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Gene Ellis

New Hurdle for Resolving Euro Crisis: Constitutions - WSJ.com - 0 views

  • In the latest example, Portugal's Constitutional Court on Thursday shot down the government's attempts to improve the country's competitiveness by making it easier for companies to shed workers—as demanded under the terms of the country's international bailout. The court ruled against the measures because, it said, they went against the principle of firing workers only when there was just cause.
  • Courts have been able to thwart some attempts to shrink the state bureaucracy or make the labor force more flexible.
  • Portugal's 1976 constitution calls for "opening the path to a socialist society." It obliges the state to promote employment, move toward free health and education services and even develop "centers of rest and holiday" for workers.
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  • So perhaps it comes as little surprise that, in the last five months, the country's Constitutional Court has struck down four government measures, including a tax on unemployment benefits and temporary trims in wages and pensions that the judges said were unfairly targeted at civil servants.
  • Last month the court ruled against a plan to steer redundant public employees into a retraining program and lay off those who aren't placed in new jobs after 12 months
  • "To fulfill what the [judges] want, we need to leave the euro," said Medina Carreira, an economist and former Portuguese finance minister.
  • Under the terms of its 2011 bailout, the government has until the end of this year to move 25,000 civil servants into a labor reserve—at reduced pay—that many view as a prelude to layoffs.
  • "In several cases, local political norms seem incompatible with euro-area membership in the long term," said J.P. Morgan Chase economist Alex White.
  • Unlike the U.S. Constitution, which has seven articles and 27 amendments, Europe's national charters tend to be lengthy and prescriptive, limiting the space for judicial interpretation. Portugal's has 296 articles, Italy's has 139 and Greece's has 120.
  • "The constitution can't set a series of obligations for a state that simply has no money to fulfill them,"
Gene Ellis

A Driving School in France Hits a Wall of Regulations - NYTimes.com - 0 views

  • The other driving schools have sued them, saying their innovations break the rules.
  • partly because getting a driver’s license here is so difficult and expensive that it has inspired books on the subject,
  • their struggle highlights how the myriad rules governing driving schools — and 36 other highly regulated professions — stifle competition and inflate prices in France.
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  • In the case of driving schools, the government offers only a limited number of exams each year, and these are doled out to the driving schools depending on their success rate the year before. That fact alone gives the old guard a virtual monopoly,
  • calling for an overhaul of the written test, which he says goes far beyond making sure that a person knows the rules of the road.
  • Some studies have concluded that the French are probably paying 20 percent more than they should for the services they get from regulated professions, which include notaries, lawyers, bailiffs, ambulance drivers, court clerks, driving instructors and more.
  • The failure rate for the French driving exam is about 41 percent, the government office for road safety said. The cost to the economy goes beyond the embarrassment of those who fail, according to those who have studied it.
  • barriers to getting a license are so high that about one million French people, who should have licenses, have never been able to get them.
  • Mr. Kramarz said that it often costs 3,000 euros, or about $3,900, to get a license. But others said the average was closer to 1,500 to 2,000 euros.
  • Although students are required to take only 20 hours of driving lessons, most end up doing double that while they wait for a chance to take the test.
Gene Ellis

Nouriel Roubini maps out the Kremlin's plan for a re-divided world. - Project Syndicate - 0 views

  • Russia’s goal is not to create another North American Free Trade Agreement; it is to create another EU, with the Kremlin holding all of the real levers of power.
  • And, once members give up their sovereignty over fiscal, banking, and economic affairs, they may eventually need a partial political union to ensure democratic legitimacy.
  • But the first step is a customs union, and, in the case of the Eurasian Union, it had to include Ukraine, Russia’s largest neighbor to the west.
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  • There is even talk of Russia and China creating an alternative international payment system to replace the SWIFT system, which the US and Europe can use to impose financial sanctions against Russia.
  • But Putin is ambitious, and – like other autocrats in Central Asian nations – he may remain in power for decades to come. And, like it or not, even a Russia that lacks the dynamism needed to succeed in manufacturing and the industries of the future will remain a commodity-producing
  • superpower.
  • US President Barack Obama says that this is not the beginning of a new Cold War; current trends may soon suggest otherwise.
Gene Ellis

