The pictures from Athens at the weekend showed a city in turmoil: protests turned violent, buildings were alight and an anti-German feeling was clear for all to see. German flags have been burnt as Greek politicians have agreed to yet more austerity, which means reduced pensions, a 20% cut to the minimum wage and mass layoffs in the public sector.
Added to that the EU has demanded that Greek politicians from both sides of the political aisle sign a pledge to implement cuts regardless of the outcome of the general election scheduled for April. Thus, even if the Greek people vote for an alternative to cuts the troika will insist on them.
By Kathleen Brooks. The opinions expressed are her own.
For the last three years talk about the global economy has been decidedly negative. Firstly there was the sub-prime housing crisis in the U.S., then the sovereign debt crisis, now we wonder whether the euro will survive and whether China will suffer a “hard” economic landing.
But amidst all of this doom and gloom, there seems to be a bright spot: Sub-Saharan Africa. For the bulk of the last thirty years the focus has been on famine, civil war or piracy, which has left a decidedly negative impression of the continent. However, in recent weeks there has been a growing number of optimistic reports about Africa, with some even thinking it could continue to grow while the rest of the world stagnates.
It used to be Greece that was the canary in the coal mine, these days it’s Hungary. The new year got off to a bad start for the Eastern European nation after it experienced a failed bond auction, causing its bond yields to surge.
This caused major jitters across global financial markets and once again a small, relatively unknown economy is dominating the headlines and causing a massive headache for the European authorities.
Some people assumed that after the debacle over the 2008 mortgage-backed security crisis in the U.S., the credit rating agencies would be discredited. However, here we are three years later and the focus is still on the same rating agencies, waiting with bated breath to see whether they move the ratings of some of the world’s most important economies.
Within the last six months rating agencies have played a big part in shaping the direction of financial markets. First, there was Standard & Poor’s downgrading of the U.S. at the start of August, which caused a wave of risk aversion and turmoil on financial markets. Europe has also been the focus of concern.
By Kathleen Brooks. The opinions expressed are her own.
The markets have had to – grudgingly – get used to pricing in political risk in recent months. Instead of being moved by economic data and fundamental or technical factors, a large amount of recent price action has been driven by politicians, and that always spells bad news.
Firstly, we have had to listen to the machinations of Europe’s various branches of power as they try to muddle through to a solution to the euro zone debt crisis. This has done very little apart from cause excess amounts of volatility in the markets as politicians talk at odds to each other. The results are pathetic: more than 18 months since the Greek crisis first flared up not only is Athens still deep in its own sovereign crisis but contagion has spread to Italy and Spain and even threatens to engulf some of the core member states like France.
By Kathleen Brooks. The opinions expressed are her own. Nicolas Sarkozy, the French President, has put UK membership of the EU centre stage. His spat last weekend with Prime Minister David Cameron at the EU summit was captured by the global media. In no uncertain terms, he said that the UK hated the euro and should mind its own business. Cue a rebellion from Conservative backbenchers who scheduled and then lost a parliamentary vote this week on whether or not to hold a referendum on our membership in Europe. This faction may not be getting what it wants right now, but its voice is getting louder. More than 80 Conservative MP’s defied the wishes of their leader (some at the risk of losing their jobs) and voted for the referendum after Tory backbencher David Nuttall proposed the motion because of an e-petition backed by more than 100,000 people. As the euro zone tries to fight for survival and re-write the rule book is now the time for the UK to contemplate its EU membership? Obviously for those Tory back benchers it is. But while David Cameron may call himself an “EU pragmatist”, the evidence suggests that the majority of people in the UK are “European Agnostics” – they don’t care if we are in Europe or not. In a recent poll by Angus Reid 49 percent of people in the UK said they want us to leave the EU. This compares with 60 percent of Conservative Party members, according to a recent poll by Conservative Home. So the rebellious Tories don’t really represent the majority view, and, with a very large margin of error, roughly half the population want us to stay in the euro zone, or couldn’t care either way. I suspect the latter is true. Most people have enough politics in their lives with the 24-hour news cycle and a general election every five years. The EU, with its myriad rules and regulations and multiple branches of power, is enough to drive most people dizzy. I don’t know anyone – not even European politics majors – who can say that they fully understand how the euro zone works. Thus, the way the EU impacts our lives may come as a surprise to some. Did you know that EU law takes precedence over