Europe in the 2010 World Cup

Looks a lot like Europe in the 2006 World Cup, actually.

Qualifiers this time: Denmark, England, France, Germany, Greece, Italy, Netherlands, Portugal, Serbia, Slovakia, Slovenia, Spain and Switzerland. That’s almost the same list as last time. Oh, we won’t have Poland, or Croatia, and the Danes, Slovaks and Slovenes got in, but eight of the thirteen are the same, and the Big Five all got in as per normal. Is it cynical of me to think that switching the Slovenes and Greeks for Sweden and the Czechs won’t make much difference?

Anyway. Consider this an open thread for World Cup football. With 192 days to go, what have been the big surprises so far? (Have there been any, really?) And what are the wild hopes? Who’ve you got?

Is There A Double Dip Risk In Germany?

This is not an idle question. Despite all those bullish headlines in the press, most informed observers – including Bundesbank head Axel Weber – are only to well aware of just how fragile the German recovery actually is. Indeed only last week the OECD warned that Germany’s economy, may only recover slowly next since investment “is lagging,”. The OECD now predict that German gross domestic product will expand 1.4 percent in 2010 and 1.9 percent in 2011 after shrinking 4.9 percent this year, which is in fact up on their earlier estimate, where the OECD predicted German growth of 0.2 percent next year. So whichever way you look at it, output at the end of 2010 will still be well down of 2008 levels. Worse, events like the recent upheaval in Dubai start to cast doubts on whether even the rather optimistic 1.4 percent growth level may now not be excessively optimistic for next year. The problem is that the recent rebound in Eurozone growth is extremely uneven as between countries, and, given its long standing export dependence, the German economy is hardly going to be leading the charge. As I said in my most recent post on the Eurozone :

“The question in hand is the Eurozone third quarter growth one, and the story is all about differences (between countries) and these differences in the key cases (France and Germany) are in many ways all about inventories……Now if you look at the chart below, you will see that German growth was in the second quarter was, more than anything, a statistical quirk which resulted from a balancing act between strong swings in inventories and in net trade. In the third quarter, as far as we can see (since we don’t have that ever so important detailed breakdown), this position has quite literally been inverted, as the earlier trade bonus has been eaten away by growth in imports (largely to stock up on export oriented inventories, not items destined towards domestic consumption) and this part we more or less know, since we do have all the trade data in for the quarter. ”


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About that coal in Kosovo (II)

A couple of years back, I wrote an article about Kosovo’s coal industry. Short version: Kosovo has lots of coal, and most of it is middle-quality lignite. But the mines suffer from a horrible lack of investment; many of them are still using thirty to forty year old equipment. So both output and quality are far below where they should be.

So I wasn’t exactly surprised to see this recent article:

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Total Eclipse At The Heart Of Dubai’s World

Back in the heady days of 2006 some 30,000 cranes, roughly a quarter of total global capacity, were busy whirring away in Dubai. Today most of these devices have either left to find service in other parts of the globe, or lie silent, unused and unloved. In what is only the latest sign of the ongoing property snarl-up affecting the emirate Nakheel, Dubai World’s property developer subsidiary, asked on Wednesday for a delay in their next debt payment. The move was widely seen by investors as a technical default, raising concerns about investment in risky assets right across the globe. So while their company slogan may well be that the sun never sets over Dubai World, the fact is that Dubai World’s sun not only no longer shines, it is suffering from something more like a total eclipse. Continue reading

Wasn’t Someone Else Involved?

An op-ed guest writer for the New York Times opines:

SIXTY-FIVE years ago, in November 1944, the war in Europe was at a stalemate. A resurgent Wehrmacht had halted the Allied armies along Germany’s borders after its headlong retreat across northern France following D-Day. From Holland to France, the front was static — yet thousands of Allied soldiers continued to die in futile battles to reach the Rhine River.

One Allied army, however, was still on the move.

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Are Russia’s Consumers Getting “Carried Away” With Themselves?

“Cutting rates by 50 basis points here and there is not going really diminish the appeal of the ruble,” said Manik Narain, an emerging markets strategist at Standard Chartered Bank Plc in London. “In terms of nominal interest rates Russia (at 9% as of 24 November) is still offering the highest yields in the emerging market space and in an environment where oil prices are remaining relatively well supported we think that the ruble will continue to be seen as an attractive way to position for global recovery,”

The world’s central banks are having a hard time of it these days, having just gotten through the worst banking and financial crisis in living memory they now face a growing dilema between continuing to give support to the developed economies (which are yet to recover from those early hammer blows) and the danger of creating fresh global asset price bubbles in emerging economies, asset bubbles which could easily be being fuelled by low US interest rates and a weak dollar. The latest warning in this respect comes not from Nouriel Roubini (or even from me, but see this post, and this recent interview I gave on Forex Blog), rather it emmanates from Germany’s new finance minister, Wolfgang Schäuble. His comments – which were cited in last Saturday’s Financial Times – highlight official concern in Europe that the exceptional steps taken by central banks and governments to combat the crisis carry with them a series of undesireable side effects. Continue reading

Ireland: The Reign of the Salaryman

There is something very traditional about the Irish economic crisis.  If you consider the staples of 1980s economics, they were the ideas that nominal wages adjust very slowly downwards and that labour markets segment strongly into insiders who are able to hold onto jobs in recessions and outsiders who bear the burden of adjustment either through job loss or wage cuts.  That’s a fairly accurate description of Ireland over the last year.

