Long Road to Economic Recovery, Warns Sentance

by David on February 23, 2012

At the annual conference of the Institute of Economic Affairs today, Andrew Sentance, former Monetary Policy Committee member, opined that

“the current phase of disappointing growth and volatility”

…was

“the new normal.”

His comments mirrored the concept of both another economic survey that projected slow growth and the European Commission that noted a UK growth rate at 0.6 percent for 2012. The growth estimate for much of Europe was downgraded as well.

Mr. Sentance proposed that Britain was experiencing the end of the second nine-year period of stalled growth that has followed extended years of growth since World War II. He stated that the first period ended in the 1970s, followed by almost a decade of stagnant growth. In the late 1980s, not only did Britain’s economy begin picking up momentum again, so did the rest of the world.

In 2007, just before the crash of 2008, the expansion-retraction cycle had begun again.

During each economic ebb period, Britain’s growth rate ran less than one percent, matching the current trend.

He stated:

“I hope that a more sustained growth dynamic will emerge in the second half of the decade. The conditions, which supported the period of growth, which ended with the financial crisis, are not set to return quickly. There are parallels with the disappointing growth the 1970s and early 1980s.”

Andy Haldane, the Bank of England’s executive director for financial security, repeated the growth estimate concerns.

“We are not yet remotely in a position where balance sheets have been fully repaired. Households and business were therefore likely to keep saving and continue to act as a drag on the economy.”

Haldane also voiced concern regarding the apparent lack of concern by banks for small- or medium-sized businesses.

“[The country] needs structural reconfiguration of the banking industry to ensure that SMEs have the financing they need to be tomorrow’s growth….”

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Greek Bail-Out Not Yet Certain

by David on February 20, 2012

Yet another weekend of Greek bail-out controversy, Germany has nodded to pressure to drop the drafting of Greece’s exit from the European Commission.

There are yet unanswered questions and conditions to the bail-out requirements, none the least of which is the grandfathered acceptance of austerity and oversight conditions after the April elections. According to the troika of the International Monetary fund, the European Commission and the European Central Bank, the incoming government must agree to these conditions.

Theodoros Dritsas, MP from the Syriza party, has stated:

“If we achieve a Left-dominated government, we will politely tell the Troika to leave the country, and we may need to discuss an orderly return to the Drachma.”

Select members of the German coalition government agree in principle that Greece should leave. Markus Söder, the Bavarian finance minister declared that the euro’s status as a world reserve currency, which would be undermined if Greece defaulted while a member of the eurozone, is

“more important”

…than Greece’s solvency. He stated:

“It would be better if Greece stepped out of the euro.”

The bail-out instalment currently under discussion by European finance ministers was agreed to in October 2011 as part of a step-down plan implemented in stages. The €130-billion payment currently under review has already been determined to be at least €15 billion shy of the total funds Greece needs by March 20, 2012.

Should the bail-out fail, Greece would default on loans and bonds due at that time and cause the country to declare bankruptcy.

One condition that was met last week regarded those bond payments: Investors were required to accept a 70-percent drop in payments. Recently, the European Central Bank protected itself against their share of the bond debt by declaring itself a primary debtor and all others as secondary, guaranteeing the ECB is paid first, and secondary debtors are paid with remaining funds.

Wolfgang Schäuble, Germany’s finance minister, fears that the Greek austerity measures cut so deeply that no government would be capable of implementing them. A troika report leaked recently disparages Greece’s chances of bringing the deficit from the current 129 percent of GDP to 120 percent by 2020.

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UK Economic Recovery Slow but Possible, Says King

February 16, 2012

In his Inflation Report yesterday, Sir Mervin King, Govenor of the Bank of England, said that the United Kingdom is headed on a “zig-zag” …route to economic growth. “With falling inflation, and the prospect of an end to the squeeze in real incomes leading to a recovery in growth, we are moving in the right [...]

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Greece Passes Austerity Bill at 11th Hour as Protests Mount

February 13, 2012

Late Sunday night, the Greek legislature passed a deeply unpopular austerity bill that granted them initial clearance to receiving the €130 billion (£110 billion) bail-out instalment negotiated in October 2011. The Greek populace, however, rioted violently against the measure. Recession and high unemployment have existed for years in the country, and the public funding and [...]

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Greek Cuts Close But Haven’t Met Minimum Benchmark

February 9, 2012

After a long night of negotiations ended without an agreement in place, talks resumed early this morning, still €300 million short of the needed budget cuts demanded by the European Union, the International Monetary Fund and the European Central Bank. The sticking point seems to revolve around Greek pensions. The above triumvirate is advocating a [...]

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UK Job Posting in Foreign Markets on Rise

February 6, 2012

As UK unemployment figures continue to rise, contradictory arguments continue to be levied as to its cause. Some blame immigrant workers displacing UK workers, while others state that immigrant workers are hired due to a lack of UK applications. Others argue that the immigration workers have no impact on UK unemployment. Some blame youths for [...]

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Greek Bail-Out Still in Question

February 2, 2012

As Greece parlays with creditors to eliminate €100 billion in debt from Greece’s books, auditors find that not only that amount must be eliminated, the projected €130 billion in bail-out funds must be awarded by the IMF, and still Greece faces a €15 billion shortfall in its budget. Even the IMF’s bail-out award has yet [...]

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Greek Teeters Toward Bankruptcy Without Bail-Out Instalment

January 30, 2012

Greece sits poised on the razor’s edge above bankruptcy unless the European Union grants another bail-out instalment of £100 billion. Without the bail-out instalment, Greece would default on €15 billion in loans due in March. Lucas Papandemos stated that Greece would face bankruptcy and be forced from the European Union. Christine Lagarde, Managing Director of the [...]

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Cameron Maintains Independent Stance at Davos Conference

January 26, 2012

As expected, David Cameron has continued his controversial stance in opposition to European Union economic and financial policies as the World Economic Forum began in Davos, Switzerland. The UK Prime Minister has called the current trend of European taxes and regulation “madness.” Cameron declared that imposing a financial transaction tax could cost thousands of jobs, [...]

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Think Tank Study Reveals Dire Picture for Middle Class

January 23, 2012

A recent study by Resolution Foundation reported that the middle class in the United Kingdom will require a minimum of eight years to recover its pre-2008 disposable income. The study centres on 10 million adults and their 5.2 million offspring, none of whom receive means-tested state support. Within the study’s parameters, annual income levels for [...]

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