Daily Loaf

Wishful thinking?

There's good news, mixed news, and bad news.

The good news: Statistics Finland just published revised data on GDP growth in Finland during 2002. The economy went up 2.2%, which is pretty ok for a mature European economy during a global slowdown.

The mixed news? Helsingin Sanomat puts a slightly positive spin on the decision by the European Central Bank not to lower interest rates any further, reasoning alongside the ECB that an observation period during the summer will determine whether the Eurozone economy is growing appropriately.

The bad: the number of jobs is still being reduced and Bush's tax cuts aren't having the desired effect - and many are questioning (NY Times, free registration, blah blah) i­f they ever will.

My conclusion: higher interest rates in Europe and a negative overall picture in the US will work together to keep the Euro up, hampering the growth of a more export-dependent market. The quirky thing is that the US would probably need Euroland's fiscal stability pact more than Europe, and Europe would be better off with short-term budget deficits.

As Sirkka Hämäläinen pointed out recently upon leaving the ECB Board of Governors, "Europe is slow." Her justification: European governments, companies and private citizens are less in debt than their American counterparts, so a decrease in interest rates has a smaller, and slower, effect on their investments and disposable income.

My favourite target for a public spending spree on both sides of the Atlantic? A maglev network connecting the biggest cities in densely populated areas, reducing air traffic and highway congestion. Looks like it'll be China, though, that will skip improving its traditional wheel-on-rail network and go straight to cleaner, faster and safer travelling.