Welfare State System at Stake in European Austerity Measures

Article first published as Welfare State System at Stake in European Austerity Measures on Blogcritics.

As a result of austerity measures, proposed as part of the bailout package offered by the IMF and European Union, the workers throughout the European Countries are increasingly joining in strike actions. Ever since the Greece debt crisis surfaced, the European governments as well as financial analysts and economists talked and wrote about the need of maintaining fiscal discipline and reducing deficits and debts. The IMF has been the one that is pressurizing the European nations, particularly the countries under monitory union to implement austerity measures like spending cuts, jobs cuts and tax increases.

Greece to Hungary

When George Papandreou’s new socialist government came to power in Greece and revealed that the Greece’s budget deficit was actually 12.7 (again modified to 13.6 percent by Eurostat in April) percent of GDP, more than twice the previously published figure by the previous government, the market began to panic. Doubts rose whether Greece could meet its debt commitments in time.

The problem was aggravated with the top three credit rating agencies –Fitch, Moody’s and S&P- went on to threaten investors by downgrading sovereign debt ratings of Greece, Portugal, Spain, Ireland and Hungary. By the end of April 2010, Greece’s government debt was downgraded to junk status. Weather the actual situation led to downgrading or downgrading prepared the ground for the so-called fiscal discipline measures remains a matter of concern.

Meanwhile a sense of urgency of fiscal consolidation was instilled through print, audio and visual media into the minds of the people. The markets and the people were so prepared by the frequent media news and analyses that everyone from common person to top investors began to believe that some drastic measures were inevitable.

Aid (Debt) Package

The run up for the announcement of the joint aid package by the EU and IMF for Greece as well as the Euro Zone was a big fiasco that equaled the stage plays scripted by the great “Bard of Avon.” Greece Prime Minister Papandreou repeatedly requested for a guarantee from the EU to prevent the rising sovereign debt costs. On one hand, Germany hesitated to announce any package; the reason said was that it feared it would have to bear major part of the aid package and that it would have to face severe opposition from its people. On the other hand, bond yields demanded by the investors to invest in Greece debt, peaked to more than 22 percent (on 2-year note) at one point.

Curious Case of Mobile Phones Lifting Poverty

Article first published as Curious Case of Mobile Phones Lifting Poverty on Technorati.

Last year a cinema was released in Hollywood named, “A curious case of Benjamin Button” that won nomination for Oscar awards. It tells the story of Benjamin Button, who starts aging backward. He takes birth as an old man and dies as an infant. One can understand that such things are only possible in movies. It is quite unnatural. Winning nomination for best picture category is another surprise.

Yesterday, on October 14, a UN study revealed a curious case of Cell phones. It said mobile phone could improve the livelihoods of poorest people in developing countries. UNCTAD, United Nations Conference on Trade And Development said in its information economy report “Mobiles have spawned a wealth of micro-enterprises, offering work to people with little education and few resources.” It advised Governments to monitor how poor people were using mobile phones and design policies to build on that.

This is a curious case of mobile phones lifting poverty instead of policies of the government that enable poor to have honorable employment. The UNCTAD’s suggestion is somewhat like tail wagging the dog. Mobile phones are no doubt a revolutionary invention that enables people to get information faster than before.

But, what information is shared by poor people through mobile phones? Small business people can order products and get them next day. Previously land phone did the same job. Transport facilities in the poorest areas of the least developed countries have not yet been developed as pointed out by the same report. And, the small business people are not poorest people, and they are placed above poverty line in developing and LDC nations.

Currency War between China and the West

Article first published as Currency War between China and the West on Blogcritics.

“Currency War” is the term coined by the IMF managing director Dominique Strauss-Khan during the annual meetings of IMF and WB in Washington, D.C that began on October 8. The meetings will be concluded on October 10. Mr. Strauss Khan latter backed down from his comment saying “war was probably too strong a word.”

Tensions on Rise

Tensions have been rising over China’s Yuan policy ever since the US President depicted China as “currency manipulator,” during his earlier days in office. Western countries along with some emerging economies are of the view that China is deliberately manipulating Yuan’s value not allowing it to appreciate. They opine, China is following various means to keep Yuan value low, like buying dollars and other forex currencies, pegging it to the dollar etc… IMF managing director also shares this view and called several times on China to allow Yuan to appreciate to correct global economic and trade imbalances.

Not Fair

Lower Yuan value is making Chinese products more competitive in the global trade, due to which China is able to amass trade surplus in hundreds of billions of dollars, according to the developed economies. China disagrees with the west’s contention and says that it is not responsible for the problems faced by the Western countries. China says the developed countries have many problems created by themselves that require immediate attention. It is not fair for the west to attack Chinese Yuan Policy without reforming their financial regulatory laws, due to which the western states are not in a position to control the “too-big-to-fail” (or “too-important-to-fail” according to the IMF) financial conglomerates, China says.