Economics | The Guardian

Move follows S&P’s downrating as agency predicts Ukraine crisis, falling oil price and rouble plunge will bring further gloom

The extension of the Greek bailout with barely a concession to Yanis Varoufakis’s demands proves only that Europe wants him to stick with the programme

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American Legislative Exchange Council combines litigation and legislation in two-pronged attack on ‘new battleground’ of workers’ rights, documents revealA network of Republican lawmakers and their rightwing corporate funders are battling behind closed doors to block minimum wage increases in cities across the US, in a step-by-step counter-attack that could cut back the incomes of millions of Americans despite an economic upswing.According to strategic details obtained by the Guardian, the American Legislative Exchange Council (Alec) – along with its localised sister organization, ACCE – is trying to prevent elected city representatives from raising the minimum wage to levels above those set by their states. The group has launched an aggressive dual-track mission that combines legislation and litigation in what Alec calls a “new battleground” over worker compensation.Related: Obama talks up US recovery and urges Republicans to back higher wages Continue reading...

Obama suggests Republicans are pretending to support the middle class, and teases them by saying: ‘If you want to be the party of higher wages, then come on’Casting his opposition as “shouting” enemies of the average American worker and minimum wage increases, President Obama suggested on Friday that Republicans were faking an interest in the wellbeing of the middle class – and insisted that a recovering economy vindicated his leadership.“The new plan is to rebrand themselves as the party of the middle class,” Obama said of Republicans, to cheers from core party faithful at the Democratic National Committee winter meeting in Washington DC. “I’m not making this up … I think their shift of rhetoric is good if it actually leads them to take different actions. If it doesn’t, it’s just spin.” Continue reading...

After reaping the benefits of world trade we are about to harvest some of the pain, argues one of the UK’s most experienced hedge fund managers

Stubbornness based on pride and prejudice is driving the rift. Reason must kick in before Grexit devastates EuropeAt the heart of the rift that runs through Europe at the moment lies a technocratic debate drowned in emotion. Germany has rejected Greece’s bailout request on the basis of the semantic difference between a programme extension (acceptable) and a loan extension (unacceptable).True, words are substance. But when the German finance minister, Wolfgang Schäuble, or his allies take the floor to explain their critical stance, the underlying reasons become evident: they quickly shift to moral and emotional grounds, invoking trust, values and cultural differences. Continue reading...

The chancellor still has many reasons to be cautious despite the improvement in public finances seen in JanuaryIn an ideal world, George Osborne would be sitting in the Treasury putting the finishing touches to a nice, fat giveaway budget. Five years ago he imagined that by now he would have cut the deficit to below £40bn, providing the scope for some pre-election sweeteners.Doubtless the chancellor will still have a couple of surprises to spring on 18 March, but despite the improvement in the public finances in January, the budget will still need to be a relatively frugal affair.Related: UK finances buoyed by influx of payments from wealthy taxpayers Continue reading...

Chancellor hails biggest monthly surplus in seven years as signal of economic recovery, but critics warn long-term challenges persistThe government’s finances improved last month to post their biggest surplus in seven years, after an influx of delayed payments from wealthy taxpayers who benefited from a cut in the 50p top rate of tax.

Retail figures show average store prices declined at an annual rate of 3.1% last month – the largest drop since records beganPrices in Britain’s shops and forecourts declined at a record pace in January, as plunging global oil prices slashed the cost of petrol.Official retail sales figures, published on Friday, showed average store prices declining at an annual rate of 3.1% last month – the largest drop since records began in 1997. Continue reading...

Outcome of meeting remains clouded in uncertainty after Germany rejected Greek compromise proposalEurozone finance ministers are gathering in Brussels for make-or-break talks that could determine Greece’s future in the eurozone.

Breakaway region relies on Kremlin for 70% of its budget and motherland’s economic woes have left residents feeling the pinch, reports Eurasianet.orgFifty-eight-year-old Veronica Zinici, a pensioner from the rebel republic of Transnistria, recently traveled to the Moldovan capital Chișinău for medical treatment. She also brought with her a tale of hardship.Related: Inside Transnistria, the breakaway nation loyal to Russia – in picturesRelated: Russia’s rouble crisis poses threat to nine countries relying on remittances Continue reading...

