Competitive guarantees

One of the diagnoses of why the Great Depression was so bad is that countries engaged in “competitive devaluation” — weakening their exchange rates to make exports cheaper, but when all try to do this, no one gains, and confidence runs out.  One wonders today if Ireland has created a new version of this risk with the dramatic government announcement that it is providing a public guarantee to all liabilities of banks with their HQs in the Republic of Ireland.  That means every debt that these banks have to anyone: to their depositors, interbank lenders, and bondholders. 

Continue reading

Elections in Bavaria: Huh.

Bavaria also had elections this weekend. (I posted about the campaign last week.)

Surprise: the Christian Social Union, which has ruled Bavaria without a break since forever, lost big. For the first time since 1962, they won’t have enough seats in Parliament to rule alone; they’ll have to take on a partner, most likely the FDP.

The big winners were the small parties — the FDP, Free Voters, Left/Linke, and Greens. Die Linke dididn’t quite reach the 5% threshold for getting seats, but they put on an impressive show anyway, jumping from nothing to 4.3%… not bad for a bunch of ex-commies plus Oskar Lafontaine, running in a rich, conservative Catholic state.

So what does it mean? Continue reading

Elections in Belarus: Um…

Belarus also held parliamentary “elections” this weekend.

Going into the elections, supporters of President Lukashenko and his government held all 110 seats in the country’s House of Representatives: there was no parliamentary opposition.

As of 9:00 this morning, it was clear that government supporters had won… all 110 seats in the House of Representatives. There will be, again, no parliamentary opposition. Continue reading

Elections in Austria: Yuck

Short version: for the last two years, Austria has been run by a “grand coalition” government of the two largest parties, the Social Democrats and the center-right People’s Party. Everybody hated this arrangement, though, and it didn’t get much done. So they called new elections, which were held yesterday.

Result: both large parties got hammered badly. The Social Democrats seem to have dropped from about 36% to 30%, and the People’s Party from 35% to 26%. (Ironically, it was the People’s Party that pulled the plug on the coalition last month.) Continue reading


Canada is interested in a huge bilateral agreement with the European Union, which going by the details given would almost amount to membership in the EEA. Cool.

Ironically, in the years when the British Empire was either trying to recast itself as an EU-like economic union or trying to get into the ECSC/EEC with all its members, Canada was notably the least enthusiastic state – and given that this included South Africa, that was saying something. Had the cards fallen differently, you can almost imagine Canada leading the effort to get the UK to join.l

It wasn’t that long ago that there were people in the Conservative Party who thought the UK should leave the EU and join NAFTA; it’s amazing what a few years’ rampant misgovernment will do. It’s almost a cliche of American discourse that Canada is almost France; you wonder what the Eurosceptics and their creepy ideological friends in the US will think when it happens.

Revisiting regulatory wisdom

When the dust settles on whatever form of banking bailout the US Congress eventually approves, attention will turn to reassessing the philosophy that got the US to this point.  But perhaps Europe will have to revisit some conventional wisdom too.  Consider the case of Benelux financial services giant Fortis, which if this evening’s reports are to be believed, will soon be getting some kind of bailout of its own, most likely with the Belgian and Dutch central banks taking on some of the bad assets.  Fortis has been stuck for cash since it joined a Royal Bank of Scotland consortium bidding for ABN Amro against Barclays — the latter bid being trumped by the higher cash portion in the former.  The consortium’s idea was to break up ABN Amro, whereas Barclays was bidding for the group as a whole.  The Dutch central bank was uneasy about the breakup idea, but just over 15 months ago, it was seen as the brave new world of cross-border European banking.  Now it looks like classic winner’s curse.  Barclays lost but since got to pluck the meat from Lehman Brothers.  And Europe gets sucked into banking bailouts, big time.

Happy Families Russian Style

“Happy families are all alike; every unhappy family is unhappy in its own way”

President Dmitry Medvedev’s recent decision to inject $20 billion into Russia’s flagging stock markets – which were down nearly 50% from last May at the time – together with the $60 billion odd dollars of support injected into its groggy banking system have served to draw attention to the fact that it hasn’t only been “over there”, on the other side of the Atlantic, that the financial turmoil has been busy raging. This simple point was further emphasized, if need there was for it, by the fact that both the Russian bourses – the MICEX and the ruble denominated RTS – were only working on a “now you see me now you don’t” basis for the best part of a week in mid September. Stealing an idea from Tolstoy’s Anna Karenina, might we not say that every financial boom is (boringly) the same, while every financial crisis is different in its own special (and intriguing) way. What just happened in Russia merely serves to prove Tolstoy’s point. Continue reading

Montenegro: I was wrong

A couple of years back, Brussels Gonzo and I had a debate about Montenegrin independence. I did a post saying it was a really bad idea. Gonzo replied with a post saying that I was just plain wrong. Bosh and drivel, I replied a few days later.

Okay, so: two and a half years have passed since that debate. Montenegrin has been independent since May 2006. How does that debate look in retrospect?

Well, it looks like Gonzo was right and I was wrong. Continue reading

Second time as more tragedy

[16:36:17] David Weman skriver: hey, I just thought of something?
[16:36:25] Alex Harrowell skriver: yes?
[16:36:36] David Weman skriver: what’s the difference between realists and neoconservatives?
[16:36:45] Alex Harrowell skriver: tell me
[16:37:20] David Weman skriver: realists are bismarck, neoconservatives are wilhelm II.
[16:37:38] Alex Harrowell skriver: +1
[16:37:59] Alex Harrowell skriver: or worse, Conrad von Hotzendorf * (actually his reported political views are remarkably similar to those of NRO et al)
[16:39:27] Alex Harrowell skriver: what worries me most of all about this is that being Wilhelmine Germany’s enemy was tough, but it was nothing compared to being one of their *allies*