Economic Assessment of the Euro Area

This post was written by John Fitz Gerald

On behalf of the EUROFRAME group of research institutes, the ESRI today published a report entitled “Economic Assessment of the Euro Area”.

Among the findings contained in the report are the following:

·         As a result of relatively weak external demand, continuing financial uncertainty and the contractionary stance of fiscal policy, output fell in the Euro Area in 2012 (-0.5 per cent). Over the course of 2012 there was a slowdown in some key economies, which were previously contributing much of the growth. This slowdown has carryover effects into 2013.

·         Even though we anticipate a recovery in confidence in some major economies over the course of this year, the outcome for the Euro Area as a whole is still likely to be a further limited fall in GDP in 2013 of 0.3 per cent. Weak external demand will not be enough to compensate for the fall in domestic demand.

·         For 2014, a recovery in domestic demand should see a return to significant growth in GDP of around 1.3 per cent. However, this forecast must be considered in the light of the continuing vulnerability to financial shocks of a number of the Euro Area member states.

·         This vulnerability of countries in financial distress is being addressed through a continuing major fiscal adjustment. However, the fiscal adjustment under way across other members of the Area is also having a substantial negative effect on growth, particularly in the crisis countries. Without this fiscal adjustment the Euro Area would be looking to growth this year at around 1½ per cent and next year at approximately 2 per cent.

56 Responses to “Economic Assessment of the Euro Area”

  1. seafóid Says:

    There was a quote from some finance wallah in the FT back in June. “The Europeans can be depended on to go right to the edge of the cliff and then do the necessary” or something similar.

  2. Aidan R Says:

    Dawn Holland and Jonathan Portes on Self-Defeating Austerity here:

    http://ner.sagepub.com/content/222/1/F4.full.pdf+html

  3. grumpy Says:

    This:

    http://www.bloomberg.com/news/2013-02-20/pound-weakens-third-day-versus-euro-before-boe-minutes.html

    ..is going to put France in particular under a lot of pressure. Combined with what the Japanese have been doing it is likely the French will start to get vocal and focused about Euro non-depreciation. Tension with Germany probable.

  4. Paul W Says:

    @ Grumpy
    The FX situation has been very interesting for a long while now. What I notice here in the US is just how cheap French wine is in particular…way cheaper than e.g. US wines but also other imports from Australia, NZ, etc. Can get a very decent enough, table wine 750ml bottle of Mouton Cadet, Phillip de Rothchild red for $7.50, inclusive of sales taxes. That’s very low for the NYC /Tri-State area. One of the very visible signs of the crisis.

  5. Paul W Says:

    I should add that this seems to me to indicate that the French are dumping whatever wine they can, at whatever price. With the FX going against them, it points to their wine industry being heavily squeezed. The FX is squeezing any (low) profitability left.

  6. seafóid Says:

    I dunno if Mouton Cadet would be much of a bellwether for the French wine industry . It is pretty generic. If you pay $7.50 you might get $2.50 worth of wine.

    A lot of French wine is consumed in the EZ and they are still fleecing customers on the higher end via the en primeur system .

  7. grumpy Says:

    @Paul W

    Interesting, but the thing that the French are particularly sensitive about is the characteristic their economy shares with that of the UK - ie not being that good at manufactured exports except for the very significant ‘defence’ industry.

    They are wary of a situation where GDP under-performs vs EZ while the Germans and Japanese out-export them generally, meanwhile British defence companies eat their French counterparts lunches via devaluation.

    French attitudes to the periphery may be influenced by this.

  8. Paul W Says:

    @ Seafoid
    Ok, it’s not a simple story. Plenty of articles like this:

    http://www.wine-searcher.com/m/2013/02/record-year-for-french-exports

    No sign of any price rises for French wines here in the US…on the contrary. Volume, volume, volume…at low prices.

    http://www.guardian.co.uk/guardianweekly/story/0,,1210238,00.html

    Declining consumption at home in France, but also generally in Europe. Note their efforts to improve the quality of supermarket wines. Specifically chose Mouton Cadet as my example.

  9. David O'Donnell Says:

    The irrationality of [EZ economic policy] is not an argument against its existance; rather it is a conditon of it.

    [Nietzsche reloaded in the context of this blog's 'eternal recurring']

  10. Michael Hennigan - Finfacts Says:

    The FT reports that the head of US tyremaker Titan International has launched a brutal attack on productivity in France, telling the government that some French workers “work only three hours a day” and his company would be “stupid” to consider taking over a factory in the country.

