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23 november 2011, angelordevil

As ever, it was quite a sight to see the mall decked out with the pomp of a state visit yesterday, with the turkish president in town, a country I know well from hosting a wonderful group of young lawyers and then in turn being taken around the antechambers of ankara and istanbul, making friendships I still have today (the photo is me with the last turkish president). By the time I was working for europe, accession talks were many years in, but by 2007 they were stalled, mainly over the cyprus issue, and they've now pretty much ground to a halt, even as others like croatia (25 may 2011) are nearing completion. There's a bitter flavour in turkey now, with the desire to join rapidly receding and spilling into a broader narrative about the retreat of the whole eu project, which the last ambassador just called a "spent force". Opposition to Turkish accession was an important part of sarkozy's election campaign, and crystallised broader feelings that "european kinship" didn't cross the bosphorus. I did though, many times, and loved it. I welcome turkey's rise and only hope that if accession isn't going to happen (which is clearly the case) then an accommodation can be found that finds not just begrudging acceptance but wholehearted enthusiasm on both sides, though I'm sure that's many years, many frameworks and many formulations away.

Attached File: turkey1.pdf

Attached File: turkey2.pdf

19 november 2011, nothing left

Once spanish elections tomorrow deliver a strong centre-right government, not one single large european country will have a government of the centre left; indeed of the 27 it's just denmark, cyprus and slovenia (austria's a left-right coalition), just over 2% of the population. And this at a time when it is supposedly the evils of capitalism, free markets gone mad and greedy profit-taking bonus-paying banks that have miserably failed, calling massively on statist support and plunging everything into recession and oblivion. So why have europeans turned so markedly to the traditional centre-right home of capital ? Part of the answer lies in a traditional wave effect, throwing the bums out and seeking change, and part is in sending nixon to china: were the left left to sort out this mess, it would seem like class war, with no hope of consensus. Also though, for all the political cross-dressing, the right at core means less public spending, the left more, and very unhappily voters have proved themselves astute enough to understand that if things are ever going to come right, the next period must be one of belt-tightening. Until the left get this, and adjust accordingly, their continuing retreat to the backbenches of europe is not going to slow.

17 november 2011, he’s back, jack

There are a few characters in my family (goodbye ralph, 15 february 2010), and one is my great uncle jack white, who was I think the second jew to be awarded britain's highest military honour, the victoria cross. He got it at gallipoli, when his boat came under attack, and as the only man not injured, he jumped into the water and, under heavy fire, tied telephone wire to the boat, took it in his teeth, and towed everyone to safety. I mustn't have been going to enough family barmitzvahs lately, as I saw a sign above my cousin's law firm today that led me to this amazing website and the discovery that jack's factory, which he returned from the war to be an apprentice at and went on to manage, is still there, and is in fact back in family ownership and booming. With its ingredients of wonderful style, design, textiles in salford, made in manchester, commerce, culture and narrative, all underpinned by such an amazing story, it's simply overwhelming for me, as it's my own family. I'll be making some calls over the weekend...

10 november 2011, the europeans are coming

Despite the fact that for rather too many people (especially brits) "europe" is in its death throes, the pronounced trend of senior eu officials and politicians vaulting back into prominent national positions continues apace, suggesting that most think they have savvy experience. Romano prodi, former commission president, was I think the first to make prime minister, and the last sensible italian one, very ably supported by my old ecb boss tomasso padoa schioppa (25 october 2009) as his excellent finance minister; the same role held in spain by ex-commissioner pedro solbes. In finland the foreign minister is the boyish alexander stubb, who I had the absolute delight of hosting for lunch once in frankfurt (31 august 2010) at one of our events back when he was a mere member of the european parliament. In between being a commissioner once and now again, michel barnier was french foreign minister. In britain, brussels used to be seen as a political graveyard, but now even the eurosceptic conservatives have promoted ex-mep theresa villiers almost to the cabinet, whilst the last government had ex-commissioner peter mandelson as deputy prime minister, and the current dpm is ex-mep nick clegg; his closest rival is another ex-mep, chris huhne. Next week may see another former commissioner (mario monti) again as italian prime minister, whilst tonight the former ecb vice-president is greece's new prime minister. Though I didn't really know him, I know that he was a hugely respected and capable workaholic, with an outstanding mind, who got where he has on the sheer merit of being a genuinely outstanding economist. The quiet storm that is lucas papademos has quite a job to do now, but if anyone can slowly, carefully, deliberately work through what needs to be done, it is this most honourable of men with surely exactly the right experience. We wish him well.

5 november 2011, greeks punch gift horse in mouth

Sometimes, a little time to reflect is better than instant reaction, and a week on, as opposed to a day, the results of last week's euro summit look pretty much as they did on the night: it is enough. Or at least, it is until it's not, when the actors showed themselves determined enough to go the next half-mile. The day after, the greek prime-minister's referendum announcement shattered the "no surprise" rule, and merkel and sarkozy responded in kind, breaking the "never talk about a break up" rule, saying that there was a choice for greece: take the medicine or leave the euro. That was the dose of salts needed, as while some 60% of greeks are against the bailout package, some 70% want to stay in the euro, and so the referendum proposal disappeared as quick as it arose. All this though destroyed the build-up to the much built-up g20 summit, and with the sherpa work not done, the result was dazed and confused, and so no contribution at all to the stability desperately needed. And all this in the week that the most powerful man in the eu is replaced by an italian, just as all the pressure moves to italy's woeful debt burden, and yet more pressure is put on the ecb to use its unique muscle to solve at a stroke the new and fundamental problem created in today's credit conditions of italy being solvent but unable to manage its liquidity, due to its (hardly new) dependence on constant refinancing. Laying some groundwork for that is the reason behind berlusconi's abrupt summoning by said m&s, obama and the head of the imf (21 may 2011), who told him that his country is now being monitored by the imf like it was argentina. It's going to be a big week for mario.

