Front Page: UK faces

14th December 2011

BRICS

Government set to act as export expansion slides

Chinese government is set to take action to prevent further declines of the country's export growth. China Daily

 

Unified world demands unified laws

A directive recently published by the Russian Ministry of Finances says that from 2012, all of the country's public companies must switch to the International Financial Reporting Standards to report on their financial affairs. Voice of Russia

 

Canadian, Indian firms to build Australia coal port

Australia on Wednesday awarded land to an Indian and a Canadian firm to build a massive US$10 billion coal export port amid forecasts of a long-term boom for energy demand. Times of India

 

Brazil Card Payments Up 23 Percent

Brazil's card market in 2011 is poised to grow by some 23 percent year-on-year, with payments by credit, debit and store cards set to reach R$667 billion (US$370 billion). Rio Times

 

European crisis casts pall over SA job prospects

Job growth is expected to remain muted in the first quarter of next year, as employers continue to fret over the full effect of Europe's debt woes on the global economy. Business Day

 

Developed Markets

UK faces £30bn EU bailout bill

The UK could be asked to put in £30bn to the IMF eurozone rescue loans; UK unemployment rises 128,000 to 2.64 million people. The Guardian

 

Fed Takes No Action, Citing Signs of Moderate Growth

The Federal Reserve said that it would take no new steps to boost economic growth this year, citing mounting evidence that the American economy is chugging slowly toward good health. New York Times

 

RBA 'alert' to Europe risks

Australia is well placed to ride out a significant downturn in the eurozone, but spillovers are inevitable, says the RBA. The Australian

 

Frontier Markets

Vietnam's banking reform gains momentum with first merger

Vietnam's central bank has approved the merger of three small banks mired in liquidity problems, the first move in a broader plan to restructure the banking system as a whole. Than Nien

 

CBK's lending rate increase ill-advised, say MPs

Parliament has dismissed the Central Bank's decision to increase interest rates to curb inflation saying the move was "highly misadvised". Daily Nation

 

Business School Chair promotes ethics in business

The Chairman of Business School Netherlands Nigeria (BSN), Ayodele Aderinwale, has expressed concern about the bad image given Nigerian managers by practitioners with little or no integrity. Daily Times Nigeria

 

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18 thoughts on “Front Page: UK faces”

  1. Anonymous says:

    Hi Shaun,

    Schaubble says we cannot rely on the central banks, so over to you Mr Schaubble – perhaps you’d like to tell us how the politicians can

    1 ) set up constructive economic reforms

    2 ) reform the EC and EU to give citizens real democracy and real accountability.

    3 ) impose cost cuts on the EC and ask Brussels to deliver better value for taxpayers

    1. forbin says:

      the Fanco – German empire will never give any power

      Forbin

    2. Anonymous says:

      Hi ExpatInBG

      This relates to the RBS story in that we see timing issues or can kicking. The job of a central bank in a financial crisis is to shore up the ship and also to commit funds to prevent contagion. However this should only be until reforms and changes kick in.

      Instead 5/6 years down the line we see central banks are still the main players in town. They have been joined by workers and consumers in the periphery of the Euro area who have taken painful changes if we stick to the ECB but what of actual official reform? The list is rather short.

  2. forbin says:

    If was the ECB ?

    Tell things can only get better

    and

    Happyness is the truth , happy happ happy

    and then do what ever the Bundesbank tell me……

    Forbin

    1. Anonymous says:

      Hi Forbin

      The Bundesbank has been getting a little edgy recently as it has been thinking through the expansion of members. It is now 1 out of 18 votes by membership and usually has one of the 6 executive board members. So overall 2 out of 24.

      A bit thin and what if discussions about rotating executive board roles come to something? Ironically who started that game….?

      They are not that weak as various nations are likely to be within the Bundesbank’s sphere of influence but as the times they are a changing as Bob Dylan put it.

  3. Anonymous says:

    Shaun,

    The ECB to turn a blind eye as France once again exceeds the Maastrict treaty limits – still Germany has also done this in the past – just don’t tell Greece or Cyprus!!

