Maybe it is because a young friend of mine here in Barcelona has just come back from a holiday in Finland with an Estonian girlfriend, or something similar, but I am pretty sensitive at the moment to the comparisons which are being made between what is happening here in Catalonia and what is happening in Tallinin.
This article in the Baltic Times today about language teaching in Estonian schools (complete text at the end of the post) is typical of what is in my head.
Basically I don't know a great deal about the current language reforms in Estonian schools, but, going by our experience here in Catalonia, intensive teaching in the Estonian language in the schools is vital as a means of integrating the Russian speaking young people into Estonian society and the Estonian labour market.
First off a few facts concerning Catalonia. The population here is 7 million. This breaks down roughly as follows - Catalan speaking families 3 million, Spanish speaking families from the internal migrations of the 1950s and 1960s 3 million, recent - post 2000 immigrants - 1 million. So native Catalan speakers are a minority, yet Catalan is the predominant public language. And Catalonia doesn't even have a state, just regional autonomy, and control over the education system. Sometimes you can do a lot with just a little.
Now all of this becomes very important when you come to think about the economic difficulties facing the Baltic economies at the present time, difficulties which can be summed up in just two words: labour shortages. As a result migration is going to become a very important lifeline for the economic development of these countries, as I explain in the Latvian case in this post here.
Now Catalonia - despite being a historically relatively low fertility area - has been able to grow into one of the richest and economically most dynamic regions of Europe quite simply by leveraging immigration. Just look at the numbers. It is obvious.
What is also important is that Catalonia has developed an immense capacity for assimilating migrants from a whole variety of different cultures, including those coming from its large Spanish neighbour.
And don't imagine it has been any easier for Catalonia to assimilate Spanish speakers than it will be for the Baltics to assimilate Russian speaking ones. Maybe in the Baltic mind Russia is associated with authoritarianism and totalitarianism for Baltic citizens, but remember that after nearly 40 years of Franco dictatorship, Spain was also associated with precisely these images and feelings in the minds of the Catalans. But they have swallowed their bad feelings, and turned the situation around. And this is what the Baltic states must now do. Their very economic survival is at stake. Latvia, Estonia and Lithuania need to become migrant assimilation machines - a la Catalana. This is the only real way forward to guarantee their citizens the standard and quality of life which they have every right to dream of. Sometimes decisions in life aren't easy, but sometimes you need to bite the bullet.
President of EU Parliament visits Narva, praises language reforms
TALLINN - The President of the European Parliament Hans-Gert Poettering gave tacit support to Estonia’s schoolbased language reforms during an official visit from Aug. 14 - 17. Poettering, a German conservative, veered off the normal diplomatic path by visiting the eastern border city of Narva to talk with residents about language concerns. While he acknowledged the often-leveled claims of discrimination against Russian speaking residents, Poettering said wider study of the Estonian language was the only way forward. He praised the government’s school reforms, which will see one extra class delivered in Estonian at Russian-speaking schools from Sept. 1. Poettering said the program was the key to better integration.
“It will then be possible to move on. It is important that the two communities should communicate with each other,” he said, adding that such communication was only possible through the broader study of the Estonian language. He also called for Russia to deal with its own history, and to adopt a better understanding of Estonia’s misery under Soviet rule. “Life under the communist dictatorship has left a very strong mark on Estonians. It is connected with liberty. That understanding, I think, is not very widespread in Russia,” he said. When meeting with Russian community groups and public figures in Narva, Poettering said it appeared most residents of the border city considered themselves Estonian, no matter what language they spoke.
His working visit also included meetings with President Toomas Hendrik Ilves, whom he invited to address the European Parliament, and Prime Minister Andrus Ansip, who demonstrated Estonia’s highly praised e-government cabinet room. Poettering, who comes from a legal background, was elected president of the European Parliament in January this year.
Tuesday, August 28, 2007
Padoa-Schioppa and the Italian 2007 GDP Growth Forecast
Italian Finance Minister Tommaso Padoa-Schioppa is being quoted in the press this morning as saying that ``The growth target of 2 percent for 2007 appears to be more ambitious that we thought two months ago,''.
He certainly has this one right. With growth in Q1 at just 0.3% and in Q2 at 0.1%, and the eurozone economy visibly slowing by the day, I would say it will be hard this year for Italian GDP to push through the 1% ceiling as an annual total. Basically I don't see combined growth in Q3 and Q4 as being greater than the combined total for Q1 and Q2. I explain some of my reasoning here.
