You can do worse than sit on a Tuesday afternoon in a little cafe about 20 yards from the Coliseum and watch five Chinese tourists getting their photos taken with three chain-smoking Italians dressed up as Roman gladiators.
There is something poignant about looking at the Italians in the epicentre of the greatest empire Europe has ever seen, pimping themselves out to the free-spending consumers of the world’s coming empire.
While Europe condemns itself to years of unnecessary austerity, China continues to grow apace. Whether China slips up this year or next is actually immaterial, the great structural shift in the world is towards China and there’s nothing we can do — short of protectionism — about it.
Chinese tourists will become commonplace in Europe. The affluent travel.
In contrast, Europe remains firmly wedded to the self-destruct button. The rest of the world is not waiting for Europe or Ireland to get its act together.
The fiscal compact signed on Monday revealed the worst type of pork-barrel politics in Europe because the concerns of the junior partner in German Chancellor Angela Merkl’s coalition rode roughshod over the interests of member states. A tiny tail is wagging a huge dog.
The fiscal compact is a bad joke. It is clearly drawn up by people who have no understanding of the rudiments of economics. It will drive Europe further into recession. If history is anything to go by, the political beast that will arise from the ashes of the economies of the debtor countries could be much more radical than anything we have seen in years.
This is ‘Angela’s Ashes’ — 21st century style.
Angela is driving a bulldozer through the EU and its institutions and in the process of trying to save the euro, she — together with Sarkozy — is destroying the EU.
Italy has just signed up to halving its debt-to-GDP ratio in 20 years. Do you have any idea what that means? Italian debt-to-GDP ratio is 120pc. It means that the Italians — who largely self-finance their own debts — are going to take 60pc of GDP out of the economy over the next two decades — a 20th every year. This is ludicrous, even if it were possible.
But it’s not possible because consider what is happening in Europe right now. Think about the world as it is, not as the politicians who met on Monday night would like it to be.
Here in Italy, youth unemployment is running at 30pc. In Greece, it is 51pc. In Spain it is 48pc and in Portugal it is 31pc. In Ireland, unemployment amongst young men between 15 and 19 is 45pc and one in three young men between 20 and 24 are on the dole. (I have just read excellent research on Irish unemployment by economist at NUIM Aedin Doris. Sobering but realistic.)
How can austerity now be the answer when these young people are on the dole because of a lack of demand? Everyone knows you can’t go on spending indefinitely, but there is a stage in the cycle when the Government has to support demand and that stage is now.
Why else would Portuguese bond yields be at 17pc yesterday if it wasn’t because the market thinks it is impossible for Portugal to survive in this straitjacket? Are yields high because austerity is making Portugal more likely to pay its debts? I think not.
And if Europe is putting its financial house in order and confidence is returning to the market — which is what the politicians have assured us — how come eurozone banks are set to borrow about â‚¬1 trillion in emergency loans from the ECB at its next three-year money auction?
If everything was hunky dory they would be borrowing from each other, but they are not because no one trusts anyone.
Then there is the little point about democracy. On Monday night I chatted to one of Greece’s foremost political commentators, Pavlos Tsimas, who painted a picture of a country imploding. Greece is supposed to be in the European family but is being cast aside.
At the weekend we saw Germany demand that the Greeks “give absolute priority to debt service” and “transfer budgetary sovereignty” to the EU while refusing to allow the issue to be put to the Greek people in a referendum. How are the Greeks supposed to react?
I write not as a eurosceptic but as a graduate of the College of Europe, someone who believes in the EU and has voted ‘Yes’ in every referendum. However, the EU that I voted for is being dismantled in front of our eyes.
All the while, the world is moving on and Chinese consumers are leading the charge. One of my must-reads of the week, the newsletter by Bill Bonner — the analyst behind the www.dailyreckoning.com — gave me a little bit of info on the ultimate luxury symbol, the Rolls Royce, and how the rich in China are emerging.
