Obviously, Daily Mail stories online are designed as clickbait. But this one is a dead straight exposition of contemporary government psychosis. Spineless capitalists are giving in to tightly knit groups of sinister leftists. The BBC is actually asking government ministers if they canâ€™t see why people might object to mandatory labour for no money. Mimsy old mumsnet has been driven along in the radical frenzy. The police are being ordered to stop demonstrations before they actually happen.
Yes, indeed. Wreckers and saboteurs are at work. False consciousness stalks the land. The relevant economic organs are resistant to co-ordination. Media is failing to follow the line set by the Centre. The plan is in danger of being underfulfilled. The peopleâ€™s security forces must act without delay. Maybe this is why the government is so fixated on the SWP. If youâ€™re doing parody Stalinism, everybody looks like a comedy Trotskyist.
Irish Prime Minister Enda Kenny has told the Irish parliament today that the government has decided to subject the Eurozone fiscal compact to a popular vote. Although the government was clearly tempted to bypass a popular vote, and there were indications that the wording of the compact had been designed to facilitate this, the calculation clearly was that if they were forced into a referendum by legal action they would definitely lose it, whereas a pro-active campaign can avoid the distractions of legalities and move directly to the big Yes/No question on the compact itself. Â In fact, various comments ranging from David Cameron’s initial opposition to the compact to Mario Draghi’s interview with the Wall Street Journal last week had made it clear that many people outside Ireland see sovereignty issues with the compact, and these views would have inevitably informed the debate in Ireland. Having now upped the ante, the government will find it hard to resist the temptation to say the vote is essentially in/out of the Euro and indeed in/out on EFSF support — but the mentality of an already under-water investment banker (go even deeper!) is not necessarily good politics. [Note: the fiscal compact does not need Irish ratification to take effect].Â Nevertheless, as with Greece, parties outside the EU consensus will relish the opportunity of the debate. Â One thing still to be seen is whether the government has lined up some sweeteners from the troika especially as regards the debt burden from support to the insolvent banks.
It’s been a long time now since Paul Krugman spoke of the Ukraine economy epitomising the arrival of what he then termed the “second great depression“, and its been an even longer long time since we lay awake at night dreaming about the coming conquests of the Orange Revolution. It’s also been a good time since I looked at and wrote about the country, so now may be as good moment as any to do so. Continue reading
Well, the latest batch of EU interim growth forecasts are out, and there are few surprises after so much prior comment. The Euro Area as a whole is expected to contract, but of course within the aggregate contraction some will fare rather better than others. “The EU is set to experience stagnating GDP this year, and the euro area will undergo a mild recession”, according to the press release. What this means in practice is that Greece is expected to contract by 4.3%, while the German economy is forecast to grow by 0.6%. During yet another year Eurozone economies are expected to diverge far more than they will converge. Downward revisions of one percentage point or more were made to the forecasts for Estonia, Spain, Greece, Italy, and the Netherlands, while those for Germany, France, Austria, Slovakia, Denmark, Poland and the UK were either left unchanged or reduced by less than a quarter percentage point. No one was revised upwards. Continue reading
The Wall Street Journal’s Marketbeat blog discusses an interesting flow chart prepared by BNP Â Paribas which shows the various scenarios that could play out following the imminent Greek bond offer to its private bondholders. Among the apparent paradoxes brought out by the chart is that Greece could be better off from a debt reduction perspective if a small majority rather than large majority of bondholders accept the offer, because then it will have the latitude to, er, screw the holdouts, including the possibility of giving them nothing. Whereas with a very high majority, there will be a strong incentive to keep everything consensual and the holdouts escape at par.
Anyway, the chart refers to the scenario where Greece is able to impose a punitive scheme on the holdouts as “Anglo Irish.” Â This is because of the bank’s 2010 offering to subordinated debt holders, who were offered new bonds with 20 percent of the face value of the old ones, and by accepting they were voting to impose essentially a complete wipeout of anyone who didn’t accept. FT Alphaville discussed the strategy in detail at the time.
It’s a perfectly good label, but if you come away from the chart thinking that Ireland came up with a hardball (or is that “fair shoulder”?) solution to its problem of bank debt, you’d be wrong. That particular offer only dealt with a tiny proportion of Anglo’s overall debt, and it was the easiest target. In fact, far larger public sums have been spent paying at par the legacy unsecured and unguaranteed senior debt in Anglo Irish — claims that would have only residual value had Anglo been allowed to go to the wall as an insolvent bank. Â The closer analogy is with the wheeze that the ECB just pulled to make sure its own holdings of Greek bonds get paid at par, despite having paid heavily discounted market prices for them.
So good luck to Greece with the Anglo Irish scenario. It would have been nice had it been tried on any larger scale in Ireland.
“On an optimistic view, that a deal was struck implies that neither side was ultimately willing to risk a Greek exit because they recognise that no one fully understands all the ramifications of such a decision. Under this scenario, when pressure again builds, the authorities will do the same: let Greece remain in the euro, even if it fails to keep to its adjustment programme. So, the reality of â€œbail-out IIâ€ means that, if the situation becomes critical, there will be a bail-out III”. Sushil Wadhwani, writing in the Financial Times
So Greece has finally been awarded a second bailout. One may wish the country will live to tell the tale. Continue reading
This new post at VoxEU on the sudden plunge in world trade in 2008-2009 is very interesting. For one thing, it gives us some detail about how the crisis was transmitted around the world, and how this transmission happened between typically supply-side factors (wages are too high, the wrong goods are produced, everyone is suddenly a “zero marginal product worker”) and demand-side ones. It seems that the unprecedently large chunk of world trade that consists of intermediate goods in supply chains played an important part. On this occasion, “The World, On Time” was the last thing anyone wanted.
Another interesting and important point which isn’t explicitly made is that fiscal stimulus didn’t actually “leak” as so many people feared. Countries that carried out substantial stimulus didn’t see their balance of payments get sharply worse. This is because public spending often goes into nontradable goods, and the rest is often spent on home production.
In so far as you want “rebalancing”, then, it doesn’t make sense to think that austerity leads to it.
The Czech Republic is the first economy in central and eastern Europe to slide back into a full technical recession during the current downturn (evidently it is unlikely to be the last), with a 0.3 per cent quarter-on-quarter GDP decline in the last three months of 2011, after a 0.1 per cent drop in the previous quarter.
I have an editorial up at Global Times on the Sun, Murdoch and media ownership generally. The story is from Horrie and Chippendale's Stick it Up Your Punter.