Economics | The Guardian

This monetary union without a political one will continue to cause suffering and divide the north from the south“If the euro fails, Europe fails”: thus spake Angela Merkel. Unfortunately, the euro is failing, but it is failing slowly. Even if Greece grexits, the eurozone seems unlikely to fall apart in the near future, although there is still a chance that it will. There is a much higher chance that it will grind along like a badly designed Kazakh tractor, producing slower growth, fewer jobs and more human suffering than the same countries would have experienced without monetary union. However, the misery will be unevenly distributed between debtor and creditor countries, struggling south and still prospering north.These different national experiences will be reflected through elections, creating more tensions of the kind we have already seen between Germany and Greece. Eventually something will give, but that process may take a long time. “There is a great deal of ruin in a nation,” said Adam Smith. Given the extraordinary achievements of the 70 years since 1945, and the memories and hopes still invested in the European project, there is a lot of ruin still left in our continent.The structural problem here is that the monetary area is European but the democratic politics are still nationalRelated: European disunion: Tsipras, Merkel and the conflict at the heart of the EU Continue reading...

Mark Carney promised to make the Bank a more open place. But its behaviour over the Serious Fraud Office investigation is reminiscent of the bad old daysMaybe the Bank of England is still feeling its way. When the news broke last week that it faced its first investigation by the Serious Fraud Office, the Old Lady of Threadneedle Street was reticent. A brief statement from the governor Mark Carney. No details. Not even an outline of the case.Almost immediately speculation started, and with it the sense that once again the public was being presented with piecemeal disclosure about allegations of wrongdoing during the financial crisis. Not only was the Bank giving the appearance of an institution with something to hide, but there was a forceful reminder that parliament has never commissioned an all-embracing investigation of what went wrong before and after the Lehman Brothers collapse, or how various institutions dealt with the fallout. Continue reading...

Lloyd George’s war loan is due to be paid off on Monday. If only those currently in charge of the national finances could think so far aheadPolicymakers in Britain and the eurozone should take note of an interesting event due to take place on Monday. The British government will finally redeem the war loan taken out in 1917 under the premiership of Lloyd George. That is to say, the last traces of that first world war debt will be repaid almost 100 years later.With debt, and deficits, one has to take the long-term view. This applied to the situation facing the coalition in 2010, and to the policymakers of the eurozone, who were also faced with the financial consequences of the 2007-09 banking crisis. The impact of the crisis was the peacetime equivalent of the devastation wreaked on public sector finances by war itself. Unfortunately, both in this country and the eurozone, an absurdly short-term view was taken of the situation, not least with regard to Greece and other peripheral eurozone economies.Unfortunately, both in this country and the eurozone, an absurdly short-term view was taken of the situation Continue reading...

Finance minister Yanis Varoufakis comes up with novel methods to reform Greek economy before meeting with eurozone ministers

Euro drops against pound and dollar as ECB plans to unleash €1.1tn of quantitative easing and strong US jobs report boosts the dollarThe pound has hit a seven-year high against the euro, bringing cheer for British holidaymakers but underscoring fears about the fragile European single currency as markets prepare for a flood of emergency electronic cash.Related: Why the FTSE 100 has hit a record high Continue reading...

On Friday, the jobless rate dropped to 5.5%, the lowest in seven years. But youth unemployment is rising – and some young people need all the help they can getSnow blanketed New York City on Thursday, and its streets quickly emptied. An occasional brave soul could be seen walking, head down, shoulders hunched against the wind. Offices cleared out early as the weather threatened the journey home, but behind the blue doors of a nondescript Manhattan building a group of young people were wishing they had jobs to leave.The Door, in Manhattan’s Soho neighborhood, is a nonprofit that helps people between the ages of 12 and 25 find jobs and get healthcare, legal help and qualifications. It helps about 10,000 young Americans a year.Related: US economy shrugs off winter weather to add 295,000 jobs in February Continue reading...

Strong jobs numbers beat economists’ expectations and is the 12th consecutive month of over 200,000 jobs, as unemployment rate falls to 5.5%The US economy shook off the brutal winter weather in February to add 295,000 new jobs, the 12th straight month it has added over 200,000 jobs, the Bureau of Labour Statistics said Friday.

