Tokyo, Japan (CNN) - Japan's economy, sputtering since the March 11 earthquake, tsunami and nuclear disaster, has fallen into recession, according to government figures released Thursday.
The country's gross domestic product fell by an annualized rate of 3.7% in the first quarter of the calendar year, according to the government, a much steeper fall than Japanese economists had predicted.
Comparing the first quarter to the previous year, according to Japan's cabinet office, the GDP fell 0.9%. In the fourth quarter of 2010, the GDP fell 0.8% as compared to the same quarter of the previous year. Thursday's GDP figures show a second consecutive quarterly drop, which fits the economic definition of a recession.
Industrial output in March was down 15.3%, the worst monthly drop in the country's history.
Businesses in the region affected by the tsunami were hit hard, with 10,000 of 24,000 businesses affected and 600 expected to close.
The figures, which did not include data from tourism or trade, underscore the fact that the natural disaster of March has become an economic disaster.
As a rule, Finnish elections don't tend to generate much international excitement – but last night’s election victory by the eurosceptic party True Finns has turned that rule on its head.
A normally stolid member of the eurozone with billions of dollars of exposure to bailout funds and loan facilities, the new-look Finland could potentially scupper any further bailouts and plunge the euro project into a new crisis.
Here's why: Bailouts - like the EU bailout of Portugal, expected in June - require the agreement of all 17 members. And Finland, unlike its eurozone partners, has to put all requests for bailouts to a majority vote in parliament.
That’s very bad news for Portugal, which just last month became the third eurozone member to ask the EU and IMF for a bailout.
One of the best bits of theater that plays out in the British parliament every year is when the Chancellor of the Exchequer (Finance Minister) stands before the House of Commons and announces the following year's Budget.
George Osborne will do this on Wednesday afternoon, less than a year after his Conservative Party came to power promising a massive five-year deficit reduction plan.
But this is not Osborne's first Budget speech. He fronted the new government's "Emergency Budget" in June last year. Following that speech and last October's spending review, the British public now know what's in store until2015: Austerity.
You would hardly know it, yet.
Anyone who’s ever visited the Emerald Isle will confirm that humor always lies just beneath the surface. Even in these tough times, with the “Celtic Tiger” reduced to the status of a bemused kitten trying hard to look cute beside a begging-bowl, the Irish can fall back on their love of irony and their taste for gallows humour.
So it’s hardly surprising that the following droll story is now hurtling round the email circuit at breakneck speed. It’s actually quite hard to find the original source, but this particular yarn does seem to have been spinning around for at least a few weeks – before the Irish government was forced into a painful climb-down in the shape of a bailout deal with the EU and IMF. In fact, I suspect it’s an older story which has been dug out, brushed off and tweaked to make it fit the current circumstances.
Whatever the source, the events of the past few days have sent this tale zooming round cyberspace all the faster, so much so that I received it from two quite separate sources on the same afternoon:
“It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.
“On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.
“The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.
“The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him ‘services’ on credit.
“The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything.
“At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.
“No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.
“And that, Ladies and Gentlemen, is how the bailout package works.”
It’s a neat little story, but I have two problems with it.
First, nobody in it is actually in debt – not net debt, anyway. Their net balance sheet is zero. Take the butcher. He owes the pig farmer €100, but is owed the same amount by the hotel owner. And so on for all the Irish characters.
Second, I am not sure how appropriate it is to dwell on the underlying message of the story. What does the story really tell us? For one thing, it reveals the way a bit of liquidity (the German's ready cash) oils the wheels of the economy.
That is a perfectly sensible thing to point out - normally. But you don’t have to be a Ph.D. in economics to realise that pumping in too much cash will overheat the economy. Too much liquidity will jack up demand and ultimately create a bubble.
Sound familiar? Well, of course that is what happened in Ireland in the boom years: the housing sector floated high on oceans of liquidity, and then when someone pulled the plug the result was a bust, and a bunch of crippled banks. The rest is Irish history.
So moral of the story, if you will, is actually a dangerous one – and certainly not the one the story-teller had in mind. Mind you, if the rich German had had the presence of mind to demand an interest rate based on the average of 5.83 percent the Irish will have to pay for their bailout, the conclusions might be different.
But it’s still a good story – so why let dreary old economics spoil it?
(CNN) – Intel earnings are kicking off what some analysts call tech earnings season. Many look to Intel as an indicator of the health of the broader tech sector.