China is now the world’s biggest market for Rolls Royce cars, overtaking the US for the first time. Prices range between about â‚¬200,000 and â‚¬350,000 a car.
During 2011 the company sold 3,538 cars worldwide. And about a third of those sales were in China. In fact, Chinese sales jumped 60pc during the year to help the company reach the highest global sales in its 107-year history.
Meanwhile, but in the same vein, the Swiss luxury goods company Compagnie Finan- ciere Richemont SA — which owns the Cartier and Mont Blanc brands — reported a year-over-year increase of 36pc in third-quarter sales in Asia-Pacific.
Unemployment in Asia is almost non-existent. Inter-Asian trade, the next big story, is booming and, for the first time, Chinese tourists are flocking to Europe’s capitals much like the rich British commercial class did in the Victorian and Edwardian age when everyone who was anyone embarked on the Grand Tour. Back then, Britain was the workshop of the world; today it’s China.
China’s commercial might is producing a similar class who are now to be seen, when not in the Coliseum, a little bit up the road in Via Veneto, buying Gucci and Prada.
Europe is languishing. We can easily deal with this crisis. Eurobonds in the morning would solve the financing deficit, prudently. But we won’t do it. So we torch the debtor nations and in this inferno, we seem to think that 30pc to 50pc of young men will be content mooching around on the dole.
Let’s see what sort of malignant European phoenix emerges from Angela’s Ashes.
This is Joe Higgins economics .
Austerity works ! it makes sense ….when you are spending too much you cut back , how simple is that .
DMcW is not the messiah ….he is a very noughty boy.
Man oh man oh man oh man. Brian Lenihan must be turning in his grave. I felt sad the day he died. I was in a house in Carrick on Suir when my wife sent me the news via text message, I thought at the time I read the text,…. he will never know how it all turned out. Sad. I was no fan of his politics, or his supposed ability as I did not believe, like some, that he was the best man for the job. He wasnt. But he was, I do believe, a patriot. No patriot wants… Read more »
The EU self-destructed when France and Netherlands both refused the proposed constitution. It is not a state, the vote against was in the order of 75%, from 2 founding members. All the hoopla since has been to covertly declare a state and Eurobonds. Anyway a state would have Frau Kommissar Merkel (Der Spiegel yesterday) doing exactly the same thing. Time to abandon any idea of a federal europe, a pan-concoction and return to a Europe of the fatherlands as DeGaulle said. We have a banking crisis. The EU thing is secondary. European nations must act now to cut up the… Read more »
David: Interesting global overview. Rather than Rolls Royce examples of European success it would be nice to hear more about Italy’s route to redemption via Via Veneto; Ferrarri, and Maserati (both now producing SUVs with potential in China market); Lamborgini and so on. What do these products have in common? Excellence of design.
Of course Ireland can’t afford to languish on the sidelines. So, who can name an outstanding Irish College of Industrial Design?
Austerity for Governments but a Trillion for banks. Nice deal eh? Look at what FT leaked. The EU/Eurozone summitry, including the flood of media “soundbites,” is actually being made totally irrelevant by the banks’ own steps to secure the money they urgently need right now, rather than wait for some summit decision to come at some time: as leaked by the FT, particularly the bigger European banks plan to borrow EU 1 trillion from the ECB’s special window at the end of February. And the word is already out among bankers that this will naturally not be the end of… Read more »
It still gets me that when the inflationary gaps started emerging within the economy and demand far exceded our ability to supply, the powers that be just threw more fuel on the fire. This is not complicated stuff..in fact its basic fiscal policy to temper demand within emerging bubbles and rapidly expanding economies. In fact now that we are within a recessionary gap the typical tools available to Goverments and Central Banks of fiscal and monetary policy/business cycle management (i.e stimulus,QE, injections) are just not there and not available. I said this a year ago..that growth is the only way… Read more »
Very nice graphic, DMcW. Do we want to go the way of the Dino flailing wildly against its successor at the KT extinction boundary? Or stop behaving like Dino’s, take a lesson from successor, the mammals, increase activity. Let Dino banking finance go.