As global warming argument moves on to politics and business, Alan Rusbridger explains the thinking behind our major series on the climate crisisJournalism tends to be a rear-view mirror. We prefer to deal with what has happened, not what lies ahead. We favour what is exceptional and in full view over what is ordinary and hidden.Famously, as a tribe, we are more interested in the man who bites a dog than the other way round. But even when a dog does plant its teeth in a man, there is at least something new to report, even if it is not very remarkable or important.Related: Don't look away now, the climate crisis needs youRelated: Gormley climate change artwork shown for first time in the GuardianRelated: Polly Toynbee: 'If you read the Guardian, join the Guardian' Continue reading...

Rising inflation, slowing growth, a weakening currency, surging debt and a deepening corruption scandal - Brazil is suddenly looking vulnerableThe more you look at Brazil’s fundamentals, the more shaky the country looks. And we are not talking about the defensive prowess of David Luiz here. It is the country’s economic backline that risks tumbling down like a set of dominoes.When a Latin American economy is in trouble a good place to start is its inflation rate. Brazil’s is today running at 7.5%. While this is nowhere near the 2,000-3,000% of the early 1990s, when the price of everything went up several times a week, it is far higher than the central bank’s mid-point target of 4.5%. Continue reading...

Bank of England finds inflation expectations at lowest level for 13 years as public mindset adapts to cheaper oil and potential deflationThe British public’s expectations for inflation are at the lowest level in more than 13 years as the nation adjusts to the impact of lower oil prices and the prospect of the first bout of deflation in more than half a century.Inflation expectations for the year ahead fell to 1.9% when the public were surveyed by the Bank of England in February, compared with 2.5% when they were asked in November. Continue reading...

Despite much to celebrate, women continue to be hit hardest by financial crises

Li Keqiang warns ‘the difficulties we are to encounter in the year ahead may be even more formidable than those of last year’China’s premier Li Keqiang cut the nation’s growth target to “around” 7% on Thursday, reiterating the need to pursue reform as development slows and the likelihood of tougher times ahead for the world’s second largest economy.

Mario Draghi said buying assets was the final set of measures and that governments needed to pick up the batonThe European Central Bank will press the button on Monday on a €1.1tn stimulus programme that will play a major role in putting the eurozone back on track for sustained growth, its president Mario Draghi said on Thursday.The ECB will pump the €60bn a month into the euro economy as the first phase in its quantitative easing programme that Draghi said would combine with low oil prices and recovering consumer confidence to spur growth and propel inflation back up close to its 2% target. Continue reading...

Business secretary opens up division with Tories by calling for investment in skills training and rail schemesVince Cable has warned that the next government must relax Whitehall spending budgets to support training and infrastructure projects in a move seen as taking the Liberal Democrats closer to Labour before the general election.In a speech in the City, the business secretary attacked the “archaic” way that public spending was controlled, calling for changes to boost areas such as skills training and new rail schemes. Continue reading...

It seems the judgment that the chancellor had no cash to spare for pre-election lollipops may well have been prematureAt the time of last December’s autumn statement, received wisdom in Westminster was that it marked the last major economic policy milestone before May’s general election.There is no financial room for pre-election giveaways, the logic went; and, anyway, by the time the chancellor stands up at the dispatch box on 18 March, it would be far too late for any to make themselves felt in voters’ pockets. Continue reading...

Figures reveal how American corporations continued to invest in the Irish Republic even during the recessionIreland has benefited from $277bn (£182bn) of US direct foreign investment in the past two decades – gaining more from American firms than Brazil, Russia, India and China combined.The figures from the American Chamber of Commerce in Ireland go back to 1990 and show corporations continued to cross the Atlantic even during the dark years of the recent recession. Continue reading...

The Bank of England cut interest rates to all-time low of 0.5% in 2009 in an emergency response to the global financial crisisUK interest rates have been on hold at an all-time low of 0.5% for six years after Bank of England policymakers voted for no change at their March meeting.It was at their March 2009 meeting that the Bank’s monetary policy committee decided emergency measures were required to address extreme circumstances. Continue reading...

A UK ruling on sovereign debt liabilities reminds us that US judges are not the world’s judgesLast July, when United States federal judge Thomas Griesa ruled that Argentina had to repay in full the so-called vulture funds that had bought its sovereign debt at rockbottom prices, the country was forced into default, or “Griesafault”. The decision reverberated far and wide, affecting bonds issued in a variety of jurisdictions, suggesting that US courts held sway over contracts executed in other countries.Ever since, lawyers and economists have tried to untangle the befuddling implications of Griesa’s decision. Does the authority of US courts really extend beyond America’s borders? Continue reading...

