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Showing posts from January, 2010

A failure of Ambition?

As always when coming to France, I am struck by the deliberate way the state has invested in infrastructure. It is not just that their Railways work so well, which is -frankly- a standing rebuke to Britain, the country that invented them, it is also the way in which grands projets reflect a vision of France. It may seem sometimes an overblown, perhaps even bombastic, vision to a more cynical Anglo-Saxon eye, but it does unquestionably reflect an ambition for France. In a country half as densely populated as the UK- especially its South-East corner- it is obviously easier to build straight high speed rail lines or such huge statements as the Millau viaduct in France. However there is also a far greater will to do so. In Britain we spend billions on invalidity benefit and call it "investing in people"; in France they genuinely do "invest" in infrastructure. It is an investment that allows the French to travel across the country in 2-3 hours. To live in Mid France and

Darling's Double Dip Disaster

The UK has released the latest GDP numbers: on 40% of the data, the statistics show that the British economy finally returned to growth... of 0.1%. The consensus forecast was for 0.4%, so there is no doubt that these growth numbers are disappointing, and there is still the scope for them to be revised downwards. Meanwhile next months numbers are likely to be worse, given the slowdown in retail spending that the increase in VAT is likely to bring about. So it may be that the British economy has not even come out of recession, and even if it has, it may go back into negative territory at the next data point. This comes despite the fact that the British government is continuing to run a double digit deficit; A deficit that is not sustainable and which must be reduced sharply. The fact is that those who are seeking to put a positive gloss on the situation of the British economy are missing the point: the country has still not escaped from its fool's paradise where property is always

A chill wind

Tonight in Tallinn is set to be one of the coldest nights so far: minus 24 Celsius. In fact it has not been above -14 for a while now. Personally I prefer it like this than when it is around freezing point, because there is no damp in the air, so it feels drier. Not to mention the fact that every day has begun with a beautiful clear sunrise and with the sun on the frost, the days are bright and cheerful. We have some snow forecast in the middle of next week, but I will be back for a few days in London and Paris, so hopefully will miss this and the -6 associated with snow. It is certainly true that you adjust your frame of reference quite quickly: once upon a time I would have considered -6 to be quite cold! However, despite the cold, there have been three separate reports today that confirm that Estonia is on track to enter the Eurozone on January 1st 2011. It looks like we have finally struggled through our economic winter. Christmas tourism is up sharply on this time last year. The

Glass-Steagall Redux

President Barack Obama is in a mean mood. Furious that his Democrats were unable to hold one of the safest seats in the Senate, he allocates at least some of the blame for this on the large bonuses that the Wall St. bankers paid themselves in the middle of the election campaign. In the battle between America's Main Street and Wall Street- the votes are largely on Main Street. Yesterday the President made his move: He has announced that he intended to restrict the ability of banks to use their own capital to take positions in the market, so-called proprietary trading. This is not exactly reimposing the highly restrictive Glass-Steagall Act , but it is being seen as a serious attempt to bring the bankers under control. So serious, in fact, that the markets have fallen sharply in response. However, despite the approving noises made by George Osborne this morning, it will be quite difficult to enact these restrictions. The German model of Allfinanz or French Bancassurance is explicit

Cup Hands: there goes Cadbury

The long saga of Kraft's bid for Cadbury is now over. The board of the British chocolate company has now agreed that the bid from the American food giant should now go ahead. Personally I think it is the wrong decision at several levels. Firstly Kraft has a poor record in confectionery: their takeover of the Swiss Jacob Suchard thirty years ago was not a demonstrable success. and the once premium Suchard brands like Milka are now mostly also-rans in their markets. It is not clear to me that the Illinois-based company will be a particularly good steward of these businesses which have acquired a massive brand equity since the foundation of the Cadbury firm in 1824. After all the repeated takeover deals that Kraft has been involved with, from Phillip Morris to Nabisco are classic examples of value destroying M&A activity. There are also clearly going to be substantial job losses- with Cadbury's UK headquarters likely to be closed, and jobs transferred to Kraft's European

