New article of Dr Georg von Graevenitz at Vox.EU.

Dr Georg von Graevenitz – Senior Lecturer in Quantitative Methods at Queen Mary University of London, School of Business and Management –  has published a new article at VoxEu.Org, the CEPR online Policy portal aimed to promote research based policy analysis and commentary.

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Prof Granville on the links between the Euro and France’s competitiveness in The Telegraph

Prof Brigitte Granville, CGR Director, has been quoted on The Telegraph on his Tuesday 7th of December edition. Prof Granville comments are included in an article by Ambrose Evans-Pritchard analysing the economics roots of Marine LePen’s Front National rise, after the first round of the regional elections hold on Sunday, December 6th, that saw the Front National swept half the  French “Communes”

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Prof Brigitte Granville participates in first Euroskeptic magazine asking: The IMF and the Eurozone, fireman or arsonist?

Prof Brigitte Granville– CGR Director and Professor of International Economics and Economic Policy at Queen Mary University of London- has participated in the Autumn 2014 edition of the “New Directions: The Foundation for European Reforms” Magazine. The Foundation for European Reform edits the publication. The organisation was established in 2010 under the patronage of Baroness Thatcher as a Brussels based free-market, euro-realist think tank.

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IMF must focus on finding the best leader irrespective of region, letter to the FT

Tuesday, 6th of October, the Financial Times published a letter signed by Prof Brigitte Granville-CGR Director- among others leading economists, calling for IMF to focus the best leader irrespective of region.  

The letter advocates for a “Transparent and timely search process aimed at finding the best qualified person”, that combines “a proven economics background with appropriate political and diplomatic expertise and capacity to engineer thoughtful policies to counter possible new shocks”, highlighting the importance of a “meritocratic process that offers constructive outcomes for advanced and developing economies”. 

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New CGR Working Paper. Financialized Accounting: Capitalization and leveraging the intangible


In the new CGR Working Paper Financialized Accounting: Capitalization andleveraging the intangible Professor Colin Haslam and Dr Nick Tsitsianis argue that financialization is about the way in which speculative ‘intangible’ value gets wrapped up as collateral to generate additional financial leverage for on-going asset recapitalisations. In speculative capital markets asset values tend to inflate ahead of earnings. That is, the ‘vendibility’ of assets is promoted at the expense of the ‘serviceability’ of these assets. 
The International Accounting Standards Board (IASB) conceptual framework and extant International Financial Reporting Standards (IFRS’s) encourage the use of ‘fair value’ or ‘mark to market’ accounting. A position reinforced by recent European Directives on the construction of a firm’s annual financial statements. Thus accountants can value balance sheet assets using information from benchmarks based on active secondary speculative markets or employ judgement to model valuations in the absence of an active market pricing assets.
In this working paper the authors make two significant and critical points. First, the system of double entry book-keeping transmits financial disturbance between line items in a firms financial statements. And because these line items are not equivalent a relatively small disturbance in one can trigger large adjustments and instabilities in another. This is illustrated with ‘goodwill’ recorded in balance sheets as the difference between the market and book value paid for acquisitions. The author’s estimate that around one-quarter of US and European corporates have reported goodwill that now exceeds 75 per cent of shareholder equity funds.  If this goodwill is impaired it could trigger a large adjustment in shareholder funds and compromise solvency. Second, the authors argue that asset values reported in corporate balance sheets are de-temporalised. Asset values recorded in current time also embody uncertain and speculative assessments about future value.  Relatively small changes in judgements about the future, for example, cash flows, discount rate and risk can have a material impact upon assets values recorded in current time. 
In financialized accounts speculative recapitalisation of asset values are now, more and more, woven into the fabric of corporate financial statements. This increases the potential for financial instability and reinforces what economists describe as a moral hazard because in times of difficulty investors will protect their positions against other stakeholders.