That Dino needs EU 1 Trillion end-February just for breakfast, meaning its eating people, jobs, futures, the economy, literally.
China is simply following FDR’s New Deal, and have said so on numerous occasions.
It seems Europe has a problem with that, not to mention a very European Obama.
Euro bonds: they may [will?] come eventually. But not yet. Note: Angela Merkel did not rule out the possibility in her Davos speech. [As alluded to by German Ambassador Herr Luebkemeier in his speech 120126 in TCD “Never Waste a Good Crisis – Why â‚¬urope will prosper”]. When Govts undertake the same degree of reform [‘fiscal responsibility’] as DD endured, the possibility may be considered, but it is not a starting point. The reality may turn out to be otherwise, and the approach questionable, but that’s the message in both of those speeches.
Today is the seventh day before the Full Moon next tuesday …………so go slow and watch the weather it wont be kind if you are not careful.
Drive slowley ……allows others go fast around you , just try to be calm and you will see the tortoise beat the hare .
To paraphrase John Allen some years ago ; put on your own lifejacket first. I listened to David some years ago and bailed my few bob out of Ireland. That worked. Then I listened again later and positioned my income stream elsewhere other than the busted flush. Again, that worked very nicely. Then later,I read another article which was illuminating about debt consolidation. I made my own conclusions and that worked very well too. Not bad for free advice from one of the few forward thinking economic strategists in the world. Now here I see another nugget to be acted… Read more »
If the buyer nations go bust, the ghost city laden nations of the far east will collapse. Rolls Royces are the preferred bauble of gangsters. criminals, financiers and dictators. Ditto for other hi priced labels. They are labels – not quality. What the west gave. the west will take away. 15 yrs ago they said the same about Japan The article neglects the effects of supply chain dependencies or the nature of that western entity called the consumer. It is a financiers view of the world. It shows zero knowledge of why China ramped so rapidly and why the same… Read more »
I have been to all the major cities of the BRICs. They are unsafe or restrictive elitist enclave laden $h1tholes. There is a reason for this. There is small middle class and it will not get a chance to grow and a smaller upper class. As for the rest. . . well get all the degrees u like, u are destined to work till u drop or die in that rural hole u came from. Is that the model of progress we are to emulate?
Phillip, with respect, you have just very succinctly described Ireland since Independence IMHO.
As for protectionism and the fear thst the West might head this way, What about the very deliberate restrictive practices of these countries – they lock in and will only use local services. Breaking in is very difficult.
Furry, correct. it takes one to know one. We know the game all too well.
“On Monday night I chatted to one of Greece’s foremost political commentators, Pavlos Tsimas, who painted a picture of a country imploding. Greece is supposed to be in the European family but is being cast aside.” Europe is not a family, it is a union and Greece cheated to get in. Their deficits were massive, they still are and there seems to be a complete lack of interest in paying tax. They should be thrown out for breaking the rules and so should we. In a soccer games if you commit a serious foul you are sent off. Greece should… Read more »
@ Malcolm McClure: We train excellent industrial designers at the National College of Art and Design in Dublin. Unfortunately the majority of our graduates cannot find work in Ireland, because the local manufacturing sector is so tiny – they tend to build very successful careers abroad, though. Lack of industrial design education in Ireland is certainly not the problem.