Greek finance minister Yanis Varoufakis’s suggestion that “things could get worse in perpetuity, without getting better” (How I became an erratic Marxist, 18 February) is at odds with a key notion of the business cycle – that after a deflationary clearout of the capitalist system in crisis, states have reformed the system to assist the cyclical recovery in such a way as to improve things in the long-run.Marx and the neoliberal economists have relied on the wrong sort of mathematical models to solve the problems, hence the continuation of the crisis without end which Yanis alludes to. Marx was not too hot on understanding what businesses could do to avoid crises, but within any value system appropriate accounting techniques need to be allied to economic theory to work on solving the problems over time. But, yes, stability needs to be established first, as Yanis suggests.

Your piece on the alleged fall of the inflation rate to 0.3% (Report, 18 February) fails to mention that CPI is the government’s claimed measure of inflation, but that RPI is at 1.1%, still not high, but a good bit higher. The government seems to have ground down the journalist profession on this scam and CPI now seems to be the press’s preferred form of inflation too. Despite the recent report by Paul Johnson of the IFS favouring CPI (well CPIH but let’s not go into that), most statisticians in the Royal Statistical Society still say that RPI is a good deal nearer real inflation than CPI and they have written to the UK Statistics Authority, which commissioned Johnson, to say so. This deception adversely affects most pensions and welfare payments, and it is today’s young who will suffer most (as usual) since the effects get cumulatively worse the longer it goes on. It also, of course, allows the government to overstate the real rate of growth.

German ministers turn down Greece’s formal request to eurozone partners

Shock announcement from Berlin came after Greece filed formal request to eurozone partnersGermany and Greece are on a collision course ahead of crucial bailout talks on Friday after Berlin knocked back a Greek compromise proposal and insisted the country stick to its existing austerity plan.Setting the scene for a make-or-break meeting in Brussels , the eurozone’s largest economy dismissed as “not substantive” a proposal from Greek finance minister Yanis Varoufakis,which appeared to have all but capitulated to creditors’ demands.Related: Varoufakis and the Greek-German standoff | LettersRelated: Greece seeks six-month bailout extension - live updates Continue reading...

Germany says Greek proposals for a six-month extension to its bailout programme do not go far enough

After the lull at the end of 2014, the halving of cost of crude oil saw order books and factory output increase during early part of this yearOrder books and factory output are being boosted by the tumbling oil price, the CBI has said in its latest health check of UK industry.The employers’ organisation said there had been a bounce back in manufacturing after the lull at the end of 2014, helped by the halving of the cost of crude during the second half of the year. Continue reading...

Strange to say, but when the snow comes, the losers tend to be many big organizations, while winners often are smaller, locally owned firmsYou didn’t have to venture much further than the Amtrak station in Providence, Rhode Island on Tuesday to witness the have/have not economic fallout of the big freeze in action.At one end of the concourse, commuters were lining up to get weather-related refunds for their pricey Acela tickets, after still more snow – another 3ft – brought the city’s total for February alone to more than 2ft. Three inches of snow isn’t much to complain about these days, but combined with the chaos winter has wrought in Boston, it was enough to derail schedules, causing widespread cancellations and delays of more than three hours. I eventually got off my stationary train – which also happened to be without heat and lighting – and trudged back upstairs to join the queue for refunds. Continue reading...

Athens’ decision to accept a eurozone loan extension shows the troika did not really want to negotiate with Syriza - it wanted capitulationThere is a phrase for what Germany is seeking to do to Greece: a Carthaginian peace. It dates back to the Punic wars when Rome emerged victorious in its long struggle with Carthage but refused to allow its opponent the chance of an honourable surrender. Instead, it enforced a brutal settlement, burning Carthage to the ground and enslaving those inhabitants it did not massacre.A Carthaginian peace is what is being offered to Alexis Tsipras. On Thursday, the Greek prime minister made it clear that he was willing to see the white flag of surrender flutter over Athens. He accepted that he would have to swallow most of the conditions demanded of him by Greece’s eurozone partners but asked for a few concessions to sugar the pill.Related: Germany rejects Greek request for loan extensionUnless the Germans are bluffing, it leaves Greece with a binary choice: abject surrender or going nuclear Continue reading...

Rolling coverage of the ongoing Greek debt talks, as Athens announces it will apply for a loan extension on Thursday

With investors parsing every word that comes out of each meeting, split language about raising rates have some wishing the Fed said lessFederal Reserve officials are increasingly at odds over how “patient” they should be with record-low interest rates, according to the minutes of the central bankers’ latest meeting.Interest rates in the US – and in many other countries – have been close to zero since the financial crisis hit in 2008 and triggered a global recession. Continue reading...