    1. Anonymous says:

      Hi Chris

      Yes the fiscal deficit forecast for France made by the European Commission this week was 4.0% this year and 3.9% in 2015. So actually not much change.

      Perhaps most disturbingly was the unemployment forecast of 11% this year and 11% next aka even the rose-tinted forecasts do not predict a fall.

  4. Midge says:

    Hi Shaun and thanks for this excellent blog.Yes governments have passed responsibility to unelected central banks and for good measure UK has created OBR so no blame can be put on elected politicians.
    A lot of the latest figures in Europe still make grim reading especially youth unemployment.
    What will the ECB do? Not a lot I believe as they seem to think things are “on track”.
    Seems to me that UK CPI could in the short term as least suffer a bout of disinflation.Although I did see that postage stamps are going to cost more.

    1. Anonymous says:

      Hi Midge

      I raised the issue of the proliferation of Quangoes (and reviews) at the UK Inflation governance open meeting at the Royal Statistical Society yesterday. It lead to a situation where a Quango called CPAC (Consumer Prices Advisory Committee) had members who thought it was in charge of UK inflation methodology when it was not! Actually many of us present yesterday pointed out that we had previously been under that impression too…

      Perfect for politicians as who can be held to account when no-one was that sure who was responsible for what?

  5. Pavlaki says:

    Just got back to UK ! What I can offer is what I have been told during my travels. The ECB needs to make funds available to small businesses as the reality is that loans have dried up. ECB efforts to date have stuffed banks with sovereign bonds instead of promoting loans to business. Secondly, get the value of the Euro down somehow. Talk it down, drop interest rates but do something. Disinflation is a real threat so get cracking with loans and a cheaper Euro and then monitor closely.

    1. forbin says:

      I think thats DE flation . but only in fridge magnets , electircal wing wongs and possibly cars

      Everything needed to live is and will go up , given that Spain and Greece and Cyprus will be the exceptions.

      2015 will be an interesting year , this year hmm, possible but that can has a few more kicks in it yet

      Forbin,

  6. Dutch says:

    ‘What would you do next week if you were the ECB? To my mind it has blunt
    broad based instruments which are ill designed for the specfic fine
    tuning it is being asked to do.’

    Any news on TARGET2 imbalances in the periphery?

    1. Anonymous says:

      Hi Dutch

      Osnabruck University follows the numbers and here is its latest graphical representation on the subject

      http://www.eurocrisismonitor.com/img/EuroCrisisMonitor.jpg

  7. David Lilley says:

    Shaun,

    “What would you do if you were the European Central Bank?”

    1. Persaude Super Mario to extend his term in office.

    2. Increase the balance sheet to include a big Ukrainian bale-out.

    3. Review the alignment of sovereign loans to foster the keeping of debt and deficit targets set by the EZ and promote internal devalutions.

    4. Get some external members on the ECB board.

    5. Learn lessons from the BoE such as funding for lending (FfL).

    1.+ Since Super Mario took the helm the enormous EZ crisis has certainly gone off the radar. Jean-Claude, his previous incumbent, had increased the base rate just when it should have been lowered. Mario had to reverse that and then start aggressively reducing the rate.

    2. + The Ukrainian problem could be reduced to a cheque book problem. The Russians could come in with a bigger cheque than the poor EU. Beating their previous efforts of election rigging, poisoning the opposition leader and doubling the price of gas and eventually cutting off the supply on Christms Eve. Mario could solve the cheque book problem as he has a record of doing so.

    3. + The new man in Itally may do the trick for Itally but the new man in France certainly isn’t and any ECB funding for France should be tied to debt and deficit tragets set by the EU.

    4. + Mario must struggle with 18 central bankers, especially the German, but he seems to go the right way thanks to his superman powers. Some external members, such as yourself, would dilute the central v periphery dichotomy.

    5. + FfL looked good and may have been followed by other CBs. But the cheap money went to the BTL brigade and not business.