Yup. Though here’s a sobering thought Phillip. We’ve about 3 million cute hoors less the hopeless and useless. Chinas got 1 billion less ditto. Ergo pro rata (some bean counter will work the maths)China has many more hopeless and useless than we have CH`s. That’s what our lot need to get their head around. Long ago, the civilised world copped that the Earth revolved around the Sun hence demise of Centrists. The message never arrived in Dun Laoighaire.I recall having a conversation with the Head of the All India SME Association some years ago. Twould take a few jars to… Read more »
David, I have read and shared your articles many times and this is the 1st time Ive seen a real sadness in what you write. Even the people implementing this austerity couldn’t believe it will work and yet they haven’t the vision to see beyond it. But worse is the fact that the middle classes and the intelligentsia are so fatalistic and self preserving. It really is like watching a car crash in slow motion. We sit in the car and watch the wall approaching, hoping somehow we will be ok, whatever about the others. I, like you am saddened… Read more »
Furry, true enough. But Ireland are NOT the only ones with the gift of the gab and the hard sell. The only way China et al will take over is on the back of a complete tech or social paradigm shift that catches the west on the hop. Might happen. Just do not see it. It is same old same old in cheaper and lower labour rights economies and they need the west more than the west need them. The unemploying aspect of new tech is very real and is geo and demo graphically agnostic and very alarming.
I’m on a Blackberry at the moment(ooohh yeahh,I hear ye say)Sorry bout dat but its not the best yoke on blogs so I can’t see threads. Anahow, as we say in rural parts, Cafe gone Julia. Commercial decision based on nous and this site. I’m down West Cork way but don’t let that stop you. As for money, until I copped our hosts message, my few bob would have been gobbled by the Jolly Green Giant aka Ireland Inc. Onwards and upwards. I think we are in a healthy, suspecting phase rather than living the gullibility of the last 10… Read more »
Phillip. Quick one for the porridge before I hit the sack. I said this 4 years ago when this craic started. When the Yanks decide on the next target, ostensibly Iran at the month, who will fund that little escapade? All the real money has shifted East. I can’t see China shooting itself in that particular foot. But then again, the Mayans might be right. Over to our Western Correpondent, John Allen, for this Intergalactic update.
Had me porridge Phillip! and have to say there was a little less in the bowl than normal! Faithnomore I subscirbe entirely. The succession of “Politicians” who have led our little country are over exalted (up to now) it is important to remember they are a concoction of qualified teachers, solicitors with a sprinkling of the odd accountant, I do not remember any one who was an economist, with the exception of George Lee, who walked into the mist and came screaming back out very quickly as any sane economist would do, hence the reason maybe DMW has had a… Read more »
Joe Soap to the shopkeeper: “Giv us a bag eiv badados I’ll pay ya next week” THE EURO CURRENCY IS FORMED Joe Soap: Peels the spuds and hops them on the cooker THE MONEY STARTS TO FLOW The spuds start to boil and spill over the lid. EXCESSIVE LENDING BEGINS Joe Soap turns down the heat. ECONOMISTS START TO WARN OF A BUBBLE The spuds simmer away. LENDING CONTINUES UNCHECKED The spuds are ready and Joe Soap and his mates all take a plate full. LENDING PICKS UP PACE The spuds are all gone and Joe and the lads want… Read more »
Had the porridge – set up for the day. 2 most bellicose nations on this planet is US and UK and then maybe France and Russia. The rest are just crowd control merchants. US can pretty well mobilise as they like and I see nothing to change that view for the next decade or so assuming they manage to haly social decline there – and even that is a tad exaggerated. They can change the rules when they choose and there is little anyone else can do about it. If Iran is to be another campaign, then I suspect there… Read more »
Actually, the “leadership” of the Eurozone are pressing the self-destruct button. And the entire debacle all started from the Treaty of Maastricht. The EU decided to commit itself to an unaccountable, ineffective, clueless, centralized form of government, that opened up the potential to create massive policy mistakes – and to perpetuate them, rather than correct them. What were the long term effects of the “Spoiled Brat” Revolution of the 1960s, then the kids of the rich rebelled against the social cohesion that existed in society to that point ? Well, now we see it. The entire manner of responding to… Read more »
Peter Matthews asked questions yesterday that indicate that he is breaking ranks with the government.
Will Peter Matthews be the next George Lee ?
Will we see an orchestrated campaign of undermining Matthews on Newstalk (the prof-FG station) ?
