For Maurice Pialat, champion of the marginal centre.
“This raises a final question, which, while not central to the issues of this paper, is nevertheless intriguing: How can a country with a low minimum wage, weak unions, limited unemployment insurance and employment protection, have such a high natural rate [of unemployment]?”
“To summarize, the actual unemployment rate is still probably higher than, but close to the natural rate of unemployment. Latvia may well want to take measures to reduce its natural rate, but the recovery from the slump is largely complete.”
Boom, Bust, Recovery Forensics of the Latvia Crisis, Olivier Blanchard, Mark Griffiths and Bertrand Gruss
With these words three IMF economists (hereafter BGG) effectively signed off on their study of “what just happened on Latvia” and, they hoped, drew to a close a debate which has been going on now for some 6 years. In fact, far from closing the debate, what they may have done is effectively extend it into new terrain, since these apparently harmlesss words – “the recovery from the slump is largely complete” – have far reaching implications, as does the methodology they use for reaching it. These implications reach well beyond Latvia, and even far beyond the Baltics and the CEE in general, despite the conclusion that everyone seems to be reaching that Latvia was just a “one off”. Possibly without intending to do so, they have drawn onto the clinical investigation table issues which have been mounting up in the theoretical lumber rooms of neoclassical growth theory for some time now, issues which begin to assume a paramount practical importance in the context of our rapidly ageing societies. What, for example, do we understand by the term “convergence” these days? And if “steady state” growth can no longer be understood as implying a constant growth rate (trend growth in developed economies is now systematically falling) should we be considering the possibility that headline GDP growth will at some point turn negative, even if GDP per capita may continue to rise, due to the fact that populations are steadily starting to shrink. And if the answer to the former question is “yes”, then what are the implications of this for the financial system, for the system of saving and borrowing, and for the sustainability of legacy debt? Not little questions these, but ones which will need to find answers and responses in countries like Latvia over the next couple of decades. Continue reading
Against a backdrop which offers an eerie parallel with events which took place somewhat to the North more than 30 years ago, Catalonia is now threatening to separate from Spain. In so doing the region seems to be putting at risk both the future of the host country and beyond that the outlook for the Euro currency and the process of European unification. Continue reading
Why are Catalans taking part in a human chain this Wednesday? The Catalan newspaper Ara has produced a series of questions and answers in English which should explain everything you want to know about why the human chain is taking place today.
What is the ‘Via Catalana’?
The ‘Via Catalana’ (The Catalan Way) is a political demonstration which will take place this September the 11th. Inspired by the Baltic Way — a human chain formed by up to two million people on August 23 1989 across Estonia, Latvia and Lithuania — its aim is to create a 400 km long chain which will cross Catalonia from north to south. 400.000 people have signed up to take part in the human chain, although organizers hope that the actual turnout will be at least twice that figure. People will be asked to join hands at exactly 17:14 (15:14 GMT). The chain, which runs along highways, roads and city streets, will come to an end at 18:00 (16:00 GMT). If successful, it will be one of Europe’s largest ever demonstrations, following in the footsteps of last year’s march in Barcelona, when up to 1,5 million people walked through the streets of the capital asking for independence, the country’s most massive rally ever. Continue reading
The recent IMF proposals to help stimulate growth and job creation in Spain at least deserve serious consideration.
In a blog post which sought to defend the recent IMF proposal to for a social compact involving a 10% reduction in Spanish wages and salaries, the EU Economy and Finance Commissioner Olli Rehn cited a line from Bob Dylan – “Something is happening here, but you don’t know what it is”. Continue reading
What follows is an interview I did over the summer with the Madrid based publication The Local.
Let’s start with the basics: what are Spain’s current economic problems?
Spain’s economic problems are a knock-on effect of the end of Spain’s property boom. The collapse of the property market led to a drop in incomes, depressed demand for goods and — slightly — lower wages.
We’ve managed to miss our own ten year anniversary, so a very heartfelt and sentimental happy belated to us. It’s a grand old age for a blog, and I think we’ve maintained very high standards year after year. It’s everything I could have hoped for ten years ago and I’m immensely proud of my part in all this. “This is the blog you want for creative, English-language coverage of European affairs”, we boasted, and I think we delivered.
Cheers to my fellow contributors, to Nick Barlow who hopped on board, to Matthew Turner, Tobias Schwarz, and Scott Martens who came along, and to Doug Merrill, Edward Hugh, Mrs Tilton, Scott MacMillan, Claudia Muir, Douglas Muir, Alex Harrowell, Guy La Roche, Iain J Coleman, Jurjen Smies, Emmanuel, Brussels Gonzo, Charlie Whitaker, Jamie Kenny, P O Neill, and Kantoos.
It’s also a reminder to get moving on a long-delayed overhaul of the site. Plans are already in place, so stay tuned.