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EU Lisbon jobs open thread

It’s now clear that the Thierry Henry assist on the William Gallas goal last night is going to generate more commentary and interest than tonight’s filling of the new EU jobs (Council President, High Rep. for Foreign Policy, and Secretary General of the Council), but nonetheless, we could be stuck with these people for a while so no harm in keeping track.  What we know: Tony Blair is out of the running for Council President, but Catherine Ashton who arrived as Trade Commissioner in Mandy’s stead apparently on the inside track for the foreign policy job.  They’re probably still having dinner at the summit and perhaps Irish PM Cowen has already cornered Sarko to argue Ireland’s case from last night, so there could a lot of distractions.  But we’ll keep an eye on it.

UPDATE: Well, that was fast.  Once Blair was out, the deal fell into place.  Herman van Rompuy as Council President.   Almost as soon as Lisbon went live, the countries seem to be working to restrain its institutions.

The new Tory party: desert for everybody

It’s taken me a few days to get around to it, but here’s my take on David Cameron’s equality speech (The Big Society: Hugo Young Lecture, 10 Nov 2009).

Cameron name checks Wilkinson and Pickett and says that they “have shown that among the richest countries, it’s the more unequal ones that do worse according to almost every quality of life indicator”.

He then sets himself this rhetorical objective: how can you square an admission that less equal societies do worse than more equal societies with a long-standing Tory view on personal wealth: that is, the wealth of an individual is a reflection of the choices they have made. Since choice is good, material gains that aren’t explicitly judged unlawful must also be good. Here is an example of this kind of thinking in a 1977 speech by Margaret Thatcher:

The economic success of the Western world is a product of its moral philosophy and practice. The economic results are better because the moral philosophy is superior. … Choice is the essence of ethics: if there were no choice, there would be no ethics, no good, no evil; good and evil have meaning only insofar as man is free to choose.

And of course this view was taken up almost wholesale by New Labour, so it’s a view that still has currency in a very large part of Britain’s polity. The problem for advocates of choice simpliciter is that choice is compatible with inequality. And it’s hard to be an advocate of inequality: at least, it’s hard to do it in a way that’s going to make you popular. Cameron’s way out suggests sleight of hand: he switches from talking about inequality measured across the whole of society to talking about inequality between those in the middle and the least well off:

We all know, in our hearts, that as long as there is deep poverty living systematically side by side with great riches, we all remain the poorer for it. That doesn’t mean we should be fixated only on a mechanistic objective like reducing the Gini co-efficient, the traditional financial measure of inequality or on closing the gap between the top and the bottom. Instead, we should focus on the causes of poverty as well as the symptoms because that is the best way to reduce it in the long term. And we should focus on closing the gap between the bottom and the middle, not because that is the easy thing to do, but because focusing on those who do not have the chance of a good life is the most important thing to do.

And if our attention can be shifted towards the category of the least well off and away from the category of the wealthy, then perhaps we might just stop worrying about the wealthy. If this is Cameron’s purpose, he’s only following in the footsteps of New Labour’s Peter Mandelson, the man who told us he was ‘intensely relaxed’ about personal wealth.

But let’s say we take Cameron seriously: let’s say we agree that alleviating extreme poverty is the goal that matters and restrict our political aim to that. How can we reach that goal while (implicitly) either maintaining taxes at current levels or even reducing them? After all, in the same speech, Cameron tells us the increase in government spending since 1997 can’t be sustained. More than that, he argues: ‘large government’ has come to cause inequality:

But, quite apart from the fact that it turns out much of this has been paid for on account, creating debts that will have to be paid back by future generations; a more complete assessment of the evidence shows something different – that as the state continued to expand under Labour, our society became more, not less unfair.

Cameron’s answer, it seems, is to reduce state spending and curtail the role of government and instead go work on the way people think: children should get “better education” and adults should get better attitudes: “responsible behaviour” should be incentivised. Now this may make you think of New Labour, but forget them: to my mind, at least, the stall Cameron is setting out looks as ugly as anything yet brought forth by American conservatives. This is workfare advocacy. And the failure of this approach, of course, is just what people like Wilkinson and Pickett have been working hard to demonstrate.

But even if your stall is unattractive, you can set it out in an honest way. You might simply say: we believe that benefit claimants should do more to justify our support. Cameron goes beyond this. For one, his suggestion that the increase in state spending since 1997 (when New Labour took office) has caused inequality is really reaching. A history of UK wealth distribution shows that most of the post-war rise in inequality took place from the late 1970s to the early 1990s: all Tory years. This is well known. Even worse, Cameron conflates ‘size of government’ with ‘amount of state spending’. These are clearly not the same thing: you can have a small government that spends a lot, or you can have millions of bureaucrats who are needlessly penny-pinching. The complaint that many have made about New Labour is that they have promoted the second. It’s a reasonable complaint, yet it says nothing about the proper role of government: what its aims should be; what makes it legitimate.

Is there anything more going on in Cameron’s speech? Is there a broader ethical point? Is there anything new? I can’t see it. And an old idea which is not getting any Conservative Party air time, but which needs to, is this: an individual’s lawful choices may have bad consequences for others. If our lives go badly, we might have a share in the blame, but we don’t carry all of the blame. Where lives are blighted, adjudicated redress – where those who adjudicate are under democratic oversight – is justified. Taxes can be fair.

Just How Much Of A Eurozone Rebound Really Was There In Q3?

Sorry, and I apologise in advance: in this post I’m going to be a nit-picker. The question in hand is the Eurozone third quarter growth one, and the story is all about differences (between countries) and these differences in the key cases (France and Germany) are in many ways all about inventories. So maybe I should have titled the post “all about inventories”, following Pedro Almodovar’s cinematographic lead in cycling and recycling that old “all about Eve” metaphor – necessity is the mother of invention, and movements in inventories are progenitors of both growth, and of that notorious double dip difficulty. So just which one of these is it that we have on our hands here? Continue reading