UK law and that some UK laws are actually illegal according to the EU statute books? The EU is a huge influence in our lives, but why are people not that interested in whether we stay or we go? One answer is that we never voted to be in the EU in the first place. We joined the EU in 1973, before most people under 40 were even born. Thus, a huge cohort of the UK has never known life without EU membership. Added to this, a lot of the things we come into most contact with in our daily lives are actually controlled by the UK, for example public expenditure including social security, health and pensions. But the EU determines a huge amount that can influence the prosperity of this nation including our trade laws, rules on financial sector regulation and even some macroeconomic policy. And then there are the costs of our membership, which tends to grab the headlines once every couple of years. The UK’s contribution to the EU Budget topped £6.4 billion in 2009/10, this expanded to £7.9 billion in 2010/11, when the UK was recovering from the worst recession since the 1930’s. Added to this, the UK now receives a trimmed down rebate from Europe. This rebate was negotiated by Margaret Thatcher in 1984, but was altered under Tony Blair’s leadership, which saw the rebate cut in return for a review of EU subsidies and the hopes of a smaller Budget. Those were sweet dreams: the EU’s budget continues to rise on cue each year. So what are the benefits of EU membership? Some may say not much, when you look at it from a cost-return basis, however that view is missing the point. EU membership allows the free movement of labour both to and from our shores as well as easy access to trade in the region; this is important since our European neighbours are our largest trading partners. The free movement of labour can be a controversial topic, however it has not only boosted the demographics of this country, but it has also had many cultural benefits. Perhaps the most important reason for our membership is prestige. The euro zone is the largest economy in the world, the UK is sixth largest but we are being chased for that spot by some fast-growing emerging market economies. Thus, our relationship with Europe helps to keep us at the forefront of the world stage. It also allows us to have a say over how to solve major global problems like the European sovereign debt crisis. The Tories may not have won their referendum this time, but our membership of the EU is likely to come under greater scrutiny as Europe’s short-comings continue to grip the headlines. But the fact is that our relationship with Europe is of the love-hate variety and it is likely to drag on for some time yet. Image — Colin Hingston from Southampton stands with other anti-European Union demonstrators as they wait to go into The Houses of Parliament in London October 24, 2011. REUTERS/Suzanne Plunkett
As New Yorkers hurried to work on Wall Street on Friday morning they were greeted by police bracing themselves to cope with a wave of protestors apparently threatening to storm the New York Stock Exchange. By lunchtime the storming had failed to occur, 14 protestors had been arrested and hungry workers were free to go out and get a sandwich.
In recent days the Occupy Wall Street campaign is looking more like a damp squib than a counter-capitalism movement. The protests may be born out of a genuine frustration with bank bailouts funded by the tax payer, but no sooner had the first placard been written then corporate big-wigs sensed the opportunity it presented and rushed in to join the fray.
Chancellor George Osborne has weathered criticism of his economic policies from both sides of the political isle in recent months, so it was no surprise that the buzz word from his Conservative Party Conference speech was “difficult”. Life at Westminster is difficult for Osborne at the moment and it’s unlikely to get any easier.
The problem for the Chancellor is that he has staked his credibility on bringing down the UK’s deficit, yet he is also trying to be a pioneer of growth and jobs. In the current environment neither goal looks achievable.
Ireland is on a wave. After a bad patch and a massive loss of confidence eventually it looks like it has turned a corner and we can start to believe that there may be brighter times ahead. Of course, I could be talking about the Irish rugby team who had a stunning win over Australia at the rugby World Cup in New Zealand. But the economy isn’t doing too badly either.
Data last week showed that the economy grew by a respectable 1.6 percent in the second quarter, after expanding by an even better 1.9 percent in the first three months of this year. This beats the dismal growth rates in the UK and the euro zone, which both came in at 0.2 percent in the three months to June.
For over a year now people have been calling for the collapse of the euro zone. Either one of the bailed out nations would leave, or the more fiscally sound northern European states would form their own version of a union. Regardless of what the outcome would be, the harsh reality was that the Eurozone’s massive floor - allowing countries like Greece to borrow for nearly a decade at German-style interest rates without some limit on spending or enforcement of fiscal rules – meant that it could not survive.
But after 18 months of stop gap solutions, emergency weekend summits and hastily constructed bailout plans it feels more and more like September may be the swan song for the currency bloc.