EUCOM Economic Analysis - Part I

[Firn]

Catalonia warns EU that million-strong march cannot be ignored

We had this discussion before and for the first time I have seen numbers for this wealth transfer:

Mas has threatened to call elections if that is done in Catalonia, believing it would provoke a wave of nationalist sentiment. Catalans pay between € 12bn and € 16bn more in taxes each year to Madrid than they receive back, with the excess going to poorer regions such as Andalusia and Extremadura.

For 7.2 millions this means roughly 2000 € per capita.

"I identify with the popular outcry," he said, adding that only his responsibilities as regional prime minister had prevented him from joining the demonstrators. "Catalonia needs a state," he added. "For years we thought it could be the Spanish state."

But just as northern Europe was getting fed up with the south, and vice versa, so Catalonia and the rest of Spain were now fed up with one another, Mas said.

He implied that one way for Rajoy to dampen the surge in separatist feeling would be to agree to a change in funding, allowing Spain's wealthiest region to hold on to more of the tax it generates.

Catalonia wants to be able to collect its own taxes and send a share to Madrid, rather than the other way around. That would make it different from most of Spain's other 16 regional government, but similar to the northern Basque country.

Mas will see Rajoy next week to discuss what he called an issue of "fiscal sovereignty". Popular outrage at Catalan money going elsewhere amid health and education cuts was fuelling the thirst for independence, he suggested.

Italy has very distinct regions with greatly differing languages and dialects but nothing like this heavy-weight.

---

The Shiller P/E or P/E 10 is rather low for most European countries with some exceptions like Germany, where stock prices have been resisted and current PE is relative low due to strong earnings. The Dividend yield is high and for rougly 3 years now superior to the bond yields, for the first time in almost 50 years. The ROE is in general good despite some relative poor earnings. In this case the Eurozone crisis has been good for investors has it has enabled us to buy a seemingly good prices for quite some periods. While I'm firmly long with a roughly 65% in equity, nominally with good capital gains I have sold quite a bit in the recent weeks. Sadly yesterday I was not able to do so, but who knows where and when...

Considering that I'm a net saver and should remain so for a couple of years those low valuations are positive. Even more so is volative nature of the stock market which allows one to buy cheap and sell some high if one wants to. Certainly Mr. Market has been very helpful lately, giving in my opion sometimes a good margin of safety. I just hope that by generally sticking to my sweet spots and rules I did not comit too many blunders. Recounting the ones made in the last 6 months is already quite a bit painful

Instead of thinking of the current crisis why not enjoy some of the best qualities of good old Europe? Schubert, Trio op. 100 - Andante con moto .

P.S: I can not resist to write that accroding to a study presented in the Corriere della Sera the Italian savers got slightly less the half of the overall yield of their investments. More then 50% went to "helpers" as Buffet calls them, in very costly fees. This is nothing but shocking and a good reminder why I have pushed hard to get the personal as low as possible. Low-cost index funds (ETFs etc) are part of this package. Sadly selling expensive products can be a good deal of the bank who enables the helpers to get enough money to help the bank to help the saver paying them in generally far too much for the performance they offer.

---

[Fuchs]

Catalans pay between € 12bn and € 16bn more in taxes each year to Madrid than they receive back, with the excess going to poorer regions such as Andalusia and Extremadura.

This does not fit together. Lots of central state expenses don't go to regions, such as military, border control etc.

Besides; all those figures that float around are unofficial, unconfirmed.

[Firn]

This does not fit together. Lots of central state expenses don't go to regions, such as military, border control etc.

Besides; all those figures that float around are unofficial, unconfirmed.

Well spotted - add another one to those blunders. Thinking more does sometimes help. I also did not openly express doubt about the numbers which I should have.

[davidbfpo]

An article on Portugal, a country that rarely appears in the UK press, which indicates:

The people have finally realised that the troika-imposed austerity is not working in Portugal.

As youth can sometimes be mobilised, this is significant:

unemployment is close to 16% of the population (youth unemployment is estimated by analysts to be as high as 40%.....

There is a 'safety valve':

..the young and talented have decided to follow the advice of the Prime Minister and are now leaving the country in droves.