    In the letter published in Wednesday’s edition of Les Echos, the French financial newspaper, Taylor writes: “The French workforce gets paid high wages but work only three hours. They get one hour for breaks and lunch, talk for three and work for three. I told the French union workers to their faces. They told me that’s the French way!”

    The communist-backed CGT last year opposed a possible Titan takeover of a floundering Goodyear plant. 

    Taylor himself was stupid to engage in this abuse. He also said the US government was “not much better than the French”.

    Frances problem’s with Unilever’s closure of a tea plant and Arcellor Mittal, which employs 20,000 in France, doesn’t help in attracting foreign projects.

    France’s trade deficit shrank by €7bn in 2012, to €67bn, from its record high of €74bn in 2011 - - it was the 11th straight deficit. Germany had a €174bn surplus.

    However, while export growth was slowed by a fall in sales of cars, particularly to the EU, which takes three-quarters of France’s car exports. By contrast, exports from France’s strongest sectors (aerospace, healthcare and luxury goods) continued to grow rapidly. Exports outside of the EU continued as well to progress rapidly in 2012 (+8.1% from +8.8%) driven by sales to the US and Asia. However, growth in exports within the EU plummeted from +7.2% to +0.3%, with sales to Germany, new members and southern Europe drying up.

    L’Occitane en Provence, which was founded in 1976 by Olivier Baussan as a one-man operation, has become a global success as a manufacturer and retailer of skincare, body care, fragrance and essential oils. After a hard slog, it now sells 50% of its turnover in Asia, where global personal care brands struggle in many markets. It is listed on the HK stock exchange and usually operates from its own branded stores.

    L’Occitane skillfully promotes its natural ingredients that are used in its Provence-based manufacturing (all its mfg is in France) with imagery of fields of purple lavender and the yellow ‘Immortelle de Corse’ flowers. It also uses old-style packaging to differentiate itself from the other global brands and it has more than 1,000 of its own standalone stores across the world, selling at premium prices.

    I find this €3.2bn valued company interesting as it took a long time to succeed in its export markets — which is normal — and it has successfully made the natural beauty and produce of the French countryside an intrinsic part of its brand.

  11. Paul W Says:

    @MH
    The L’Occitane story is indeed positive…but it’s not a bellweather industry for France I would say. Wine on the other hand employs 300,000 people directly. Your stats above are very interesting, as always.

    What I do love about French industry is that much of it remains French owned. In Ireland, we sell off (too early anyway) much of what is really good e.g. Irish Distillers (owned by the French Pernod Ricard). Irish whiskey is no longer Irish.

  12. Paul W Says:

    ….However the French drinks’ industry is acquiring and using other “better” products to mitigate the deteriorating healt of its wine industry…..

    http://www.independent.ie/business/irish/jameson-sales-up-13pc-in-first-half-as-us-revenues-rise-24pc-29070627.html

  13. David O'Donnell Says:

    Spain:
    Economic doldrums and political crisis
    20 February 2013 El Periódico de Catalunya Barcelona

    The prime minister’s annual state of the nation speech on February 20, coincides with one of the country’s worst economic, social and institutional crises, which has left no one unscathed. Rotten with corruption, the political system is threatening to implode, putting an end to Spanish democracy.

    Virtually everywhere you look, on every level of the state, it is hard to find a public figure who is not facing some kind of coercive pressure. And no political party can say that it is not in danger.

    http://www.presseurop.eu/en/content/article/3438361-economic-doldrums-and-political-crisis

  14. David O'Donnell Says:

    The EZ Patient - Cartoon of the day

    Health:

    Next!

    20 February 2013 Süddeutsche Zeitung Munich

    http://www.presseurop.eu/en/content/cartoon/3438121-next

  15. David O'Donnell Says:

    back to labor economics - and the ol statsig bias in journals

    Minimum Wage a Winner Both Politically and Economically
    Posted by Kenneth Thomas | 2/19/2013

    President Obama’s proposal to raise the minimum wage to $9.00 per hour puts the Republicans between a rock and a hard place politically. Paul Krugman echoes the point that a big majority of the population supports a minimum wage increase, including a majority of Republicans (his linking to the original poll source appears to have crashed that website, but I will update later). Yet the Republican leadership remains trapped because it opposes this increase as well as any alternative policy that might make the poor better off, such as increasing the Earned Income Tax Credit or endorsing a Guaranteed Minimum Income (points Matthew Yglesias makes in the link above). As further evidence, the minimum wage increase Proposition B in Missouri in 2006 passed 76-24, probably helping Senator Claire McCaskill to her first Senate victory with under 50% of the vote.

