The Great Debate UK

from Anooja Debnath:

When it comes to recessions, 40 is the new 50

If it were about age, 40-somethings would cringe. But it seems a dead certainty that 40 now means 50 -- or even higher -- when it comes to predicting the chances of a recession taking place.

Going by past Reuters polls of economists, every time the probability hits 40 percent, the recession's already started or is perilously close to doing so.

After the brief recovery period from the Great Recession, Reuters once again started surveying economists several months ago on the chances of developed economies stumbling back into the muck.

As the data get nastier and euro zone politicians wrangle over the sovereign debt mess, the probability goes higher. Just not high enough or fast enough.

The probability that Britain slides back into recession hit 40 percent in the Reuters poll this week, up from one in three last month.

The last time that happened was in July 2008, a few months before U.S. investment bank Lehman Brothers collapsed. The British economy contracted by 2 percent that quarter, its second contraction of 2008. And we all know what happened next. If 40 is the new 50, we're in it.

"It is a very big thing to say we are going into recession ... it is one of those things people are cautious sticking their necks out about," said Alan Clarke, who said there’s a 75 percent chance of that happening.

from Africa News blog:

Is Africa drought a chance to enact new UK policy?

New ways of managing aid are being debated in Britain as global concerns mount over a hunger crisis devastating the drought-affected Horn of Africa.

Randolph Kent, director of the Humanitarian Futures Programme at King's College in London, says the crisis provides a perfect opportunity for the British government to test its recent promise to reform how it responds to humanitarian emergencies.

The severe drought, caused by the driest weather since 1995 in East Africa, has affected an estimated 10 million people and is expected to continue to worsen into early 2012, according to the United Nations Office for the Co-ordination of Humanitarian Affairs (OCHA).

While Kent acknowledges the importance of a $145 million (90.2 million pound) injection of humanitarian aid from the British government, he says the money will not help prevent the next Horn of Africa drought and that the government needs to become more "anticipatory".

"This disaster has to teach us that the ways we've approached such crises in the past is not good enough," Kent said in a statement. "If we don't want to be consistently on a back foot when disasters happen, then we need evidence of strategic planning taking place at an international and regional level now."

The British government's Humanitarian Emergency Response Review (HERR), released in June, recognises that as a result of the increase in the intensity and frequency of disasters - a trend expected to grow with climate change and population growth - preparedness must be a key goal.

from UK News:

Libya crisis could scupper British aircraft carriers once and for all

So the world has unfurled a no-fly zone over Libya, apparently undeterred by the lack of Royal Navy aircraft carriers. Judging by the uniforms gracing the steps of 10 Downing Street on Friday and the attacks launched over the weekend, Britain’s military top brass haven’t been put off either.

Liam Fox and General David Richards in Downing Street

The Libya crisis has, until now, provided a platform for the “Save our Aircraft Carriers Campaign” to champion its cause but in the process they’ve thrown down some whopping red herrings.

First we were told Britain could have done a better job extracting citizens from Libya if it had an aircraft carrier. In the event nature’s own aircraft carrier, Malta (immune to rough seas and mechanical failure) proved a perfectly good operations centre from which to manage rescue efforts. If Britain’s response was slow, that had more to do with the speed of decision making than the available military hardware.

Even if HMS Ark Royal had been in service, victualled, crewed and ready to put to sea from Portsmouth, she would have taken a good four days to reach Benghazi sailing at full steam the whole way, through still waters. Had she been in the Gulf of Oman supporting operations in Afghanistan, it would have taken closer to five days at best. Once in theatre she would have required defence from air attack and even the threat of submarines should any of Gaddafi’s Soviet-era vessels still be operational.

from Global News Journal:

UNsensational? Five more years of Ban Ki-moon

U.S. Senators Joe Lieberman and John Kerry look on as U.N. chief Ban Ki-moon addresses reporters in Washington. REUTERS/Molley Riley

It's hard to find a delegate to the United Nations who despises U.N. Secretary-General Ban Ki-moon. But it's even harder to find someone who thinks he has the gravitas and charisma of his Nobel Peace Prize-winning predecessor Kofi Annan, who invoked the wrath of the previous U.S. administration when he called the 2003 invasion of Iraq "illegal." As one senior Western official, who declined to be identified, said about Ban: "It's not as if he's lightning in a bottle, but we can live with him."

