Brace yourself for the next phase in the eurozone crisis, due to come around any time soon. That might seem an odd thing to say.
After all, Portugal has just emerged from its bailout programme; Greece has dipped its toe into the bond market; while Ireland's export-slanted economy is growing at a fair lick. Crisis over, you could say. But hang on a minute.
All is not well in Europe, as the votes for fringe and extremist parties in Sunday's European parliament elections will testify. There are five good reasons why the crisis could flare up again at any time. Problem one is that growth remains painfully weak.
Across the 18-nation single currency zone as a whole, activity increased by just 0.2% in the first three months of 2014. That was disappointing in view of the unusually mild winter, and would have been even worse had it not been for the strong 0.8% expansion in Germany.
Problem two is that weak growth is no longer confined to the euro's fringe. Italy's performance has been woeful ever since the creation of the euro a decade and a half ago, and the 0.1% contraction in the first three months of 2014 was the 10th decline in the last 11 quarters.
The Netherlands posted an even bigger decline of 1.4%, but the biggest problem of all is France, which has failed to deliver two consecutive quarters of growth during François Hollande's presidency.
This matters not just because of its impact on France, where one in eight of the working population is jobless, but because of the gap emerging between the eurozone's two biggest economies.
Over the past 50 years, the smooth running of Europe has relied on the Paris-Berlin axis, but strong growth in Germany and weak growth in France complicates matters.
Hollande clearly wants the European Central Bank to pull out all the stops to boost growth; Angela Merkel will favour a more cautious approach. The third problem is deflation and its impact on heavily indebted eurozone countries.
The cost of living is rising by less than 1% a year across the eurozone, but the average masks the fact that certain countries, such as Greece and Spain, are already experiencing falling prices. What that means is that the real value of those countries' considerable debts are increasing.
At some point, financial markets are going to cotton on to the fact that weak growth plus deflation equals unsustainable debt-to-GDP ratios, and bond yields will start to rise once more.
The fourth problem is Europe's zombie banks, which have been kept alive thanks to support from the European Central Bank but have proved unable, or unwilling, to provide the credit to businesses and households that would push the eurozone's nascent recovery on to the next level.
Without a functioning banking system, the risks of a relapse are high. Finally, there's the threat posed by the trouble on Europe's eastern borders.
The tension between Ukraine and Russia will almost certainly result in both countries suffering recessions this year. So far, the impact on neighbouring countries, such as Poland, has been limited by the solid performance of Germany.
But Sunday's presidential election in Ukraine, together with signs that Germany is coming off the boil, could feed through into weaker business and consumer confidence.
Mario Draghi is doubtless aware of all these threats. He knows the crisis could re-erupt at any time. So do the financial markets. That's why it is put up or shut up for the ECB when it meets early next month. Draghi has been an absolute master at manipulating markets simply by talking to them.
Now he needs to cut rates, announce a plan to boost credit in those countries where its flow is most impaired and signal that he is prepared to announce a fully fledged quantitative easing programme should the deflationary threat not abate.
Blown off course by Boris island?
Few public figures could get away with the brazen cheek shown by London mayor Boris Johnson in solemnly declaring that a "political fix" is taking shape around expanding Gatwick airport.
Johnson has been the beneficiary of frantic behind-the-scenes machinations himself when it comes to airport policy. The independent Airports Commission has allowed the mayor's team to make anew the case for an airport in the Thames estuary.
But whatever one thinks of Johnson's grandiose vision for north Kent, his words on Gatwick bear some attention. A bigger Gatwick was, he said, a snare, a sham, a delusion. It was a plan that ticked many boxes and was politically deliverable, but was not the right answer.
With the mayor so frequently landing punches on Heathrow, it can be easy to forget that they share a vision of what an airport should be: a multi-runway hub, oriented to the needs of business. Gatwick has been, according to Johnson and his team, a red herring.
The mayor's latest submission to commission chair, Sir Howard Davies, attempting to restore the Thames estuary to the shortlist, says airports are "a major intervention in the fabric of society"; they "bind and shatter communities; and they pollute".
Gatwick claims its extra runway offers the most expedient solution. Unlike Heathrow, there will be no need to put the M25 into a tunnel; unlike Boris island, there will be no need to spend billions on new transport infrastructure.
If the point of airports policy is to search for the least controversial solution, the airports commission is in danger of drifting to a conclusion underpinned by a complete lack of principle. It will not answer environmental concerns nor address the worries of the business community, and it will infuriate a swath of suburban London.
The commission needs to be clear about the problem it is addressing – a lack of airport capacity – and deliver an honest answer.It would be wise to keep Burberry boss in check
Christopher Bailey, new boss of Burberry, is an unusual and spectacularly well-rewarded chief executive.
Unusual because he has been handed the top job of the £6.5bn company despite never having run a business or even sat in a boardroom, and because he now has two jobs: he is still the label's chief designer.
Well-rewarded because he has been given a £7.6m "golden hello" – even though he has been at Burberry for 13 years – and a pay package of up to £8.1m a year. That includes a £440,000 "allowance" on top of his £1.1m salary, like executive dinner money, to cover day-to-day expenses – the sort of thing most people pay out of their salary.
Last week, when Burberry reported record annual results, he had the opportunity to explain his pay deal, and how he intends to run the business and the design team at the same time. But he ducked out of a conference call Q&A with financial journalists, sending along two deputies instead.
