The Russian Government Forecasts A Possible 8% GDP Contraction For 2009

Of course, with all these large negative numbers doing the rounds at the moment, we are all in danger of going rapidly dizzy, but some pieces of data still have the power to shock, like this morning’s announcement from Russia’s Economy Minister Elvira Nabiullina that the economy may shrink as much as 8 percent this year.

“The specific contraction numbers could be 4 percent or 6 percent or 8 percent,” Nabiullina said in an interview with Bloomberg Television in Moscow today. “We’re doing various calculations, pessimistic and optimistic. We believe much depends on how efficient we are.”

So the Russian Government is still running through the scenarios, and the ministry now promises to submit new growth forecasts by the end of the month, but it is worth bearing in mind that, as recently as last January, the most probable estimate stood at minus 2.2 percent. And the Economy Ministry aren’t the only ones with the excel sheets and calculators out – Alfa Bank, Russia’s largest private bank, Goldman Sachs, Citigroup and the International Monetary Fund have all revised their 2009 growth forecasts down recently, with Alfa this week cutting its outlook to minus 5.7 percent from an earlier anticipated drop of 3 percent. Nabiullina’s deputy, Andrei Klepach, recently described the International Monetary Fund’s estimate for a 6 percent annual drop as “realistic.” Continue reading

How the USSR missed European integration

An interesting post on the reaction from the late-Stalinist Soviet Union towards what was about to become the ECSC/EEC-and-beyond. It seems that the Soviet leadership was much more concerned about the European Defence Community proposal, an eventual failure, than the economic, social, and administrative/political version. But then, this was Europe ten years after the war; who would imagine that the main story there would roughly be “peace, and prosperity” for the foreseeable future.

It’s also telling that it was exactly the forces of economics and of culture that the Soviet Union structurally underestimated in Europe. Curiously, the Soviets missed the significance of economic union even as they shifted from the swagger of the late 40s to the status-quo power of the 1950s – you might think that, if you were going to order your allies in Europe not to make any trouble, and pursue a policy of peaceful competition, you would be very concerned indeed with the other side’s economic integration. This is, of course, 20/20 hindsight.

So what is it with Tory MEPs and the Internet?

Those horrible surveillance proposals came up again in the European Parliament, and got shot down again. Even though their co-author Syed Kamall did come out against some forms of mass surveillance, I promised I’d look into the two British Conservative MEPs who keep doing this. Anyway, so we’ve got Syed Kamall and Malcolm Harbour, and we’ve also got the great new Web site for spying on MEPs, Votewatch.eu, as well as a gaggle of other things.

Harbour is easy enough to deal with; as his Wikipedia article explains, he was involved with a highly transparent lobby for software patents which sent unsolicited bulk e-mail from his address, supposedly without his knowledge. More about the “Campaign for Creativity” – in reality, Microsoft – is here. He’s now a “political member” and member of the board of governors of the European Internet Foundation, whose “business members” include several firms involved with the CFC and which was itself party to the software-patent campaign. Conveniently, according to the EIF’s Web site, only the business members have to pay a membership fee.

Kamall, who is leading the Tory list for the London region at next month’s election, is slightly different. His primary outside interest is something called the “Global Business Research Institute”, a supposed think-tank arguing for the benefits of globalisation which has a rather second-rate Web site and not very much else. In fact, it doesn’t seem to do anything much but collect links and accept donations – a figure of $500 is mentioned. At some point it seems to have been associated with Alex Singleton’s Globalisation Institute. What interests me about this is why, if he wants to blog, he doesn’t just get a blog – why does he need an Institute?
Apparently the institute is a British company limited by guarantee, that is to say, a non-profit entity (so donations are tax-deductible) – its entry in the register of companies is here.

However, it can hardly explain his commitment to total surveillance; its total expenditure for 2008 was £15, the fee for filing its accounts.

The Agony Continues – Latvian GDP Falls By 18% (Updated)

Latvia’s economy shrank by nearly a fifth (year on year) in the first quarter, according to the latest flash estimate from the national statistics office. Obviously this is a dreadful state of affairs, and illustrates just how difficult the country’s chosen adjustment path is proving to be.

Gross domestic product fell 18% year-on-year, and Statistics Latvia reported that the decline was broad-based, with manufacturing down 22%, retail trade down 25% and hotel and restaurant services output 34% lower from a year earlier. “The economic situation is of course very serious,” Latvian Prime Minister Valdis Dombrovskis reportedly told a press conference in Stockholm, and who could disagree. Continue reading

Bad Russian Radar

An unexpected consequence of the North Korean attempted satellite launch was that it has demonstrated that Russian early-warning radar coverage is poor. Specifically, the Russians didn’t detect the North Korean launch at all; they picked up the object during its suborbital flight, but not during its ascent. This is worrying, because it suggests two things – first of all, that the Russians would only get warning of a missile launched from that direction when it was already about to re-enter the atmosphere, giving them very little time to analyse the situation, and secondly, that the US Groundbased Midcourse Defense interceptors based on the Pacific coast could, if launched to intercept a North Korean missile, appear on the Russian radars flying up over the edge of the Earth, as if they were incoming North Korean, Chinese, or US submarine-launched missiles.