The former South Korean foreign minister is in the final year of his first five-year term and is widely expected to run for another stint as the supreme U.N. official. The formal re-election process is likely to commence in the coming months. In the meantime, Ban is visiting the capitals of key U.N. member states to gauge his chances of keeping his job. Those chances, U.N. diplomats say, are excellent. So far, no country has nominated any candidate to oppose him. "I'd put my money on Ban Ki-moon getting a second term," said a Security Council diplomat.

The 15-nation Security Council nominates the secretary-general, though the choice has to be confirmed by the 192-nation General Assembly. Despite the veneer of democracy, it is the five veto-wielding permanent council members -- Britain, China, France, Russia and the United States -- who choose the top U.N. bureaucrat in New York. And none of the five has any serious objections to a second and final term for Ban, diplomats say.

Some people say that running the United Nations is the toughest job on earth. With little real power, he spends his time mediating and negotiating behind closed doors, getting blamed for member states' failures and receiving no credit for his off-camera successes. National lobbyists push and pull him in all directions. The five permanent Security Council members, known as the "P5", regularly insist that he acquiesce to their demands, often pressuring him to reserve a healthy portion of top U.N. jobs for their nationals or preferential treatment for themselves or their allies. Journalists harangue the secretary-general to disclose the details of sensitive negotiations, which he usually tries to keep secret under the label of "quiet diplomacy." Human rights groups routinely skewer him for not being tough enough on the rulers of despotic countries, which are, after all, member states like all the others and don't take kindly to criticism.

Ban has been no exception. He has been publicly clobbered for not congratulating jailed Chinese dissident Liu Xiaobo for winning the 2010 Nobel Peace Prize or raising his detention with President Hu Jintao during a recent visit to China. He was hung out to dry for not being tough enough on Sri Lanka's government and Sudanese President Omar Hassan al-Bashir, who was indicted by the International Criminal Court for genocide in Sudan's western Darfur region. Arab and other delegations from the developing world accuse Ban of being a U.S. lackey, noting how often his statements on the Israeli-Palestinian conflict and other issues echo those of the U.S. State Department or White House.

from Global News Journal:

Quadriplegic in an age of austerity

Every time I write a story on European countries cutting public spending, I feel a frisson of panic. I can't help but fear my health, lifestyle and liberty could be a casualty of the "age of austerity".

On assignment covering the Sri Lankan civil war for Reuters four years ago, I broke my neck in a minibus smash. It left me quadriplegic, almost entirely paralysed from the shoulders down and totally dependent on 24 hour care. I was 25.

Nine months later, in a wheelchair, using voice recognition software and supported by government-funded personal assistants, I got back to work in Reuters London headquarters the day after leaving hospital. Now political risk correspondent for Europe, the Middle East and Africa, I write about the interplay of politics and markets. For the past year and a half, much of that has been the drive to cut government spending as Europe rebalances its books.

That hasn't done my personal mental health any good at all. I even had my doctor tweak my medication to make sure worry didn't produce a gastric ulcer.

Britain's new coalition government intends to cut more than many countries, some 25 percent over five years. Some details will emerge in an Oct. 20 spending review, but I may have to wait until the end of the financial year for details on how that will affect my care and that of others.

In many respects, I have already been very lucky. Stringent UK employment law meant it was hard to pension me off just because of my disability. Improvements in voice recognition software meant I could still write at roughly the same speed as before - crucial to continuing work as a newswire journalist.

Most important of all, decades of growth in Britain's social welfare system meant that - after a substantial struggle - enough state funding was available to look after me in my own home.

Pope’s visit both punctual and provident

– Madeleine Teahan is a speaker for the Catholic Voices project. The opinions expressed are her own -

The Holy See is a sovereign entity which has enjoyed diplomatic relations worldwide for at least 1,000 years and as head of this state, the Pope has been invited by the Queen to visit Britain and address civil society.

With the papal visit less than one week away, the Birmingham Post predicts that the Pope’s visit will generate £12.5 million for the city’s economy. In further welcome news, Edinburgh is anticipating a profit of £4 million. With Birmingham and Edinburgh expecting to prosper so significantly from hosting Pope Benedict for one day only, this is a highly auspicious indicator for the economic benefits of the Holy Father’s two-day stay in London.

This hopefully alleviates the taxpayer’s fears about the cost of the papal visit. The legacy of the banking crisis has understandably deepened sensitivities regarding public expenditure. The pursuit of profit must be tempered by an ethical framework in order to serve the common good, not the privileged few. The Pope’s encyclical entitled, ‘Charity in Truth’, published in July 2009, reminds society that “development is impossible without upright men and women, without financiers and politicians whose consciences are finely attuned to the common good”.

