What a day. Unemployment rate in the bloc has been stuck at a euro-era high of 12.1% for five months straight, and analysts forecast that the August reading will be no different. Why isnt the employment situation improving? Survey data on firms hiring decisions has not kept pace with the improvement seen in the wider macro data, analysts at RBC Capital markets say. While the ECB is busy planning monetary policy in Paris, and investors try to keep up with the data flow, a domestic political drama is playing out in Rome. Over the weekend, former Prime Minister Silvio Berlusconis party said all five of its ministers would resign from the cabinet, sending the yield on 10-year Italian government bonds /quotes/zigman/4869096/delayed IT:10YR_ITA to a three-month high. In response and to avoid snap elections Prime Minister Enrico Letta has scheduled a vote of confidence for the government in parliament on Wednesday. Berlusconi said he engineered the walkout because he opposes a planned increase in the sales tax, but Prime Minister Enrico Letta called this a huge lie. Last week, Berlusconis allies threatened to bring down the government ifa special Senate committee meeting on Friday, Oct. 4 votes to expel the former prime minister from the upper house because of his tax-fraud conviction . Meanwhile, political disagreements in the U.S. also look set to keep investors on edge.Congress has to agree on a budget bill before the new fiscal year starts on Tuesday, Oct. 1 to avoid the first government shutdown in 17 years , but one of the key points of partisan contention is funding for the Affordable Care Act, also know as Obamacare.The Republican-led House voted early Sunday to delay the health-care law by one year, as part of legislation to keep the government running. Rounding off the week on Friday is the nonfarm payrolls report from the U.S. along with the unemployment rate. Expect the rate to stay at 7.3% and payrolls below 200,000.
Analysis: Success, compromise, ageing erode Europe’s Greens
The median forecast in a Bloomberg News survey of 34 economists was for 1.2 percent growth. The core inflation rate, which excludes volatile food and energy costs, was 1 percent. Elsewhere, U.K. mortgage approvals rose to the highest in more than five years in August and Hometrack said the nations house prices rose the most in more than six years this month. In the U.S., congress is leaving itself just one day to end a budget stalemate that raises the risk of the first government shutdown in 17 years as Republicans sought to shift blame for the gridlock to Democrats. The Senate will reconvene this afternoon, when it will reject a House plan to delay and limit President Barack Obamas Affordable Care Act. In response, the House would add another provision to the spending measure and send it back to the Senate, said Representative Kevin McCarthy, the top House Republican vote counter. Modest Recovery While the ECB expects the currency blocs economy to gain further strength in the second half of this year, Draghi said this month that risks are still on the downside, referring to a modest pace of the recovery. The Frankfurt-based central bank predicts the economy will shrink 0.4 percent this year before growing 1 percent in 2014. The ECB pledged to keep interest rates at current levels or lower for an extended period of time to fuel the recovery, a commitment it first made in July and repeated in August and September. Policy makers will gather in Paris on Oct. 2 for their next monthly rate decision meeting.
Generation change has also caught up with the Greens. The activists in jeans and T-shirts whose playful insolence blew a gust of fresh air into parliaments and local assemblies across Europe in the 80s and 90s have become pillars of the establishment in many countries. Green ministers have held cabinet seats in Paris, Berlin and half a dozen other EU capitals on-and-off since the late 1990s – and not just for the environment. Joschka Fischer, once an anarchist firebrand, was a widely admired German foreign minister in 1998-2005, who justified his country’s first participation in military action since World War Two in NATO’s campaign in Kosovo in 1999. Ecologists sit on regional executives and city councils around continental western Europe. One large, prosperous German state, Baden-Wuerttemberg, even has a Green premier. But there is a flipside to such success. Green members and voters have aged with their leaders and become more bourgeois and reconciled with the market economy. Surveys show they have a higher than average education level and income. The German Greens alienated some of that electorate by campaigning for higher taxes, prompting Fischer to observe that the party leadership had “gotten older but not yet grown up”. Drawing lessons from defeat, new parliamentary floor leader Katrin Goering-Eckardt said: “Our task is to make ourselves more able to connect with the middle ground in society.” That, however, makes the party less attractive to young people seeking a radical alternative in a period of economic crisis and mass youth unemployment. From Greece to Italy, and Ireland to Spain, disaffected youngsters have either turned apolitical or preferred radical anti-austerity parties of the far left or hard right. In Italy, the anti-establishment 5-Star Movement that surged to prominence in this year’s election includes some former Greens. Single-issue groups such as the Pirates, who campaign for Internet freedom, and eurosceptical parties have drawn some first-time voters away from the Greens, who are strongly pro-European at a time when EU institutions have been tarnished. The Greens’ failure to capitalize on the global financial crisis or the euro zone’s debt woes suggests they are seen as a “fair weather” party, advocating policies that seem a luxury in tough economic times.
What Africa can learn from medieval Europe
They see institutional factorsmost notably the introduction of democracy and the development of state capacity for growth as the threshold conditions met in Europe, but that have generally not been in Africa. For instance, as Douglass North and Barry Weingast have argued, constitutional reforms after the Glorious Revolution of 1689 enabled these conditions to be met in Britain, producing growth in the eighteenth century that was never reversed. Increased parliamentary control over the executive and a credible commitment to pay back the public debt encouraged public and private investment which, they say, produced sustainable growth. Europes wider economic take-off in the nineteenth century can be seen in a similar light. The creation of strong and stable states in nineteenth-century Europe enabled investment in canals and railways, which increased growth rates there. The development of professional civil services and judiciaries, where promotion was based on merit rather than corruption, also helped too. These types of reforms contributed towards creating open access societies where all groups of the population have equal opportunity to access state services, such as the courts system to enforce property rights. Mr Broadberry and Ms Gardner argue that failure to fulfill these threshold conditions in most African countries have resulted in them being trapped in the cyclical pattern of growth reversals seen over the last 60 years. They argue policy makers should encourage the growth of “civil society” in order to escape from the threat growth reversals still pose to Africa’s current phase of growth. But perhaps other lessons could be learned from this sort of economic history as well, aside from the importance of good institutions for growth. Social conditions could also be important in explaining development. Both modern Africa and medieval Europe suffered growth reversals after long-lasting epidemics: after HIV/AIDS hit Africa and after bubonic plague spread into Europe. Perhaps higher expenditure on healthcare and preventative measures against future epidemics could boost growth. And as growth took off in Europe after the invention of the printing press and the spread of mass literacy, higher spending on education may matter too.