10 june 2012, manchester as europe

Judging the veracity, or otherwise, of this little fantasy, is limited to those that know well the geographies of both the european union and greater manchester. See both as a collection of sovereigns, bound together in a broader union that the evidence suggests drives economic growth, but of which they remain suspicious, because pooling sovereignty, to a degree, is losing it. For germany, largest member state and economic powerhouse, read (the city of) manchester. For the other, albeit smaller, half of the essential partnership, read salford: germany and france are the eu's irreplaceable motor. The third leg, italy, always destined to be a leadership also-ran, is a nation barely a century old yet was in at the eu's creation: with a little squinting, we might see tameside. The powerful outsider, uncomfortable with its strange political bedfellows, that reluctantly joins, because it has nowhere else to go: is for europe, the uk; and for gm, trafford. Stockport, like the benelux, will never call the shots, but has much to gain and little to lose. Wigan, bolton, bury, rochdale and oldham, like poland, hungary and other new member states that joined in 2004, have profoundly different economies: poorer, lower-skilled, with less connection to the higher end of the value chain. They have potential for innovative niches, and seem to need more than they are needed, but bring labour supply, a bigger market and more weighty influence. Interesting that while the eu has complex and varied systems of representation that reflect differing weights, gm has just one person, one vote. Maybe though that's the difference between being 1 year old and 55.

1 june 2012, yes

Referendums have a habit of getting a no (20 february 2011), but in ireland, when on a european treaty, they usually have a second try to get the right answer, both on nice in 2001 and lisbon in 2008. Then, the fate of the eu pretty much hung on a purist irish constitution that empowers people over parliament but is a process subject to populist pressure. Today though, they resoundingly said yes, in a reluctant vote against greek-style self-seeking victimhood rather than take the medicine; which would have meant more medicine administered more harshly. The vote signals ireland's maturity and is a milestone on their long road back to growth and stability. For europe it is also a minor triumph, for the wonks amongst us, because for the first time there was no power of veto. Only 12 members states need to ratify, and so had ireland voted no, the treaty would still have come into force, but ireland would have excluded itself from the (underwhelming but serious) array of tools, like the esm, that the treaty brings on line to help stabilise the eurozone. The new treaty's architects have finally cracked giving countries a genuine choice, rather than making every vote a gun-against-the-head all-or-nothing. That much is sure, the next bit is not; but the innate optimist within me sees a low-key turning point in a population saying quite loudly that it believes that the euro is going to make it. For some time now the doom-mongers have been making the running. Suboptimal make-do politics in a complex scenario is willfully seen as dereliction and aimlessness, and a break up as inevitable. Francois hollande's victory was seen in that way, with france and germany set to tear consensus apart. That has not happened (7 may 2012) and, as they have done for a long time now, leaders are still ready to do what they need to muddle through to avoid collapse at all costs. The root of stability lies in neutralising greece, and that, as it was in ireland, is in the hands of the people, when they vote on 17 june either to take the medicine for the foot they have shot themselves in (5 november 2011), or head off into the chaos and uncertainty of "out", by which time the euro has hopefully got its big bazooka plans in place to firmly stabilise the new configuration.

30 May 2012, no easy road to increasing competitiveness

The stagnation of zero growth stalks the economy, dreadful public finances, very high unemployment, the universalist welfare state under threat, a radical government trying to make the labour market more mobile and the now-traditional driver of the economy, the consumer, resolutely not spending. The uk in 2012 - and germany in 2005. In that year gerhard shroder's centre-left government gave way to a grand coalition led by angela merkel, but the hard and unpopular work of reform continued almost without missing a beat. The economic pressure made germany's big companies restructure and cut costs, helped by workers and trades unions that ultimately accepted less and less pay, bringing down unit labour costs, helping germany become more and more competitive - making it once again the world's leading exporter (it is still second only to china). Heaped on the pain of paying for unification - some 1.3 trillion euros, or about half germany's annual gdp - this was a decade long squeeze on the population, but it was shouldered largely without complaint, and in the years following germany emerged as, and remains, europe's powerhouse economy, with its industry and exports going from strength to strength, a solid economy, deep social safety net, strong business confidence and, despite the euro's woes, the faith of the markets, giving germany extremely low borrowing costs, although its debt levels are low and sustainable. Was that medium term pain for long term gain ? Some might say.

