Portugal's exit from support program highlights success of austerity program

Portugal is escaping from the claw-like grip of the IMF/ECB/EEC support program.  Its current account and primary budget are in surplus.

Deputy Prime Minister Paulo Portas commented that Portugal now regains the sovereignty that it had surrendered to creditors.  On the other, we may observe that had this sovereignty not been surrendered, the success would not have been achieved.

Europe is tasting the sweet fruits of austerity as manufacturing rises

The Eurozone has just achieved its highest manufacturing PMI in 6 years: 53.4.  The countries above 50 (expansion) include Germany, France, Italy, Spain, the Netherlands, Ireland, Austria and Greece.  Unemployment remains high at 11.8%, but below last year’s record of 12%.

ECB forecast of 1.2% GDP growth for 2014 looks very achievable.  It is notable that Greece, Italy, Spain and Ireland are all experiencing manufacturing expansion.  Are the fruits of austerity finally turning sweet?

Housing bubbles in the UK but cools in China

Deputy Governor Jon Cunliffe of the Bank of England says the UK housing boom is “dangerous,” and that “this is a movie we’ve seen before.” Gov. Mark Carney added that the housing market could heat up at “warp speed.” (Is he a trekkie?) Meanwhile, housing prices in China’s 100 largest cities were up 9.06% y/y, while sales were down 15.5%


Maybe the Chinese housing bubble is already deflating the places we need to worry about are the UK, Canada and Australia?

Kwacha in the sights of forex traders?

Malawi’s central bank has decided to keep lending rates at 25%.

Good yield.  Should we be looking at the kwacha?

Australian austerity promises to bite the far future elderly

The Australian government is proposing to raise the retirement age for everyone born after 1965 to 70 years.  This is due to budget problems arising from the collapse of mining investment in the country.  $15 charges for doctors visits are being considered.  (Australia is the only country in the world where health costs/capita are as high as in the US.)  Even worse, MPs’ special cards that entitle them to free plane travel may be restricted.

Australia is a trend-setter.  Expect New Zealand to follow suit.

The Russo-German Axis?

Gerhard Shröder, Merkel’s predecessor as chancellor, celebrated his 70^th birthday in St. Petersburg on Tuesday.   President Putin gave him a big hug.  The German ambassador was also there, and Merkel’s party’s foreign policy spokesman joined in the jollity and fun.  Back in Berlin, Foreign Minister Steinmeir is said to be supportive of the Russian position on Ukraine.  Anti-Americanism in the German population, exacerbated by the NSA spying scandal, is being further intensified by the Ukraine crisis.

Europeans don’t see why the US is making such a big thing about Ukraine, which they view as in the Russian sphere of influence.

Is a German-Russian axis developing?

The city versus the countryside in Turkey

Riots in Europe’s largest city: Police in Istanbul (40,000 of them) blocked labor union May Day marchers from approaching the city center. Police used tear gas and water cannons. The same occurred in several other Turkish cities. Freedom House in Washington has downgraded Turkish media from “partly free” to “not free.”

Like in Thailand, this is a struggle between the majority in the pious countryside, who support the government, and the libertine city dwellers, who do not. The second law of thermodynamics suggests that the libertines will ultimately win.