Total funding on offer now €68.3bn as Greek banks come close to using €65bn of liquidity funds granted by European Central BankThe embattled Greek government has been thrown a lifeline by the European Central Bank after the ECB agreed to €3.3bn more emergency funds for the country’s banks.Related: When will Greece run out of money? Continue reading...

Europe has a chance to admit its failings over the Greek financial crisis – but it may just keep on diggingDenis Healey had a good rule of thumb for policymakers: when you are in a hole, stop digging. Greece provides a classic example of why the former chancellor was right.Work on the hole Europe has dug for itself began in the 1990s when the flawed plan for monetary union was conceived. Instead of a single currency crowning a process of integration, Europe’s policymakers decided that monetary union would be the catalyst for integration. Far from bringing widely different economies closer together, the euro has highlighted the differences between them.Syriza wants to stay in the eurozone but says conditions attached to the bailout are senseless. It is right Continue reading...

Bonuses paid to small segment of workforce – Bank of England optimistic in forecast that earnings growth will be up to 3.5% by end of year

Readers answer other readers’ questions on subjects ranging from trivial flights of fancy to profound scientific conceptsWhy, whether figures are good or bad, are economists and City analysts always taken by surprise?Peter James, Liskeard, Cornwall Continue reading...

Without a deal to extend the terms of its bailout, Greece is likely to run out of cash. The question is a matter of when – and the answer is complicatedIn order to answer the question of when Greece might run out of cash, let’s start at the top of the debt mountain. The country owes €323bn (£238bn), which is more than 175% of its GDP. About three quarters of Greek debt is owed to the EU and the International Monetary Fund (IMF), two of the three members of the troika that has rescued the country with a contentious bailout package.Where did all the money go? @YiannisMouzakis traces how the troika loans to #Greece were used http://t.co/WmWLAmkK7G pic.twitter.com/9Gy6AQU0rY Continue reading...

Industry experts react to figures that show unemployment fell by 97,000 to 1.86 million in the three months to December last year

This week, Guardian Membership held a debate among an expert panel and a room full of Guardian Members eager to pick apart the TTIP trade agreement between the EU and the US. So, was there any agreement?London’s Conway Hall was the venue for a Guardian Membership event held this week to debate the pros and cons of TTIP. The discussion was chaired by Guardian economics editor Larry Elliott and the panel comprised Claude Moraes, Labour MEP; Owen Tudor, head of European Union and International Relations, TUC; John Hilary, executive director of charity War on Want; and Vicky Pryce, chief economic adviser at the Centre for Economics and Business Research. There was also a room full of impassioned Guardian members. So what did we learn?So what is TTIP?

Leaked document suggests Athens remains committed to repealing some austerity measures attached to original bailoutAthens has confirmed it will ask for a bridging loan from its eurozone partners, as it battles to reach a deal that will secure its future as a member of the single currency.However, a leaked negotiating document from the Greek finance minister, Yanis Varoufakis, suggested the country remained committed to repealing some austerity measures attached to its original bailout.* German economy minister gabriel says welcomes signal from Greek government that it is ready to negotiate - RTRSWe want to believe that we are on a good path. We are coming to the table to find a solution Continue reading...

Bank of England’s chief economist says information revolution may have cognitive costs, with shorter attention spans posing a risk to the next leap in living standardsBefore you tweet about this, spare a thought for economic growth.What if Twitter’s rise is evidence of a damaging decline in attention spans? The same short attention spans that stem creativity, cut educational achievement, stymie investment and prompt Premiership bosses to be fired mid-season.We are clearly in the midst of an information revolution, with close to 99% of the entire stock of information ever created having been generated this century. This has had real benefits. But it may also have had cognitive costs. One of those potential costs is shorter attention spans,” Haldane told the University of East Anglia.“Some societal trends are consistent with that. The tenure of jobs and relationships is declining. The average tenure of Premiership football managers has fallen by one month per year since 1994. On those trends, it will fall below one season by 2020. And what is true of football is true of finance. Average holding periods of assets have fallen tenfold since 1950. The rising incidence of attention deficit disorders, and the rising prominence of Twitter, may be further evidence of shortening attention spans.”It may cause the fast-thinking, reflexive, impatient part of the brain to expand its influence. If so, that would tend to raise societal levels of impatience and slow the accumulation of all types of capital. This could harm medium-term growth. Fast thought could make for slow growth.”If short-termism is on the rise, this puts at risk skills-building, innovation and future growth,” he adds. Continue reading...