IMF's Olivier Blanchard says global recovery is still 'weak' - FT.com - 0 views

  • IMF’s Olivier Blanchard says global recovery is still ‘weak’
  • “There is a strong case to be made for more public investment, for demand-side reasons in the short term, and supply-side reasons in the longer run,” says Mr Blanchard. The US and Germany are prime examples, Mr Blanchard said, of countries where there is a backlog of high-return infrastructure projects. He added that their governments should make the most of record-low borrowing costs and reap the large macroeconomic benefits that come from increasing demand.
Gene Ellis

Waiting for the Markets to Blink - NYTimes.com - 0 views

  • “You get these occasional disconnects and start asking who’s right and who’s wrong,” said Daniel Morris, global investment strategist at TIAA-CREF.
  • “We think the equity market is right,” he said. “If that’s the case, bond yields are too low.”
  • “We’re constructive about the future and think all this intervention is going to work, but how much is priced in” to the stock market? So much, in his view, that “we’ve been selling into the strength,” he said.
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  • “Do you believe that things are going to get better? If you do, you don’t want to be in Treasuries at 2.5 percent,” he said. “Some things don’t make sense to me. It’s frustrating.”
  • He says it doesn’t make sense that the stock market has held up as well as it has amid the Fed’s debt purchases and its policy of maintaining short-term interest rates near zero, a measure taken in a crisis that is supposed to be over.
  • “How do you know there has been an economic recovery and the patient is breathing normally when it’s in an oxygen tent?”
  • For all of 2013, gross domestic product increased by 1.9 percent, compared with 2.8 percent for 2012.
  • Orders and shipments of durable goods
  • were flat in 2013, and housing has weakened. February was the eighth consecutive month of declines in pending home sales, leaving them down 10.2 percent from 12 months earlier.
  • “It will be extremely difficult for the U.S. economy to escape its Great Recession hangover with this poor profits backdrop,” Mr. Edwards wrote. “Indeed it leaves the economy extremely vulnerable to adverse shocks,” like declining growth in Asia.
  • “We’re keeping a very close eye on China,” Ms. Patterson said. “If there are signs that it’s slowing more than we expect, that would hurt our view of emerging markets and worsen the outlook for developed markets due to contagion” because of the increasing importance of China in the global economy.
  • American real estate companies and European banks, for instance — but he is keeping 13 percent of his fund in cash because of a dearth of attractive investment choices.
  • Mr. Morris finds a wider array of opportunities. He likes shares of consumer-discretionary companies, which provide the products and services that people want but do not need. The sector includes businesses as diverse as hotels, carmakers and clothing stores.
  • the industrial sector, which includes manufacturers of business equipment. Another preferred segment is banks; he expects them to flourish as interest rates rise and the gap widens between what they charge in interest and what they pay.
  • Mr. Morris encourages stock investors to buy American.
  • “You can’t just unwind quantitative easing, with all of its distortions, and achieve stability without some pain along the way,” he warned. “What that pain is, when it happens, that’s where the uncertainties lie. The margin to maneuver is getting less and less with the passage of time.”
Gene Ellis

Citi Cuts Costa Rica Growth Forecast After Firings - Bloomberg - 0 views

  • Citi Cuts Costa Rica Growth Forecast After Firings
  • Hours later, BofA said it would be exiting operations in Costa Rica, Guadalajara, Mexico and Taguig, Philippines, without saying how many jobs would be lost. Costa Rica’s foreign investment agency said the BofA move would result in 1,500 layoffs.
  • “This is a strong call to the country to keeps tabs on things like the rising cost of electricity, telecommunications, wages and social guarantees.”
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  • The country of 4.7 million people climbed seven spots to 102nd in the World Bank’s annual “Doing Business” report this year, lagging behind China, Vietnam and Namibia. Moody’s Investors Service lowered its outlook on Costa Rica to negative from neutral in September, citing a rising debt burden and widening budget deficit. Moody’s rates the country Baa3, putting it in the same category as Turkey and Iceland.
  • In a Bloomberg survey published last month, Costa Rica was ranked fourth behind Russia, Argentina and Ukraine on a list of countries confronting the biggest loss of investor confidence. The survey cited data including the rising cost of credit default swaps and the currency’s performance against the dollar.
  • California-based Intel, whose processors run more than 80 percent of personal computers shipped worldwide every year, originally chose to establish operations in Costa Rica after studying sites in Indonesia, Thailand, Brazil, Argentina, Chile and Mexico, according to a 2000 case study by Harvard University’s Center for International Development. The company’s $600 million investment at the time represented about 4.2 percent of GDP, prompting the company’s then-Vice President Bob Perlman to say Intel’s arrival was like “putting a whale in a swimming pool,” according to the study.
  • n 2013, about 21 percent of Costa Rica’s exports of goods came from Intel, according to investment promotion agency CINDE
Gene Ellis