Link:http://www.opendemocracy.net/eunice-...l-plays-truant

[Firn]

Wie eine Waehrungsunion Italiens Sueden verarmen liess

Erst mit einiger Versptung merkten die Zeitgenossen, wie sehr die Whrungsunion den wirtschaftlich schwcheren Regionen zu schaffen machte. Ihre Ausfuhren gingen um 16 Prozent zurck. Manufakturen mussten schlieen, im Binnenmarkt wuchs der Exportberschuss des reichen Nordens. Investitionen blieben aus, weil die wohlhabenden Schichten lieber die als sicher geltenden Staatsanleihen des neuen Whrungsraums kauften. Es half nichts, dass eine rigorose Sparpolitik die anfngliche Schuldenkrise bald berwand und sogar zu einem ausgeglichenen Haushalt fhrte: Die Art, wie diese Austerittspolitik ins Werk gesetzt wurde, vergrerte die Kluft weiter.

So war es, nachdem die Italiener vor 150 Jahren ihren Nationalstaat grndeten, aus so gegenstzlichen Teilen wie dem liberalen Piemont und dem feudalistischen Knigreich beider Sizilien. Bis heute vereint das Land die konomischen Extreme Europas innerhalb der eigenen Grenzen. Im Sden lag die Jugendarbeitslosigkeit schon vor der Krise bei 50 Prozent, in einigen Regionen des Nordens herrschte hingegen stets Vollbeschftigung. Die Frage ist, was sich aus diesem Europa im Kleinen fr das groe Ganze lernen lsst.

This actually very informative article does illuminate some of the Italian issues and their origins for German readers. Not that their are well-known to an even small number of Italians. The Banca d'Italia has a lot of quaderni, basically papers, on the storia economica d'Italia. They do a good job at explaining the historical economic development of this country.

Convergence among Italian Regions, 1861-2011

Abstract

In 150 years, the trends in regional disparities in economic development within Italy have differed depending on whether they are gauged by longitude or by latitude. The disparities between western and eastern regions first widened and then closed; the North-South gap, by contrast, remains the main open problem in the national history of Italy.

This work focuses on the underlying causes of the turning points in regional disparities since national unification in 1861. The first came in the late nineteenth and early twentieth century, with the industrialization of the so-called industrial triangle. This was followed by the failed new turn during the interwar years: not only were the beginnings of convergence blocked but the North-South gap, until then still natural, inevitable, was transformed into a fracture of exceptional dimensions. The second turning point, in the twenty years after the World War, produced the first substantial, lasting convergence between southern and northern Italy, powered by rising productivity and structural change in the South. The last turning point was in the mid-1970s, when convergence was abruptly halted and a protracted period of immobility in the disparity began.

JEL Classification: N63, N93, R11, R12
Keywords: Italy, regional disparities

Authors: Giovanni Iuzzolino * , Guido Pellegrini** , Gianfranco Viesti***

I will comment on it when I have more time.

[Fuchs]

I thought about writing an article for my blog about this kind of problem, but so far refrained for lack of connection to the usual blog topics.


European unity had to turn from a realist policy strategy to an ideology in order to succeed on the grand scale. The pro-Europe ideologues (including Kohl) looked at the commonality that a common currency provides and mistook it for unity.

A currency union does not unite; it divides. Existing imbalances are likely to increase with a common currency, and the utterly incompetent behaviour of naive investors and governments has amplified this effect.

Now we're in great trouble, for the ideology drove us into a wrong turn and walking back is not allowed to ideologues.

The challenge will be to break the ideology without breaking the real advantages of the degree of unity and cooperation so far achieved in Europe.

[Surferbeetle]

Lot's of excellent links to read of late here on this thread

Been thinking about the importance of inculcating 'sustainable values' regarding privilege & responsibility while reading the Joseph Rowntree Foundation piece on Regional Government in France & Spain by Andy Smith and Dr Paul Heywood. The diffusion of power, while still maintaining a hand on the reins, is one of the themes that I see in the work...1789, 1905 & 1917, 1989, and the Arab Spring are arguably examples to keep in the back of one's mind while reading. Along those lines Dr. Charles Tripp's A History of Iraq, although strictly outside of our geographic area of concern but a trading partner nonetheless, is another very interesting and adroit analysis of power.

