Archive for the ‘Finance’ Category

British driving without winter tyres

January 19, 2013

Here’s a picture of British driving in the latest snow. All over the place, even on a flat road. And why? Certainly because winter tyres are scarcely used at all in this country.

In many countries on the continent of Europe, winter tyres are mandatory at this time of the year. The Swiss rule that vehicles must be “adapted to the conditions.” That means winter tyres when the conditions require. If you have an accident without winter tyres, you can fined or lose your insurance cover.

Isn’t that expensive? Not much. During winter, you don’t wear down your summer tyres. The main cost is to have a garage change them over twice a year. The savings in less damage make up for this – and you are safer.

Winter tyres are not effective just in snow and ice. At any temperature from 7 Celsius downwards, winter tyres grip better.

Perhaps we need a European Union directive …

Photo: Matthew Plucknett,/Oxford Mail

New Year falls flat in Italian ski resort

January 1, 2013

The ski slopes in the Italian winter sports resort where I spent New Year were as full as ever, and on the streets the odd fur coat could still be seen. Crisis? What crisis?

But come New Year’s Eve, usually an excuse for unrivalled extravaganza, the hotel served up an aperitif from which alcohol was almost entirely absent. The dining room for the “Cenone”, the traditional New Year Eve’s dinner, was half empty. And when the clock struck 12, scarcely a single firework limped into the sky.

Madrid has turned from one of Europe’s most vibrant cultural capitals into a sad desert where young people make tapas to eat in their homes because they cannot afford to go out.

Is Italy now losing its exuberance too? Dread the thought.

Northern Europe may be dull, but it’s economically competitive – survey

September 6, 2012

Northern Europe may not fire the imagination, but five countries in that region are in the top 10 worldwide measured by economic competitiveness, according to the World Economic Forum (WEF). They are Finland, Sweden, the Netherlands, Germany and the UK.

Southern European countries, struggling to cope in the eurozone, languish far back (Spain 36th), but are stabilising their positions due to austerity measures, says the WEF’s latest survey.

In Asia, Singapore, Hong Kong, Japan and Taiwan are the top 20. China may be a powerhouse but competitively it is back in 29th place.

Top of the class, for the 4th consecutive year is Switzerland. This is what the WEF likes there:

– flexible labour market
– R & D
– protection of intellectual property
– education and training
– transparent public institutions
– rule of law
– economic stability

Credit Suisse has just forecast that after growth of 0.5% this year, Switzerland’s economy will grow strongly again next year.

The moral? Perhaps it’s that you get on well if you are solid and hard-working, but not necessarily hugely inspiring.


August 23, 2012

Whilst I’ve been away from the UK in Europe, I’ve crossed frontiers a dozen times, and never had to show a passport or identity card, nor declare goods to customs. Eurozone citizens crossing with me did not have to lose money through changing currencies. I lost 8% to the money-changers by having to change sterling.

When I return to the UK on Sunday, I will have show an identity card at Trieste airport as I leave the Schengen zone. When I arrive in the UK two hours later, I will have to queue to show my identity card again.

I’m still trying to discover the supposed benefits of British insularity. Our currency is devalued far more than the euro is. Staying outside Schengen means we are excluded from sharing of security information.

Nobody likes too much regulation, but that’s not the sole preserve of the European Union – national governments do it too. Democratic accountability in the EU? Maybe not great, but Britain has a first-past-the-post voting system that usually gives exclusive power to a party winning around a third of the votes. Not supremely democratic either.

At least I have not only British nationality, but also Swiss, so like most Europeans I can travel around with a small plastic identity card in my wallet rather than a passport. Switzerland doesn’t even belong to the EU, but it has adapted itself to many EU norms and remains safe even after opening up its frontiers within Schengen.

In most respects I love living in England, the place where I was born and grew up, so I’m working hard on my insularity. But for the moment, I don’t quite get it. Just now, I find European harmonisation liberating and convenient.

Germans remember economic boom, not austerity

July 26, 2012

Germans are said to be scared of a revival of their hyperinflation of the early 1920s, explaining why they don’t want to fund bailouts for eurozone countries. But what Germans remember more is the Depression of the 1930s, when austerity did not work, and even more the 1948 economic reforms which led to the German economic miracle.

Polls show Germans consider the creation of the Deutschmark and the lifting of price controls and other market restrictions in 1948 as one of the two most important events in their recent history (the other being reunification in 1989). Overnight severe scarcities of everything turned into abundance. A bicycle shop which one day had no parts to repair broken bicycles the next day had 60 new ones on sale. The German economic miracle took off and in 1960s growth was still steaming ahead at 9%.

What’s the moral for today? Firstly, in 1948, there were no austerity measures, no cutbacks on public spending. It was economic boom from one day to the next. Today the euro is still a relatively stable currency, for all its recent wobbles. It is firmer against the dollar and sterling than four years ago. It has kept inflation in check, just like the creation of the Deutschmark did in 1948.