Profits Vanish in Venezuela After Currency Devaluation - NYTimes.com - 0 views

  • Profits Vanish in Venezuela After Currency Devaluation
  • The country’s high inflation — currently around 60 percent a year — has also meant that the prices in bolívares that companies charge for many goods and services have risen sharply.
  • Now companies are feeling the pain from a series of currency devaluations over the last year and a half. Photo
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  • But the rosy outlook changed in late March, when Brink’s started calculating its sales using the recently created exchange rate of about 50 bolívares to the dollar
  • Further complicating the picture, the Venezuelan government has not allowed companies to repatriate profits for the last five years.
  • Companies have ways of chipping away at the locked-up profits, including charging higher fees to Venezuelan subsidiaries for goods and services provided by the parent corporation. But many foreign companies are stuck holding vast troves of bolívares that shrink in value each time there is a devaluation.
  • Procter & Gamble said in April that it had the equivalent of about $900 million in cash in this country and that it was taking a $275 million write-down as a result of applying the government’s intermediate exchange rate to its Venezuelan balance sheet. Colgate-Palmolive wrote down $174 million, while Ford wrote down about $316 million.
  • “All the companies knew there would be a loss because everyone knew there wouldn’t be dollars” available at the fixed exchange rate, said an executive with an American company in Venezuela who spoke on the condition of anonymity. “We were trapped because the law here did not give you a way out.”
  • The government has also failed to pay companies the hard currency it had promised them for imports bought on credit from suppliers, and in many cases suppliers are now refusing to ship more goods to Venezuela until they receive payment.
  • Stores are often out of basic products such as dish soap or corn flour. DirecTV has stopped taking on new customers because it cannot get the dollars to import more dish antennas.
  • Without dollars, car companies cannot import the parts needed to assemble vehicles; Ford and Toyota were forced to temporarily close their factories.
  • In yet another reflection of the currency restrictions, the government has refused to let airlines operating in Venezuela trade the bolívares they receive for ticket sales and other services here for dollars. The International Air Transport Association says that the airlines have more than $4 billion in revenues held up in the country, based on the government’s base exchange rate at the time the tickets were sold.
  • American Airlines says that it is owed $750 million by the country’s government.
Gene Ellis

The Economist explains: Why airlines make such meagre profits | The Economist - 0 views

  • Why airlines make such meagre profits
  • In those six decades passenger kilometres (the number of flyers multiplied by the distance they travel) have gone from almost zero to more than 5 trillion a year. But though the industry has done much to connect the world, it has done little to line the pockets of the airlines themselves. Despite incredible growth, airlines have not come close to returning the cost of capital, with profit margins of less than 1% on average over that period. In 2012 they made profits of only $4 for every passenger carried. Why has a booming business failed to prosper?
  • Airlines were state-owned beasts in receipt of juicy handouts from state coffers. These “flag carriers” were regarded as important strategic businesses with monopoly powers that conferred national pride and international prestige. But they rapidly turned into bloated nationalised industries that regarded profit as a dirty word.
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  • Air travel was governed by inter-governmental deals that dictated which airlines could fly where, how many seats they could offer and, in many cases, what fares they could charge. The result was inefficiency and losses.
  • Low-cost carriers, such as SouthWest and Ryanair, introduced cut-throat rivalry on short-haul routes. Former flag-carriers struggled with the legacy of older fleets, large networks, uppity unionised workforces and vast pension liabilities. Low-cost carriers devastated their model of feeding short-haul passengers onto more lucrative long-haul services.
  • As well as stiff competition from their rivals, airlines face the problem that there is little competition in the industries that supply them. Two firms—Airbus and Boeing—provide the majority of the planes, and airports and air-traffic control are monopolies
Gene Ellis