Home Office’s decision “flies in the face of the economic well being of the country”

By Victoria Granville
In the years running up to the election, the Home Office have hardly shied away from showing their agenda. With the government’s umm-ing and ah-ing on Europe drawing some Tory backbenchers to UKIP, it seems they have clung onto the last thing they can to prevent further defecting, namely to toughen up on immigration. However, by avoiding a decision on Europe, and focusing on immigration, they are jeopardising the British economy, and damaging people’s lives in the process.
On 13th August 2013 June Natcha Nativivat – a 23-year-old Thai citizen – applied for Indefinite Leave to Remain (ILR). What was to follow was a revelation of the true nature of the Home Office’s agenda: keeping immigration numbers at an all time low by extraordinary means.
On the 14th February 2014, whilst doing her MSc in Chemical Engineering at Imperial College London, June found out that her application for ILR had been refused. On the advice of her lawyer, she appealed. In March of that year, her father was diagnosed with a brain tumour – she had already appealed, to withdraw and see her father would mean giving up on what she was told would be an easily won case; her family urged her to stay.
June worked hard on her MSc, steering her research in a more Bio-chemical engineering direction, in seeing how drug delivery could be more affective to treat cancer. Meanwhile, her father’s condition steadily declined, and he was admitted to the Intensive Care Unit (ICU) in his hospital in Bangkok. With a letter from the doctors in Thailand, proving how critically ill her father had become, June asked the Home Office for her case to be expedited so that the hearing be moved to an earlier date. The Home Office refused on the grounds that her father had to be dying for the hearing to be moved. It is worth noting that a brain tumour is rarely anything other than a fatal diagnosis.
She attended her hearing at Taylor House in London on 17th October. The Home Office had refused June ILR, and was going to continue to do so, as under paragraph 276(a)(v) in immigration law, a person may be given ILR after having lived here for 10 years or more, on the grounds that in that time the applicant has not left the country for more than 548 days. June had left the country for 1137 days.
One may think that the Home Office had a very strong case, but June had been placed in a foreign country, at a British boarding school at the age of 11. She was not living with her family in Thailand, but at a school in Britain. The most influential years of her upbringing had happened here in the UK. For 11 years, she has grown roots here, qualifications, she owns property, she learnt to drive here, and most importantly: she wants to work here, making her a potential economical asset to the country. Thailand is her parents’ home, not hers.
Whilst a minor her parents decided when she would go back to Thailand, which would usually be in the long school summer holidays, however as a young adult, in the 4 years of studying at university, she only left the country for 233 days. June chose to remain here because she wanted to continue to contribute to the welfare of Britain, by working and paying taxes here. This young woman has attained a 2:1 BA from Bath University studying Chemical Engineering, and an MSc in Chemical Engineering from Imperial. She was interested in working in either pharmaceuticals, fast moving consumer goods such as P&G or work as a consultant for engineering firms. In her own words:

“I am now in a good position to make a valuable contribution to British society as a qualified engineer, a field which has a shortage of skilled personnel, especially female engineers. I am particularly placed to make an important and positive contribution – both as a professional and as a role model to aspiring young female students. I have benefitted a great deal from the education I have acquired at some of the top academic institutions in the UK and I am now in a position to develop further as a person and at the same time give back to society from the excellent education I have received in the United Kingdom.”