    Moreover, much recent research (via Think Progress) shows no “job killing” effects from raising the minimum wage. As originally shown by David Card and Alan Krueger, there was strong evidence of “publication bias” in the studies underlying the former economists’ consensus that the minimum wage reduced jobs. That is, economics journals tended to prefer to publish studies with statistically significant results and not publish those showing no effect from the minimum wage. Researchers thus adjusted their statistical specifications until they achieved statistical significance, thereby generating a mass of studies that all barely reached statistical significance despite larger volumes of data which should have produced stronger results. As the Schmitt paper emphasizes, more recent studies of studies (”meta-analysis”) continues to support the conclusion that the purported job killing effect was a mirage.

    http://www.angrybearblog.com/2013/02/minimum-wage-winner-both-politically.html

  16. David O'Donnell Says:

    contd.

    cross-national comparisons of the minimum wage and unemployment rates also do not support the view that the minimum wage is the job killer Republicans claim it is. Indeed, as in my September 2011 post, nine OECD countries have higher minimum wages rates than the U.S. does on a purchasing power parity basis that adjusts for the cost of living, yet only two have higher unemployment rates (France and Ireland), while the U.K.’s unemployment rate is the same. The table below illustrates this and underscores the point that the minimum wage is a winner for the middle class. [see Table in above link

  17. David O'Donnell Says:

    finally

    Martin Wolf Misses the Real Reason the Eurozone’s Unhappy Marriage Has Not Broken Up Yet - 02/20/2013 - Yves Smith

    Wolf … proceeds to tell us that the Eurozone continues to be a resolute practitioner of austerity policies. Readers may recall that there was a huge kerfluffle in the economics-related media when the IMF admitted it was all wrong, that the fiscal multipliers in the Eurozone had turned out to be larger than one. In econ-speak that means you can’t starve your way back to health. Cutting fiscal deficits results in an even greater economic contraction, resulting in even worse debt to GDP ratios. But the rest of the European officialdom seems to be in shoot-the-messenger mode.

    Read more at http://www.nakedcapitalism.com/2013/02/martin-wolf-misses-the-real-reason-the-eurozones-unhappy-marriage-has-not-broken-up.html#LpZ0PPl6Ev7wHbVT.99

  18. David O'Donnell Says:

    So why are the periphery countries suffering this level of unproductive pain? Because the countries aren’t making the decisions. It’s powerful local politicians who are selling out their countries, working in cahoots with Eurozone technocrats. And I can assure you none of them are sharing in the suffering of periphery country workers. [Yves Smith

    +1

  19. Mickey Hickey Says:

    A left of centre viewpoint.

    Independent Annual Growth Survey (IAGS)

    Three pages on Ireland.

    http://www.socialistsanddemocrats.eu/gpes/media3/documents/4128_EN_4121_EN_iAGS_Report_final_version_EN.pdf

  20. Mickey Hickey Says:

    This is the background page to my previous post.

    http://www.progressiveeconomy.eu/content/about-us

  21. Joseph Ryan Says:

    @John Fitzgerald

    ” Even though we anticipate a recovery in confidence in some major economies over the course of this year, the outcome for the Euro Area as a whole is still likely to be a further limited fall in GDP in 2013 of 0.3 per cent.”

    On what basis do you ‘anticipate a recovery in confidence’?

    I would like to think that you may be correct but would like to know why you believe this.

  22. DOCM Says:

    How many economic institutes does it take to change a light bulb?

    For a more realistic view off the situation confronting Europe at this juncture, the man in charge of the funding arrangements is worth consulting.

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_17/02/2013_483485

  23. DOCM Says:

    The WSJ view of the situation in France and of the country’s incapacity to keep up with Germany.

    http://online.wsj.com/article/SB10001424127887323764804578314363987090712.html

  24. Fiatluxjnr Says:

    Is our neighbour sinking…
    http://www.telegraph.co.uk/finance/comment/9883519/Losing-our-AAA-rating-could-mean-bank-collapse-and-deflation.html

  25. Brian Woods Snr Says:

    @ JfG: “For 2014, a recovery in domestic demand should see a return to significant growth in GDP of around 1.3 per cent.”