This is why I normally don't agree with the kind of economists Bloomberg seems to consult, who seem to continually regard Italy's consistently sub-par growth readings as "unexpected". If you look at Italy's growth history over the last 15 years, think about the ageing population issue, and follow the short term economic data on consumer confidence, retail sales and industrial ouput, then the GDP readings being obtained shouldn't come as a shock, since they are empirically and theoretically entirely to be expected. As a consequence the annual growth rate for 2007 looks like being well down. To be talking about 2% growth at this stage is frankly ridiculous. As I say, in the current climate it is hard to imagine H2 2007 being better than H1. So I think someone somewhere had better get to work preparing the explanations for those good people from Standard and Poor's and Moody's.
He certainly has this one right. With growth in Q1 at just 0.3% and in Q2 at 0.1%, and the eurozone economy visibly slowing by the day, I would say it will be hard this year for Italian GDP to push through the 1% ceiling as an annual total. Basically I don't see combined growth in Q3 and Q4 as being greater than the combined total for Q1 and Q2. I explain some of my reasoning here.
This is why I normally don't agree with the kind of economists Bloomberg seems to consult, who seem to continually regard Italy's consistently sub-par growth readings as "unexpected". If you look at Italy's growth history over the last 15 years, think about the ageing population issue, and follow the short term economic data on consumer confidence, retail sales and industrial ouput, then the GDP readings being obtained shouldn't come as a shock, since they are empirically and theoretically entirely to be expected. As a consequence the annual growth rate for 2007 looks like being well down. To be talking about 2% growth at this stage is frankly ridiculous. As I say, in the current climate it is hard to imagine H2 2007 being better than H1. So I think someone somewhere had better get to work preparing the explanations for those good people from Standard and Poor's and Moody's.
Monday, August 27, 2007
US Midwest Manufacturing Index July 2007
Well, for what it's worth here's this months reading on the Chicago Fed Midwest manufacturing index:
Since January the trend has been steadily up, though midwest manufacturing obviously took a significant knock at the end of last year, as a result the year on year reading is not that substantial. Clearly the line is up though, which to some extent must be a consequence of the relative weakening of the dollar.
As Reuters says:
Since January the trend has been steadily up, though midwest manufacturing obviously took a significant knock at the end of last year, as a result the year on year reading is not that substantial. Clearly the line is up though, which to some extent must be a consequence of the relative weakening of the dollar.
As Reuters says:
The Chicago Federal Reserve Bank said on Monday its Midwest manufacturing index rose in July amid broad-based gains in all sectors.The index gained 0.6 percent to a seasonally adjusted 106.0 from an upwardly revised 105.3 in June, originally reported at 104.9. Still, compared with a year earlier, Midwest factory output was only 0.5 percent higher, trailing the 1.9 percent national increase in industrial production. Output in all four of the regional manufacturing sectors tracked by the Chicago Fed rose in July. The biggest gain came in resource output, up 1 percent on strength in food, wood, paper and chemical production.Resource production ran 3.2 percent above a year ago, outpacing the national 1 percent increase, while year-on-year output fell in the auto, steel and machinery segments.Midwest machinery sector output for July rose 0.8 percent from June but was down 0.7 percent from a year earlier.Auto sector production rose 0.3 percent and steel output was up 0.7 percent in July The Chicago Fed Midwest Manufacturing Index is a monthly estimate of manufacturing output in the region by major industries. The survey covers the five states that make up the seventh Federal Reserve district: Illinois, Indiana, Iowa, Michigan and Wisconsin.
Following is a breakdown of the index components:
Percent change:
July June July 07/06 CFMMI +0.6 +0.4 +0.5 Auto +0.3 +0.1 -0.1 Steel +0.7 -0.3 -0.7 Machinery +0.8 +0.2 -0.7 Resources +1.0 +1.2 +3.2
US Economy Reality Check
This is the first of a series of posts which will try to get to grips with the state of the global economy in the wake of the recent liquidity turbulence.
