Thursday, April 14, 2005

Brighten up at the FT, please!

The Financial Times is full of doom and gloom today. Here is a quick look at some of their stories.

Eurozone finance ministers raised the stark contrast between countries such as fast-growing France and Spain and laggards such as Germany and Italy, complicating the task of setting a single interest rate for the entire region.
Their discussion at a meeting in Luxembourg this week highlighted official concern that, despite the introduction of the euro in 1999, the 12 economies of the eurozone are drifting apart, according to a senior German official.

More @ Divergencies in the Eurozone economy
The one size fits all interest rate has always been problematic, though not as problematic as creating a currency union without first putting in place the political structure to underpin it. Doing it the other way around, as the EU is attempting, is fraught with difficulty as they are discovering.

In another leading article the FT remarks that:
In an extraordinary speech yesterday, resonant with the language of class warfare, Franz Müntefering, chairman of Mr Schröder's SPD, condemned the profit-maximising strategies of global financial institutions as a danger to democracy. The debate about the country's economic future has become increasingly poisonous - one reason why companies have been reluctant to invest more in Germany.
Just as the country's political establishment miscalculated the economic effects of German unification, it has been miscalculating the economic effects of EU enlargement. The appropriate response would have been to improve economic flexibility to allow resources to shift into new sectors. Instead, there is a rise in protectionism that does not bode well for Germany's economic future.

Full text @ Protecting Germany
Oh dear! This doesn’t bode well for Germany’s ever burgeoning army of unemployed! Germany has gone downhill in recent years - couldn't be anything to do with the €uro could it? .... it's just that it's a bit odd that the costs of German re-unification have suddenly become an issue 16 years after the event.

Yet another editorial paints an equally gloomy picture as regards the US trade defict and the possible implications it might have on global growth, and the value of the US Dollar. See - Imbalances worsen

Further weakness in the US$ will be very bad news for the €uro and could send it to new heights with all that implies for the Eurozone economies etc. etc.

Looking at the above anyone would think we were on the brink of global recession and economic crash – no wonder economics is called the dismal science! Looks as if the sun will come out here in Budapest .... time to take a walk on the bright side of the road!