This is what she said in her hearing in October. During the hearing the Home Office’s agenda was clear to the judge: that of simply keeping immigration numbers down. However, the judge pointed out in her decision that although the Home Office has the right to control the entry of foreign nationals, the decision must be made under Article 8(2). This article states that the Home Office can only prevent the entry of a foreign national when it is “in the interests of national security, public safety or the economic well being of the country” and “for the prevention of disorder and crime, for the protection of health and morals, or for the protection of the rights and freedoms of others”. The judge emphasised how the Home Office never mentioned that their decision was based on the economic well being of the country, as quite rightly, that would be a hard, if impossible argument to win in this case. Moreover, the judge noted how under Section 117B(ii) “that those who seek to enter or remain in the United Kingdom” and “are able to speak English […] are less of a burden to the tax payer and are better able to integrate into society.” Therefore, in her opinion, because June “has gained all of her qualifications within the British education” system, been “educated at Masters level” and owning “her own home”, she “will [therefore] not be a burden to the taxpayer.” In fact the judge ruled that to remove such a potential asset to British society would “be evidence of a failure in the system” and that “such a decision” would “fl[y] in the face of the economic well being of the country and will cause [June] considerable distress.”
With these words the judge ruled in favour of a Human Rights visa. This visa would allow June to live and work in the UK for two years. After those two years the case would then be reviewed. This was not the perfect outcome, but at least now June did not have to choose between her father and her future. Unfortunately, the worst was yet to come.
The Home Office appealed against a Human Rights visa. Given June’s case, surely this must have been a tactful move. Were they playing with time and with death? As June had made the Home Office aware of her father’s illness, were they testing her time, to see who would be the first to blink? June had not seen her father since 2013 and now his health was in serious decline, her time was limited, and the Home Office knew it. They appealed against her case just before Christmas – a dead end time for getting things done quickly. June spent Christmas with her sister, who came to visit her from Thailand, but together they spent it on Skype, watching their father being admitted back to hospital for the third time in 6 months. On Boxing Day June watched her father being moved to ICU at 05:00 am, and watched her other sister sat next to his bed throughout the night. He was struggling to breathe, and June struggled with her need to be with him, and her guarantee of leading the life that she wanted.
In early January June went to the Tribunal herself to ask for her case to be expedited. She bought all of the necessary documents explaining how ill her father had become. The Tribunal said that her case was being processed, and it was uncertain when a decision would be made. Weeks passed and although she called them everyday, there was still no news from the Tribunal. Her father was now heavily sedated and it was clear that to be able to say goodbye to him in person, she would have to leave. She obtained a CI document from the Thai embassy, which would enable her to leave the country without her passport. She preferred this route to that of officially withdrawing, as that would mean having to call the ‘enforcement team’, who would have apparently ‘escorted’ her out of the country. To be officially deported out of a country that she saw as her own, would have been to swallow the last bit of pride that she had left. Just before she boarded her flight, she found out from the Tribunal that they had accepted the Home Offices’ appeal. This would mean another court hearing, and more months of waiting. She had officially lost.
June’s father died on 17th February 2015, she was by his bedside. Her graduation from Imperial will be in May, and her mother has already bought them flights to go to London for it, as her father would have wanted to be there, and for them to have gone. However, whether June will be allowed back into the country on a mere visitor’s visa is a different matter.
Recently there have been reports of relatives who have been barred from visiting the UK to attend their granddaughter’s funeral. 5-year-old Andrea Gada, who had been hit by a car in Sussex, has had her funeral postponed as her grandparents have been refused to enter the UK on temporary visas. The girl’s mother, Mrs Gada, claimed that because of the situation in Zimbabwe “The Home Office has just been assuming that […] [her] relatives will not go back”. The family have gone so far as to offer to wear electronic tags and report to the local police station, in order for the Zimbabwean couple, Grace and Stanley Bwanya, to be able to attend the funeral. Only after a petition signed by more than 120,000 people, and David Cameron urging Theresa May to look into the case, has the Home Office allowed the grandparents to apply for a temporary visa for a third time.
Earlier in April last year a 19-year-old student, who had been predicted top grades at A-level and had offers from Russell group universities, was deported back to Mauritius. Yasheeka Bageerathi had fled Mauritius with her family from an abusive relative in 2011. The family claimed asylum in the summer of 2013. A spokesperson from the Home Office stated the following: “We consider every claim for asylum on its individual merits and in this case the appellant was not considered in need of protection […] The case has gone through the proper legal process and our decision has been supported by the courts.” In mid-March, whilst Yasheeka was held in a detention centre with nothing other than the clothes she was wearing and some small change, her school began a campaign to let her remain. The campaign compelled the Home Office to be humane and at least allow Yasheeka to sit her A-levels before deporting her. It was 175,000 strong with pleas from politicians and celebrities for the Home Office to show some compassion. Even Air Mauritius joined the campaign and refused for Yasheeka to board the flight on the first attempt. On the second, however, they had to comply, as they have to abide with decisions made by UK authorities. Before boarding her flight on the 2nd April 2014 Yasheeka pleaded, promising that once she had finished her A-levels, her family would leave the UK and find a “safe place” to go.
It seems that in the heat of the election campaign, the Home Office has lost sight of any morals, and focuses solely on beating UKIP’s immigration promises. As the judge in June’s case declared, there is a failure in our system; people no longer count as people, but as numbers to be reduced.
Victoria Granville is Educational Consultant at Carfax Education. Victoria graduated with and honour BA degree in Russian Advanced studies from the School of languages, culture and societies, University of Leeds.
Victoria is a close friend of June, they met at school when they were both 13 years old