The Rollercoaster Ride of the Pound

I must admit I am feeling a bit smug: I anticipated that the UK inflation numbers would be worse than expected and as a result delayed transferring my cash off shore. The numbers are so bad though, that my long position in Sterling may be only needed for a few months. Some may ask themselves why such bad news would cause the Pound to go up. The answer is all about interest rates. The market is increasingly anticipating that the Bank of England will have to raise interest rates substantially in order to deal with an inflation rate that is already headed to the top of its supposed permissible range. Is this good news? Very obviously not: the costs of borrowing for British companies and households is going to rise substantially, and probably very rapidly. On the other hand if the Bank fails to act quickly enough, then inflation could really take a hold: with equally dire consequences for the UK cost of living. Yet the UK economy remains in a highly fragile state, large rises in interest

Class War

As the British election draws ever closer, the debate begins to focus on a small number of key themes. This time, the media have taken up Class as a subject of debate, well I say the media, but actually I mean the left wing media which thinks that pointing out that David Cameron is a posh boy will stop him getting elected. Class, we are told, is still with us, and it still matters. Well no shit, Sherlock. However it is not really about David Cameron, or even the large number of rather chinless public schoolboys who make up most of his shadow cabinet. It is about something much more fundamental. You see the dark secret of British Society is that Labour too is dominated by the public school system, Harriet Harman is at least as posh as George Osborne. Tony Blair- famously- is an Old Fettesian and Alistair Darling was at the- even posher- Loretto. Amongst the Liberal Democrats, public school educations are equally popular; Nick Clegg went to school at Westminster. Nor is the extraordin

The Implosion of British Power

I have been participating in a small conclave of very senior foreign policy experts: by experts I mean Foreign Minister (several were present) and Senior Ambassadorial level. It was one of those informal meetings that drives much of the opinion forming on key issues in international relations. I was one of those few present in an unaffiliated analytical capacity, since I have direct experience of several of the topics covered. The conference was conducted under the Chatham House rule, which limits what I can say to reporting the tone of the meeting and does not reveal attendees or ascribe views let alone direct quotes to specific individuals. In any event the point I wish to make is not about the specifics of this meeting. What this meeting- and several others that I have attended recently- has revealed, is the utter breakdown of relations between Britain and its allies. I would say that the United Kingdom is not only isolated, it is actually pitied. Neither is this a European phenome

Chinese Puzzle

Google has announced that they have uncovered a systematic attack on their systems in China, targeting pro-democracy activists . They have therefore renounced their policy of self censorship, the so-called "Chinese firewall", that prevents a Google search showing results that the Chinese Communist Party does not approve of. From the point of view of most users of the web, this will be welcome news, and Google has sustained some withering criticism for its willingness to accommodate the authoritarian regime in Beijing. As for Google itself, they have seen falling market share in China, and although there is a growth opportunity forgone, the costs of withdrawal from the Chinese market are not particularly severe at this point. However, this is the latest in a series of news items from China that suggests that the country could be on the brink of significant upheaval. The Chinese economy is expanding rapidly, to the point where the Chinese monetary authorities are moving to tig

Lies, Damn Lies and Greek Statistics

After the the crisis hit Greece, it became clear that the country's political leaders had forced the Greek statistics agency to produce false accounting. Instead of the actual numbers, the country reported a slew of figures that seemed to show that the country had eschewed its old spendthrift and incompetent ways and embraced the rectitude of the Maastricht economic criteria. In fact instead of a single figure deficit, the country has been running much bigger deficits and then lying about it. The effect of discovery was to send the country towards a serious crisis and to see a dramatic expansion of its debt yields... oops! In fact the FT now reports that the positions is even worse than was feared . In fact, virtually all the Greek statistics are lies or meaningless. Not too surprisingly, the European institutions, from the Commission, to the ECB to Eurostat are livid. The next steps now remain a bit of an open question. Obviously the new government in Athens is trying to show