The Story So Far
As indicated in this post, the big danger we face at the present time is that the current liquidity crunch converts itself into a credit crunch. This may or may not happen. For it to happen there needs to be a pretty systematic ongoing process of interaction between the financial markets and the real economy in such a way that the negative components of each of them reinforce each other. As far as the global economy goes, there are a number of key sectors to keep an eye on: the US, China, India, Germany, Japan, Italy and Eastern Europe. Eastern Europe is especially important, not for its magnitude, but for its growth rate, and its significance in the recent expansion of high risk new credit.
Now Germany, Japan and Italy all seem to be slowing considerably at the present time (for Geramny see here, for Japan see here, for Italy see here). China is more or less on course - now a touch this way, now a touch that, as is India. Eastern Europe is starting to overheat badly (and here, and here, and here).
And the US? In many ways the US could tip the balance one way or the other. So watching how things play out in the US in the coming weeks and months can prove to be critical.
One of the issues at the moment is that the financial markets are a bit adrift due to the lack of real data, so what little news there is is rapidly pounced on.
Today we have two pieces of "news" from the US. The UBS investor optimism index, which you can see below.
Obviously the index has been trending down slightly of late, but it is hard to read any deep significance into this, since it has been moving up and down quite vigourously throughout the present business cycle.
The other piece of data we have to say is the existing homes sales index for July from the US National Association of Realtors.
Now clearly the volume of sales has dropped off considerably, about 9%, as compared with a year ago. And this does mean that the rate of turnover in the market is low. But if we look at the prices index (see below) then - at least nationally - the price decline situation is far from dramatic. I would expect to see a lot worse in some of the most vulnerable European economies (Spain, Ireland, Greece) if the liquidity crunch really does turn into a credit crunch. At the present time all we can say is that this outcome represents a possibility, but it is still certainly by no means an inevitable eventuality.
However, as DailyFXnote, this data is now to a certain extent history:
Essentially there is anecdotal evidence all over the place that people have started to find it much more difficult to obtain mortgages, even people who are in no way "sub-prime", so it is hard to believe that existing home sales in August won't be well down, which is just one of the reasons why Bernanke may be seriously considering a rate reduction in September, and one of the reasons why Jean Claude Trichet may be having second thoughts, since some Eurozone economies will be very sensitive to any credit conditions tightening. This is going to be a very hard call for them all.
Now this chart needs a bit of explanation, since I have done a bit of simple improvisation. The bars in brown represent average prices for 2004, 2005 and 2006 respectively. I have put them alongside the monthly time series for 2006 and 2007 (the blue bars)just so people can get an idea of the orders of magnitude involved, and of the size of the "correction" - at least to date. Of course, the big outstanding question is whether the slowdown in turnover will eventually translate itself over into a more substantial price reduction. I would say that that is really the big outstanding "what if" question at this point in the US business cycle, and why I think it is possible that things can move one way or another, depending really on the conditions under which US banks are prepared to lend money to first time buyers.
Obviously there is a correction going on, but to date it is hardly a dramatic one. There are still plenty of sales, and prices are not falling dramatically. Clearly there are a lot of delinquencies in a relatively small part of the US market, but does this have to bring the whole global credit industry to a halt? I find that hard to believe.
Obviously people are nervous for a whole variety of reasons, and this nervousness is currently focusing on the US most risky mortgages sector. But these people also represent some sort of version of "moral hazard", since they know that Bernanke will ultimately bail them out, don't they? Isn't that what all the shouting is about. Ouch, it hurts! Please help me.
That all of these cries of pain come from people who supposedly believe in market economies really does make me laugh.
Actually, the whole situation does make me think about how the business cycle is 90% psychological, and about how right Keynes was to talk about animal spirits.
Basically, I think the key market participants are bi-polar, and once they get in a gloomy state then on comes the recession. Obviously there are underlying fundamentals that play a part like this housing correction, but, come on, you could legalise 11 million Latinos tomorrow, and sell them a lot of houses, if this was the only problem. It appears other issues also play their part here. I mean, if they were all legal and regular, a lot of these people would stop being sub-prime, wouldn't they? So why aren't they, and why are some people busily trying to use taxpayers money to build a wall between the US and Latin America? Where is the underlying economic rationale here?