There are few heads of state courageous enough to be the voice of the vulnerable and not the architect of political expediency. Aside from the economic fruits his visit will cultivate,  British society has never so desperately needed the Pope’s moral courage and wisdom to navigate a just and prudent route at this crossroads in our history.

Pope Benedict’s state visit is both punctual and provident for British society.

from MacroScope:

It’s all Germany’s fault

It is fairly commonplace at the moment for U.S. and UK financial analysts -- what continental Europeans call the Anglo-Saxons -- to predict the collapse of the euro zone,  a project they were mostly sceptical about in the first place.  MacroScope touched on this on two occasions in March.

The latest foray into this area comes from Alan Brown,  global chief  investment officer at the large UK fund firm  Schroders. But he does it with twist,  blaming what he sees as the eventual  collapse of the euro zone not on the structure itself nor  on the profligacy of peripheral economies, but on Germany's response to the crisis.

Brown reckons countries like Greece cannot do what is needed.

If Greece does all that it is asked to do, it’s debt/GDP ratio will rise to around 150 percent as debt continues to accumulate and the denominator declines as a result of a renewed recession and deflation. With debt at 150 percent and real interest rates anywhere near today’s level, Greece would have to run a primary surplus of around 8 percent  of GDP just to stabilise its debt ratio.

In the best of worlds, Brown says, German and other northern euro zone countries would solve the problem by stimulating their own economies to offset the deflationary impact of measures to improve public finances in the profligacies.

Increased demand from Germany (and other Northern European countries) would boost demand for goods and services from the South helping to maintain growth in the euro zone region as a whole and to reduce the current chronic current account imbalances.

Brown says the trouble is  that is not likely to happen. Germany has actually done the opposite, launching its own austerity programme.

from FaithWorld:

Strong support to outlaw face veils as France prepares to vote ban

France's plan to ban full face veils, which comes up for a vote in the National Assembly on Tuesday, enjoys 82% popular support in the country, according to a new poll by the Pew Research Center’s Global Attitudes Project. Its neighbours also approve -- 71% of those polled in Germany, 62% in Britain and 59% in Spain agreed that there should be laws prohibiting the Muslim veils known as niqabs and burqas in public.

The poll, conducted from April 7 to May 8, did not range further afield, but reports from other countries show support there as well. The lower house of the Belgian parliament has voted for a ban, which should be approved by the Senate after the summer. In the Netherlands, several bills to ban full veils in certain sectors such as schools and public service are in preparation. Switzerland's justice minister has suggested the cantons there should pass partial bans but make exceptions for visiting Muslim tourists (the wives of rich sheikhs visiting their bankers in Zurich or Geneva?)

The big exception in the Pew poll is the United States, where 65% of those polled disapprove of a ban and only 28% support the idea. The poll did not investigate the reasons for this difference, so we can only assume it has to do with the more widespread acceptance of religion in public life in the U.S. and a more open approach to immigration.

The brief analysis that Pew published showed that support for a "burqa ban" seems pretty strong across the pollsters' demographic categories. It said:

"Opinions about banning Muslim women from wearing a full veil do not vary along gender lines in any of the five countries where the question was asked. In France, Britain and the U.S., views on this matter are also similar across education and income groups. However, in Spain and Germany, those in higher income groups are more likely than the less affluent to approve of such a ban; for example, a slim majority (51%) of low-income respondents in Spain favor a ban on full veils, compared with 62% of those in the middle-income range and 68% of those with high incomes.

"Ideologically, those on the right in France, Britain and Germany are more likely than those on the left to approve of a ban on women wearing the full Islamic veil in public places, but majorities across the political spectrum in these countries endorse such a ban. In France, 87% of those on the right support prohibiting women from wearing full veils in public, and 75% of those on the political left agree. Spain is the only Western European country surveyed where those on both ends of the ideology scale express nearly identical views; 59% of those on the right and 57% of those on the left approve of a ban on Muslim women wearing veils that cover the whole face. Ideological differences are also insignificant in the U.S."

In the latest twist to this story in France, businessman Rachid Nekkaz is offering to sell properties to set up a one million euro fund to help Muslim women pay the 150 euro fine they may receive for wearing the full veil in public if the ban becomes law.