The company beat expectations coming in with $3 billion in Q-3 profit, or 52 cents a share. That’s compared with 1.9 billion or 33 cents a share in the same quarter last year.
“It was an all-time record in terms of revenue – our first quarter ever above $11 billion,” Intel CFO Stacy Smith told me.
Intel’s stock rose in after-hours trading. The company says PC demand is staying strong despite declines in U.S. consumer demand.
Some analysts say Intel has been left out in the iPad craze, focusing on cheap PCs known as netbooks rather than tablet style technology and smartphones.
Can Intel create excitement about its stock without a foothold in the tablet market? How important is China’s market?
Muhammad Yunus is a man on a mission. He's been a banker, an economist, and a Nobel Peace Prize winner. He developed microcredit and microfinance, giving loans to entrepreneurs who are just too poor to be considered for bank financing.
You may have heard about his Grameen Bank. Its founding was what helped him to jointly win the 2006 Nobel Prize.
His most recent book is about what he calls "social business." These are small-scale enterprises run not for profit, but to make an impact. They are different from charities, because they do make a profit; however, that is not their primary purpose. They are meant to be self-sustaining, tax paying, revenue generating enterprises that help fix a social problem.
While on his book tour, I had the chance to talk to him at length about the book, and the role of social business in the global economy.
He is passionate about young people. When he speaks to them at universities he says he finds passion that you can sense he equates with his own. "Young people are not graduating with their job offers in their hands any more. They want to make a difference and they see that making money is not what is important. They want to change the world."
Yunus is sharp as a tack, hopeful, and brimming with enthusiasm for his work. He bristles at any suggestion that social business is too small to make an impact, that it's anti-capitalist, or that it just can't work if owners can't be motivated to take profits from the business. He believes in changing minds.
An early venture in social business involved making fortified yogurt for areas in Bangladesh where most children are malnourished. This small program struggled to succeed in a country without refrigeration and infrastructure to distribute the yogurt. Women were hired to sell the tubs door-to-door, but cultural barriers got in the way. Wheat and milk prices shot up in the U.S., and that raised the price-point of the yogurt, hitting sales hard.
It took time, but the venture is now considered a small success, in a big way.
You can read more about this project and others in his book: "Building Social Business: The New Kind of Capitalism That Serves Humanity's Most Pressing Needs."
And check out our interview. It will make your day.
East Cork, Ireland (CNN) – The issue of ghost estates in Ireland is more than empty houses. It's a symbol of the country's descent from the Celtic Tiger leading the European charge of prosperity to a broken state, crippled by what most would agree was a universal greed: greed of consumers, developers and those who Irish people blame the most, the banks.
I moved to England from Ireland 10 years ago, just as the building boom was really taking off. I left a small coastal community of just over 5,000 people, and on each return visit I was amazed and somewhat aghast at new developments nestled within the town.
The old fairground and amusement center made way for a block of brightly colored apartments. The field where my friends and I used to hang out as children was freshly paved with a new development. Even the building which used to house our convent school was rumored to be next in line for conversion into seafront apartments.
This money never came and the building now lies unoccupied. One look and it's visible that the grounds remain unattended, with grass shoots sprouting from some parts of the roof.
It's this overindulgence –- this viewpoint that property equaled money –- that drove the Irish property market. Cian O'Callaghan, one of the authors of the only official reports into ghost estates, told me that during the boom the few voices that questioned this flood of housing were systematically accused of “standing in the way of progress.”
In other words, the Irish people seemed to view this building trend as a means of traveling to modernity. Rows of bright shiny houses with two bathrooms, front and rear gardens and a garage would show the world that Ireland was no longer the poor man of Europe. Ireland was taking its place amongst the developed world and its people would benefit from the fruits of its success.
People now living in ghost estates were, not surprisingly, reluctant to talk about the experience of living in a half-finished development. But I met an interesting character who shed more light on an already tragic situation. This man was a council tenant on a ghost estate where the council had taken over about a dozen empty homes.
He takes care of his severely disabled daughter in a two-story house. Moving his daughter up and down the stairs was proving difficult and he pleaded with the council authorities to rehouse him into a bungalow.
“It's a disgrace,” he kept saying. “Not five miles down the road there are rows of empty houses, all unoccupied and with all the thousands of unoccupied houses in the country, the council tells me there are no bungalows available.”
I traveled to the estate he told me about in a neighboring village and sure enough, there was a fenced part of an existing estate with rows of bungalows and signs threatening: “Danger. Keep out.”