25 may 2012, greece on grease

Few stories have dominated the news like greece has (I'm at 2:45 and later) for now so many weeks and months; quite remarkable for a small country of just 11 million people, although disproving the truism that all publicity is good publicity. There remains such a wide variation of possible outcomes that no-one at all knows what will happen and that level of uncertainty totally undermines confidence not just in greece but in growth in europe, to such a degree that we might not even make it through to the june elections. In an ironic way this is something of a success, in showing how deeply interconnected the eu has become, and especially the euro, which now is really the heart and soul of the project. It it is difficult to imagine the one existing in its current form without the other. It is a sign that greeks have begun to realise this that support for keeping the euro has actually gone up over these weeks (to 80%) even as support for the anti austerity party also rises. And people have begun to draw out their euros and stick them under the mattress. Solutions such as eurobonds are part of a proper fiscal co-ordination package (8 may 2010), and even the fiscal compact, seem slow and irrelevant, but in fact it's the architecture that's wrong (monetary without economic union) and so at least agreeing on that, and then showing some determination to fix it with a realistic plan that may get support and be implementable, is a key part of the solution, a foundation on which confidence can be built, followed by stability and then growth. Fresh with a renewed term as poresident, van rompuy is the latest to have another try at that, hopefully before the jokes start about humpty rumpty (21 november 2009). For all that the higher ups do or don't though, this is going to be decided by voters - in ireland next week, and in greece a fortnight later.

19 may 2012, hardening up

The modern history of london as a global financial centre pivots around the opportunistic eurobond leaping into the breach in 1963, when in one of kennedy's less inciteful moments, he passed the interest equalisation tax that stopped americans buying foreign securities from foreigners in the us. A similar sized opportunity, off-shore renmindi (the chinese yuan) trading, is more anticipated, and will be more competitive. As the world's second largest economy (25 june 2010), it is strange that china's is not already a hard currency, instead still pegged to the dollar. In the not too distant future though the yuan will stand on its own two strong feet, and appreciate significantly; meaning the dollar and everything else will go down. It is this anticipated effect, with the rest of the world in a race to bottom to cheapen exports and boost growth, that has likely held the chinese back, alongside their persistent fear that domestic consumption is not quite ready to fill the gap falling exports will cause. Contrary to american perception though, the yuan has been slowly strengthening, making hard yuan day that much nearer. Payment systems are also springing up to settle the yuan cross-border, and it is even becoming a store of international value, as hsbc's recent launch of a 3-year rmb bond shows - in a coup for london, where renminbi deposits are estimated to total over $17bn. This dim sum market though is delicious but limited, and on location hong kong remains far ahead. Most tellingly, central banks are becoming more familiar with the renminbi, and beginning to hold small reserves, e.g. in malaysia, nigeria and chile, where it is now 0.3% of its assets. As in all things, the chinese are cautious and long-term: constant dripping wears away a stone. The days when the renminbi joins the dollar though as a, if not the, global reserve currency (10 november 2010), are coming.

14 may 2012, the unthinkable exit

That the crisis, greece's fault (28 april 2010), would lay that country low, was never in any doubt. The only question was the degree to which the euro would suffer collateral damage (23 july 2011). Two years ago, greece somehow leaving would have been absolutely catastrophic. Eighteen months later though, the dam was breached when the greek pm pulled his referendum rabbit out of a hat (5 november 2011) and merkel and co started talking openly about an exit. In doing so, they were clearly signalling their view that the threat level had been reduced from fatal. Today, floods, as even the no-break up high priests of the ecb's governing council let the greeks know that they simply can't have their cake (no austerity) and eat it (stay in the euro). Nor can they pretend they don't have a choice by not establishing a government like a naughty child hiding in the bedroom instead of facing the music. This high-stakes game of poker must have an end, and that greece will lose is inevitable. They really now must realise that they have to make a call: in or out. That is the abyss they must stare down in what is likely another election, though it may not wait for that. I must say I was very surprised to read the german line (of both merkel and schauble) that "greece would always be in the eu", as to my mind the best strategy to minimise the collateral damage includes showing clearly that the rules still operate, and in that respect things are pretty clear: the only option is for greece to leave the eu (16 january 2010). The germans though are nothing if not deliberate, and as politics is the art of the possible, this is another signal - that the plan is in place, and so just get on and push the button now if you're going to. It looks then like there's no more stake raising - it's for the greeks to see, or fold. And it's right that the people make the call, as they're the ones that will have to live with it. As for the rest, well the picture should be clear by the irish referendum of 31 may. Never a dull moment.