But investors don't like unconventional pay arrangements such as allowances and golden hellos for internal promotions. He can't duck the questions for ever.
theguardian.com
After all, Portugal has just emerged from its bailout programme; Greece has dipped its toe into the bond market; while Ireland's export-slanted economy is growing at a fair lick. Crisis over, you could say. But hang on a minute.
All is not well in Europe, as the votes for fringe and extremist parties in Sunday's European parliament elections will testify. There are five good reasons why the crisis could flare up again at any time. Problem one is that growth remains painfully weak.
Across the 18-nation single currency zone as a whole, activity increased by just 0.2% in the first three months of 2014. That was disappointing in view of the unusually mild winter, and would have been even worse had it not been for the strong 0.8% expansion in Germany.
Problem two is that weak growth is no longer confined to the euro's fringe. Italy's performance has been woeful ever since the creation of the euro a decade and a half ago, and the 0.1% contraction in the first three months of 2014 was the 10th decline in the last 11 quarters.
The Netherlands posted an even bigger decline of 1.4%, but the biggest problem of all is France, which has failed to deliver two consecutive quarters of growth during François Hollande's presidency.
This matters not just because of its impact on France, where one in eight of the working population is jobless, but because of the gap emerging between the eurozone's two biggest economies.
Over the past 50 years, the smooth running of Europe has relied on the Paris-Berlin axis, but strong growth in Germany and weak growth in France complicates matters.
Hollande clearly wants the European Central Bank to pull out all the stops to boost growth; Angela Merkel will favour a more cautious approach. The third problem is deflation and its impact on heavily indebted eurozone countries.
The cost of living is rising by less than 1% a year across the eurozone, but the average masks the fact that certain countries, such as Greece and Spain, are already experiencing falling prices. What that means is that the real value of those countries' considerable debts are increasing.
At some point, financial markets are going to cotton on to the fact that weak growth plus deflation equals unsustainable debt-to-GDP ratios, and bond yields will start to rise once more.
The fourth problem is Europe's zombie banks, which have been kept alive thanks to support from the European Central Bank but have proved unable, or unwilling, to provide the credit to businesses and households that would push the eurozone's nascent recovery on to the next level.
Without a functioning banking system, the risks of a relapse are high. Finally, there's the threat posed by the trouble on Europe's eastern borders.
The tension between Ukraine and Russia will almost certainly result in both countries suffering recessions this year. So far, the impact on neighbouring countries, such as Poland, has been limited by the solid performance of Germany.
But Sunday's presidential election in Ukraine, together with signs that Germany is coming off the boil, could feed through into weaker business and consumer confidence.
Mario Draghi is doubtless aware of all these threats. He knows the crisis could re-erupt at any time. So do the financial markets. That's why it is put up or shut up for the ECB when it meets early next month. Draghi has been an absolute master at manipulating markets simply by talking to them.
Now he needs to cut rates, announce a plan to boost credit in those countries where its flow is most impaired and signal that he is prepared to announce a fully fledged quantitative easing programme should the deflationary threat not abate.
Blown off course by Boris island?
Few public figures could get away with the brazen cheek shown by London mayor Boris Johnson in solemnly declaring that a "political fix" is taking shape around expanding Gatwick airport.
Johnson has been the beneficiary of frantic behind-the-scenes machinations himself when it comes to airport policy. The independent Airports Commission has allowed the mayor's team to make anew the case for an airport in the Thames estuary.
But whatever one thinks of Johnson's grandiose vision for north Kent, his words on Gatwick bear some attention. A bigger Gatwick was, he said, a snare, a sham, a delusion. It was a plan that ticked many boxes and was politically deliverable, but was not the right answer.
With the mayor so frequently landing punches on Heathrow, it can be easy to forget that they share a vision of what an airport should be: a multi-runway hub, oriented to the needs of business. Gatwick has been, according to Johnson and his team, a red herring.
The mayor's latest submission to commission chair, Sir Howard Davies, attempting to restore the Thames estuary to the shortlist, says airports are "a major intervention in the fabric of society"; they "bind and shatter communities; and they pollute".
Gatwick claims its extra runway offers the most expedient solution. Unlike Heathrow, there will be no need to put the M25 into a tunnel; unlike Boris island, there will be no need to spend billions on new transport infrastructure.
If the point of airports policy is to search for the least controversial solution, the airports commission is in danger of drifting to a conclusion underpinned by a complete lack of principle. It will not answer environmental concerns nor address the worries of the business community, and it will infuriate a swath of suburban London.
The commission needs to be clear about the problem it is addressing – a lack of airport capacity – and deliver an honest answer.It would be wise to keep Burberry boss in check
Christopher Bailey, new boss of Burberry, is an unusual and spectacularly well-rewarded chief executive.
Unusual because he has been handed the top job of the £6.5bn company despite never having run a business or even sat in a boardroom, and because he now has two jobs: he is still the label's chief designer.
Well-rewarded because he has been given a £7.6m "golden hello" – even though he has been at Burberry for 13 years – and a pay package of up to £8.1m a year. That includes a £440,000 "allowance" on top of his £1.1m salary, like executive dinner money, to cover day-to-day expenses – the sort of thing most people pay out of their salary.
Last week, when Burberry reported record annual results, he had the opportunity to explain his pay deal, and how he intends to run the business and the design team at the same time. But he ducked out of a conference call Q&A with financial journalists, sending along two deputies instead.
But investors don't like unconventional pay arrangements such as allowances and golden hellos for internal promotions. He can't duck the questions for ever.
theguardian.com
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