The Story So Far
As indicated in this post, the big danger we face at the present time is that the current liquidity crunch converts itself into a credit crunch. This may or may not happen. For it to happen there needs to be a pretty systematic ongoing process of interaction between the financial markets and the real economy in such a way that the negative components of each of them reinforce each other. As far as the global economy goes, there are a number of key sectors to keep an eye on: the US, China, India, Germany, Japan, Italy and Eastern Europe. Eastern Europe is especially important, not for its magnitude, but for its growth rate, and its significance in the recent expansion of high risk new credit.
Now Germany, Japan and Italy all seem to be slowing considerably at the present time (for Geramny see here, for Japan see here, for Italy see here). China is more or less on course - now a touch this way, now a touch that, as is India. Eastern Europe is starting to overheat badly (and here, and here, and here).
And the US? In many ways the US could tip the balance one way or the other. So watching how things play out in the US in the coming weeks and months can prove to be critical.
One of the issues at the moment is that the financial markets are a bit adrift due to the lack of real data, so what little news there is is rapidly pounced on.
Today we have two pieces of "news" from the US. The UBS investor optimism index, which you can see below.
Obviously the index has been trending down slightly of late, but it is hard to read any deep significance into this, since it has been moving up and down quite vigourously throughout the present business cycle.
The other piece of data we have to say is the existing homes sales index for July from the US National Association of Realtors.
Now clearly the volume of sales has dropped off considerably, about 9%, as compared with a year ago. And this does mean that the rate of turnover in the market is low. But if we look at the prices index (see below) then - at least nationally - the price decline situation is far from dramatic. I would expect to see a lot worse in some of the most vulnerable European economies (Spain, Ireland, Greece) if the liquidity crunch really does turn into a credit crunch. At the present time all we can say is that this outcome represents a possibility, but it is still certainly by no means an inevitable eventuality.
However, as DailyFXnote, this data is now to a certain extent history:
In the US today the markets will get a look at the Existing Home Sales data with consensus call forecasting a small contraction from the month prior. The data is for July and therefore may be a dated in its value as the recent market turmoil has made credit far more difficult and costly to obtain which will likely have a much more depressive effect on home sales as we move into the fall season. The median house price data is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950 indicating the sharpness of the decline.
Essentially there is anecdotal evidence all over the place that people have started to find it much more difficult to obtain mortgages, even people who are in no way "sub-prime", so it is hard to believe that existing home sales in August won't be well down, which is just one of the reasons why Bernanke may be seriously considering a rate reduction in September, and one of the reasons why Jean Claude Trichet may be having second thoughts, since some Eurozone economies will be very sensitive to any credit conditions tightening. This is going to be a very hard call for them all.
Now this chart needs a bit of explanation, since I have done a bit of simple improvisation. The bars in brown represent average prices for 2004, 2005 and 2006 respectively. I have put them alongside the monthly time series for 2006 and 2007 (the blue bars)just so people can get an idea of the orders of magnitude involved, and of the size of the "correction" - at least to date. Of course, the big outstanding question is whether the slowdown in turnover will eventually translate itself over into a more substantial price reduction. I would say that that is really the big outstanding "what if" question at this point in the US business cycle, and why I think it is possible that things can move one way or another, depending really on the conditions under which US banks are prepared to lend money to first time buyers.
Obviously there is a correction going on, but to date it is hardly a dramatic one. There are still plenty of sales, and prices are not falling dramatically. Clearly there are a lot of delinquencies in a relatively small part of the US market, but does this have to bring the whole global credit industry to a halt? I find that hard to believe.
Obviously people are nervous for a whole variety of reasons, and this nervousness is currently focusing on the US most risky mortgages sector. But these people also represent some sort of version of "moral hazard", since they know that Bernanke will ultimately bail them out, don't they? Isn't that what all the shouting is about. Ouch, it hurts! Please help me.
That all of these cries of pain come from people who supposedly believe in market economies really does make me laugh.
Actually, the whole situation does make me think about how the business cycle is 90% psychological, and about how right Keynes was to talk about animal spirits.
Basically, I think the key market participants are bi-polar, and once they get in a gloomy state then on comes the recession. Obviously there are underlying fundamentals that play a part like this housing correction, but, come on, you could legalise 11 million Latinos tomorrow, and sell them a lot of houses, if this was the only problem. It appears other issues also play their part here. I mean, if they were all legal and regular, a lot of these people would stop being sub-prime, wouldn't they? So why aren't they, and why are some people busily trying to use taxpayers money to build a wall between the US and Latin America? Where is the underlying economic rationale here?
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