Farmers and managers are being encouraged to ‘do business creatively’ in the totalitarian state’s biggest domestic policy experiment since Kim Jong-un took powerNorth Korea is trying to invigorate its hidebound economy by offering more control and possibly more personal rewards to key sectors of its workforce in the country’s biggest domestic policy experiment since leader Kim Jong-un assumed power.The measures give managers the power to set salaries and hire and fire employees, and give farmers more of a stake in out-producing quotas. Some outside observers say they’re a far cry from the kind of change the North really needs, but they agree with North Korean economists who say it is starting to pay off in higher wages and increased yields.Related: Pyongyang is booming, but in North Korea all is not what it seemsWhat is happening in the enterprise area is a development of major economic significanceRelated: The North Korean women driving economic change Continue reading...

Online craft marketplace’s listing is expected to be largest tech IPO since 1999, bringing in hundreds of millions of dollars in investmentEtsy, the online craft and vintage goods marketplace, has formally filed its intention to float on New York’s Nasdaq stock exchange.The Brooklyn-based company, founded in 2005 by painter, carpenter and photographer Rob Kalin after he struggled to find anywhere to sell his handmade wooden computers, registered its intention of an initial public offering (IPO) on Wednesday night. Continue reading...

It is unclear whether the Bank’s employees are suspected of involvement in any attempt to rig the auctions, used as emergency lending during the credit crisis

Innovation and the proximity of knowledge-intensive jobs are more important than the decline of manufacturing in causing the divide between England and Wales’ largest cities and towns, according to a Centre for Cities analysisThe decline of traditional industries – often cited as an explanation for Britain’s north-south divide – does not alone determine a city’s economic success in the 21st century, according to analysis by Centre for Cities thinktank.In a study of 100 years of economic data from 57 of the largest cities and towns in England and Wales, researchers concluded that proximity to knowledge-intensive jobs and a city’s capacity for innovation were more important.The scale of the deindustrialisation challenge was such that the city still has some way to go; in 2013 Manchester still had 90,000 fewer jobs than it did in 1951. However, its recent successes suggest that it is on a new pathway of knowledge-based economic growth. Continue reading...

So household incomes are back to 2007 levels. This isn’t evidence of success but confirmation of how dismal economic performance has beenHousehold incomes are back to 2007 levels, before the crisis – though still below their 2009-10 peak. Does this in some way vindicate the government’s economic strategy? For most economists, even asking that question is bizarre. As the UK has got richer, average incomes have grown pretty consistently since the second world war. And after recessions, they have grown particularly fast – for example, between 1982 and 1985 they grew by about 3% a year.But this “recovery” has been different. As Paul Johnson, director of the Institute for Fiscal Studies, puts it: “It’s astonishing actually that seven years later incomes are still no higher than they were pre-recession, and indeed for working-age households they’re still a bit below where they were pre-recession.” For the chancellor, George Osborne, to claim this as evidence of economic success – “a major milestone in our recovery”, he told BBC Radio 4 today – is not really credible.Related: UK household incomes near pre-banking crisis levels, thinktank claims Continue reading...

Details of rises in retail sales and services sector output come on eve of ECB’s announcement of its bond-buying programmeShoppers across the eurozone went on a new year spending spree in January, raising hopes that the 19-member single currency area is bouncing back from the brink of a deflationary downturn.

European court rules that they should not be forced to move from London to the eurozone in a victory for the chancellorGeorge Osborne declared a victory over Europe on Wednesday after a landmark ruling that protected the City’s position as a major financial centre and prevented leading clearing houses being forced to move out of London.The European Central Bank had argued that clearing houses – such as LCH Clearnet, which step in between major banks and financial firms on big deals to guarantee the transactions – should be based in the eurozone as they handle euro-denominated deals.

Average income of people aged between 22 and 30 estimated to be 7.6% lower than before the financial crisis, according to Institute for Fiscal StudiesAverage household incomes in Britain have finally returned to their pre-financial crisis levels, but recovery has been very slow and working-age households are still worse off, according to a leading thinktank.The Institute for Fiscal Studies (IFS) said average incomes in 2014-15 are about the same as they were in 2007–08, before the banking crisis triggered a deep recession. Continue reading...

