Britannia Radio

The ‘spinning’ for the G20 mounts!  A big deal is announced:---
“Tax havens victory for Brown as nations sign deal”  This makes the  
front page but when you look at the list there are ten involved  and  
all are in continental Europe including Switzerland, Liechtenstein,  
Luxemburg, Monaco, Austria and Andorra  and ... ?    While possibly a  
good move it has no bearing on the recession at all and is only there  
for the cheer.

In the real world continental Europe is beset by bad news and falling  
confidence.  In this they have lagged behind Britain who realised  
much earlier on that something was wrong out there!    However, and  
perhaps irrationally, there are reports of increased confidence in  
the UK amongst consumers only - not amongst industry -  and certainly  
the housing market has stirred a little with the coming of spring.   
Most commentators are now trying to deflate expectations of the  
summit  - but then that could be ‘spinning’ too !!

But most seem agreed that the worst is still to come.  The world car  
industry is gripped with paralysis and both General Motors (which of  
course includes both Vauxhall and Opel here in Europe) and Chrysler   
have been refused further aid by the US government and face  
bankruptcy in the near future.

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EU OBSERVER                 31.3.09
Wave of economic bad news hits Europe

    ANDREW WILLIS

A wave of economic bad news buffeted Europe on Monday (30 March),  
with European Central Bank president Jean-Claude Trichet saying he  
expected falling growth in each quarter of 2009.

"Latest information suggests economic activity has deteriorated  
further in the first quarter of 2009. Looking ahead, we expect demand  
to remain very weak throughout 2009, both at the global level and in  
the euro area," Mr Trichet told MEPs in Brussels.

A gradual recovery is now not predicted before 2010, while several  
European economies may have to wait until 2011 or later for signs of  
an upturn.
Rating agency Standard and Poors cut Ireland's top credit rating on  
Monday from AAA to AA+, making it more expensive for the government  
of the western isle to borrow money at a time when tax receipts have  
plummeted. The country is expected to borrow as much as €25 billion  
this year to plug the shortfall.

"This is bad news for Ireland at a very bad time. Standard & Poor's  
decision to downgrade Ireland's credit rating will make it even  
harder for the economy to recover," said Richard Bruton, the  
opposition spokesman on finance, reports Bloomberg.

S&P downgraded ratings for Spain, Portugal and Greece in January.

Spanish deflationary fears
Addressing the economy committee on Monday, Mr Trichet told MEPs that  
inflationary pressures "have diminished further."
"Looking ahead, we expect the inflation rate to remain well below two  
percent for this year and 2010," he said, but ruled out the prospect  
of deflation for the euro area as a whole.

However, for a number of individual countries the threat of deflation  
remains very real.

In Spain, the National Statistics Institute said on Monday that month  
on month inflation for March had fallen by 0.1 percent, marking the  
first time prices have fallen since the current measuring system  
began in 1997.

Dropping prices can convince shoppers to postpone purchases as they  
anticipate further falls, driving down consumption while at the same  
time increasing the real value of debt.

Deflation is also a concern in Ireland and the UK.

Fall in European economic confidence
On Monday, the European Commission reported that consumer and  
business confidence slumped to a record low in March.

The EU executive said its economic sentiment indicator for the euro  
area fell to 64.6 points in March, down from 65.3 points in February.  
This new level marks the lowest point ever recorded since the survey  
began in 1985.

For the EU27, the index fell to 60.3 points from 60.9, marking a  
slower rate of decline following a number of sharp drops since  
September 2008 when the US bank Lehman Brothers collapsed.

OECD warns of huge job losses
While many thousands have already lost jobs in Europe since the onset  
of the financial crisis, economists and unions warn that there is a  
natural time-lag before falling production is converted into job  
losses, indicating that the worst may still be to come.

A new report to be published on Tuesday (31 March) by the  
Organisation for Economic Co-operation and Development forecasts that  
unemployment rates will approach 10% in the OECD area by 2010,  
compared with the recent low of 5.6 percent in 2007.

If proven to be accurate, the numbers of unemployed in the OECD area  
will rise by about 25 million, by far the largest and most rapid  
increase in OECD unemployment in the post-war period.
"Governments need to take quick and decisive action to avoid the  
financial crisis becoming a fully-blown social crisis," OECD  
secretary-general Angel Gurria told G8 Labour and Employment  
Ministers in Rome on Monday.

The ECB is aware of this need for action, making a euro area interest  
rate cut from the current 1.5 per cent level highly likely when the  
board meets this Thursday. An announcement on a new policy to buy  
corporate bonds may also be included.
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TELEGRAPH                31.3.09
1. Brown must be single minded in his approach to G20 agreement
The apparent significance of this week's G20 summit in London has  
been whipped up to epic proportions.