“Can France Reform itself within the Euro?” Presentation by Professor Brigitte Granville at a meeting of deputies and staffers of the European Parliament.

On 22 April, Professor Brigitte Granville – Centre for Globalisation Research Director– was invited by the European Conservatives and Reformists (ECR) Policy Group to take part in the workshop “Exchange of views on the Eurozone Crisis”. The conference was chaired by Professor Joachim Starbatty MEP and other speakers included Professor Alberto BagnaiAssociate Professor of Economic Policy at the Gabriele D’Annunzio University, Pescara (Italy) – and Frits Bolkestein – former European Commissioner for Internal Market and Services. 

Professor Granville’s talk, entitled “Can France reform itself within the Euro?”, showed how the French elite has taken advantage of the single currency to avoid having to undertake the reforms necessary to modernise the country’s economy. She began by recalling the competitiveness gap between France and Germany (the two EMU founders) stemming from differences in inflation rates and relative unit labour costs. The main reason for this divergence in unit labour costs is France’s heavy burden of payroll taxes, which (together with borrowing), is a crucial source of financing for the country’s very high public expenditure that has now reached 57 per cent of GDP (the second highest level of any EU member state). The preservation of this ‘French model’ has been helped by the introduction of the Euro, as this has allowed France to borrow at virtually the same low interest rate as Germany, in turn removing the urgency to implement structural reforms sheltering the state elite from social unrest.
But if the euro has allowed the ‘exception française’ to survive, the prospects for strong growth and full employment are bleak thanks to outdated institutions and, in particular, the nature of the state elite that seems poorly prepared to adapt the country to shifts in the global economic order since the last quarter of the twentieth century, when innovation and creativity have become core growth drivers in an environment of more open international trade and capital flows. 

The hermetic elite that controls the French state, media and leading industries is the product of a rigid and outdated system of selection and training centred on the Ecole Nationale d’Administration (ENA) , which supplies the personnel for the most powerful bodies in the state bureaucracy (the so-called “grands corps”). This has significant consequences for the country’s economy. In this connexion, Brigitte Granville compared the structure of “Economic Freedoms” in France and Germany, highlighting how a highly professional, impartial, and closed French public administration tends to meddle in business activities (as reflected on Bar Charts I and II). Not only has the French elite proved incapable of rising to the challenge of tackling France’s economic troubles; the elite itself is a main cause of these troubles.

Professor Granville concluded that the effect of the single currency in relieving pressure to carry out the reforms required to boost France’s competitiveness has allowed France to become the Eurozone’s free rider – that is, a country that is “too big to fail” and that Germany is “too afraid to constrain”.
Below you can find a video of Professor Granville’s talk. As mentioned above, the conference was organized by the ECR Policy Group, a think tank linked to the ECR Group in the European Parliament designed to encourage the exchange of ideas among policymakers and academics rather than be a political platform. 

