Archive for November 18th, 2011

FPS’ Friday Fiver

The FPS team has once again prepared a news smorgasbord for your consumption. This week we’ve served up our thoughts on new prime ministers, unemployment, a bank sale, a possible change of heart and the ever present issue of sovereign debt.  Thanks to Ed and Dave for their contributions this week.

EUROPE’S TOP TABLE…Conspiracy theorists and to a lesser extent the mainstream media were left considering the consequences of three senior appointments within the Eurozone this week. Europe has two new prime minsters, Mario Monti in Italy and Lucas Papademos in Greece. The European Central Bank also has a new President, Mario Draghi.

These three men have something in common. They have all worked for Goldman Sachs. GS is known for its search for talented and driven individuals and in many ways it is not particularly surprising that the three men have found themselves dining at Europe’s top table.

[Image from The Independent]

However, given the interconnected nature of debt markets, European politics and Goldman’s business, the appointments have left a number of commentators wondering what the situation says about the state of European democracy.

I know little about the men in question, but I suspect they will all have been shaped by their former employer’s organisational culture to some extent.

Organisational culture defined – “A pattern of shared basic assumptions invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration”

CAMERON LOOKING FOR AN ANGELA OVER EUROPE…Four weeks ago, Cameron witnessed over 80 Conservative MPs defy him on Europe. This was the biggest Conservative revolt against Europe. EVER.

[Picture from The Guardian]

Fast forward to this week and the PM’s annual speech at the Lord Mayor’s banquet on foreign policy and you will notice a stark shift in his approach to Europe. His language was sharp: “We sceptics have a vital point. We should look sceptically at grand plans and utopian visions,” playing up to the wailing of the backbenchers. “We’ve a right to ask what the European Union should and shouldn’t do and change it accordingly…, in Britain’s case, for powers to ebb back instead of flow away.” Sounding remarkably like an effort to repatriate powers from the EU, precisely what his backbenchers wanted a few weeks ago. Whether this is just positioning from our premier will be revealed after his showdown with Angela Merkel today, we’re watching it closely.  

OLDER WORKERS – HANGING ON IN THERE…This week’s UK unemployment figures were a little grim. In fact, for many in the media, they were very grim. The main focus of attention fell on the number of young people now lacking a job topping the 1m mark. David Miliband added his thoughts on the issue as well, labelling it a “tragedy” and an economic “timebomb”.

 

[Picture from The Daily Telegraph]

Public sector job cuts and a lack of new private sector jobs are undoubtedly a central cause of youth unemployment, but is it the only one? It wasn’t explored this week, but the issue of increasing life expectancy may well be another cause. People are living longer, and increasingly therefore looking to work longer. The Government has indicated its comfort with this, recently abolishing the default retirement age and giving the green light for people to work as long as they like. And why shouldn’t the Government do so? After all, the alternative to paying young people jobseekers allowance is paying older people state benefits if they don’t have sufficient income to live off in retirement. The question for the Chancellor is which one is more expensive now, and in the longer term.   

The BBC’s informative infographic on the subject of unemployment can be found here.

GOOD WEEK/BAD WEEK…A good week for consumers looking for a bank account this week. The sale of Northern Rock to Virgin Money should in theory increase competition on the high street for current accounts, thereby leading to better rates for customers. As we noted last week though, start-up banks are finding it tough.

 

[Picture from The Evening Standard]

On the flip side, a bad week for consumers in their role as taxpayers following the sale of the Rock. With the bank being sold for £747m, taxpayers are theoretically sitting on a £650m loss – the Government has injected around £1.4bn into the bank since taking the decision to nationalise it. The maths may not be quite that simple, as Robert Peston pointed out, but even so, it doesn’t bode particularly well for the eventual sale of the Government’s share in RBS and Lloyds.

I.O.U €10.9 trillion…We’ll leave you with another visual feast in the form of an I.O.U infograpic, yet again from the Beeb. It’s a handy guide to sovereign debt and the scale of debts relative to population size and economic muscle. 

The infographic can be found here.