Here we go, it’s “deja vu” all over again…
The only Europe that exists is one through the eyes of Germany. This has destroyed the EU experiment. As G.Soros said common currency without a common treasury founded on divergent geo eco political ideologies. (But it should be pointed out that he believed that the Euro would survive for a certain reason). This has resulted in financiers taking control of Europe. There is also the fact that they ‘the financiers’ know exactly what they are doing whereas the politicians do not have one iota about economics. China is now in the ascendancy and will become the dominant economic global power.… Read more »
I am sitting here at home and am very angry with this government ,they are as use full as a snow ball in hell,why I am sitting at home is because I have no work I am a self employed gob shite,the reason the dole figures are down is because the Irish are leaving in there thousands ,I watched v brown last night and fine gale and labour are in cloud coo coo land ,the time to leave the euro is now kenny can be as proud as he likes but he is a gob shite and he will destroy… Read more »
Angela is playing a game of brinkmanship, the intention is to create a situation whereby the Euro is in so much trouble that that the only real solution is the formation of a federal Europe. This new entity will have at it’s center a Germany which will be the only strong economy left, and will dominate the terms of the new constitution, which will in effect give all the power to Germany. We have two options so as to keep any kind of our remaining independence. The first is as has been suggested earlier, pull out of the Euro. The… Read more »
Western Correspondence @ Furrylugs
Actually , in this week end edition Limerick Leader I can be found requesting Mr Noonans Immediate Resignation …he is so heartless to the old age pensioners
Woe woe and double woe. The end is nigh and the yellow man shall walk the earth. Fair enough. At the rate at which teenagers are getting to know one another across all races in facebook etc I figure it’ll be the brown skinned who’ll dominate. The world will be dominated by Naomi Campbell lookalikes. Let’s look at a few little facts you can google to your heart’s delight. The world is a far far less violent place than it ever was for that last few 100s of years…indeed for the last few decades. There are fewer incidents of violence… Read more »
Merkel is trying to ensure Germany gets through this crisis untroubled, that is her motivation NOT saving the Euro.
I think that 60% in 20 years is more like 1/33rd of GDP per year not 1/20th, still difficult to achieve if you aren’t growing.
Good afternoon all,
The Eurobonds will come but under a guise of Infrastructure Project Financing. Yesterday, I attended a private equity event in which some very serious Telecoms companies presented a joint paper outlining that the EU needs to invest nearly â‚¬290 billion in fibre optic based networks just to keep abreast of the internet traffic growth (by 2015 traffic will have grown by 400% versus 2010 levels).
This financing will come from the Eurobonds to finance infrastucture as above and not for consumption, the classic Keynesian solution.
Anyone else feel like they are living in groundhog day! We all know what the end game is, even a more integrated Europe means kicking the can down the road, eventually that will end up falling apart too. Federal bond this, euro bond that. How will that fix a pointless government here, pointless technocrats in Brussels, and a complete waste of so many resources? Funding these gobshites through more bond issuance only prolongs the cancer we have in our “society/economy”. David, you are pro debt jubilee and also pro Eurobonds, but a Eurobond is exactly what might be used to… Read more »
The Dublin city council handed over there loss making bin/rubbish collection in Dublin to grey hound waste company do you think they will run it at a loss,why could they not have done the same because they are like this government they can’t run this country,or maybe it was never about running the country the right way ,more about power hungry misfits looking after them selves and there cohorts .
Collapse means physical economic breakdown, caused by the financial dino. Shipping now is essential for goods and food – look what has happened : World Shipping Costs Plunge 58 Percent in January Alone on European Collapse The Baltic Dry Index, which tracks the cost of international container shipping, fell a whopping 58 percent in the month of January alone. At 680 it is now is just a touch above its all-time low of 663 at the worst part of the last collapse cycle in 2008. The low world demand for shipping as the Euroland crisis deepens, resulting an “oversupply” of… Read more »
As I said, once the west stops buying, the manufacturing engine grinds to a halt. PMI index is down 3rd month in a row for China.
Meanwhile our Saudi friends with 1 Trn in da bank in da USA are dropping the hint that Mr “give me back me dinnerjacket” in I ran is play nukies. So Obama is playing a few war games to keep the nerves steady while showing who is boss.