So Germans don’t need to force an austerity on others that they did not need in their severest crisis 63 years ago. Nor do they need to worry about inflation.

But what Germans did create in 1948 was a liberal economic market free of distorting price and other controls. The needy eurozone countries have huge distortions in their markets due to all sorts of government measures. Eliminating them overnight, as the Germans did in 1948, may be the salutary example the Germans have to offer.

See A FOOT IN BOTH CAMPS: A GERMAN PAST FOR BETTER AND FOR WORSE by Marcus Ferrar, published July 2012.

Greece: cradle of democracy and philosophy – and now also destroyer of Europe?

May 16, 2012

Greeks were the first to organise themselves politically to represent the common interest. Philosophers such as Plato and Aristotle showed the power of reason, which never lost its influence despite religions which insisted knowledge came only from divine revelation.  Greeks have thus inspired us over the ages.

Will they now write a third chapter in their history by destroying the vision of a Europe which no longer tears itself apart – as it did at huge cost in human lives in the last century?

Since joining the European Union, Greece acquired a reputation as the member which consistently flouted its rules. Its citizens lived far beyond their means and today show no signs of acknowledging responsibility.

Predictions are that the new elections will favour parties who care nothing for Europe and nothing for the financial ruin they will bring by reneging on the country’s debts. In doing so, they may bring down the euro and perhaps even the European Union.

Europe’s younger generations take the benefits of the European Union largely for granted – that is, freedom of movement and employment, relaxed personal relations, democracy, rule of law, common standards, no passport queues at airports, and, yes, a common currency which facilitates price comparisons and is immensely convenient.

Greeks now risk writing themselves into history as the destroyers of this harmony. They will be remembered long for their selfishness and fecklessness if they choose that path. It is hard to believe Europe’s young people will let them get away with it. But if they succeed, how many will still remember Greeks as pioneers of democracy and philosophy?


The euro? Greece may be on the way out but Turkey has already embraced it

May 16, 2012

If you are one of the millions who visit Istanbul nowadays, you can pay for most things with the euro. Greeks may be about to vote in a government which will take their country out of the common European currency. But Turkey, which does not even belong to the European Union, is already unofficially using it.

Even in the teeming tunnels of the Grand Bazaar, dating back to the 18th century, cash machines offer the euro and dollars besides the Turkish lira. Try getting a euro out of a cash machine in Britain. No chance.

Turkish cars carry number plates with the blue flash on the side used by member countries of the European Union. The plates carry the letters TK, as if it were a member country. Only the yellow stars of the European Union are missing.

The concept of a united Europe may seem tattered to some. But to outsiders such as the Turks, it is still an alluring prospect.

Greece: could it be tempted to go into default? Latin America sets an example

April 28, 2012

The European Union, the IMF and other creditors have decided to help Greece avoid default on its sovereign debt, but is a default really out of the question? A number of other countries have found it quite convenient to remain in default for 10 years or more. Recent history suggests Latin America may be an inspiration for that.
Take Argentina for an example. It is no stranger to defaults. Its central bank holds most of its reserves at the Bank for International Settlements (BIS) in Switzerland. This is because of its last default on its international debt 10 years ago The BIS has a special legal status as the “central banks’ bank,” backed by immunity provided by the Swiss government, preventing creditors from seizing a debtor country’s assets held there.
With its attachable assets safely at the BIS, Argentina has settled with 93% of its creditors at a fraction of the original claims, but the remaining 7% are still making vigorous efforts to seize its assets all over the world. Hence Argentina’s continuing need for the BIS. However the BIS arrangement has a price – the bank pays only around 0.4 % of interest. If the reserves were held conventionally, Argentina could be earning about 2%. The estimated loss is about $675 million per year.
The Argentinian people already suffered enormously in the financial crisis which led to the default. I was in Buenos Aires at the time. A thief attacked me as I left my hotel and tried to wrestle my watch off me. Queues of destitute people waited for free handouts of food from restaurants and supermarkets. The losses on the BIS arrangement in the end mean further losses for the people.
Another example on a smaller scale is Paraguay, which failed to pay back money it raised from Swiss banks in the 1980s. It is in default since it failed to conform with a Swiss court judgment of 2005 that it must honour a Paraguayan government guarantee given to the banks. So it too has chosen to park its reserves with the BIS. Not only does Paraguay forfeit interest – some $100 million per year – but it recently revealed that it was also paying 9 million dollars a year of professional fees to keep the arrangement going.
So the Paraguayan people have to put up with financing these losses year after year, while the BIS protection prevents the Swiss banks from recovering their loans.
Many central banks keep funds at the BIS for entirely legitimate reasons, but the worldwide average is 4% of reserves. One may wonder why the BIS wishes to protect debt defaulters whose assets a court may otherwise be justified in seizing. It is unlikely to explain. When I covered it as a Reuters correspondent in the past, it consistently refused to discuss its affairs.
Greece may not be out of the woods. Could it yet be tempted by these Latin American precedents?

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