Professor Granville’s talk drew on a forthcoming paper “Institutions, Thickets and Elites:
French Resistance and German Adaptation to Economic Change, 1945-2014” written in collaboration with two CGR’s fellows, Jaume Martorell Cruz and Dr Martha Prevezer.
Further information on the relationship between France and the Euro can be found on the following CGR working papers:

When Labour Market Reforms actually Reduce Unemployment

Pierre Cahuc, Francis Kramarz and Pedro Martins 

Recently, “Les Echos” journalist Dominique Seuxobserved that, in contrast with the abundant commentary on Greek economic woes, there is little discussion about the case of Portugal. A recent conference of Pedro Martins, one of the authors of this article and former Secretary of State of Employment in Portugal, provides us with the perfect occasion to revisit the recent evolution of Portugal’s labour market. 
Between 2008 and 2011, the minimum wage there increased by 20%. This increase was also broadly reflected in salaries beyond the minimum wage, thanks to centralized negotiation mechanisms featuring unrepresentative trade unions, with a membership below 10% that mostly represent permanent workers’ interests. Thus, when the recession started, these developments on wages amplified its impact on employment. From April 2008 to January 2013, unemployment rose from 8.6% to 17.7%, affecting mostly young workers. Permanent workers enjoyed one of the most restrictive regulations of the OECD, with its redundancy payments (one month per year of compensation) amongst the highest. In this situation, Portuguese youth was confined to temporary contracts, destroyed in a very large scale once economic activity cooled off. Among those below 25 years, unemployment rate surged from 20 to 40%. 
In 2011 Portugal reached an agreement with the EU and the IMF, which led to an ambitious eighteen-month program of labour market reforms. It decentralized collective bargaining –giving more room to business negotiations-, reduced the gap between permanent and temporary contracts –providing equal conditions for equal work- and aligned redundancy payments with the European average. Jobcentres were deeply modernised by providing stronger incentives to hiring, through the coaching, support, and monitoring of the unemployed. 
In spite of severe austerity, unemployment plunged from its 17.5% peak to last quarter’s 13.1%. Over the same period, youth unemployment was brought down from 42.5% to 32.2%. Employment, especially permanent contracts, enjoys constant growth. The Portuguese experience is a reminder that labour markets reforms oriented to synch wages with productivity and limit the duality between permanent and temporary workers, will favour employment, especially youth employment, as was the case in Germany over ten years ago. 
Do we need to emphasize the similarities between French and Portuguese malaises? Although complacency and arrogance may blind us while helplessly witnessing the steady rise of unemployment, the Portuguese experience shows that there is another course: to take specific actions –based on clear and simple principles- that bring unemployment down, instead of waiting for a hypothetic recovery. 

Pierre Cahuc and Francis Kramarz are Professors of Economics at CREST-ENSAE and the Ecole Polytechnique. Pedro Martins is Professor of Applied Economics at Queen Mary University of London and former Secretary of State for Employment of Portugal. 
This article was originally published in French in “Les Echos” on 27th February 2014.

The Economic Consequences of Greece.

Professor Brigitte Granville, CGR director, has published a new article on Project Syndicate. “The Economic Consequences of Greece” – co-authored with Alberto Bagnai, Peter Oppenheimer and Antoni Soy – analyses how the Greek crises exposes the cracks in the Economic and Monetary Union.

“The first sentence of the 1957 Treaty of Rome – the founding document of what would eventually become the European Union – calls for “an ever-closer union among the peoples of Europe.” Recently, however, that ideal has come under threat, undermined by its own political elite, which adopted a common currency while entirely neglecting the underlying fault lines.

Today, those cracks have been exposed – and widened – by the seemingly never-ending Greek crisis. And nowhere are they more evident than in Greece’s relationship with the International Monetary Fund.”

You can continue reading it at Project Syndicate, or read here –at the Centre for Globalisation Research blog- an unabridged version of the article.