Fun and games everywhere abd the rules keep changing,
Our main problem is we have nobody running the country with any balls ,we need someone like the iron lady hate her love her at least she was no door mat and with weak people running the country we are doomed.
The EU pressed the self-destruct phase a long long time ago.
It is only that we started seing the results in stark terms from 2007 onwards.
Hats off to Marian Harkin. In Ireland we are told to keep the rules of the new fiscal treaty, it will eliminate the risk of future crisis and help solve the current one. Yet from 2002 to 2008 Ireland did not once break the rules of the Stabilisation Growth Pact, unlike others — so we know from bitter experience the rules don’t always deliver and certainly will not deal with the current crisis. In 2007, our debt to GNP ratio was approximately 30%. By 2014, it will have ballooned to 145% – no developed economy can survive those levels of… Read more »
It is clear that the majority of people feel there should be a referendum on such an important question. This online petition to the Taoiseach is a means by which thousands of people across the country can add their voice to those demanding a referendum on the Treaty. We will be encouraging people to get involved in sharing this petition via social media to turn it into a vehicle to build massive political pressure on the government in the next few weeks to force them to hold a referendum. Dublin Socialist Party MEP Paul Murphy sign the petition seeking a… Read more »
Stephen Donnelly wipes the floor with Lucinda Cretin.
Also a perfect response to the austerity trolls…….
I did not bother to read this article. Why did I not bother? I did not bother to read it because I wanted to comment before I read the article. I will read the article but my point is I will not be swayed in my opinion of why we are where we are. It seems to all boil down to debt. Europe is up to its neck in debt.The debt will not be written off because we have the Germans who are paranoid about inflation. I dont know much about inflation but it seems to me that we are… Read more »
@Malcolm: You should come and visit us sometime; you might be pleasantly surprised by our facilities. The college website is surely not the place for an inventory?! Besides, the days were you could attract people by dropping words like CAD/CAM are truly over.
Anyway, whatever about the PR or lack thereof, there are more than enough industrial design graduates around and, yes, Malcolm, they do know how to use rapid prototyping equipment.
David, I was looking at your lastest retrospective articles, the 10 year old one, to slag off Naomi Klein’s ‘No Logo’ a bit in it. Looking at this article here above in contrast with the one of 10 years it seems your dismissive attitude then was ill-judged. I think that you missed a large part of the point about ‘No Logo’ at the time but your article here is picking up on the results of what she was getting at and extensively documented in ‘No logo’. Your statistics on the now extensive youth employment across the EU which you clearly… Read more »
@ Bonbon and Juanjo R and all on this blog who seem to believe market capitalism should be somehow benevolent: 1) Ireland and other countries will receive the Eurobonds as part of infrastructure financing such as for the fibre-optic investments being considered if it demonstrates willingness to be competitive and it pays it’s foreign-owed debts; 2) Business and therefore jobs are created by securing relative competitive advantage, ie., lower costs, higher value add, greater productivity, unique offer proposition versus your closest competitor/neighbour; 3)Ireland is still a high-cost country in which to do business. Managerial salaries, rents and professional services need… Read more »
Stock Markets in the UK and US are very buoyant. What, if anything, does this mean?
Thanks, from an amateur observer.
Optics Fast Fwd ……arriving news Tomorrow 1 Greek Prime Minister Lukas Papademos Debt Crisis: Eurozone bailout founds not enough as new â‚¬15bn hole found in Greek finances INTERNATIONAL debt inspectors believe they have found another â‚¬15bn black hole in Greece’s public finances caused by the deepening recession, delivering the crippled nation another devastating blow. 2 Hungary’s Malev grounds fleet after running out of cash 3 Bank of Ireland takes â‚¬1.1m from airport’s deposits Two ministers were seeking clarification last night after Bank of Ireland raided â‚¬1.1m held on deposit by Galway Airport and offset it against the company’s loans. How… Read more »