Spain opts for more austerity in 2012
Spain’s new government has said the public deficit for 2011 will be 8% of GDP, well above its target of 6%, and has announced increases in income and property tax along with a wage freeze for civil servants to tackle it. Looks like a very tough year ahead for the Spaniards, one of several in the last few years,as illustrated in this timeline.
read more...»Eurozone macroeconomics for 9 year olds - brick by brick
It’s time to start treating our A2 economics students like 9 year-olds…in a kind-hearted way. How? With this highly creative and engaging piece of analysis by the market analysts at JP Morgan.
The Eurozone crisis is both political AND economic, with the underlying issue one of who pays the bill for nation and bank bailouts. The political impasse in Europe over the crisis is difficult to understand. But this Lego-inspired graphic does a pretty good job of explaining who wants what. Follow the commentary underneath the graphic to hear the story.
Hand it out to your A2 students and see if they can make sense of it.
EU Economics: Comparing the UK with Europe
Stephanie Flanders has posted a very useful blog examining Eurozone growth, and whether the UK can best be compared to France and Germany or to Greece, Portugal and Spain. She starts with Ed Balls rejection of the Chancellor’s habit of likening the position of the UK economy to those of the southern states which are struggling so badly at present; the Shadow Chancellor believes a better comparison would be with our traditional competitors in northern Europe.
read more...»EU Enlargement - Evaluating the Impact
Many of Europe’s newer member states have outperformed established EU countries since they joined the single market in 2004 and 2007. And as a result there has been a process of convergence in average living standards and improved employment opportunities. Europe’s new nations have injected extra dynamism into the region despite inevitable teething problems along the way.
For students revising aspects of EU enlargement here is a streamed version of a presentation I gave to a Tutor2u event in London a few weeks ago
A streamed version of the presentation is available here
PDF Handout of the presentation
Related news issues
Germany expects influx of Polish workers (BBC news, April 2011)
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OCR F585 June 2011: A Brain Drain from Spain?
High unemployment, declining real wages and worsening employment prospects might be causing a surge in net migration out of the Spanish economy. The economic and social consequences of high unemployment figures prominently in the OCR F585 stimulus material for the June 2011 exam. One in five under the age of 30 in Spain is unemployed, and a staggering 64% of those age 16 to 19 are unemployed. Youth unemployment rates in Spain are higher than both Egypt and Tunisia
Official data shows that 118,000 people left the country in the two years to April 2010 - many of them heading to Germany where economic growth is strong and unemployment rates are falling. There is also growing evidence of younger Spaniards heading to Latin America. 30,000 Spaniards moved to Argentina between June 2009 and November 2010 — an 11 per cent increase over that period. Some 6,400 went to Chile — a jump of 24 per cent in the same timeframe — and 6,800 headed for Uruguay, an increase of 16 per cent.
If the brain drain effect gathers momentum consider some of the possible consequences for the Spanish economy.
Canadian Press: Portuguese, Spaniards seek new lives in old colonies as they face dead-end future at home
Spanish jobless level hits another record high (April 29th)
OCR F585 June 2011: New articles on the Spanish economy
As preparation for the OCR F585 June 2011 economics paper here are some new articles on the Spanish economy - which features heavily in Extract 3 of the pre-release stimulus material. Our toolkit is available from here.
read more...»Tracking the effects of the recession on GDP
An excellent resource for Unit 2 and Unit 4 macroeconomics. Vishnu Padmanabhan from Timetric has this excellent look at the impact of the recession on real GDP growth in OECD countries. Which countries did best and worst in the recession? It turns out that Australia, Poland, Israel and South Korea were the countries least affected by the crisis and all avoided a full-blown recession - experiencing instead a soft landing. Here is Vishnu’s article. Our own growing selection of Timetric charts can be found by scrolling down to the bottom of this blog entry.
The OECD has just produced their annual review of Going for Growth - a largely supply-side look at policies designed to promote long-term growth in productive potential in the world economy. Details can be found here.
AS Macro Key Term: Relative deflation
The term “relative deflation” is generally used to describe an economy with an inflation rate, which has not necessarily descended into negative territory, but is markedly lower than comparable economies. Over time, a low relative rate of inflation can lead to an improvement in price competitiveness in international markets, assuming that there has not been a compensating change in the exchange rate between two countries.
