Institutional weaknesses are mainly to blame for Greece’s dire trading performance, with exports around a third smaller than they should be, according to a new paper from staff at the European Commission.
Aside from being the world’s largest shipping nation, Greece sits at the cross road between three continents and on one of the world’s busiest sea routes.
Yet, researchers estimate its exports are approximately 33 per cent lower than would be expected based on the size of the Greek economy, its trading partners and its geographic position. The Commission staff dubs this “the puzzle of the missing Greek exports.” Read more
Throughout its campaign to convince everyone that the eurozone is not about to fall into deflation, the European Central Bank has drawn a distinction between two different sorts of episodes of falling prices.
The first involves a short period during which prices fall. In its monthly bulletin, published on Thursday, the ECB tries to define it, not as deflation, but as “negative annual inflation”. In the ECB’s view, a few months of falling prices will do little long-term damage to the economy. Indeed, the eurozone has already experienced this sort of deflation in the autumn of 2009.
The more dangerous sort of deflation, which the bulletin labels “outright deflation”, can, however, cause lasting pain. If what Mr Draghi has recently dubbed a “pernicious negative spiral”, triggered by ever weaker demand, was to emerge, all hope of the currency bloc’s economy returning to health anytime soon would be shot.
So how can you tell one from the other? Read more
It’s crunch time for the ECB. After more than six months of talking, the governing council has finally eased policy:
- Deposit rates have gone negative decreasing by 10 basis points to -0.10%
- The main refinancing rate has been cut by 10 basis points to 0.15%
- The marginal lending facility rate has been cut by 35 basis points to 0.40%
The changes all take effect from June 11
ECB president Mario Draghi will take questions from the press at 1.30pm to explain the thinking behind the cuts
Follow all the action and market reaction here with economics reporter Emily Cadman and Lindsay Whipp in London, with Eurozone economy correspondent Claire Jones in Frankfurt.
It’s crunch time for the European Central Bank. After more than six months of jawboning, pretty much every seasoned ECB watcher thinks the governing council is finally going to ease monetary policy on Thursday.
Disappointing growth, worryingly weak inflation, and the rise of anti-establishment parties in the European Parliamentary elections have only added to the sense that rate-setters must do something to stave off the threat of deflation and help stimulate lending in the real economy. What can we expect from the ECB and how will it work? Read more
Lithuania looks set to become the 19th member of the euro in January 2015 having met all the requirements demanded by the European Commission. Were the Baltic state to join the single currency, as is widely expected, that would trigger a big change in the way the European Central Bank’s governing council votes on monetary policy. Read more
It’s official: money can buy you happiness. Or more precisely, having money to spend can.
That’s the conclusion from a new piece of analysis by the ONS which looks at how household spending correlates with self-reported levels of well being in the UK. Read more
Andrew Levin, a Fed staffer who worked extensively on Janet Yellen’s communication reforms when she was vice-chair, sets out a set of principles for central bank communications in a paper at today’s Hoover central banking conference.
He calls for press conferences after every Fed meeting and a quarterly, Bank of England-style monetary policy report. Mr Levin is currently at the IMF but this a direction many Fed officials want to go.
Here are Mr Levin’s principles, with my highlights in bold, and comments in italic: Read more
Professor Thomas Piketty has given a more detailed response to the Financial Times articles and blogs on his wealth inequality data in Capital in the 21st Century (here, here, here and here). He says it is “simply wrong” to suggest he made errors in his data.
There are a few things on which we agree. First, the source data on wealth inequality is poor. I have written that it is “sketchy” and Prof Piketty says it is “much less systematic than we have for income inequality”. Second, it would have been preferable for Prof Piketty to have used a more sophisticated averaging technique than a simple average of Britain, France and Sweden to derive an estimate for European wealth inequality. Third, the available data suggests a broad trend of reduction in wealth inequality during most of the 20th Century. Read more
French academic Thomas Piketty has issued a detailed response to criticism by the Financial Times of his work on inequality, saying it is “simply wrong” to suggest he made errors in his data.
The best-selling author of Capital in the Twenty-First Century, which has ignited an international debate on trends in inequality, said “the corrections proposed by the FT to my series (and with which I disagree) are for the most part relatively minor, and do not affect the long run evolutions and my overall analysis”. Read more
How do you measure what prostitutes and drug dealers do for the economy? Britain’s official statisticians have had a go – and decided their inclusion in the UK’s GDP estimates will add about £10bn to the size of the economy in 2009. But how did they get to that number? Read more