Business group asks George Osborne for measures to boost growth of UK’s Mittelstand in last budget before the general electionChancellor George Osborne should use his final budget before the general election to help Britain’s medium-sized firms while sticking to his deficit-cutting plans, the business lobby group CBI has said.CBI director-general John Cridland says the UK’s equivalent of Germany’s widely praised group of companies known as the Mittelstand, are the “backbone of the UK economy” and should be allowed to grow further with investment support, export help and a simpler tax system.This is a good opportunity for the chancellor before the election to support growth and investment well beyond the election, providing stability, certainty and simplicity for the UK’s Mittelstand to get themselves on the front foot.“So the chancellor must reward growing, ambitious firms with the tools to get on with the job of rebalancing the economy and lift productivity. There has been good progress on this front from the government, and the chancellor can now take further action to boost investment and innovation.”Innovation is fundamental to long-term growth and creating more high-skilled jobs in the economy. If we want to really get the full benefit of the great work going on in labs and workshops up and down the country, we need to encourage more firms to build their prototypes here in the UK.There is a growing pattern of re-shoring production back home and a super-charged tax credit could help keep that ball rolling. Continue reading...

British Retail Consortium said overall prices in February were down 1.7% on last year amid supermarket wars and drop in commodity costs

Institute for Fiscal Studies report finds that falls in inflation and unemployment, together with modest wage rises, have raised household spending powerAfter the longest decline in living standards this century, the fortunes of Britain’s workers have turned – with the average household ending the financial year in April better off than they were in 2008, according to a leading thinktank.In a huge pre-election boost for the government, the Institute for Fiscal Studies (IFS) said average incomes in 2014–15 are around the same level as they were in 2007–08 – before the banking crisis precipitated a deep recession. Continue reading...

Mark Carney says 42 cases have been sent to FCA following forex-rigging scandal and new Bank policies for staff to raise suspicionsBank of England governor Mark Carney has said 50 cases of potential market abuse have been uncovered following the foreign exchange-rigging scandal that led to the Bank’s own chief currency dealer being fired last year.The cases have come to light since March 2014 when the Bank launched an investigation into its own role in the scandal involving the manipulation of the £3.5tn-a-day foreign exchange markets.Related: Bank of England foreign exchange investigation too narrow, says MP Continue reading...

Rolling economic and financial news, as a new survey finds that investors are more concerned about Greece leaving the eurozone

A resurgence in confidence and orders gives construction sector a lift after a drop to a 17-month low in DecemberBuilding firms performed strongly in February, ending the slowdown that hit the construction sector at the end of last year. However, economists say growth in the sector is likely to cool later this year.The latest survey by financial data provider Markit found that a resurgence in confidence and orders gave the building industry a lift after a drop to a 17-month low in December. Continue reading...

Jesse Norman commissions report into review by Anthony Grabiner QC, claiming it set very low tests for an inquiry into the scandalThe Bank of England has come under attack for failing to properly investigate its role in the rigging of foreign exchange markets.In a report commissioned by Jesse Norman, the Conservative MP and a member of the Treasury select committee, a leading British barrister said the Bank set very low tests for its inquiry into the scandal.I have commissioned an opinion from Charles Bear QC pro bono into the @bankofengland Grabiner Inquiry. Strong stuff. http://t.co/QbAk86bj3W Continue reading...

Improvement in proportion of working women boosts UK’s ranking in PwC index, but Nordic countries still leadThe UK has moved up a “women in work” league table after the economic recovery helped cut female unemployment, but it still lags well behind Nordic countries when it comes to overall empowerment of women in the workplace.The UK is at its highest position since 2000 on the Women in Work Index from consultants PwC. It ranks 14th out of 27 developed economies, up four places on a year ago.The reality for many flexible workers is that they have to work harder for promotion and don’t progress as quickly. The decision to go part-time is often made for short-term reasons, but unfortunately for women it often seems to have a wider, long-term negative impact.The Shared Parental Leave policy, which comes into force in April, is a step in the right direction but the UK’s cultural perception of gender equality needs to catch up with such changes in policy. Some of the reasons the Nordic countries top the index is down to the recognition that all individuals should be able to balance their career and family life, and to support themselves.Southern European countries such as Greece and Italy at the bottom of the index are still struggling to improve their performance since the fallout from the economic crisis. Continue reading...

