capital of the world at least in part to a slightly looser regulatory structure than New York, and things like this are happening in New York…

Going Down to the Wire

No smoke signals from Brussels, but that isn’t surprising.

I suppose the various issues could be kicked down the road another six months and still be sorted out in time for the elections to the European Parliament in June 2009. That would leave a smaller window for ratification in the second half of 2008 and the first quarter of 2009. That might actually be marginally better, as it would allow for a closer focus on the unconstitution. On the other hand, if anything goes wrong during that period, the next Parliament gets elected under the old approach, and the EU’s institutional shortcomings become more apparent in practice.

Better to placate Poland with something workable, if illogical, and Britain with something that appears to cover their concerns. And that’s the way I’m still betting.