Is A 6 percent 2011 Deficit Realistically Within Reach For Spain?

Last Thursday Moody’s Investor Service cut Spain’s Sovereign credit – to Aa1 from AAA – thus removing the last of the country’s highly-valued triple-A ratings. The move really surprised no one – in this case the Moody’s rating could be regarded as a lagging indicator on the health of Spain’s finances – since the two other “majors” (S&Ps and Fitch) had long taken the decision, and the market predictably shrugged off the news, as if to say “what else is new”. But there was one small detail in the report which should have attracted more attention than it has: the agency explicitly stressed that it was the government’s show of determination to reduce its very large fiscal deficit in the near term which influenced their decision to limit the downgrade to just one rating notch, and this was also the reason the rating had been assigned, for the time being, a stable outlook. Which means, of course, that should there be any slippage in that determination, any wearying, or falling asleep at the wheel, then the outlook would rapidly move to negative, and more downgrades could be anticipated. Continue reading

Promotion to prison


If you can work and if you’re offered a job and you don’t take it, you cannot continue to claim benefits. It will be extremely tough.

This statement has a partner. David could have gone on to say:

If you’re able to hire, and if you define a role for someone and you don’t offer minimally decent wages and conditions, you cannot expect to prosper through recruitment. It will be extremely tough.

State benefits aren’t just a signal to workers, they also send a message to employers: treat your people at least as well as this, or they’ll tend to prefer living on benefits. It shouldn’t always be the case that you’re better off working: in fact, one way to guarantee that work makes a person better off involves putting slackers in jail. It’s been tried.* For those who don’t want that sort of country (or something closer to it than we currently are) discussion of benefits can’t just be about the unemployed. More balance in the rhetoric please, Tories, or we’ll assume you don’t understand this.

* If you think that coming up with an actual example involves confirming Godwin’s Law, well, you’d be wrong. Apparently the Swiss had an arbeitsscheu policy of their own up until the early 1980s.

Bubble Trouble In Finland?

According to an intriguing article I read in Bloomberg recently an alert signal has been sounded due to the fact that house prices in the Scandinavian countries have been rising very rapidly of late. Judging by what they explain what is now going on in the housing markets of Norway, Sweden and Finland would seem to have all the hallmarks of a “mini-bubble”, one which is all the more perplexing given the lowish level of economic activity which characterises the current environment. But then I asked myself, and those whopping German export numbers we saw in the second quarter, wheren’t they also some kind of “mini bubble” which was quite out of keeping with what we should expect to be seeing.

Worse, if this seeming Scaninavian bubble were to pop, it could well send what has up to now been among the strongest regional rebounds on the whole European continent straight into a nosedive. In particular the Finnish problem interests me, house prices are rising steadily, and with them construction activity, even as the economy in general remains severely depressed following one of the sharpest output falls to be found in the Eurozone. Continue reading

All For One And One For All – “We AreThe Eurozone”

One of the worrying things about the handling of the current European crisis is how many of those responsible for taking the decisions seem to view the Eurozone in a way which is every bit as rigid, timeless and dogmatic as the thinking of those old school scholastics whom Galileo, in his time, found himself battling against. Rather than facilitating a dialogue, and a free and open discussion, the guardians of fortress euro seem to want to keep the doors slammed tight shut, just in case any strange and unwanted ideas should inadvertantly slip in without them noticing. Continue reading