Prospect of Greek debt breakthrough and recovery in oil prices power FTSE 100 to 15-year highThe UK stock market hit a 15-year high, buoyed by hopes that Greece will reach a breakthrough with its creditors.A Greek government spokesman said Athens would request an extension of its bailout on Thursday, which expires in 10 days. This will fuel speculation over whether Jeroen Dijsselbloem will call another emergency Eurogroup meeting on Friday to consider the plan. Continue reading...

Before he entered politics, Yanis Varoufakis, the iconoclastic Greek finance minister at the centre of the latest eurozone standoff, wrote this searing account of European capitalism and and how the left can learn from Marx’s mistakesIn 2008, capitalism had its second global spasm. The financial crisis set off a chain reaction that pushed Europe into a downward spiral that continues to this day. Europe’s present situation is not merely a threat for workers, for the dispossessed, for the bankers, for social classes or, indeed, nations. No, Europe’s current posture poses a threat to civilisation as we know it.If my prognosis is correct, and we are not facing just another cyclical slump soon to be overcome, the question that arises for radicals is this: should we welcome this crisis of European capitalism as an opportunity to replace it with a better system? Or should we be so worried about it as to embark upon a campaign for stabilising European capitalism?When called upon to comment on the world we live in, I had no alternative but to fall back on Marxist traditionWhy did Marx not recognise that no truth about capitalism can ever spring out of any mathematical model?Europe’s elites are behaving as if they understand neither the nature of the crisis, nor its implications for the future Continue reading...

Neither Athens nor Brussels has an interest in Greece leaving the eurozone. Compromise will not solve everything but it would win valuable timeIn the next few hours and days Germany and Greece will either fail to save the European Union from a damaging crisis from which it might not fully recover, or they will agree, as now seems more likely, on one of those messy last-minute deals that are the norm in EU affairs. The hints on the evening of 17 February, in defiance of morning pessimism, were that Greece would in fact apply for an extension of its loan deal. Sensible though this is, the terms will be decisive and in any event would be only a temporary, if welcome, respite to the underlying problem. It would be foolish to assume that it represents a conclusive step back from the brink. The stakes remain too high for easy optimism. The fact remains that the shock of a Greek exit from the eurozone, and perhaps the union, would be huge. There is no provision for leaving the euro and none for leaving the union, either by secession or expulsion. The EU has brakes, which may now be applied, but it has no reverse gear.It can be argued that Greece is a small country and also a rather unusual EU member, a sort of special case. But all the members are in their different ways special cases, and while Greece is indeed a small country, it is a small country that would leave a very big hole. People forget the way in which the retreat from authoritarianism in southern Europe, in Greece, Spain and Portugal, was cemented into place by union membership. They overlook Greece’s special relationship to the European idea, a relationship which, as long as the understanding of the classical world as our predecessor and ancestor persists, will continue to deeply influence Europeans. They overlook what arrangements an excluded Greece, even if it remained an EU member, might cultivate, or have to cultivate, with Russia and China.Related: Greece makes concessions under pressure from eurozone Continue reading...

The European Union’s demand that Greece continue with the catastrophic austerity policies of the past five years flies in the face of democracy and sound economics. The Greek people in democratic elections decisively rejected these policies, which have led to a 26% shrinking of the economy, 27% unemployment and 40% of the population on the poverty line. A continuation of austerity will jeopardise the future of the EU and betray principles of democracy, prosperity and solidarity. It risks fuelling the rise of extreme anti-democratic forces in Greece and elsewhere. We urge the European leadership to respect the decision of the Greek people and to give the new government breathing space to reverse the humanitarian crisis and start the necessary reconstruction of the country’s devastated economy.