In a radius of 10 miles from the town of Middleton, which is featured in my report, I must have counted at least a dozen ghost estates. In some, there were a few rows of houses occupied. One entire estate of 78 houses, which appeared almost ready for occupancy, was now fenced off. The developer had gone bust. Roads and lighting had not been finished. However, advertising signs of future planned developments next to ghost estates remain: A sign that had not the money run dry, the appetite for development would have continued. Now the land earmarked for future building lies empty and overgrown.
The question is, will Ireland ever be at a point to resurrect these plans on its quest for progression?
(CNN) – It was an upbeat message from José Manuel Barroso during his first State of the Union speech at the European Parliament. And during it, the President of the European Commission also let slip a proposal that was new to me.
I had the chance to follow-up in an interview after the speech. So I asked him, What exactly was the ‘European Vacancy Monitor’? It turned out to be a suspiciously simple system to help clear up job vacancies across the Union.
All vacancies would be published so someone looking for a job in, say, France could see what’s available in Portugal, or Ireland.
For an economist it makes perfect sense. It’s a straightforward market, matching up supply and demand. But even after you’ve dealt with the administrative challenge, what about the political backlash? The two most explosive issues in the region right now must be immigration and unemployment.
How does the President see his proposed new system working? Watch a clip here and check out the rest on TV later today:
The size and scale of the protests in Greece were hard to ignore. Athenians filled Constitution Square in the heart of the capital protesting the austerity measures being put forward by the government of George Papandreou. This is his first major test on the ground since taking office last autumn.
It is quite easy to be swept up into the strike action in Greece and the other labor protests we have been witnessing in Europe during this winter of discontent - affecting industries from the airline sector (Lufthansa and British Airways) to the energy sector (French giant Total) - but it would be a mistake to see them as classic disputes over wages.
In Greece, Spain, Portugal and Italy protests go right to the heart of what many in the labor movement and broader society see as a birthright - to continue to enjoy benefits that in today's globalized world are disappearing fast.
Taking Greece for example, investors saw the recent strike by Ministry of Finance workers as somewhat ironic since they are the very members of the civil service who are at the forefront of the restructuring plan itself. It is not often discussed, but many government workers enjoy preferential tax rates, can retire at the age of 54 (in some cases earlier) and enjoy 14 months of pay for 12 months worked.
The Papandreou government is trying to reign in some of those policies. But as leader of the socialist movement, Pasok, those that brought him into power were not expecting changes to what they consider sacred covenants of their day-to-day existence.
I had a chance this year in Davos to share a tea with the Greek Prime Minister who seemed extremely determined to get the job done. He conveyed a certain Zen-like calm about what the job entails. The Prime Minister recalled having to defuse a university sit-in during his first week on the job as Education Minister (in his father’s cabinet), then in his early days as Foreign Minister dealing with a huge row with Turkey over Abdullah Ocalan, the Kurdish rebel leader who was on Greek soil.
While those were big challenges for a cabinet minister, this scale of top-to-bottom reform is clearly in a different league altogether. In today's crisis, no one is really arguing that there will have to be sacrifice, more how deep the pain will go. The strike is an effort by workers and students to carve a line in the marble so to speak.
As this Greek drama plays out with huge consequences for the country's people and finances, there are many in Frankfurt, Paris and Brussels who are looking back at the brief history of the Euro and what led to this "Southern Med" crisis.
There is a lesson in this effort for the counterparts in the Middle East, particularly in the Gulf where development of the single currency is underway. European countries were forced to come together after World War II. Major schisms can provide impetus for change, but it does mean leaders need to build the foundation of the process carefully.
One of the key architects of the European monetary union, former European Commission President Jacques Delors saw the launch of the Euro as a path to deeper political union. With a much bigger vision in mind, those who hurried this process along after the fall of communism and expansion of the European Union from 12 to 27 members overlooked or chose to ignore both the generous entitlements and, worst still, the levels of corruption and tax avoidance that permeate these economies.
In December, Papandreou admitted to other European Union leaders that "systemic corruption" was at the heart of the Greek crisis and said his government intended to take "harsh measures" to root it out.
The Euro has, without contention, created both stability and wealth in Southern Europe. In the past decade citizens have been lulled into believing that a price won't have to be extracted for Europe turning a blind eye to misdeeds. As they take to the streets in protest, they are finding out that the lenient times are drawing to a close.
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