UK News

from Felix Salmon:

Europe’s doomed fate

This is beginning to feel like 2008, complete with all the rumor and chaos and volatility we saw back then. MF Global is a bit like those Bear Stearns hedge funds which went bust -- an isolated datapoint in one respect, but ominous in many others. And right now the best case scenario is that Greece ends up being Bear Stearns, rescued by an international community petrified of what might happen in the event of a chaotic collapse.

But Greece being Greece, of course, a chaotic collapse has to be pretty much an inevitability at some point.

Of the many ways in which the euro project was fundamentally misguided, this might be the proximate cause of its demise: it was never robust to the messy world of political reality. And in the real world, people -- including heads of state -- make stupid decisions all the time.

So it's a bit silly, frankly, second-guessing George Papandreou's fateful decision to call a referendum on the latest Greece bailout. It might not have been the most statesmanlike thing to do, but the fact is that, judged by the standard of most Greek prime ministers, Papandreou's pretty much the best that Europe could reasonably hope for. (Just think: Greece could be run right now by someone more like Silvio Berlusconi. Or, for that matter, Jon Corzine.)

In Greek tragedy, humans don't rise above events to triumph; rather, they are crushed by forces greater than themselves. (It's one reason why The Wire was such an innovative piece of television: it reached back past that great humanist, Shakespeare, to his Greek antecedents.) The architects of the eurozone displayed classic hubris: they saw the increasing economic ties between the various countries and locked themselves in to a momentum trade where such ties could only ever strengthen and never weaken.

And in the event it took much less time than even the skeptics had anticipated before that hubris resulted in the inexorable nemesis.

There is a decent chance that the G20 summit will somehow muddle through in Cannes. There's even a possibility that Greece will manage to extract itself from its current political mess, implement the reforms that Merkel and Sarkozy are insisting on, and live to collapse some other day.

from FaithWorld:

FInancial crisis boosts European suicide rates, especially in Greece, Ireland

(Suicide hotline sign at telephone booth near Beachy Head, the chalk cliffs near Eastbourne, a leading UK suicide spot, 29 January 2009/Les Chatfield)

Suicides rates rose sharply in Europe in 2007 to 2009 as the financial crisis drove unemployment up and squeezed incomes, with the worst hit countries like Greece and Ireland seeing the most dramatic increases, researchers said on Friday. Rates of road deaths in the region fell during the same period, possibly because higher numbers of jobless people led to lower car use, according to an initial analysis of data from 10 European Union (EU) countries.

"Even though we're starting to see signs of a financial recovery, what we're now also seeing is a human crisis. There's likely to be a long tail of human suffering following the downturn," said David Stuckler, a sociologist at Britain's Cambridge University, who worked on the analysis.

Stuckler said he feared the social and health costs of the recent global economic downturn would turn out to be high. "We can already see that the countries facing the most severe financial reversals of fortune, such as Greece and Ireland, had greater rises in suicides," he said. "And suicides are just the tip of the iceberg in terms of mental health problems. Suicide itself is a relatively rare event, but wherever you see a rise in suicides there is also a rise in failed suicide attempts and in new cases of depression."

Analyzing data available so far, Stuckler and colleagues found that suicide rates were up 17 percent in Greece and 13 percent in Ireland. Unemployment increased by 2.6 percentage points -- a 35 percent relative increase -- between 2007 and 2009 across the EU as a whole, they said.

"The steady downward trend in suicide rates, seen...before 2007, reversed at once," the researchers wrote.

from The Great Debate UK:

Not much stress, not much test

-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own.-

Back in the 1950’s, when most women stayed at home while their menfolk went out to work, a favourite trick of life insurance salesmen was to walk into the prospect’s home at dinner time and ask the wife:

“Mrs Smith, have you ever thought what would happen if your husband keeled over and had a heart attack right now?”

Imagine the effect of this question on the poor guy sitting there eating his meat and two veg. It must often have been enough to make him choke on his roast potato there and then – maybe even die on the spot.

Not being in the business of selling life insurance, the European bank regulators were unwilling to take any chances with the client’s cardio-vascular system, so they have restricted themselves to asking the question:

“What would happen if the client had the flu and needed a couple of weeks off work?”

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 Global News Journal:

Should Norway bail out Iceland?