This obviously involves some pretty awful risks, and it is another good reason to be sceptical of GMD; in a real crisis, would it actually be wise to fire it? If not, of course, it’s useless and the potential enemy can be expected to take account of that. Worse, however, is that the Russians are bound to consider a radar contact from that direction more threatening than one from over the Pole, from the West, or from the South, directions in which they have much better coverage. Therefore, the very fact of the weakness is destabilising; it increases the perceived importance of quick reaction, and therefore the coupling between Russian and other missile/radar complexes. With the increasing numbers of ballistic missiles in Asia – Indian as well as Chinese, North Korean, or submarine-based – this is not good news.

It’s been suggested that one solution would be a Joint Data Exchange Centre, a headquarters in Moscow in which US and Russian staff would swap information from their warning systems. This has a serious problem; if one party is willing to launch a first nuclear strike, they are surely also willing to feed fake data to the JDEC and to accept the imminent death of their representatives there. Unfortunately, it is unlikely to be credible. Hence another plan, RAMOS (Russian-American Missile Observation Satellite). This foresaw that the US would finance and help build a constellation of satellites similar to its own Defense Support Program birds, which detect rocket launches worldwide using infrared cameras, which would broadcast their data in the clear so that both powers (and anyone else) could receive it and use it independently. Both parties would participate in their development, and would be able to do anything they liked to verify the satellite before launching it on one of their own rockets. (Perhaps now we could publish the design under the GPL.)

This Clinton administration idea, however, failed to get funding back in 1999 and was promptly canned by the Bush administration as far too sane. Perhaps it could be resurrected. Or alternatively, whatever the Americans think, why shouldn’t the European Union do it? The radar position is not as bad in our direction, but the Russians have their own missile-defence interceptors that do fly out our way, and there was that horrible business with the Norwegian research rocket. We have a serious space industry, and the French would be wholly delighted; they consider space power to be a major national priority anyway. It’s better than relying on another Stanislas Petrov.

VIPs have data too

For years there have been concerns about the voracious appetite for personal data on citizens created by governments and the private sector, and facilitated by technology.  If one thing might be changing, it’s a series of incidents where politicians get to experience for themselves what happens when personal data works its way into the public domain.  Does UK Home Secretary Jacqui Smith have an increased awareness of privacy issues with her husband’s PPV purchases being tabloid fodder?  And now the jinxed Czech Presidency of the European Union council uses a Saturday press release to confirm a story from Finland that passport and schedule details for the EU delegations at the EU-US summit were left on a computer at a Prague hotel.   The press release implies that a person deemed to be responsible has been disciplined in some way, but this just shows that for all the talk about safeguards and firewalls, this type of data is ultimately handled by fallible people, even if well-intentioned.   Hopefully, incidents like this move data privacy issues higher on the political agenda.

The ECB schism

You might think that enough has already been written about dealing with deflation and unconventional monetary policy tools.  But apparently not enough to settle the question of whether the European Central Bank should in fact further cut interest rates and shift to quantitative easing i.e. outright purchases of debt.  This Bloomberg story puts names on who is arguing for what, with an extended Hellenic phalanx (George Provopoulos, Athanasios Orphanides and Lucas Papademos) pushing for quantitative easing but the Bundesbank’s Axel Weber arguing that the ECB is already near its limits on any type of loosening.

Continue reading

They need a second opinion

Statement from the meeting of EU finance ministers and central bank governors (ECOFIN) in Prague –

The Ministers and Governors singled out the excessive focus on the supervision of individual financial market institutions and the related neglect of systemic risks as shortcomings of the current system.

Does anyone think that individual regulated institutions were suffering from excessive regulatory focus in the last 10 years?   If so, which one?  RBS, Hypo, Fortis, SocGen?  Inquiring minds would like to know.

Paging Vaclav Klaus

The response to yesterday’s no-confidence vote in the Czech government, holder of the EU Council Presidency, was a standard “move along folks, nothing to see here”.  Normal service would not be interrupted, the remaining 3 months of the Presidency would continue, and the grip-and-grin festival with Barack Obama next week would continue as before.

That was presumably before the lame duck PM Mirek Topolánek’s bizarre speech to the European Parliament today, which is going to go down like a lead balloon in Washington (and probably London too) –

Continue reading

Czech Government Falls

The coalition led by Mirek Topolanek was forced out of power last night after losing a confidence vote in parliament, 101-96, over its handling of the economy.

Off the top of my head, I can’t think of another time in the last 10 years that a government has fallen while it held the EU presidency. Given the present rotation, the Czechs won’t get another chance until the 2020s. Oops.

Topolanek will stay on as a caretaker until Czech President Vaclav Klaus names a new prime minister who can assemble a working coalition in parliament. If three attempts to form a government fail, early elections must be called. What a mess!