Leading Universities out of Dependency

Sometimes headlines seem like an endless succession of repeats- a kind of Groundhog Day from a 24 hour media with little short-term, let alone long-term, memory. This morning we have had the annual complaint from Universities- not co-incidentally just ahead of the annual budget discussions they must have with the Education ministry- that they are in a "crisis" that will lead to unimaginable cuts. Now, I am not one who imagines that all is rosy with the universities in the United Kingdom. Far from being the ivy-clad, ivory tower of cliche, many of Britain's higher education establishments are actually quite squalid places. While many uncomfortable, inappropriate buildings are being replaced, the fact is that the new buildings are expensive and as a result, the temptation of University administrators to overcrowd facilities has become overwhelming. The basic problem is not so much that budgets may be cut and policies changed, but that they are changed erratically and with l

Direction of Travel

Yet another "plot" to unseat Gordon Brown before the Labour Party's date with destiny at the next general election appears to have fizzled out before even getting started. It is not hard to see why. Despite his obvious failings, both personal and political, Gordon Brown does not actually have an obvious rival. After 10 years as heir apparent to Tony Blair, Brown was elected as leader by the Labour Party unopposed. One can argue whether the coronation of Mr. Brown ought not to have been contested, but in the end not one individual was even prepared to act as a stalking horse candidate against him. There was not even a facsimile contest. Mr. Brown's reputation for unforgiving, volcanic anger and a Stalinist devotion to destroying his enemies seems to have persuaded his colleagues that discretion was the better part of valour. The fact is that no figure has emerged who is prepared to challenge directly the failing and faltering leadership of Mr. Brown. Only Charles Cla

The Politics of Jelly and Ice Cream

As a child you may have wanted to eat jelly and ice cream for every meal, to eat it until you were sick. Yet, for most kids, there were adults to prevent such greed from causing their offspring such harm. In the end we put away childish things and if we eat jelly and ice cream today it is with an adult sense of moderation. Learning such moderation is a large part of growing up. Yet our society today seems to reward the infantile and the irresponsible. The adult equivalent of jelly and ice cream is probably sex- and here we seem to revert to our inner child. The tawdry succession of sex partners that Katie Price, aka "glamour" model Jordan, has left in her wake has enabled the manipulative owners of the "Big Brother" franchise to populate their nasty programme with quite a few of Jordan's former bed mates. Ms. Price's candour- on the front page of gossip magazines, newspapers, and in a series of ghost written books- about her complicated, even tortured, love

Me, me, me...

Oh dear... the launch of the "unofficial" UK election campaign in a blaze of posters seems to have begun. Discussion about the profound, existential crisis facing the country is reduced to some unilluminating truisms- preferably banal ones. The absurdly airbrushed David Cameron announces that he will cut the deficit and not the NHS . Hmm ... The NHS is in another crisis. Not, it is true, the funding crisis that it endured under the Conservatives, but a far more serious one. The system as it currently stands soaks up more money and delivers generally worse outcomes than most European comparables . The lack of accountability and responsibility is leading to gold plating at every level: the tripling of GPs compensation over the past decade has not delivered triple the care- indeed GPs now work a fraction of the time that they worked 15 years ago. Hospitals struggle to cope with basic cleanliness- and unrestricted visiting is sending MRSA and other superbug infections out

Sufficient unto the day is the evil thereof

Well, a long holiday- and a long break from blogging. I have travelled several thousand miles across several European countries, but am now back in Tallinn, under a record covering of snow. Like all of Northern Europe, the winter here is breaking records, being both much colder and much snowier than usual. The ice is beginning to cover the sea, and we are told that the ice road to the islands will be open within a couple of weeks. Meanwhile, the last part of 2009 was a time of a large number of goodbyes- including the flat I lived in for 12 years in London. 2010 seems a more than usually uncertain year- and not just for me. In the press and amongst my friends I see a sense of foreboding. There is very real anxiety- continued terrorism, continued war in Afghanistan, continued economic crisis. In a way it takes me back to my childhood in the 1970s, where Britain in particular faced serious economic decline, combined with a particularly vicious and insidious form of terrorism from the IRA