Economic Interests

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The next EU Bailout?


The Euro Crisis has died down in 2013 after a turbulent 2012. This was not because of a lack of effort by Europe’s trouble makers; Italy ground to a halt when trying to decide a government, while Cyrpus were the latest government to need a bailout. Yet the cost of borrowing for many EU countries has been decreasing gradually regardless. This has mainly been down to the statement made last year by the head of the European Central Bank to “do whatever it takes” to save the euro, hinting at the bank finally becoming a lender of last resort to the rest of the eurozone.

But tricky times lie ahead for Europe. The Euro area declined on averaged by 1% in the first quarter of the year and unemployment has reached a record 12.1%. Protests and riots have been more common in recent years (with even Sweden now experiencing public unrest) leading to many extreme parties getting more public attention, campaigning largely on their respective countries leaving the EU.

So a big question remains; who will be the next country to request a bailout?

One likely candidate is Slovenia. With a budget deficit over 5% of their GDP, their finances are in disarray. The economy retracted by over 15% in 2008/09 and is not set to return to growth until at least 2015. The largely state owned banking sector, saddled with debt, has grown to 140% of GDP, with an estimated 20% of loans considered non-performing (extremely late repayments). The public debt is still rather low at around 60% of GDP compared to much of Europe, but the interest levels Slovenia have to pay for borrowing are rather high at near 6%, if that rises much higher in the coming months they may lose access to the international markets and require external help (i.e. a bailout). Much of Slovenia’s problems come down to the credit crunch, where easy credit fuelled a construction boom similar to that in Spain that promptly burst. Another problem was the size of the state, which kept a tight grip on the bigger markets, crowding out private competition and stopping innovation. With the government now employing austerity measures, the growth of these industries have stalled, with potential buyers now a lot harder to find in a recession hit EU.


Slovenia’s prime minister has announced a brave rejection of any bailout talks, instead talking of important reforms to the banking sector (a creation of a bad bank for the worst debts) and budget balancing austerity measures including: cuts to school subsidies, a recent 5% cut in nominal public sector wages and a new higher marginal personal income tax. Their crisis resembles more Ireland’s than Cyprus and some strong leadership is giving the country a fighting chance of avoiding an international bailout.

So if not Slovenia, who then?

Two countries that resemble Cyprus (the latest bailout victim) more closely are Malta and Luxembourg. Both are small countries with massively outsized banking sectors. Malta’s banking sector is nearly 800% of its GDP making it impossible for the government to bailout out the sector by itself if needed, while the government already has high public debt of around 70% of GDP. But Malta has relatively low unemployment and a controllable budget. Its banking sector is rather different in nature to Cyprus’s as well; instead of two big local banks full of dodgy russian money and heavily exposed to the volatile Greek economy, Malta banks are actually subsidiaries of foreign banks, with high capital ratios and profits. Luxembourg also has a large banking sector, roughly 23 times its GDP. But once again the banks are large foreign owned, differentiating it from Cyprus. The economy is also very strong; experiencing low growth in 2012 when the surrounding countries were in deep recession, holding low public debt and unemployment and possessing one of the large current account surpluses in the region. If that weren’t enough, the small country has the highest GDP per capita ratio in Europe, meaning its people enjoy a very high standard of living. Both countries are over reliant upon their financial sectors and are very exposed to shocks in the market, but neither are realistically on the brink of a bailout.


Rather more worryingly, a much bigger economy is at risk, one which has already had to accept a bailout for its banking sector. Spain withdrew around €40 billion from European Stability Mechanism to help recapitalize their banks (a EU organism set up to offer up to €100 billion in bailout funds to member states). Yet many believe this wasn’t enough and that problems remain in the troubled Spanish banking system. Spain has had to nationalise one of its largest banks Bankia, while most others have had to make large cuts to their balance sheets. If this wasn’t enough, the economy is in serious trouble. Spaniards are seeing a deep decline in their national output, likely to fall for an eighth consecutive quarter and unlikely to see growth until after 2015. Unemployment is at a record high of 27% of the population, nearly 60% for the young. The budget remains heavily unbalanced, with a deficit of 7% of GDP, leaving public debt high (though not as high as private debt). A construction crash has lost many young spaniard an entry into the work force and has caused a lot of bad debts in the banking sector. When times were bad for the EU, Spain and Italy have faced some of the highest borrowing costs. Many see Spain as the weakest member of the big club, and any serious bailout of the economy would cause massive fractures in the EU and could possibly cause a domino effect on the likes of Italy and so forth. Fortunately, the political scene is stable, with the government in power for the foreseeable future and elected on a mandate of budget balancing and reform. Such reforms and austerity are already under way, with labours cost having dropped in contrast to rises in Frances and Germanys and a 4% drop having been achieved in the budget deficit since 2009. Progress is being made, but it needs a stable environment and a strong recovery in europe wide demand for Spain to really recover and see of the need for a bailout. That is a big ask in a continent that has become synonymous with the word crisis. A bailout for Spain is largely not talked of, precisely because of the implications it could have for the future of the EU. Yet it probably remains more likely than a bailout for Luxembourg and Malta.