27 october 2011, is it enough ?

So, they (and its with a slight pang of regret it's not "we") finally seem to have come to a solution, or at least to a state that things can settle: greece can "default" in an orderly way, the other countries seen as weak but not insolvent can be left to trade their way out to stability, the banks get a bigger cushion of cash, and the first steps are taken on the long road towards stopping all this ever happening again, through treaty-change towards economic union. By nature I am an optimist, and a deep euro enthusiast, and so maybe I cannot help but be biased. However, yes, I think this is enough. The problems were never going to be solved by a dramatic gesture, but by a process around which there is confidence. It may take an age to get to china walking one step at a time, but if you walk long enough, you get there eventually. So, though confidence may again fizzle out, though the devil of the details may yet risk elements of the package unravelling, I do think that two rubicons have been crossed. First, greece has gone, and second the argument over the way the others will be guaranteed the breathing space they need, namely fiscal or monetary, has been definitively answered. It's the former, and so now all can just get on with it, and if at some point some element needs bolstering, that will happen. A classic distraction has even been thrown in to stop people talking about the deal, getting them to talk instead about whether greece should have been in the euro in the first place instead (correct but irrelevant). This gives confidence a few more precious hours to build in this ludicrous news cycle led mass media world we live in (see 15 august 2011). So there it is, we can breathe a bit easier, think a bit further ahead, and sleep rather better across europe tonight, as pax merkela reigns.

24 october 2011, no deleveraging at home

The big force behind the tea party movement in america is the perception that through government action thrifty and sensible americans are paying for the reckless overstretch of others, "do we really want to subsidise the losers' mortgages ?" ranted rick santelli, "this is america ! How many of you people want to pay for your neighbour's mortgage that has an extra bathroom and can't pay their bills ?". That's moral hazard of the personal kind, with a policy also echoed in europe. Now, they're at it again, as obama announces more government loans for homeowners whose mortgages are rather too high. Like quantative easing, the basic rationale for this seems to be stimulus, i.e. how can we get people borrowing and spending more again. The high priest of the policy, lawrence summers, says that us house-owners losses have reduced their wealth by over $7,000bn in the last 5 years, which obviously knocks confidence and reduces their spending. As I've said before though, this can't go on, and not because I've much sympathy for tea partiers, but because the time is never, ever going to be right to deleverage: but here we are, and it isn't going to feel great, especially for house buyers that gambled on ever-increasing prices. A hard lesson for all, that there's no such thing as a one-way bet.

23 october 2011, miles and miles

We have been klocking up the kilometres recently. Yesterday, we drove down to halton hall to meet my sister's family (coming up from london), although without my other half, who has gone to budapest (see this amazing photo) for a few days. And earlier this week, we had a much-needed few days in the scottish highlands. We drove up to crianlaroch, taking the train to fort william, where we spent the night, and saw snow for the first time this year, sitting nonchalantly on ben nevis. The next day was the major highlight of the gorgeous train to mallaig, now to be known forever as the harry potter train, due to the scene from the film, which was indeed breathtakingly gorgeous. We then hopped on the ferry to the isle of skye, where we spend a lovely couple of days driving round ever-more amazing scenery, before doing the whole thing in reverse, by which time ever peak was snow capped, and we also managed a lovely lunch by the fabled shores of loch lomond. It already seems like a month ago...

15 october 2011, not just yet

At the more sensible end of british think tanks on europe, the centre for european reform has maintained a cogent analysis of the euro crisis, which is essentially that its genesis lies in the inbuilt need for wages to fall for competitiveness to be maintained in one part of the eurozone vis a vis others, because the traditional way to do that, devaluation, is no longer an option. Over the euro's lifetime, germans have done precisely that, becoming both keenly competitive and also, because wages and consumer confidence have stagnated, avid savers, so depressing consumption. Being so competitive, exports boomed, great for germany, but bad for those uncompetitive areas sucking in imports, where wages and asset prices boomed instead, including through those infamous irish and spanish property bubbles. When all that ground to a halt in 2007, investors didn't know where to put their money, as suddenly debts in many countries looked unsustainable, whilst returns in the sensible ones remained as low as ever. Nothing the eu has done since has changed that essential outlook, which they argue is worsened by the (german-led) course towards more fiscal rectitude, which lowers further domestic demand. The centre's basic solution is that the only way out is growth, which I agree with, but I don't with their contention that the only way to achieve that is massive government borrowing, taking advantage of cheap money desperate to land. My problem is tectonic plates: somehow, at some point, we need to realise that it was debt that got us into this mess, and it will not be finding a reassuring way to get back to such levels of debt that will get us out. The time is never, ever, going to be right to deleverage: but here we are. In their latest publication, reaching the endgame, they've rather succumbed to the british club of pessimists, seeing the euro's first decade also as its last. A shame, as that's the easy, but wrong, analysis.

Attached File: 15 oct 2011.docx

13 october 2011, you spends your money

It is astounding what we actually spend our money on. This chart is a good bird's eye view of uk public spend, which many places, like westminster, manchester and cumbria have broken down further. It reveals that we spend most money first in people not in work, and second on people not in good health. If you add up every single penny spent annually on the three million or so people living in those places combined, on every single service, local and national, it is approximately a quarter of what the usa spent getting two men on the moon. And what did the moon dust, as brian might say, ever do for us ? Well, there's some nice photos and teflon-coated fibreglass, but value for money from a few spacesuits short of $500 billion ? Go figure.

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