Author Archives: Edward Hugh

About Edward Hugh

Edward 'the bonobo' is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

Here Comes the First ‘Issue’

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The Chinese, as is often the case, are showing that they have an uncanny knack for putting their finger exactly on the sore spot:

“Beijing on Sunday criticised the European Union’s plans to restrict imports of textile products amid heightened controversy surrounding the threat Chinese clothing exports pose to the world’s manufacturers.”

“A spokesman for the Ministry of Commerce, Chong Quan, said that the EU’s efforts to limit importsof some clothing products from China were rash and unfair…..It is an inaccurate assessment and an incorrect decision,? said Mr Chong of the EU’s latest move. ?It not only sends the wrong signal of trade protectionism to the European industry, but also seriously harms the rights that Chinese enterprises are allowed to enjoy in the global textile trade.?

Really I would say that the timing of this response from China is very much to the point. The EU has now to ‘interpret’ yesterday’s vote and answer. Do Europeans want more protectionism, or should we press ahead with a new and improved Doha round (including the reform of agricultural subsidies, which of course, will not be popular in France). After giving the Bush administration the runaround on currency reform over the last six months, it appears Beijing may now be about to give the EU a little more attention. The really interesting detail will be to see the response. I think this is what might give financial markets a first hint of where we are going.

Roses in Picardy

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In part this vote may be decided by differing participation rates across the regions. It is clear that in some Departments the participation rates are very high. I just heard a reporter in Picardy. Apparently the anti-Maastricht (remember even the Maastricht vote was only a ‘petit oui’) sentiment was high in Picardy. Today they have a high participation. It is such factors, local and regional ones like this, which may in the end decide the vote. Strange to think that the future of Europe may be in the hands of a number of voters ‘on the margin’ over in Piccardy, and similar.

Update One: An estimate for Radio France by CSA suggest a participation as high as 82.5%. One thing is sure, the big news about this referendum, apart from the result that is, will be the participation. No-one can say this isn’t representative. Meantime the metro stations around the Chanmps Elysee have been closed – the police fear spontaneous demonstrations (of joy presumeably). The left have called for a celebratory ‘fevstival’ in the Place de la Bastille at 22:00.

BTW: it is now 20:00. All stations outside Paris and Lyon are now closed.

Update 2: The CSA has now backed off a bit, and the participation will be something in the 70′s %.

Blogging The French Referendum

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Update I: Participation rates at 19:00 have just been released: 66,24 %. This means that it will surely clearly surpass the Maastricht final participation of 69,69 %. The poll estimates are talking about a final participation of 75%. This is big for a topic which many said was ‘abstract’. In Spain, the particpation was in the mid forties. The majority of polling stations close at 20:00 (in 40 minutes) but in Paris and Lyon they close at 22:00.

Well it’s a beautiful hot & sunny spring day here in Barcelona. I’ve got my web-radio tuned to France Inter (France Info) and I’m working quietly away updating some things on my website. I think today is an important day for Europe, and I’m going to be blogging live as the news comes in.
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Looking On The Brighter Side Of Life

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Oh come on, it’s Friday afternoon, the sun is probably shining all over continental europe, and you’re all probably off away from your desks for a weekend in the country or on the beach. So why spoil the fun. I’ll save my piece on Portugal till Monday. And meantime, you deserve something better than ‘gloomy Edward’ on such an afternoon, so why not, the opposite view: Stephen – ‘bright sider’ – Roach:

“As a congenital euro-skeptic, I will be the first to admit that it feels rather uncomfortable rising to the defense of Old Europe. But someone has to. The world is down on the Mother Continent as never before. And Europe, itself, is caught up in a bout of self-flagellation that is getting worse by the day. The risk, in my view, is that this is an overdone story of cyclical angst. While the economic outlook for Europe is far from terrific, it?s not nearly as bad as the consensus mindset would lead you to believe……. At the same time, I would concede that the tails of the political verdict could well have major impacts on financial markets. A decisive French rejection of the EU constitution could force markets to raise the probability of an EMU break-up. A ?yes? vote, by contrast, could spark a huge rally in the euro and in most-euro-denominated assets. We?ll know soon enough.”

I think I’ll deal with this, and with Henry’s arguments when the votes are safely in and counted. Have a nice weekend everyone :) .

In The Interest of Fairness and Balance

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Looking forwards rather than backwards, I can’t help trying to imagine what the world will look like on Monday. (We may all be in for a surprise, but the latest poll seems to put the ‘no’ at 55%, which is quite a large margin of error if it’s wrong, *and* Le Monde today makes the point that as the ‘no’ rises and rises in the polls, the number of undecided voters continues to reduce).

Well, ironically I think one of the consequences will be an attempt to enforce the Stability and Growth Pact. This is why I mention being fair and balanced, since in the past I may have been a little too cynical about this: although not without reason.

I now think The Pact Mark II may have considerably more bite, here’s why:
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Falling rate of Intelligence?

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Conventional marxist theory used to argue that capitalism was doomed to regular and deepening crisis due to the impact of a phenomen known as ‘the falling rate of profit’. Basically the idea runs as follows: since on the marxist view labour is the only source of genuine wealth creation, and capital accumulation means that the proportion of active labour to ‘dead labour’ (capital investment) tends to decline, then the ‘rate of profit’ will diminish accordingly. Now I certainly have no intention of going into all this rigmorole, but I do remember some wit back in the seventies suggesting that if this was the case, then, for example, we could argue that intelligence must be falling, since the quantity of active human brainpower as a proportion of accumulated knowledge (living to dead ‘mental labour’) was constantly diminishing.

Well, low and behold, a paper out this week at the NBER argues just this case.
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The Morning After

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Speculation is already rife about what might happen on Monday following Sunday’s vote in France. One small detail that I hadn’t thought about before, Monday is a bank holiday in the UK, so most traders won’t be working, Bloomberg’s Mark Gilbert feels that could even add to euro volatility.

One thing that is clear is that there are a mounting catalogue of issues to fuel ‘negative sentiment’ next week. The latest of these is the reported statement from German CDU EU spokesman – Peter Hintze – that if the French vote no, then the entry of Bulgaria and Rumania should be temporarily suspended.

“Our position is clear: inclusion of Bulgaria and Romania must be put off if the French vote no,” said the party’s parliament spokesman on the EU, Peter Hintze, in a telephone interview today.

So on May 30th we may have an EU where in one of the main countries the electorate have just passed an effective motion of ‘no confidence’ in their government, whilst in another of the ‘key states’ the existing government already has a ‘sell-by’ date. Add to this the uncertainty over deficits and the SGP, the absence of growth, and the growing unease about what exactly is happening at the ECB and, if you ask me, you have all the ingredients of a major currency crisis. Well, next week we’ll know.

Czech Republic Having Second Thoughts

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I missed this at the time, but apparently officials responsible for monetary policy in the Czech Republic are begining to have second thoughts about joining the euro.

“Czech central bank policy maker Robert Holman said the government should abandon plans to adopt the euro by 2010 because joining the single currency may stifle growth, the first central banker in the country to call for a delay.

“I would not rush with euro adoption because it represents significant risks for us,” said Holman, 51, who joined the bank’s board on Feb. 13, in a May 18 interview in Prague. “The euro zone economy has been growing very slowly in the past five years, and among other factors, it could have been caused by having the common currency.””
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