    And should domestic demand continue to contract - then what? GDP has an energy component - increase use of energy correlates with an increase in GDP. So a decrease in energy use will lead to a decrease in GDP. Our energy use has declined significantly since 2008. So, if you want to ‘predict’ GDP - then measure the increase/decrease in energy usage. Its not 1:1, just positively correlated in some fashion.

    For those with strong constitutions: Our Investment Sinkhole Problem - http://www.theoildrum.com. Read some of the comments for a full appreciation of our financial and energy predicament. Its not confidence building.

  26. David O'Donnell Says:

    Another Austerity Victim: Bulgarian Government Resigns Amid Protests

    Europe’s debt crisis claimed its latest victim on Wednesday when the Bulgarian government stepped down after days of violent nationwide protests against austerity measures, high energy costs and corruption.

    http://www.spiegel.de/international/europe/bulgarian-prime-minister-borisov-resigns-following-violent-protests-a-884463.html

  27. David O'Donnell Says:

    Spain and Italy: The Euro Crisis Gnaws at Europe’s Underbelly
    By SPIEGEL ONLINE Staff

    The euro crisis may have dropped out of the headlines recently, but Spain and Italy would seem to be doing their best to bring it back. Real estate giant Reyal Urbis’ bankrupcy has raised fresh concerns about Spanish banks and many fear that a Berlusconi election victory could drive Rome to seek emergency aid.

    http://www.spiegel.de/international/europe/spanish-economy-and-italian-politics-could-trigger-euro-crisis-return-a-884458.html

    The Euro [Banking] Krisis: Nietszche says it best - ‘ETERNALLY RECURRING’

  28. Bryan G Says:

    Euroframe GDP growth estimates:
    Winter 2010: predicted 2012 = 1.7; actual = -0.5
    Winter 2011: predicted 2013 = 1.4; latest = -0.3
    Winter 2012: predicted 2014 = 1.3; actual = ???

    “Good times, there will be good times
    We’re two years behind, but there will be good times
    Good times, there will be good times
    Doubters never mind, there will be good times”

    A classic song that never goes out of date…

  29. DOCM Says:

    The difficulty with this study is that, while it contains much useful information, it does not examine why the countries involved are embarked on such an austerity exercise. Apart from Germany, they appear to have little choice but to suffer through this phase in the hope of an improvement in overall economic circumstances.

  30. DOCM Says:

    Another point that can be made is that the choice of countries for comparison purposes appears rather random. Deutsche Bank in a recent study - to which I have linked elsewhere - identifies where the real “pain threshold” lies in terms of the political pressures on European leaders.

    http://xa.yimg.com/kq/groups/17389986/1473140226/name/Deutsche+Bank+Focus+Europe.pdf

    In short, it seems that only Germany can comfortably cope with a rising euro. The challenge for the other major economies is to carry out major structural reforms in the middle of an economic downturn.

    How this circle can be squared is not obvious. The hope seems to be that by the end of March the “final” arrangements for the programme countries will be in place, countries - notably Italy - will have the political capacity to continue the reform process and the international economic climate will enable the whole doubtful strategy to work.

  31. Brian Woods Snr Says:

    @DOCM: “… they appear to have little choice but to suffer through this phase in the hope of an improvement in overall economic circumstances.”

    No. The ARE alternative options - just not one’s that suit some folk (like those in power). And each and every one is bad - for the ordinary folk.

    Lets just park the ‘austerity’ adjective for a while and consider the nature of an exponential plot of a real variable in a physical system (subject to the immutable laws of nature and the iron rules of math - not the unicorn-style laws and math axioms of economics). And what the physical laws and math rules mandate for physical systems (all economies are physical systems embedded within a biosphere with finite resources): they mandate REAL (like absolute) limits.

    And it would appear from the slowly emerging empirical evidence that we may have entered onto the margins of one or more of those limits (the margins tend to be somewhat broad in temporal terms). The rising exponential plot-line of aggregate economic activity has inflected (as it must) and is tending toward a maximum. This process cannot be reversed - but it is possible to slow it down. This is being attempted - with increasingly poor results. And, depressingly, will continue until exhaustion finally brings about a cessation. Could be a decade.

