In Search of Lost Time

Time is a fascinating concept. Today we learn that, according to the Oxford English Dictionary, ‘time’ is top noun in use terms in the English language. Interesting statistic that, especially as time is such an integral component in our decision making process.

Also in today’s news we learn from Dr. Kunio Kitamura of the Japan Family Planning Association that “”Japanese people simply aren’t having sex”.

Now why should these two little details be interesting, and what connection could there be between them?
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New OECD Economic Outlook….

…below the fold.

But first an introduction. I’m guestblogging from Amsterdam and my site can be found here. Very much honored to post at the Fistful (I would be, they’ve got visitors), although in all honesty they might be better served by a Francophone blogger.

As it is, they are grossly misunderestimated by the French part of the blogosphere (le sphère au blog?).
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OECD on Portugal with a touch of Eurozone criticism

In case you were wondering about the Portuguese economy a recent OECD survey tries to steer you in the direction and although the OECD are undobtedly right in many of their observations the case of Portugal also mirrors how being a member of the Euro does not necessarily help you to achieve those honourful demands of convergence.

Let us see what OECD has to say about Portugal’s economy.
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Sustaining Growth in Turkey

I don’t suppose it’s much of a secret that Turkey is one of the main ‘growth tigers’ in the ambit of the EU. The big issue is, I suppose, just how sustainable Turkey’s growth is. Well the World Bank is on the story, and now has a Country Economic Memorandum entitled Promoting Sustained Growth and Convergence with the European Union. As the FT notes:

Turkey needs to create more jobs, get more women into the workforce, and send its children to school for longer if it is to improve its chances of joining the European Union, the World Bank said on Monday.

I absolutely agree, and address the significant inequality between Western Turkey and the Kurdish east, may I add. But I do find myself having the thought, if Turkey does all the things which she is being encouraged to do. If Turkey becomes one of the largest and most dynamic economies in the neighbourhood of the EU, will this really increase the membership chances, or will this only make the resistance in some quarters even stronger?

Italy Had Zero GDP Growth In 2005

I am sure some people must sometimes feel I am exaggerating when I try to explain the rather dire straits which I feel the Italian economy has fallen into. If you are one of those people I would ask you to take a good look at the latest data release:

Official statistics published on Wednesday showed Italy experienced zero growth in 2005 underlining the dire state of the country’s economy and dealing a blow to Prime Minister Silvio Berlusconi’s election campaign…..Istat, the official statistics institute, said that the weak data contrasted with the US’s 3.5 per cent, the UK’s 1.8 per cent, the 0.9 per cent of Germany and Spain’s 3.4 per cent.

And it’s not as if 2005 was a bad year for the global economy generally, the world economy steamed ahead at a rate of around 4.25% last year, driven by systematic development in India and China and strong growth in the US. Italy has now had an annual growth rate of around 1% per annum over the last decade, and I see no good reason to justify the expectation that this is going to perk upwards sharply anytime soon.

Hot Labour Anyone?

This post has one sovereign virtue: apart from in the current sentence it will not refer, either directly or indirectly, to the Catalan Statute. The topic it does deal with however is probably equally vital for the future of Spain. The issue is Spain’s housing boom, and the role of immigration in fuelling it. Two facts above all others stand out: Spain is currently ‘enjoying’ the longest and deepest housing boom (in the current round) among all the world’s developed economies (see this useful article from the Economist, or this one from Business Week), and Spain is also enjoying sustained rates of immigration which – at around 2% of the population per annum, may well be the most intense ever experienced in a developed economy. For purposes of comparison I could point out that Spain’s net migration rate of 17.6 per thousand in 2003 contrasts sharply with that recorded for the old European Union 15 for the same year – 5.4 per thousand – and is even well above the level recorded by Germany in the early 1990s – a maximum of 9.6 per thousand in 1992 – or by France in the early 1970s. So there is a housing boom, and there is immigration, the question is, what is the connection?
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Is The ECB Measured-Pace Cycle Over?

Well, not unexpectedly, the ECB decided to leave its main refinancing rate unchanged at 2.25% yesterday. Rather more surprisingly (for some at least) the German Federal Statistical agency reported that German economic growth ground to a halt at the end of 2005.