10 may 2012, and again: we have failed

For thirty years I was obsessed with israeli politics, yet I realised how remote it has become when it was quite a shock to read yesterday that kadima had joined the coalition. As they originally split from likud, it should not really be a surprise, yet just a year or two ago they were the last force closest to the peace camp left standing. Things change though, labour having now bounced back to being the opposition and kadima, having ditched their once-excellent leader, now feeling they had little to lose by moving back into a renewed likud bloc. With 94 of the knesset's 120 seats, the move completes the likud and netanyahu's journey from spent force to a domination not seen since the days of david ben gurion. As to what this means for the peace process, there's always the nixon goes to china hope that like menachim begin and camp david, it is the right that may make the breakthrough. But if we've learnt one thing about netanyahu's decades on the scene, it is that his entire career has been based on frustrating any efforts towards peace or palestinian statehood and with peaceniks more powerless than ever there's no reason at all to expect that to change. The reason I am so far away from this now is that when I do get to think about it, this hopeless situation is one of the saddest burdens I carry. As I wrote in one of my first blogs (21 september 2009) - we have failed.

7 may 2012, not just yet

The age of austerity may or may not be right, and may or may not be inevitable one way or the other - but it is certainly not popular. And so sarkozy, who started with such great promise, became a rare one-term french president, and the eleventh european government to lose an election since austerity began. Days before, the uk contingent suffered a significant (though largely consequenceless) defeat, and on the same night anti-austerity greeks stormed to victory. However, the british results conform to a typical mid-term reaction; indeed had they been held a couple of months before, the government would likely have held up very much better. For the french, this was above all an anti-sarkozy vote. Beneath the rhetoric there is vastly more that hollande and merkel have to gain by being nice together (and quickly) than in arguing. A new narrative that destresses austerity, bolts on a new "growth" component that anyway everyone was looking for, tweaks the new treaty and lets hollande claim victory, merkel continue with more small steps, and the eurozone avert a crisis of confidence, all ought to be possible after these new dance partners get used to each other's moves. The big unknown however is greece, where the traditional two party-led system, both reluctant defenders of forced austerity, was shot to pieces; registering together just over 30% of the vote, and probably not enough to form a government. This heralds weeks of negotiation and uncertainty, the real possibility of an anti-austerity coalition, or more likely new elections after no government of any sort can be formed. This is exactly the sort of chaos to throw the markets, the euro area's only counterargument being, once again, that greece is small and exceptional. This very much strengthens hollande's hand, as to evidence that argument rapid unity with france is even more necessary. Weeks then turn to days to show the new "merlande" partnership is going to work. There is little doubt it will; but as for greece...

30 april 2012, the f word

For four years now I've managed to avoid using the f word: football, which for many of my friends and colleagues, let alone much of the general population here in manchester, is one of the most important words in the english language. Ironic then I was on national radio (47 minutes in) today talking about it. My dad was a big united fan, though strangely I saw more manchester city matches as a kid (colin bell, joe corrigan), as his boss was a guy called dovoud alliance who had some connection, so we worked there (sort of) on saturdays. By the time my brother came along, united was far too expensive, and rough, and so they toured local lancashire clubs until alighting on the friendliest and most convenient, the then obscure blackburn rovers, who promptly got bought by a local bigwig, built a new stadium & a great team, got promoted twice and actually won the league, kenny dalglish on that occasion getting the better of alex ferguson. And they've been in the top league ever since, though will finally drop out this year, having being bought by new indian money. City are now built on abu dhabi oil money, whereas united are debt-fuelled capitalism at its most extreme, though it may yet prove a solid enough base to win the english premier league yet again this year, despite this evening's result...

28 april 2012, the art of gentle shoving

I'm not sure its wholly new, or isn't more about presentation, but the "nudge" has become one of those ideas that has what people in the political sphere like to call traction. The british prime minister has his own nudge unit, and now obama is at it too, hiring one of the book's authors. At its heart is a tweak to economics, which traditionally rests on a big presumption: that people act rationally. By contrast, behavioural economics tries to understand why decisions are taken. Maybe people are actually badly informed, or inconsistent, leave decisions to another day, or just lazy. Whatever the logic, maybe we'd take a bit of jam today, rather a whole cake tomorrow. Nudge gives focus to the influence of context, social norms, and looks to change behaviour rather than opinion, for example by presenting choices in different ways. One british trial looked at why people were not taking up incentives to reduce their energy consumption by insulating their homes. It found that many could not be bothered to clear out their loft. So, the insulation firm offered to clear the loft, leading to a tripling of insulation grant take ups. The use that can be made of social norms can be seen in denmark, where green footprints were put on the floor leading to rubbish bins, reducing littering by 46%. An american example reduced energy use by providing information about how neighbours used less. Strangely, some brits don't sign up to their (free) company pension plan. A new law nudges them to do so, by making joining the default option. All good, if not revolutionary stuff, but maybe salvation comes not from exhaltation, but from nods and winks - and nudges.

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