    This is where many ‘western-style’, economically developed states are now (inflecting toward their maxima) Hope is good. Just remember that Unicorn - it sh*ts gobstoppers!

  32. DOCM Says:

    @ Brian Woods Snr.

    It would be nice to think that the discipline that is described simply as “economics” could be subjected to the scientific method but I cannot see how this can be done. As this study tends to underline, there are attempts at it by treating economies as if they existed in some aseptic world divorced from the rough and tumble of politics and human folly.

    Regling, the head of the EFSF and now the ESM is one active practitioner who manages to straddle the divide.

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_17/02/2013_483485

    Our minister for finance also seems to be able to manage it.

    http://www.irishtimes.com/newspaper/finance/2013/0221/1224330309035.html

    P.S. To ensure that we get past the Ides of March, progress will also have to be noted on the domestic budgetary front. Sacrosanct “relativities” in the public sector are being shown to cut both ways. That they can survive at all must now be in question given the general misguided approach to public service reform.

  33. DOCM Says:

    @ All

    FYI (HT Eurointelligence)

    http://www.voxeu.org/article/panic-driven-austerity-eurozone-and-its-implications

    No doubt the author is aware of the comment attributed to Keynes that “markets can remain irrational longer than you can remain solvent”.

  34. Fiatluxjnr Says:

    Austerity is working!
    http://www.rte.ie/news/business/2013/0221/368852-euro-zone-business-slump-worsens-unexpectedly/

  35. grumpy Says:

    @docm, fiat

    Both you and other economists should be mindful that Austerity is not only the favoured response for reasons of political bias for many influential people, but it has the additional attraction that to whatever extent it does not work, central banks respond via monetary policy to boost asset prices as their favoured route to affect the real economy.

    For those who have both the above political bias and hold financial assets, Austerity appears to them a bit of a ‘win win’ scenario.

    The Fed is provoking a bit of a minor sulk today by suggesting it might, at some point, start playing ball less enthusiastically.

  36. Mickey Hickey Says:

    @DOCM
    Thanks for the VOXEU link.
    The concluding paragraphs hit the nail on the head.

    In order to avoid misunderstanding, we are not saying that southern European countries will not have to go through austerity so as to return to sustainable government finances. They will have to do so. What we are claiming is that the timing and the intensity of the austerity programs have been dictated too much by market sentiments of fear and panic instead of being the outcome of rational decision-making processes.

    Financial markets did not signal northern countries to stimulate their economies, thus introducing a deflationary bias that lead to the double-dip recession.
    The desirable budgetary stance for the Eurozone as whole consists in the south pursuing austerity, albeit spread over a longer period of time, while the north engages in some fiscal stimulus so as to counter the deflationary forces originating from the south. The northern countries have the capacity to do so. Most of them have now stabilised their debt-to-GDP ratios. As a result, they can allow a budget deficit and still keep their ratio constant. Germany in particular could have a budget deficit of close to 3%, which would keep its debt-to-GDP ratio constant. Given the size of Germany, this would allow for a significant stimulus for the Eurozone as a whole.

    The intense austerity programs that have been dictated by financial markets create new risks for the Eurozone. While the ECB 2012 decision to be a lender of last resort in the government bond markets eliminated the existential fears about the future of the Eurozone, the new risks for the future of the Eurozone now have shifted into the social and political sphere. As it becomes obvious that the austerity programs produce unnecessary sufferings especially for the millions of people who have been thrown into unemployment and poverty, resistance against these programs is likely to increase. A resistance that may lead millions of people to wish to be liberated from what they perceive to be shackles imposed by the euro.

  37. Brian Woods Snr Says:

    @ DOCM: Thanks for the update and links.

    Science v Economics: Think - Alice in Real World v Alice in Wonderland.

    Reductions in wages/salaries/entitlements or whatever. The empirical evidence available* suggests that this is a very bad (political) move. Causes deep resentments, resistances and morale gets trashed. Lets see how this develops.

    * “Why Wages Don’t Fall in a Recession”: [Truman Bewley]. Recommended by Kevin Denny.

  38. DOCM Says:

    @ Mickey Hickey

    I think that the analysis is mistaken. Markets are markets. Getting the northern countries to reflate would be of only minor assistance. In any case, the countries concerned, having gone through a rigorous programme of structural reform, are not about to throw away the advantage that they have gained. It is, furthermore, doubtful if they are in as good a position as imagined e.g. the Netherlands.