The reality is that many member states could require a bailout if matters turned for the worst, with Portugal another possibility after the rejection of austerity measures by the national courts. The lack of a proper system in place and the reluctance by the ECB to really put its money wheres it mouth is, means rich and stable countries like Germany will continue to fund the mistakes of poorer economies. A more united Europe could solve this, with the spreading of some of the debt between the member states an attractive idea, ending the vicious circle of national debts being inflated by bailouts and increasing the need for further bailouts. Politically it remains a tough sell, especially for Germany, but it would also show a strong and united Europe, something most national leaders would secretly like to see.

Slovenia are the strongest possibility for a next bailout, with markets lacking confidence in the economy and increasing the costs of borrowing to perhaps unstable levels. But a spreading of at least some of the debt  through Euro Bonds could greatly decrease the need for this guessing game.


Yuri Milner’s Fundamental Physics Prize: Back to basics | The Economist

Yuri Milner’s Fundamental Physics Prize: Back to basics | The Economist.

Sounds like an excellent idea, will support creativity in physics much better

God’s particle – A boost for particle physics

There are points in the history of mankind that are never forgotten; three days ago such a moment happened. The DNA of the universe, the Higgs Boson, was finally found at CERN (World’s biggest particle-physics laboratory) to the delight of Peter Higgs (now 83) who first predicted the Higgs Boson back in 1964.

Peter Higgs 

The discovery makes sense of everything scientists currently believe, for without it there would be no mass. Without mass we wouldn’t have atoms and consequently no life. The Higgs Boson completes the Standard Model, which along with the general theory of relativity gives us the best explanation of the workings of the universe. The finding of the Higgs Boson has been a long time coming and was finally found using the Large Hadron Collider (LHC) in CERN, where protons were sent crashing into each other at the speed of light. It has taken so long so discover, because it was theorised that the Higgs Boson (by interacting with itself) would have a huge mass, which would consequently (using Einstein’s Theory’s) mean it would take a lot of energy to produce. The LHC provided the scientists with the power they needed, but they still didn’t know the mass of the Higgs Boson, so trial and error through countless experiments was needed. The hard work paid off though on the 4th July and helps justify the $10 billion it cost to build the LHC.

Showing the history of particle physics. Found at

However, contrary to the title of this article, a nick name given to the Higgs Boson, it does not explain the creation of the universe. In fact many are hoping the LHC can now help explain the biggest question mark in science right now, dark matter. The make-up of the universe as we know it is only accounted for by 4% matter. The rest is either dark matter or dark energy, which scientists know little about.  The Higgs boson’s discovery will now let scientists test out theories they hope will help explain such big question marks in the universe we live in.

Showing the make-up of the Universe.

The problem for particle physicists is that the discovery changes little in our society. It won’t change lives like Einstein’s theory of relativity which helped create nuclear weapons, or the discovery of DNA which lead to advances in modern medicine.

This helps explain the down fall in physics. Where once physicists  were key players in the running of the world (after giving governments the key to nuclear technology), they now live within tight budgets and experience little public interest in the discoveries they make. Particle physics has been overtaken by computer science and genetics in the science world, with both getting bigger budgets nowadays. This is especially true in the USA, where the Superconducting super collider was shut down last year (America’s version of LHC) as America allowed CERN to take the front seat in particle physics. In fact a planned mission into space in 2019 by America to study dark matter (discovered by America) will be launched by the European space agency instead, as NASA takes a minor role in a mission that was built up by the Americans themselves. When the biggest economy is the world isn’t taking particle physics seriously, you know there is something wrong.

The superconducting super collider, now shutdown. 

But the Higgs Boson’s discovery should pave way for new theories and explanations. It might not have any practical use right now, but the knowledge gained from the discovery should have a profound impact on the future of science. Indeed the Standard model which the Higgs Boson has now helped to complete is still rather flawed, and a better model could now be established in its place. There shouldn’t be a price on the knowledge of the universe; human beings should strive to know the inner workings of their surroundings. Discoveries could be made in the future that could benefit society, some could be made that make it worse, but regardless we should work towards knowing as much as we can about the laws of existence.

As a British Astrophysicist, Arthur Eddington once said: “Not only is the universe stranger than we imagine – it is stranger than we can imagine”.

10 Famous CEOs Who Think You Should Skip College | OnlineMBA

10 Famous CEOs Who Think You Should Skip College | OnlineMBA.

Good read for those undecided on higher education.

Does money buy success? « Back Page Football

Does money buy success? « Back Page Football.


Article I wrote on whether money has bought success in the 5 big European leagues this past season. Have a read, its very interesting 🙂

Spurs must change their approach after missing out on Champions League

Spurs must change their approach after missing out on Champions League.

A new article I wrote on how Spurs will react to missing out on the Champions League next season. Check it out if your interested.

100 Smart Ways to Invest Your Time When You’re Unemployed – Online College Courses

100 Smart Ways to Invest Your Time When You’re Unemployed – Online College Courses.


For those who are unfortunately unemployed right now, some tips on how to keep active.

Euro 2012: Will Poland’s economy benefit from hosting a European Championship? – Just Football

Euro 2012: Will Poland’s economy benefit from hosting a European Championship? – Just Football.


Article I wrote on Poland and how Euro 2012 will effect the country, have a read, its very interesting 🙂

The Substitution • Nostradamus

The Substitution • Nostradamus.

A range of predictions for the euro’s, including mine 🙂

An economic explanation of Bayern’s failure | Economics Intelligence

An economic explanation of Bayern’s failure | Economics Intelligence.

An economic argument for why Bayern Munich lost in the final. By the same writer as below 🙂

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