    By Damian Reece    

Gordon Brown has spent the last three months trying to micro-manage  
world leaders, cajoling them into an agenda which many of them have  
spent the last three weeks undoing.

Obviously national leaders find his style just as condescending as we  
do, although we've had to put up with it for a dozen years as one  
Brown Budget after another brought the state more control and  
influence over our lives. There's been no respite since he became  
Prime Minister.

Brown's strategic mistake with this week's summit has been to try to  
get too much agreement from too many people. He's forgotten the  
golden rule, assuming he ever knew it, of negotiating with multiple  
parties who have many diverging interests.

He should have identified early on one simple goal from the meeting  
that all could sign up to. This would have given the meeting a  
greater sense of purpose and significance. Instead it will inevitably  
descend into an international slanging match, Brown having gifted  
every fast developing and aspiring economy, such as those in Latin  
America, the chance to attack the waywardness of Europe and America  
on their fiscal irresponsibility and regulatory failings.

The likes of Chile for instance can, with some justification, reject  
the hectoring and prescriptive "we must do this, we must do that"  
style of our Prime Minister. A bland G20 communiqué issued after a  
day of bickering will undoubtedly make the situation worse, not better.

Trying to get the G20 to agree on even more spending paid for by more  
borrowing is a waste of time. Some can afford it, some can't  
(including the UK). It suits some domestic political situations but  
not others.

International regulation is another guarantee of no meaningful  
agreement. Giving regulators even more power is hardly the most  
imaginative solution to a problem caused in considerable part by  
failed regulators. International "initiatives" such as the Basel  
Committee on Banking Supervision have been trying to get to grips  
with the industry since the mid 1970s. Again regulations will remain  
national concerns, some better than others, some in accord with  
others but all reflecting some national differences. General  
principles that responsible countries sign up to will be the best  
that can be hoped for, allowing the "responsible" community to  
threaten to cold shoulder those whose regulations fail modern standards.

But any national leader will find it difficult to tell their  
electorate that they will be attending the G20 to encourage  
protectionism. Those present at the meeting control 90pc of the  
world's wealth and have got to that point in large part by being able  
to sell domestically produced goods and services abroad while  
allowing their citizens to buy goods from overseas in return. Some,  
such as France, have greater protectionist instincts than others. But  
calling a halt to any further protectionist measures is within this  
G20's grasp if Brown can get them there.

Agreeing not to do something, such as not increasing protectionism,  
can be easier and just as significant in these complex situations as  
a raft of supposedly positive actions. Such a statement would draw a  
line, from which an expansion of free trade could be subsequently  
negotiated, bolstered by the G20's commitment. It would be a credible  
statement and would boost confidence.

Surely one clear, unambiguous item on which to shake has to be better  
than vague undertakings that mean nothing.
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2. UK consumer confidence returning faster than rest of Europe
Britons are becoming more confident, more quickly than their European  
counterparts, in the latest evidence that the UK may recover from the  
recession sooner than Germany, France and its other major continental  
neighbours.

    By Edmund Conway

Figures published by the European Commission have revealed that in  
the wake of the Bank of England's decision to cut interest rates to  
zero and embark on quantitative easing, British households' optimism  
about the economy started to recover. The statistics, from a monthly  
survey of European consumers, meant spending might recover faster in  
the UK than elsewhere, economists said.

The Commission's survey showed that, across Europe economic  
confidence was now at the lowest ebb since the survey began in 1985,  
with its overall confidence barometer dropping from 60.9 in February  
to 60.3 in March.

The UK's overall confidence – including surveys of both businesses  
and consumers, also dropped to a record low of 56 points, but the  
household element of that actually rose from -46 to -38. In most  
other European countries that consumer confidence element is still  
falling sharply.

Gabriel Stein of Lombard Street Research said: "It is early days yet.  
Britain is obviously not going to see a consumer boom in the next few  
months. But the numbers support the view that Britain should emerge  
from recession sooner than Germany – and, more importantly, that it  
will do so because of stronger domestic demand. By contrast, the  
German insistence on waiting for the rest of the world to recover and  
then hitch a free ride by exporting its way out of recession condemns  
the country to a longer and deeper slowdown than is actually necessary."

The figures are produced in conjunction with market research group  
GfK whose own consumer confidence figures, published today show that  
its overall optimism barometer rose by 5 points to -30 in March.  
Although this is low by historical standards it is the highest level  
since last May.

However, a report from Asda showed that the amount of discretionary  
income available to the average family has dropped by 9.2pc in the  
past year, leaving them with less cash to spend.
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