    At best, there will be some organised softening in Merkel’s position as part of the election campaign. There is, for example, the spectacle of the main opponents - the CDU and the SPD - trying to get the FDP to agree to a countrywide statutory minimum wage. The situation with regard to energy policy is also critical. Germany has no more access to domestic energy sources than France but has, nevertheless, decided - or, rather, Merkel has - to abandon nuclear energy (replacing it with a dedicated gas pipeline across the Baltic from Russia!).

    @ Brian Woods Snr.

    It seems to me that there is, by this stage, a widespread recognition that the country simply cannot continue to borrow money to pay rates of salary in the public sector well above those in the countries that are currently lending us their credit card. I do not know how the story will end. One benefit, however, is that it should put a stop to all the management guff about an “integrated public sector”. The very opposite is what is required with a major question mark being put over the granting of public sector status to various groups in the first place.

  39. Fiatluxjnr Says:

    @Grumpy

    I think it’s a bit more than a minor sulk. Interestingly the fx and stock markets are reacting in tandem. Those EU PMI numbers are dire…especially for France and of course German is doing ok. She is having a good crisis.
    Only time will tell if she manages to impoverish the remainder of Europe.

  40. Paul W Says:

    http://www.ft.com/intl/cms/s/0/b0823cea-7c09-11e2-bf52-00144feabdc0.html#axzz2LXLThOKe

    “While job shedding was reported to have eased in both Germany and France, it accelerated across the rest of the region on average, Markit said.

    “Today’s figures are a reality check,” said Peter Vanden Houte, economist at ING. “The improvement in Europe has until now been a financial markets story….”.

    Our esteemed Govt and supporting economists should take note of these realities when projecting positive growth/making predictions that Ireland’s economy willtake off like a rocket. Particularly worrying is the acceleration of unemployment (combined with the acceleration in e.g. poverty stats, etc). The generalindicators are again flashing red.

  41. skeptic01 Says:

    @ Mickey Hickey

    “Financial markets did not signal northern countries to stimulate their economies, thus introducing a deflationary bias that lead to the double-dip recession.”

    Debatable. Yields on German bonds have been extemely low and for short-term debt were negative at one point. The markets were literally begging Germany to borrow money.

    However Germany evidently believes in rules-based finance and at 85% of GDP their public debt is above Eurozone limits and close to levels at which e.g. Reinhart+Rogoff would predict a drag on economic performance.

  42. Michael Hennigan - Finfacts Says:

    @ grumpy

    According to Deutsche Bank, the effective rate of the euro is back at its 2005 level. The only outliers over the past decade are the yen and the Swiss franc.

    Japan needs more than a currency fix.

    There is a pertinent economic signal: sales of adult nappies have overtaken the ones for babies.

    @ All

    I do agree with DOCM’s sentiment on this report. It has some useful data but smells of consensus.

    As for Mickey Hickey’s link, the claim Irish manufacturing has taken off because of wage cuts is bunkum.

    The Netherlands like Ireland has a big current account surplus but a salt cellar should be at hand in regard to both.

    Most people including some who should know better, do not go further than the ‘country is going to the dogs’ level because we are clueless as to what should come next.

    Last year, an attendee at one of the ‘Four Angry Men’ public events, that was organised by publisher Penguin Ireland, said online on ticketmaster.ie: “Unfortunately, each angry man seemed unable and/or unwilling to rise above the blame game and help to chart a future.”

    This individual was motivated enough to have paid €25 and If he had bought one of the books, it would have cost him the equivalent of 10 pints of Guinness!

    The Taoiseach today asked business folk attending some forum to forward him ideas on job creation.

    Maybe it’s time again for a national ideas competition?

    Fintan O’Toole on Tuesday praised the Finnish education revolution but such change does not come à la carte. In Ireland, every ideologue have their own breed of sacred cows and why tell bitter truths to fans?

    Finnish lessons for Irish education

    http://www.finfacts.ie/irishfinancenews/article_1025595.shtml

    @ Paul W

    The French lost out to the Southern Hemisphere producers at the low end of the wine market because the small chateaux hadn’t strong brands; they tended to have 12% alcohol compared with their rivals offering 14% and the wines were often bland. People just didn’t remember the names of the better ones.

    Australian and Chilean wines are the most common in Asia.

    For a country boy from West Cork, I would opt for a Marqués de Riscal Gran Reserva Spanish Rioja for a a small premium over the general level than buy the pricier French wines!