Lauded Mittelstand companies make up 16.3% of economic activity in Germany, whereas comparable businesses in Britain account for 17.2% domesticallyBritain’s engine room of medium-sized manufacturing and service companies are more than a match for the German Mittelstand that is lauded by politicians and business leaders as the template for economic growth, according to a study by HSBC.The UK’s “Brittelstand” of middle-market companies with a turnover of more the $50m (£33m) but less than $500m (£325m) make up 17.2% of economic activity, compared with 16.3% in Germany and 13.2% in the US, the study found. Continue reading...

Prices across region fall 0.3% compared with 0.6% in January, while jobless total slips from 11.3% to 11.2%

Rolling coverage of the latest events across the world economy, the financial markets, the eurozone, Greece’s bailout, and business

We are deluded to think we can achieve real change within the common currency. Syriza should be radicalThe agreement signed between Greece and the EU after three weeks of lively negotiations is a compromise reached under economic duress. Its only merit for Greece is that it has kept the Syriza government alive and able to fight another day. That day is not far off. Greece will have to negotiate a long-term financing agreement in June, and has substantial debt repayments to make in July and August. In the coming four months the government will have to get its act together to negotiate those hurdles and implement its radical programme. The European left has a stake in Greek success, if it is to beat back the forces of austerity that are currently strangling the continent.In February the Greek negotiating team fell into a trap of two parts. The first was the reliance of Greek banks on the European Central Bank for liquidity, without which they would stop functioning. Mario Draghi, president of the European Central Bank, ratcheted up the pressure by tightening the terms of liquidity provision. Worried by developments, depositors withdrew funds; towards the end of negotiations Greek banks were losing a billion euros of liquidity a day.Related: Greece secures eurozone bailout extension for four months Continue reading...

From All My Sons to The Crucible and beyond, the great playwright captured America’s financial, as well as existential, desperationArthur Miller called The American Clock, which premiered in 1980, a vaudeville. But it was really his view of the crash of 1929 and the Great Depression: even more than an economic crash, it was a national emotional collapse, “like all the winds had stopped, gone dead” – the moment Americans realised that those in charge had not known what they were doing for some time, or if they did, had corruptly misused that knowledge.The play flopped, likely because Miller tinkered with it until the characters drained away, except his young self reworked as a detached narrator. The way he remembered the events of the Depression is as what we’d call an “elite debacle” – a historical mega-catastrophe caused by hubris, over self-confidence resulting from diminished contact with reality. “They believed,” the narrator says of the bubble hucksters of the 1920s, “in the most important thing of all, that nothing is real.”Related: A View from the Bridge five-star review – Ivo van Hove reinvents Arthur Miller“They believed in the most important thing of all, that nothing is real.”Related: Theatre archive: Roy Hattersley meets Arthur Miller – a view from the barricades Continue reading...

Proposed reforms win conditional approval in Brussels for extension of rescue package that new Greek government has repeatedly pledged to scrapGreece’s new leftwing government faces months of fraught negotiations with its creditors over how to ease its unsustainable debt levels and austerity programmes after securing - but only conditionally - a eurozone lifeline on Tuesday that wins it time until the end of June.Alexis Tsipras, the Greek prime minister and leader of the Syriza movement, had to bow to German-led pressure to stick to the broad terms of its €240bn (£176bn) bailout in order to obtain a four-month extension to the rescue he repeatedly pledged to scrap. Continue reading...

Central bank and inflation ministry agree historic move to rein in volatile price rises by setting consumer inflation targetsIndia’s government and central bank have agreed to commit to inflation targeting, in the biggest change to monetary policy since the economy was opened up more than two decades ago, making a priority of subduing volatile prices.

One still might think that it makes sense to hold cash directly, rather than holding an asset with a negative return. But holding cash can be risky, as Greek savers have learnedMonetary policy has become increasingly unconventional in the last six years, with central banks implementing zero-interest-rate policies, quantitative easing, credit easing, forward guidance, and unlimited exchange-rate intervention. But now we have come to the most unconventional policy tool of them all: negative nominal interest rates.Such rates currently prevail in the eurozone, Switzerland, Denmark, and Sweden. And it is not just short-term policy rates that are now negative in nominal terms: about $3tn of assets in Europe and Japan, at maturities as long as 10 years (in the case of Swiss government bonds), now have negative interest rates.Related: Q&A: what are negative interest rates? Continue reading...

Mariano Rajoy hits back over accusation that Spain and Portugal deliberately tried to bring Greece’s Syriza administration into ‘unconditional surrender’