New gateway for British business opens in Asia

- Ash Verma is Chairman, Gateway Business Consultants Limited and Founder of Gateway Asia. The opinions expressed are his own. -

London has long had a reputation as a city where entrepreneurs from Asia have come to seek their fortune.  From its early 19th century roots when Sake Dean Mahomed opened up Britain’s first Indian restaurant and introduced the city to shampoo, London’s Indian diaspora has now grown into one of the largest communities outside the country. The Chinese community in London, too, is Europe’s oldest and largest.

London’s entrepreneurs should therefore be among the best placed in the world to export back to massively expanding markets in India and China. However, despite these powerful diasporas, we are not as a city or country doing as well as we should as exporters to these countries.

UK exports to India did increase last year but that was only because the values of diamonds shot up as a result of the global economic downturn. Only around one percent of the UK’s total exports go to India despite the UK having a Diaspora of one million people.  In its exports to China the UK is still a long way behind countries including Australia and Germany. Nine out of ten businesses in Britain don’t export at all.  And it is many of these companies that could find fertile markets if they looked east.  While there is no shortage of initiatives branded as helping exporters, they do not always offer the business to business hands-on help that research shows that companies want before exporting to India and China.

Even for those with family links, these countries remain difficult places to do business.  According to a report from the Department of Business, Enterprise and Regulatory Reform, India and China rank 122nd and 183rd respectively in estimates of their ease for businesses  – compared to a sixth place ranking for the UK. Our research shows that companies are being put off by practical obstacles – from coping with exchange rate fluctuation to understanding letters of credit and preparing goods for transport. Many fear that they will see their property rights get lost in a thicket of bureaucracy. Though much Olympic-related attention goes to the multiculturalism in the east of the City, it is in the western boroughs around Heathrow where Chinese, Gujurati, Tamil, Punjabi and Pakistani minority communities have built up strong small and family businesses that offer the greatest potential for trade links. We have attempted to fill the gaps in provision for SMEs by establishing “Gateway Asia” – the largest and most coordinated attempt to help West London’s small businesses build on their “family connections” to export to India and China.

The 1.2 million pound Gateway Asia Programme, which provides free support to any SME under 250 employees, funded by a mixture of public and private sector partners including HSBC, BAA, TCS and the Mayor’s London Development Agency, is expected to help around 250 businesses. The initiative will give free hard-nosed practical advice through ten workshops and one-to-one advice on the practical obstacles that exporters to the East will face – from transport to packaging.  One of the partners, HSBC, are using their branch network across London and overseas to support trade delegations and to spot potential collaborations between their clients. Meanwhile, thethe Confederation of Indian Industry will put London businesses in touch with potential trading partners in India. Among the first to sign up is the American Muffin Company, a business based in West London that wants to export its range of luxury brownies and cookies – currently supplied to UK supermarkets – into India.   And Bina Mistry, the writer and singer of  Indian hit “Hot, Hot, Hot” from Bend it Like Beckham is being helped by Gateway Asia’s help to export singing and dancing shows back to Bollywood. This could be a lucrative export market for the wealth of film producers, actors, scriptwriters, animators and events management companies working in West London. Napoleon once said of China. “Let her sleep, for when she awakes she will shake the world”.  China and India have long-since awakened as powerful traders; it is London’s businesses that need to rise from their slumber if they are to use their natural advantages to prosper in the East.

from MacroScope:

Brit Euro Shock Horror: Part II

A week ago we ran a post on MacroScope noting, in part, that Britons have a strange relationship with the euro, sometimes bordering on disbelief that it exists at all. Some new numbers from the monthly Bank of America Merrill Lynch fund managers poll underline the extent of UK scepticism compared with that of others.

For two months, BofA Merrill has asked fund managers around the world what they think will eventually happen as a result of the Greek debt crisis. Four choices are on offer:

1) The Greeks will sort it out themselves

2) The European Union will bail Greece out

3)  Greece will default or restructure in an orderly manner and remain in the euro zone

4) Greece will default in a disorderly manner and exit the euro zone

Guess which region's/country's  fund managers have been most likely to predict that Greece will leave the euro zone. You're right -- Britain.

Globally, the March poll shows 24 percent of respondents reckoning Greece will handle the debt problem itself , 52 percent seeing an EU bailout and 19 percent betting on an orderly restructuring. Only 2 percent predict default and euro zone exit.

Among British fund managers, however, 11 percent reckoned Greece was headed out of the euro zone. Back in February, this number was  22 percent. No other region/country comes close. No U.S. fund managers, for example, voted for the exit outcome.

It begs the question whether British investors and analysts know something that others do not. Or perhaps they are being influenced by decades of political and media scepticism. If the latter, is there not a danger of making the wrong financial decisions?