  43. David O'Donnell Says:

    Hi all - just checking into the “DOCM Blog” for a little deconstruction:

    ‘countries that are currently lending us their credit card’
    …. are making a tidy profit.

    ‘Markets are markets’
    … unless they are ‘banking markets’ where ‘captured states’ intervene at the expense of the citizenry.

    ‘Deutsche Bank in a recent study - to which I have linked elsewhere - identifies where the real “pain threshold” lies in terms of the political pressures on European leaders.’
    The real pressure is on the millions thrown into penury due to a flawed austerity program designed to prop up the ‘f*ck ups and debts’ in the rogue sections of the financial system/market.

    Hey - this deconstruction is roight tedious …. I need a koffee an a kitkat.

    @all

    Did you hear the one about the Trillions in derivatives floating around Frankfurt? …..[censored due to commercial sensitivities]

  44. David O'Donnell Says:

    @Giro d’Italia

    Beautiful!

    @Michael Hennigan

    A good few vines now in Cork.

    ‘… a Marqués de Riscal Gran Reserva Spanish Rioja.’ Must be a Kinsale connection there somewhere?

  45. DOCM Says:

    @ All

    FYI Minister Noonan on Bloomberg.

    http://www.bloomberg.com/news/2013-02-21/noonan-says-ireland-has-case-for-bank-recapitalization-refund.html

    Regling in his interview;

    “Now, on your question, it is true that initially, two-and-a-half years ago, for the first Greek loan facility, there was a small profit for the lenders, but that was eliminated two-and-a-half years ago. So when the EFSF does its lending, since last year, we don’t make money and we don’t lose money. We charge the cost that we ourselves have to pay in the markets, when we issue bonds. We have to pay interest to the investors of our bonds and pass on the refinancing costs to the borrowing country – Greece, but also Portugal and Ireland. We add a very small margin to cover administrative costs, so nobody has been making money or losing money during these last two years.”

  46. Fiatluxjnr Says:

    NAMA becomes major property developer and increases its balance sheet by 50%. Wow.

  47. Fiatluxjnr Says:

    And back in Namaland..it appears they are going to recover 750 million in assets transferred by developers to family members. That is a tidy sum.

  48. seafóid Says:

    There is a good analysis of Finnish vs US schools here

    http://www.nybooks.com/articles/archives/2010/nov/11/myth-charter-schools/

  49. David O'Donnell Says:

    European Commission:
    Agreement to allow Brussels more supervision of national budgets

    21 February 2013Presseurop Les Echos, Frankfurter Allgemeine Zeitung

    “Brussels wins new powers to supervise national budgets”, writes Les Echos, in the wake of the agreement concluded between member states and the European Parliament. The “two pack”, as it has been dubbed in Brussels, will enable the Commission evaluate member state budgets and to recommend adjustments. For the business daily, the measure adds “the final touch to the new European governance”.

    The “two pack”, which is set to come into force by the summer, is more “intrusive” than preceding texts, explains Les Echos —

    From now on, national governments will have to present plans for next year’s budgets to Brussels before they are examined by their own parliaments. The Commission will then have the option of issuing an opinion, but not of imposing a veto. […] If its recommendations are not taken into account, the Commission can always threaten to slap financial sanctions on countries with excessive deficits.

    http://www.presseurop.eu/en/content/news-brief/3443241-agreement-allow-brussels-more-supervision-national-budgets

  50. Joseph Ryan Says:

    @DOCM

    re: DeGrauwe article that you linked to:

    http://www.voxeu.org/article/panic-driven-austerity-eurozone-and-its-implications

    Excellent article imho.
    A panicked political and mandarin class in full obedience to a volatile, self interested and headless market casino, consigning millions to penury and wastelands in the process. This cannot last.
    The mantra of ‘painful restructuring’ is wearing very thin on those suffering the pain. Germany’s uber export surplus is little consolation to the >50% youth unemployed in Spain or Greece.
    One wonders how the already cracked edifice will finally start to collapse.

  51. DOCM Says:

    @ Joseph Ryan

    I am not really into either predictions or value judgements. If the facts support an argument, I am persuaded. If they do not, I am not.

    Spain’s unemployment problem is not new. Nor can it be blamed on the Gemans.

    http://www.tradingeconomics.com/spain/unemployment-rate

  52. DOCM Says:

    @ Joseph Ryan

    Click on the year 1987 and Refresh which will demonstrate the pattern of unemployment since that date; well beyond a point when the euro was but a gleam in the eye of the “panicked political and mandarin class” in Europe.