While not exactly pocket change, Iceland’s $5.5 billion Icesave debt to Britain and the Netherlands amounts to just 1.2 percent of the value of Norway’s offshore wealth fund. For Iceland, it's more than $15,000 per citizen.

Given the two countries’ close historic links -- Norwegian Vikings discovered the Atlantic island where people still speak a version of “old Norwegian” -- speculation about Oslo coming to the rescue has Reykjavik licking its lips.

It would take some coaxing of the Norwegian electorate, but why shouldn’t Oslo help out its crisis-hit cousin, Icelandic newspapers are asking.

On muted idea has Norway buying Icesave debts and allowing Reykjavik to repay the loans on better terms than it has gained from the Dutch and British governments.

The standing terms, a 5.55 percent fixed annual rate for the next 15 years with no payments for the next seven years, are deemed unfairly high by most Icelanders and set to be overwhelmingly rejected in a referendum on the Icesave bill this Saturday.

Unlike Germany, which fears it will have to bail out fellow euro-member Greece by taking cash from its own people or issuing more debt, Oslo would simply tap into savings and ensure the loan gets repaid before its oil runs out in a few decades.

But finding bailout advocates in Oslo is proving tough.

from Global News Journal:

Cometh the hour, cometh Van Rompuy?

Three months ago, Herman van Rompuy might have struggled to be recognised on the streets of his native Belgium, let alone Paris or London. The bookish former prime minister, a fan of camping holidays and Haiku poetry, was nothing if not low-key; a studious consensus builder in the world of Belgian politics.

Three months on and Van Rompuy, 62, may not outwardly have changed much, but his title and the expectations surrounding him certainly have. In November he was chosen to be the first permanent president of the European Council, the body that represents the EU's 27 leaders, and on Thursday he will host those heads of state and government at an economic summit in Brussels -- the first such gathering he has chaired.

With Greece under extreme pressure with its mounting deficit and debt problems, and Portugal, Spain and Italy threatening to go the same way, the summit comes at a critical time. It is perhaps the most serious test of Europe's monetary union since the euro single currency was introduced 11 years ago.

"Cometh the hour, cometh the man", some might say, even if one wonders whether Van Rompuy would have been the first name on most European leaders' lips at such a pressing time.  But Van Rompuy it is, and he has his work cut out if he is going to seize the moment and tackle one of the EU's biggest problems.

First he must put Greece and debt on the agenda. As it stands the summit is only scheduled to discuss the EU's 2020 strategy (a plan to boost growth over the next decade), Haiti, governance and climate change. And once he has put Greece firmly on the table, he must ensure that EU leaders give it serious, hard-nosed discussion, even if that means broaching super-sensitive issues such as what plans the union has to bail Greece out if it comes to it.

Van Rompuy, with his thinning grey hair and professorial air, may not look like the sort of man to squeeze decisions or commitments out of the likes of French President Nicolas Sarkozy or Germany's Angela Merkel. But his record suggests he has hidden depth and a command of the issues that may prove handy.  

A student of philosophy as an undergraduate, Van Rompuy went on to gain a master's in applied economics and then worked for the Belgian central bank, before going into politics. As Belgium's budget minister in the 1990s, he was instrumental in helping to drive Belgium's debt down from a peak of 135 percent of GDP, higher than Greece's debt pile is right now. In his one-year stint as Belgium's prime minister, he won plaudits for his ability to build consensus, steering Belgium's notoriously fractious politics away from the brink on several occasions.

from Reuters Soccer Blog:

France break Irish hearts to seal World Cup slot

France ensured the likes of Franck Ribery, Karim Benzema and Thierry Henry will be at the World Cup in South Africa next year after winning through with a goal that has left Irish fans seething.

There was nothing wrong with the finish from William Gallas, but Thierry Henry admitted using his hand to keep the ball in play and commentators and Irish supporters are already talking of "The Hand of God II" and "The Hand of Henry" in reference to Diego Maradona in 1986.

"Yes, there is handball but I am not the referee," Henry told reporters. "I'm in the box, there are two defenders in front of me. The ball bounced off my hand, the referee did not see it and I played on."

Ireland coach Giovanni Trapattoni called the goal a "great mistake" by Swedish referee Martin Hansson but he chose not to accuse Henry of cheating.

"I told the referee that it is possible to make great mistakes," Trapattoni told a new conference after the game at Stade de France. "It is a bitter evening."

Trapattoni said he felt the referee should have talked to his assistants and to Henry before awarding the goal.