Monthly Archives: July 2015

Things to know before moving to Sweden

1 There are no flats A policy of rent controls means your options in getting somewhere to live are:

  • Live in the forest
  • Illegally buy a rental contract on the black market
  • Buy an (expensive) flat / house
  • Get around on 3-6 month temporary second hand rental contracts
  • Have your employer fix it

2 There are no jobs Unemployment is currently 7.6%. If you don’t already have a job you will need to be a qualified nurse or construction engineer AND speak Swedish if you want to find a job easily

3 There are no people Doesn’t matter where you live. The Stockholm regions has a population density of 340/km2. England and The Netherlands both have 407.

4 There are no “no-go areas” Some ridiculous stories about how some areas are too dangerous to enter have been circulating. This is complete and utter nonsense and based on a report naming areas where “criminal gangs have a negative effect on the local community”.

5 There are no Swedish international furniture companies IKEA is a Dutch/Luxembourgian company. It is NOT Swedish

6 There are approximately as many privileged people whining, complaining and moaning as in other countries

 

Grodaeu summit statement on Germany

The Grodaeu Summit stresses the crucial need to rebuild trust with the German authorities. In this context, ownership by German authorities is key. A euro area Member State is expected to comply with The Macroeconomic Imbalance Procedure (MIP). The MIP is already showing considerable lenience towards Germany by asymetrically setting the upper limit for Current Account Balance at 6% of GDP, while the lower limit is -4%. In the long run this should be set symetrically at +/-4%. In spite of this Germany has failed to comply 2012, 2013 and 2014 and it seems very unlikely it will manage to comply in 2015. The Grodaeu Summit welcomes the commitments of the Greek authorities to legislate without delay a first set of measures. These measures, taken in full prior agreement with the Institutions, will include:

by 15 August
• Unfinanced increases of government spending and lowering of taxes amounting to 2% of GDP of €56bn annually;
• Introducing quasi-automatic spending increases in case of deviations from ambitious deficit targets;

by 22 August
• on labour markets, undertake modernisation of collective bargaining and industrial action in order to strengthen the unions and drive up labor costs;
• adopt the necessary steps to strengthen household demand, including action to redistribute wealth from richer households to poorer. This can be via increased progressivity in the tax system, increased benefits or introduction of a wealth tax;
• in line with the German government ambitions, to modernise the administration. Seriously, faxes, it’s ridiculous;
• raise corporate taxes;

The above-listed commitments are minimum requirements to avoid annual fines of €14bn for violating the MIP.

Annoying Koruna Apologetics

This post is loosely based on this post by Paul Krugman.

Are there good arguments against the proposition that the Czech Republic keeping the Koruna was an epic mistake? Maybe. But the arguments I’ve been hearing lately are really bad. And they’re also deeply annoying.

An argument, is that the gains from greater integration are outweighed by the supposedly huge gains from greater flexibility. But where’s the evidence for these huge gains?

The chart shows a comparison I find interesting, between the Czech Republic and its neighbor Slovakia, which joined the euro in 2009. For both countries I use 1995 as a baseline; the first year for which IMF provides data after the Czechoslovakian breakup in 1993.

slovakia_czech

IMF

After that breakup, the Czech Republic experienced a long stretch of solid economic growth. But so did Slovakia.  Since 2009, on the other hand, Slovakia has done much better.

As I said, maybe there are good arguments against the proposition that keeping the Koruna  was a mistake. But pointing out that politics matters, and economies grow, doesn’t cut it.

Who to blame for Greece

  1. Syriza: They got elected by lying their heads off, went into negotiations insulting everyone and issued confusing statement after confusing statement about their plans. Finally, they called a dishonest referendum on nothing. But how come the Greeks were desperate enough to vote for this gang of clowns?
  2. IMF: A currency area close to the US in economic size which can borrow at almost 0% comes to them asking for help. Instead of replying “GROW THE FUCK UP” they agreed. This caused problems for the plan of hiding Greek debt indefinitely since the IMF likes to pretend debt is sustainable, and also since they believe (believed) large primary surpluses are a way to bring down debt.
  3. Jean-Claude Trichet: It’s impossible to know how much of the stalled euro zone recovery was due to the insane ECB rate increase, but surely SOME of it. Even a slight improvement in the recovery would have helped prevent the Greek mess.
  4. Germany: Their insanely large current account surplus is a large part of the euro zone problem. The easiest way to fix this would be to blast off a few hundred billion euro in fiscal stimulus. Now people say higher German wages would not help Greece since they export different things. Rubbish I say. For sure SOME products are similar. Also, surely some of the stimulus money / higher wages would have been spent on feta cheese / whatever.
  5. EC/Germany/Finland/Slovakia/Spain: Greek primary surplus as % of GDP has been: 2009[-10.2%], 2010[-5.2%], 2011[-2.9%],2012[-1.3%],2013[1.2%]2014[1.5% forecast]. So the euro zone deserves some credit for preventing a total collapse 2009-2010. But 2014 would have been the year to say: “Good job Greeks. You actually even overdid it. 0.5% surplus is enough. We’re sorry your economy collapsed but you have to unerstand it’s politically impossible for our taxpayers to fund you indefinitely.” They didn’t. Instead they called for higher surpluses.