Just 20 some pages into the well written Banca D'Italia piece Convergence among Italian Regions 1861-2011 by Giovanni Iuzzolino, Guido Pellegrini, and Gianfranco Viesti, but it brought to mind David Blackbourn's The Conquest of Nature (Water, Landscape, and the Making of Modern Germany) and the FT Article about NRW (North Rhine Westphalia) Strengths and Location Help Cope with Change, By James Wilson on September 26th 2012....which leads to the Initiative Neue Soziale MarktWirtschaft website and a report on the Bundeslander

http://www.insm.de/en/

The initiative wants to renew the social market economy of Ludwig Erhard and adjust it to globalization, demographic change and the knowledge society. The INSM stands for a social system of freedom and responsibility.

http://www.bundeslaenderranking.de

Im Auftrag von Initiative Neue Soziale Marktwirtschaft (INSM) und WirtschaftsWoche haben Wissenschaftler alle 16 Bundeslnder untersucht: Wo stehen sie, was Arbeitsmarkt, Soziales, Wirtschaft und Wohlstand angeht? Rund 100 Einzelindikatoren gehen in diese Studie ein, die in diesem Jahr zum zehnten Mal vorliegt. Das Dynamik-Ranking bildet ab, wie sich die Bundeslnder in der Zeit von 2008 bis 2011 entwickelt haben Das Bestands-Ranking vergleicht den Ist-Zustand – also das absolute Niveau. Die INSM und die WirtschaftsWoche lassen diese Studie durchfhren, weil sie damit einen Beitrag zum fderalen Wettbewerb zwischen den Bundeslndern leisten wollen. Diese Webseite ermglicht es, auch Einzelindikatoren wie Arbeitslosenquote, Bruttoinlandsprodukt, Einwohnerentwicklung und Kitabetreuungsquote anschaulich gegenberzustellen. Den wissenschaftlichen Endbericht zu dieser Studie und Informationen fr die Presse finden Sie hier.

So...how does one operationalize all of this information (and soon to be knowledge) into success in the market? Here's one of many toolkits: FT Guide, Understanding Finance (A No-Nonsense Companion to Financial Tools and Techniques) 2nd Edition by Javier Estrada

Time to fire up another cup of coffee...

______________

This article, although well written, is not as enjoyable....perhaps a datapoint to consider for later in the day.

Eine unsichtbare Mauer teilt Marseille, International Samstag, 22. September 2012, NZZ, http://www.nzz.ch/aktuell/internatio...lle-1.17634697

Von einem «Bandenkrieg» im Norden von Marseille war im Fernsehen die Rede. Der fast 70-jährige Taxifahrer, der sich «Monsieur Josi» nennt, lacht nicht auf die Frage, wo es denn zur «Front» gehe. Er schimpft über die Polizei, die nie dort sei, wo man sie brauche. Er bestätigt gern, dass es da ein paar «cités» (Hochhaussiedlungen mit Sozialwohnungen) gebe, wo er auch am Tag nicht gern und nachts «ganz sicher nicht» hinfahre. Er sei nicht der Einzige. Auch Ärzte, Sozialhelfer, die Feuerwehr und selbst die Polizei mieden diese Gegend. Merkwürdigerweise fehlen auf dem vom Fremdenverkehrsamt abgegebenen Stadtplan diese Quartiere, als wollte man ihre Existenz leugnen.

In einem Interview mit der Lokalzeitung «La Provence» hat die Senatorin darum den Einsatz der Armee angefordert und so Schlagzeilen gemacht. Die Militärs sollten die Dealer entwaffnen und den Zugang zu diesen «Supermärkten des Drogenhandels» blockieren. «Ohne Nachfrage kein Angebot», lautet Ghalis Logik zur Bekämpfung dieser Schattenwirtschaft. Zudem meint sie weiterhin, es wäre nur billig, den Kunden mit Sanktionen zu drohen.

«C'est compliqué»

«Soll ich dir etwa die zweite Panzerdivision schicken?», habe der französische Innenminister, Ghalis sozialistischer Parteikollege Manuel Valls, sie am Telefon spitz gefragt. Die Provokation sei ihr jedenfalls gelungen, und das sei natürlich auch der Zweck der Übung gewesen, gesteht sie im Nachhinein mit unverhohlener Genugtuung. Seit ihrem Aufschrei der Empörung über die eskalierende Gewalt wird die 44-jährige dunkelhaarige Frau mit ihrem feurigen Blick zu Fernseh-Talkshows eingeladen und interviewt.