Slovenia's financial crisis: Stressed out | The Economist - 0 views

  • The banks’ plight arises from mounting losses on their loans. Between the middle of 2012 and of 2013, the ratio of non-performing to total loans rose from 13.2% to 17.4%, which is the highest level in the euro zone after Greece and Ireland (see chart). The bad debts have been incurred predominantly through lending to businesses.
  • Only the state can provide the funds needed to recapitalise the banks. It wants them to transfer a big chunk of their bad loans to a state-run “bad bank”, for much less than their original value.
  • In this respect Slovenia is a textbook case of the problem that has plagued other parts of the euro zone: the link between weak banks, which governments end up recapitalising at great expense, and weak government finances.
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  • But Slovenia’s predicament also arises from its history. It has been slower to dismantle public ownership than Europe’s other formerly communist countries. Most notably, the three biggest ban
Gene Ellis

To Lower Tariffs, Vietnam Pushes for Easing Trade Rules - NYTimes.com - 0 views

  • Europe generally requires what is known as a “double transformation” in goods for them to be considered made in a certain region. In the case of clothing, one step, or “transformation,” would be weaving yarn into a fabric. A second transformation would be assembling the fabric into a garment. The United States requires a “triple transformation” that extends back to the production of yarn from synthetic or natural fibers, like cotton.
  • Lien Phat Ltd.'s factory,
  • Its supplies are imported. “I mainly take orders from international corporations, who give us materials and designs,” said Truong Thi Thuy Lien, the owner of Lien Phat. “Usually the clients will designate us to certain suppliers, most of them are in China.”
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  • “I don’t deal with the exporting process. I take the order and deliver the goods to the port” in Ho Chi Minh City, she said. “The rest lies with my clients.” <img src="http://meter-svc.nytimes.com/meter.gif"/>
Gene Ellis

Why Apple Got a 'Made in U.S.A.' Bug - NYTimes.com - 0 views

  • Today, rising energy prices and a global market for computers are changing the way companies make their machines.
  • Hewlett-Packard, which turns out over 50 million computers a year through its own plants and subcontractors, makes many of its larger desktop personal computers in such higher-cost areas as Indianapolis and Tokyo to save on fuel costs and to serve business buyers rapidly.
  • “It’s important that they get an order in five days,
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  • there is a pride for the local consumer to see a sticker that says ‘Made in Tokyo,’
  • Cook is looking to give Apple some good news.
  • A Dell factory in Winston-Salem, N.C., for which Dell received $280 million in incentives from the government, was shut in 2010 (Dell had to repay some of the incentives).
  • In 1998, President Bill Clinton visited a Gateway Computer factory outside Dublin to cheer the role of American manufacturers in the rise of a “Celtic Tiger” in technology.That plant was shut in 2001, when Gateway elected to save costs by manufacturing in China
  • As cheap as a Chinese assembly worker may be, an emerging trend in manufacturing, specialized robots, promises to be even cheaper. The most valuable part of the computer, a motherboard loaded with microprocessors and memory, is already largely made with robots. People do things like fitting in batteries and snapping on screens.
  • The labor cost on a notebook, which is about 4 to 5 percent of the retail price, is only slightly higher than the cost of shipping by air. Soon even that is likely to change because of the twin forces of lower manufacturing costs from automation and higher transportation costs from rising global activity.
  • Intel, which makes most of the processors, has plants in Oregon, Arizona, New Mexico, Israel, Ireland and China.
  • Many other chip companies design their own products and have them made in giant factories, largely in Taiwan and China. Computer screens are made in Taiwan and South Korea, for the most part.
  • The special glass used for the touch screens of Apple’s iPhone and iPad, however, is an exception. It comes primarily from the United States.
  • More recent products, laptops and notebook computers, were in many cases originally assembled in China, and they are still largely made there. So are most smartphones and tablets. Every week, H.P. sends a group of cargo containers filled with notebooks to Europe.
  • That plant was shut in 2001, when Gateway elected to save costs by manufacturing in China. Dell, which made its mark by developing lean manufacturing techniques in Texas, closed its showcase Austin factory in 2008 as part of a companywide move to manufacturing in China. A Dell factory in Winston-Salem, N.C., for which Dell received $280 million in incentives from the government, was shut in 2010 (Dell had to repay some of the incentives).
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