  53. David O'Donnell Says:

    Deconstructing Regling [h/t DOCM

    Regling in his interview;

    “Now, on your question, it is true that initially, two-and-a-half years ago, for the first Greek loan facility, there was a small profit for the lenders, but that was eliminated two-and-a-half years ago. So when the EFSF does its lending, since last year, we don’t make money and we don’t lose money. We charge the cost that we ourselves have to pay in the markets, when we issue bonds. We have to pay interest to the investors of our bonds and pass on the refinancing costs to the borrowing country – Greece, but also Portugal and Ireland. We add a very small margin to cover administrative costs, so nobody has been making money or losing money during these last two years.”

    ‘… so nobody has been making money or losing money during these last two years…

    NOBODY?

    Well the investors in the Fund from the FINANZSYSTEM make a few bob

    BILLIONS go to the States

    The States ‘give_gift’ the BILLIONS to the ROGUE BANKING ARM of the FINANZSYSTEM

    The CITIZENRY pick up the bill - BIG BIG LOSERS

    The FINANZSYSTEM wins on the way in and WINS BIGTIME ON THE PAYOUT.

    Ergo: we need to RE-CONSTRUCT THE FINANZSYSTEM

  54. Joseph Ryan Says:

    @DOCM
    ” If the facts support an argument, I am persuaded. If they do not, I am not.”

    I thought De Grauwe presented a very factual argument.

    re: Spanish unemployment
    Thank you for the link. It is informative, but lets see what it says.

    “Spain Unemployment Rate
    Unemployment Rate in Spain increased to 26.02 percent in the fourth quarter of 2012 from 25.02 percent in the third quarter of 2012. Unemployment Rate in Spain is reported by the INE. Historically, from 1987 until 2012, Spain Unemployment Rate averaged 16.67 Percent reaching an all time high of 26.02 Percent in December of 2012 and a record low of 7.95 Percent in June of 2007.”

    So which is better for Spain, a credit boom or austerity?

    I was paraphrasing DeGrauwe with my comment re ‘panicked political and mandarin class’.
    Frankly, EZ political discourse and political direction has been abrogated by the financial sector to their advantage and to the disadvantage of the millions of unemployed. It is almost as if we have a new ‘estate’ that has to be supported regardless of the consequences.
    In reality, the problem is one of people in power, particularly Merkel, actually having no understanding of any common European history or conviction about future direction, other than to get good tabloid support to winning the next election.

    Like it or not, the EZ and possibly the EU is still falling apart, with the real and most important fundamental, unemployment, being studiously ignored in favour of saving the casino gamblers.
    In reality it is another crisis of morality at the heart of Europe.

  55. DOCM Says:

    @Joseph Ryan

    You misunderstand the point that I am trying to make. Nobody denies that unemployment is bad and that the current round of austerity makes it worse. The debate is about the reasons why. I do not subscribe to the belief that everything can be laid at the door of the euro or attributed to errors on the part of policymakers at a European level (of which, of course, there have been many). The crisis is dire in various countries principally because of errors at a national level, Ireland being no exception. It may be that the inability to correct them may bring the whole euro house down. I have no argument with you on that score. But it seems very unlikely to me.

  56. Shay Begorrah Says:

    @DOCM

    Nobody denies that unemployment is bad and that the current round of austerity makes it worse.

    If I may be so bold as to distill DOCM’s postings from many hundreds (ten in this thread) to one.


    What we have is clearly a set of simultaneous near identical economic crises in Eurozone countries not bordering Germany just after a global financial crash (which, incidentally, was mainly the fault of greedy local borrowers). If we just stick to the same set of fiscal rules we were compliant with before these unconnected simultaneous purely national economic crises started we can be confident that they will not happen again, and confidence is very important in this game let me tell you!

    As for the word “systemic” I do not hold with it.

    Finally the fact that other countries have followed a different economic path to the EU with better results is neither here nor there. I see no reason to debate the theory or acknowledge the evidence. We are where we are and if we just shrink the state and follow market discipline we will be doing the lawful thing (notice how I do not stoop to (potentially revealing) value judgments or testable predictions - I do not hold with either philosophy or science).

    Hail Mammon. Hail technocracy. Can I have my money now?

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