Film Screening and Discussion: "NO"

When: Tuesday 3rd of March 2015, 18:30 hrs
Where: The Lock Keeper’s Cottage
-Light Refreshments will be served-
Sponsored by CGR (in collaboration with CRED)
NO is a thrilling Oscar nominated film that take us back to a momentous time of Chilean history: The 1988 referendum on Pinochet’s dictatorship, when the continuity of the authoritarian regime is put in the hands of Chile’s citizenship, a “Yes” vote would ensure the dictator in his post, a “No” mean the end of the dictatorship. The movie portrays the combat of wills between two ad-men bent on convince the wider Chilean population of their position. In the “Yes” side, we find René Saveedra (Gael Garcia Bernal); in the “No” camp his boss Lucho Guzmán (Alfredo Castro). Every night a fight through the airwaves, 15 minutes for the “No” camp, 15 minutes for the “Yes” camp. 
The film not only offers a reflection on the place of Pinochet´s regime in history –through the lenses of the “Yes” and “No” camp- but on the role of modern advertising and communication methods in campaigning. As much emphasis is put on the debate taking place on the Yes side: Should they try to highlight the atrocities of the regime and risk alienating the undecided voters or should they shift towards a more optimistic campaign focusing on the future and the promises of democracy?
Third on a trilogy of movies on Pinochet’s dictatorship – The director Pablo Larraín, previously helmed “Tony Manero” and “Post-Mortem” – “No” got rave reviews at Cannes 2012, winning the Art Cinema award and being hailed as a masterpiece by some critics. Selected as Chile’s bid for the Foreign Language Oscar at the 85thacademy awards it was nominated in December 2013, ultimately losing to Michael Haneke’s Amour.
Do not miss the opportunity to watch this terrific movie: 3rdof March, 18:30 lock-keepers cottage! 
Themes for Discussion:
1.    Capitalism and Democracy
The most ardent advocates of capitalism so often highlight its relationship with Democracy, while not all capitalist countries are democracies all democracies are capitalist countries they’d say. In this debate –so often too much simplified- the dictatorship of Pinochet takes a special role. In first place, by overthrowing Salvador Allende a the first democratically elected marxist that seemed to offer a more nuanced path in the black and white cold war world. In Second place, by the relationship that Pinochet maintained with liberal icons such as Margaret Thatcher, who affirmed that Pinochet “brought democracy to Chile”,and Friederich Hayek, who stated that was preferable a liberal dictator that a democracy without liberalism.
2.    Consent, Democracy, Dictatorship, and Referendum.
Despite the campaign effectively ended Pinochet’s government, the “Yes” side –pushing for continuity- obtained 44.01% of the votes. Which puts forwards an important question, why sectors of the society that in 1973 mobilized to overthrow a legitimately elected government accepted the result of a democratic referendum? A question that loomed over the “No” campaign, that feared the referendum would be rigged.  A question that puts the focus not only on the controversial relationship of plebiscitary elections with populism, democracy and dictatorship, but the underlying conditions that drive a society towards a dictatorship. The renowned political scientist Adam Przeworksy, pointed that no country that has transitioned from democracy to dictatorship has had a higher level of per Capita Income than Argentina in 1975. According to him, upon a certain threshold of economic development the interests that may organise a coup d’état or a revolution have too much too lose.  
3.    Politics and Communication
The movie stirred the debate in Chile, not only re-opening the always present debate on Pinochet´s dictatorship, but by simplifying history and the excessive emphasis put on the advertising side of the “No” campaign and being oblivious to the grass-roots campaign, a point raised by Gerardo Arriagada, the director of the “No” campaign. Claudio Fuentes, a Chilean Political Science Professor, criticized the movie as a celebration of the moment when marketing took over ideas in political campaigning.
These critiques may struck a chord on contemporary Britain, specially a moment where the British Elections seems to be marked by too much on script politicians, and results tend to be explained through “narratives” and so forth rather than on policies and interests.