    I’m sorry but I have two disagreements, as follows:

    A. The credit crunch was a consequence of the debt crisis. It isn’t that we had a credit crunch or a finnacial crisis. These were the inevitable results of a debt crisis, a boom brought about by borrowing tomorrow’s income and spending it today. The, so called, boom years were nothing more than taking a sub. GDP should be measured in real-time and the bringing forward of tomorrow’s income and counting it as today’s should be included in the calculation of GDP.

    B. I would always trust the CBs rather than the politicians. The CBs win office via meritocracy. Politicians, with the exception of statesmen who can sell the right medicine, pander to the vote. If a 75p increase in the state pension backfired just come back with a massive increase given that they are 20% of the population, they are better educated than today’s young and they use their vote.

    C. Democracy isn’t about the vote nor the tyranny of the majority over the minority. It is about freedom of thought and freedom of speech such that the best argument gets out there and can win the day. It is about debate and scrutiny in Parliament resulting in good laws. It fails when we have a hung Parliament like Greece and it fails when we have a big majority government and, like Labour, they don’t attend debate and scrutiny but only attend for the vote. Typically none attended finance bills.

    D. I like the idea of the OBR having meritorious/ Plato’s guardian powers such that an incomming government cannot spend, spend, spend or borrow, borrow , borrow.

    Ben Bernacke always screamed that he shouldn’t have to single handedly rescue the economy via monetary policy but the gov should help with fiscal policy.

    1. Anonymous says:

      Hi David

      I am particularly intrigued by point 4 which is something I do not recall being mentioned elsewhere. What was that about the best place to hide things is in plain sight? Yes what about some external expertise on the ECB…

      Although the Bundesbank may not be so keen on the lines of my response to Forbin.

    2. Anonymous says:

      Hi David,

      Ukraine is more than a chequebook problem. Crimea is an essential defence asset for Putin, which shouldn’t have been given away 60 years ago. Stalin annexed a strip of Poland to the west and these people want nothing to do with Russia. Corruption is the big problem keeping the majority in poverty. A simple economic comparison between Poland and Ukraine is reminiscent of the cold war competition between the DDR and the Bundesrepublik. Putin can lavish much money and heavily subsidise energy in Ukraine, but I think corruption will rake off the benefits to a few oligarchs. Also the similarity of an oligarch backed autocrat being toppled by the majority may touch sore nerves in the Kremlin.

      Within Europe, alarm bells must be ringing in Warsaw, Prague and Budapest. Hello Barack – please bring your missile defence system here, and do it quick. Investors might look at buying Euro armament shares. While Gazprom shares are dropping, some oligarchs can profit by buying them dirt cheap. Although wise investors should have fled Russia after Yukos.

      Politically, European energy security is the next
      nightmare – will the Kremlin use Gazprom to blackmail, divide and
      rule over EU nation states ? For Britain, I can only repeat my often
      proffered advice to invest heavily in nuclear power to reduce the
      dependence on imported gas. Are Britain’s LPG terminals adequate if
      Gazprom turns off the gas ?

      1. David Lilley says:

        Dear Expatin,
        I completely agree with you.
        We are on the hook for Ukriane and Russia is on the hook for Crimea.

        Ukriane will not get another penny from Russia but Russia will have to bail out Crimea (not a problem if Kornocovitch did take $70b with him).
        Russia will increase the cost of our hook by pushing
        up the price of gas in the Ukriane and hurting their trade with Russia.
        The West’s hook is only $35b so I think there will be a happy ending with no shots being fired.
        A happy ending would better be facilitated if the IMF assessment, that the EU is waiting upon, put a crackdown on corruption to the fore. And any EU/IMF bailout was equally distributed to the East and the West.
        It sickens me that a servant of the people, the outgoing president, basically stole about $300,000 every day he was in office. A grand total of $1b. And yet they vote for him.
        It is a cheque book problem. They are all cheque book problems.

        1. Anonymous says:

          I’d say accountability problem too. It’s difficult to fill a bath without a plug. Likewise when money is being corruptly syphoned off – you need a bigger chequebook. Your taxpayers won’t like that, just as they dislike the excessive EU bill.

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