According to the Financial Times:

Johann Hahlen, president of the federal statistics office, said that growth last year had been based largely on exports, with domestic demand remaining weak. “Broad and self-supporting growth is still not being observed”.

Again according to the FT, Herr Hahlen’s comments “surprised economists, who had expected growth to continue and have become increasingly upbeat about the outlook in 2006”. I’m surpised the FT can be so blazé in saying ‘economists’: they certainly didn’t surprise me. I think it was reasonably clear that this was coming. If I am surprised by anything it is that it has come so quickly.

So where do we go from here? Well Jean-Claude Trichet, the ECB president, has been trotting out the party line to the effect “we have to be vigilant as regards inflation”, but with inflation now falling back (in December the harmonised rate slipped back a fraction to 2.2% from the 2.3% in the year to November) and with virtually no ‘second round oil rise’ effects in evidence this argument is going to sound increasingly hollow. Couple this with the ongoing ‘low- growth’ environment in the Eurozone (we’re still awaiting the sort of news from Italy which will again I imagine surprise ‘economists’) and you can see that there will be few reasons to justify any serious interest rate rises. At the limit we may just see one more quarter point rise squeezed-in before year’s end. Aside from that the ECB tightening cycle is, as I suggest, just about done.

Since it has recently become fashionableto try to predict the future, below the fold are my 2006 forecasts.
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What A Surprise!

According to the Financial Times this morning “Vietnam’s economy is expected to maintain rapid growth in the year ahead, after its gross domestic product last year expanded 8.45 per cent – the fastest pace of growth in nearly a decade.” This is to be added to the fact that “Economic growth in Vietnam, which averaged about 7 per cent between 2000 and 2004, has been driven in recent years largely by surging exports, after the signing of a long-anticipated bilateral trade agreement with the US in 2001”.

Now let’s take a quick look at the charts, yes, that’s it: median age 25.51, fertility 2.2 , life expectancy 70.61. The median age is still a little low for achieving complete take-off, but it is certainly in at the bottom end of the ‘new tigers’ range, and with fertility down to 2.2 and life expectancy already comparatively high, that median age looks set to rise rapidly.
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The Pébereau Report

According to the French writer Rabelais debt and deceipt are almost invariably inextricably linked. So it is appropriate that it should be a French banker – Michel Pébereau – who takes it upon himself to try to bring this harsh reality home to a French public which still seems excessively steeped in the finer details of the arts of self-deception. Pébereau does not mince words: over a quarter of a century century French public policy has accumulated for itself a national debt has neither supported economic growth nor reduced unemployment. The debt is “asphyxiating” and unless the State acts to reduce its spending now France will “lose control of the financial situation” before the end of the decade. Indeed so stark is the picture Pébereau paints that French economy minister Thierry Breton, on reading the report, was moved to comment: “Unbeknownst to them, our children are already financing part of our standard of living.”
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The Political Fallout of Italy’s Growth Problem

Yesterday the news from Italy was the sudden drop in industrial output, today it is the fact that this makes Berlusconi’s re-election much more uphill work. In particular his coalition just lost a vote in Messina, Sicily, that they normally should have won.

This trend in indutrial output is important for what it implies about growth in Italy this year and next, and this is important for the knock-on implications for Italy’s deficit. This Italian government has incorporated an economic growth target of 1.5 per cent in its 2006 budget, and this target now seems improbable. This means the budget shortfall will be greater than agreed with Brussels, and that the deficit will rise more than anticipated. More problems.

The IMF is critical of the approach the Italian government is taking and has already expressed its fears that Italy will not meet its goal of reducing its budget deficit to 3.8 per cent of gross domestic product in 2006 from 4.3 per cent this year. The principal culprit for the IMF: Italy’s slow productivity growth.

“The nation’s economic problems are essentially ‘made in Italy’,” an IMF report said last month. “The fundamental factor accounting for weak competitiveness, and for a decade of disappointing economic performance, is slow productivity growth. Over 1996-2004, growth of output per hour worked was the lowest among all industrial countries and a cumulative 5.5 percentage points below the euro area average.”