In our data example shown below we track consumer price inflation in Ireland, Spain and Germany. For most of the period shown, the annual rate of inflation in Germany was substantially lower than two of her partners in the European single currency area - this is an example of relative deflation.
read more...»OCR F585 June 2011: Competitiveness
One important aspect of the OCR F585 stimulus materials for June 2011 is the economics of competitiveness within the single currency zone - the Euro Area. A conventional view is that some of Europe’s peripheral countries (notably the PIIGS) have become uncompetitive because they have allowed their producer prices, consumer prices and relative unit labour costs to rise. This - in the absence of a compensating exchange rate depreciation - has made their manufacturing and service industries relatively more expensive leading to a deterioration in trade balances, slower growth and stagnating living standards.
read more...»Focus on Spain
I will be developing a series of data charts and links to other resources in this blog for students and teachers who want to use developments in the Spanish economy as part of their macro studies. The economy is a member of the single European currency but widely regarded as experiencing deep structural problems and facing a tough adjustment process in the years ahead. At the bottom of the blog we link to recent articles on the Spanish economy. The OCR F585 June 2011 paper focuses on Spain as one of the countries experiencing difficulties within the Euro Area.
May 2011
Migrants pushed towards exit by Spanish jobs crisis (BBC)
April 2011
Spain economy gets IMF vote of confidence
Spanish jobless level hits another record high
March 2011
Spain pledges additional measures to strengthen economy
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Timetric: Unemployment Rates for Selected Countries
In this Timetric chart blog we look at unemployment rates for a selection of country groups - these automatically updated charts will track what is happening to the standardised jobless rates for clusters of countries starting with one that includes the Euro Area, Germany, USA, UK and Japan. The second chart is the unemployment rates in the so-called PIIGS - Portugal, Italy, Ireland, Greece and Spain
read more...»Unemployment in Germany and Spain
For many years Germany was criticised for persistently high unemployment rates and an inflexible labour market. But having weathered the worst of the steep contraction in global manufacturing output and trade in 2009 the German economy is being propelled forward by a strong surge in export sales. Unemployment is falling and for the first time in recent memory, the official jobless rate in East Germany is now lower than the state of California!
Economics Q&A: Why might Europe’s weaker economies struggle to grow in the next few years?
A starting point to this question is to discuss what “weaker EU countries” might mean. We can use some of the conventional indicators of macro performance to help us namely:
1. Slow or negative economic growth
2. Rising unemployment and falling employment rates
3. Deteriorating public sector finances and higher government debt
4. Relatively high inflation or perhaps an economy experiencing a period of deflation
5. A high deficit in trade in goods and services
Other indicators might be used to identify weaknesses in performance - for example:
1. Relatively low labour productivity
2. A falling share of global trade
3. Rising yields on long term government bond issues
4. Weaknesses in non-price competitiveness
EU Economics: EU Economy in Charts Jan 2011
Here is an updated twenty five slide streamed presentation on macroeconomic developments in the 27 countries of the EU with a particular focus on the Euro Area and UK/EU comparisons.
read more...»A2 Macro - Economic Growth Charts
We started our teaching this year by looking at issues related to measuring living standards and now we are moving onto aspects of the causes and consequences of economic growth.
I like to put growth into some kind of context by drawing on recent UK cyclical data and growth information for a range of other countries. I have attached a brief powerpoint of such charts with this blog which may be of some use for colleagues.
One of the interesting trends for many OECD countries is that estimated trend growth (the % change in potentail) GDP has fallen sharply in recent years. Indeed for Spain and Ireland, trend growth estimates have dropped into negative territory. Mo’s recent blog on hysteresis links in part to why this is happening.
Download the A2 Macro Growth Charts
Economic_Growth_Charts.pptx
Warnings of hysteresis for the EU economy
This is an updated blog post on the topic of hysteresis in the EU economy. The recession and financial crisis may lead to a permanent loss in potential economic output and a slower trend rate of growth in the future according to a study by the European Commission. The fall in potential GDP will be an example of hysteresis effects across the European economy and the cyclical downturn in output and jobs creates long term damage.
read more...»Pain in Spain - on the brink of depression
In our introductory AS macroeconomics we have discussed the differences between a cyclical recession and a depression. Much depends on the scale of the contraction in real national output from peak to trough of the cycle. This article from the Telegraph looks at a dire outlook for the Spanish economy which - not long ago - was one of the fastest growing countries in the European Union with a rising relative per capita income.
Quoting a report from Madrid research group RR de Acuña & Asociados, the peak to trough loss of GDP is likely to be more than 11%. “The group said Spain’s unemployment will peak at around 25pc, comparable to the worst chapter of the Great Depression…...The construction sector will shrink from 18pc of GDP at the peak of the boom to around 5pc, making it unlikely that there will be any significant recovery before 2012. Even then growth will be “slow, weak, and fragile”.
A huge rise in the Spanish government’s budget deficit has left them little wriggle room for a fresh fiscal stimulus.
Spain and Ireland are frequently quoted as two EU countries whose property bubbles have been well and truly smashed with huge macroeconomic consequences. The slump in property represents a very large internal demand-side shock for a country heavily dependent on construction and also tourism for value-added measures of GDP.
