Group items tagged

Could Greece be Europe's Lehman Brothers?

Three years ago today, US Treasury Secretary Hank Paulson made a momentous decision - to let the investment bank Lehman Brothers fail. The US government had helped to rescue a string of financial institutions, but markets kept pushing more to the wall. Mr Paulson was running out of time and options. There was no political support in Washington to keep throwing money at the problem. Wall Street would just have to learn to bear the consequences of its own folly. Today, many say that it was the wrong decision. The resulting financial meltdown (the stock market plummeted 43%) forced the authorities to do exactly what they had been trying to avoid - commit trillions of dollars to rescue the financial system.

Now fast-forward to the present. The "troika" of lenders to Greece - the European Union, International Monetary Fund (IMF) and European Central Bank (ECB) - may soon face a similar moment of reckoning.

It is this gloomy backdrop which exercises the minds of the third and final group of experts, the bears. For them, the risk is both of a double-dip recession and a long, painful work out from the excesses of the past. Looking at the four main components of demand they would say that consumption is going to be weak so investment will disappoint. Government spending is going to be slashed, leaving a massive burden on exports at a time of slower growth and currency wars. The bears are currently the smallest group. Their numbers are likely to be swelled as winter progresses.

The overall picture remains one of a jobs recovery that is much more sluggish than after previous recessions, analysts say.

ear ago. This compares with the 1.7% rise previously reported for the thre

as up 2% on a year ago. This compares with the 1.7% rise previously reported for the three

The annual growth of productivity in the British economy increased by only 0.8% in 2005 the slowest growth since the recession year of 1990. There are many reasons for this sluggish growth of productivity. Part of the reason was the slowdown in growth in 2005 because output and output per worker tend to be positively correlated. In an economy where demand and output is weaker, people in work are not being used as intensively compared to when the economy is stronger. Deeper-rooted explanations for weak productivity performance focus on supply-side deficiencies. These include the effects of skills gaps in industry; and the transfer of the economy's resources into the public sector where productivity is lower. Other factors contributing to sluggish productivity growth include the effects of business red tape and a persistently low rate of spending on research and development.Low productivity growth means that little progress has been made in reducing the productivity gap that exists between the UK and most of her major competitors.

In the first half of 2010, the story was that the big emerging economies – India, China and Brazil – were acting as the locomotive for global growth. But during the second half of 2010, there were signs of the United States and Germany joining the party