Disinflation sees consumer prices index fall to 0.3% thanks to drop in cost of crude oil and food but lower wages could make deflation a danger

Rolling coverage as Athens and the eurozone battle to break the deadlock over its loan programme, after Monday night’s talks collapsed

Leftist government has a packed schedule of meetings and repayment deadlines as it seeks to win support for an end to relentless cuts

Three loaves of bread in a window, cans of hairspray, a trailer-load of carrots ... David Hlynsky’s photos show that the dying days of eastern bloc communism didn’t offer much for consumers except visions of Marxist austerityPhotographs of shops in eastern Europe a quarter of a century ago have the quirky appeal of some kind of communist pop art. For the 21st-century British viewer accustomed to endless consumer goods and relentless advertising, they are likely to look charming and innocent, even idyllic. Here is the high street purged and purified: shops that sell just one thing, and tell you what it is with minimalist simplicity. A picture of a ham in what otherwise looks like a domestic window announces a ham-seller. A Moscow toy shop has only a handful of simple, plastic toys in the window. Another shop appears to sell nothing but washing powder. Does the Czech window with a picture of a rabbit seen through a telescopic sight advertise rabbits, rifles or both? Continue reading...

The party’s plans to boost skills and long-term investment are sensible, feasible, and could change Britain for the betterPolicy documents by political parties are typically not the greatest of reads. There is a ritualised attack on the hopeless failings of others, and then a valiant attempt to shoehorn a collection of interventions – some ideological, some a concession to interest groups and some improbably ambitious – into a narrative that only just about has a beginning, middle and end. It’s predictable and incoherent.A Better Plan for Britain’s Prosperity, which sets out Labour’s economic thinking, is much better than I had feared. It’s not Keynes’s General Theory, but it’s a well thought-through attempt at analysing Britain’s problems with some substantive supporting evidence, drawing from a host of small commissions that the party created carefully over the past few years. And it offers a feasible programme that could address the problems it identifies. Claiming it is all anti-business won’t wash. Rather it is for a different kind of business and business culture than that which dominates the economy now.Related: British capitalism is broken. Here’s how to fix it | Will Hutton Continue reading...

Greece refuses to accept demands from eurozone ministers that it should ask for an extension to its bailout Continue reading...

Drop in petrol prices and supermarket price war push inflation to slowest pace since records began in 1989UK inflation fell to the lowest level on record in January as the sharp drop in global oil prices fed through to petrol pumps and food prices continued to fall amid a supermarket price war.The government’s preferred measure of inflation fell to 0.3% in January from 0.5% in December, the slowest pace since equivalent records began for the consumer prices index in 1989.

Greece’s new government must bite the bullet, declare itself bankrupt and break free from the eurozone – only then can its economy and society recoverPray for plan B. However many times Greece’s new leaders swear there is none – pacifying their terrified bankers – they must know what to do if last night’s debt renewal disarray continues. They must take the plunge, bite the bullet, face the music, lance the boil. Only by ending the terrible mistake that was Greece’s eurozone membership can its economy hope to recover.Related: Greece bailout: pressure mounting to agree deal – live updates Continue reading...

Right-wing governments in Europe’s periphery are terrified of a Greek success at the negotiating tableWhile the wealthiest 85 individuals on the planet own more wealth than the bottom half of the world’s population – and when the top 1% will soon own more wealth than the bottom 99% – the people of Greece and the anti-austerity party, Syriza, they elected to lead them are struggling to rebuild their economy so that ordinary people there can live with a shred of dignity and security.But powerful international interests are putting the pro-growth, pro-worker experiment in progressive democracy currently underway in grave danger. Continue reading...

Forecasters claim falling cost of oil and supermarket price war will drag inflation down to 0.4%Inflation is expected to fall to its lowest level in at least 25 years as the dramatic plunge in oil prices and the supermarket price war drag down the cost of living.Analysts expect the Office for National Statistics report released on Tuesday at 9.30am GMT to show that inflation dropped to 0.4% in January. This is down from the 0.5% recorded in December and well below the Bank of England’s 2% target.The combination of rising wages and falling energy and food prices will help household finances and boost the growth of real take-home pay this year to its fastest rate in a decade. This will support solid growth in consumer spending.It is hard to find a labour market indicator that has not brightened. Beyond those in our chart: average hours have risen since 2012; most of the jobs created over the past year have been for full-time employees. Underemployment remains higher than unemployment, but the former has nevertheless fallen markedly from its peak.We have for some months been forecasting 2015 to record the strongest consumption growth in a decade. Improving pay, along with falling petrol and food prices, should combine in a powerful cocktail that puts the fizz back in the UK recovery. The BoE’s updated forecasts this week show rate setters looking for consumers’ real disposable income to gain 3.5% this year, the highest for 10 years. Continue reading...