Thursday, April 19, 2018

Thoughts from Galicia, Spain: 19.4.18

Spanish life is not always likeable but it is compellingly loveable.
- Christopher Howse: A Pilgrim in Spain. 

If you've arrived here because of an interest in Galicia or Pontevedra, see my web page here.

Spain v Cataluña
  • A commentator in the Voz de Galicia has make the interesting point that it was always as unlikely that a German court would send Sr Puigmdemont back to Spain as a Spanish court would send back to Ireland someone accused of being involved in an abortion there.
  • Here's a beautiful set of fotos on the consequences of Spain's phony, euro-driven construction boom.
  • And here's some good news for those who want to stay in the van of food fashions.
Life in Spain
  • Here's one of those sagas which endorse Vernon Werner's allegation that employees of the same company will not only show little by way of a customer service attitude but also insist that the mistakes of colleagues have got nowt to do with them. I can't say I've suffered much from this. Possibly it doesn't happen if you speak the lingo.
  • On the other hand, yesterday I spent 30 minutes in Pontevedra's central Post Office – actually it's the only one – sending a registered letter to the UK. Here's why . . . .
14.20: I arrive to find the place virtually empty, with only 2 people in front of me.
14.22: I realise that only 1 of the 8 desks is operative. The clerks at all the others are doing paperwork or chatting. Or both.
14.30: I'm finally called to the desk and give the clerk my letter. I tell her I want to send it registereted (certificada).
She takes an A4 form to fill in and inserts it in a slot.
She looks at her screen, where nothing is happening.
She points this out to me, takes the form out of the slot and tells me she now has to fill it in by hand. She asks for my name and we go through the usual routine of me having only 1 surname but 2 forenames.
She adds the latter to the surname I've written on the back of the envelope and I correct her spelling of them. To help her, I give her my ID card so that she can read my address details for the form.
She looks at my card and tells me it's expired. I say that ID cards are no longer given to Brits (Europeans?) and that it doesn't matter, as my ID number is still the same as the one on it. I stress I'm showing it only for 'illustration purposes'.
As she looks sceptical, I offer her my driving licence.
She declines it and starts to fill in the form.
Seh asks me what's in the envelope and I tell her it's Aspirina powdered form.
I was expecting problems with this but she merely puts the word Medicinas on a blue Customs sticker and attaches it to the back of the envelope.
Then she asks me if Gran Bretaña is in Inglaterra and, after I've lied and confirmed that it is, she completes filling in the form, weighs the envelope and tells me the cost is €6.05.
I go through the change in my pocket and tell her I have exactly €6. And a €50 note.
She asks me to check again as she has no change. I confirm that I lack 5 cents and she gets up to go and get change from a colleague.
After at least 5 minutes, she returns and counts out my change and gives me a copy of the form she's filled in by hand.
I note there's nothing in the box for my ID number and ask if this isn't necessary.
No, she says. It's not.
14.50: I leave, shaking my head.

The the way, the registered-mail process used to be a lot less slow when you filled in a form yourself, while waiting 10 minutes to be served. Now, there's a computer. Technological progress. More ways to be inefficient. And to justify your job. As Mr Werner would doubtless claim.

The EU
  • Things are not looking great for The Project right now . . .
  1. A German recession signal soars to 'danger level' as global woes mount, says Ambrose Evans-Pritchard, in the article posted below.
  2. As predicted, the Macron-Merkel EU reform engine is spluttering, says Leopold Traugott, a policy analyst at Open Europe. See his article at the end of this post.
  • A religious scholar called Reza Aslan claims that Trumpism is a cult. An Aussie chap – in this video – says this is total balls. Make up you own mind.
Nutters Corner
  • Here's The Friendly Atheist, Hernan Mehta, of having fun with the news that Catholic priests might be giving exorcisms by phone.
Social Media
  • Below is the article on Facebook's shadow profiles that I forgot to post yesterday.
  • Yesterday saw the start of the commission of inquiry into the Santiago rail crash of early 2013. By the time it hands down a verdict – that the dead driver was the only person responsible – almost 5 years will have passed. Astonishing.
  • Spain's banks are reported to still have more than 2,500 unsold properties on their books, though only 20% of these are in our cities.
  • I'm off south today. Haven't had time to cherry pick from Lenox Napier's Business Over Tapas. Tune in tomorrow for bits from this.
© David Colin Davies, Pontevedra: 19.4.18


1. German recession signal soars to 'danger level' as global woes mount

The economic outlook in Germany is deteriorating with alarming speed and any mistake by policy-makers could push the country into a full-blown slump, a leading economic institute has warned.

“The danger of recession has increased markedly. It is a notably more critical picture than a month ago,” said the Macroeconomic Policy Institute (IMK) in Düsseldorf.

The IMK’s early warning indicator said the recession risk over the next three months has jumped suddenly to 32.4pc as trade tensions mount and liquidity ebbs away in the international financial system.

This is higher than in March 2008 when the pre-Lehman storm clouds were gathering and the country was already sliding into a slump, unbeknownst to Berlin at the time. It may be a false alarm but it clearly indicates that global growth is weaker than widely assumed just weeks ago.

“What we have seen lately is a typical late-cycle constellation, with uncertainty from the financial markets having a self-reinforcing spillover into the real economy. It is not yet clear whether such a downward spiral has already begun. Everything must be done to avoid intensifying the uncertainty,” it said.

Germany is heavily reliant on world trade and is therefore a bellwether for the broader health of the global economy. Its industrial sector lurched abruptly from boom to bust early in the last downturn and proved to be a leading indicator for the Great Recession.

JP Morgan’s instant "Nowcast" tracker of eurozone growth in the first quarter has dropped to 1.5pc, half the torrid pace of late 2017.

Germany is the chief supplier of machine tools and engineering equipment to China. The weakening data dovetails with signs that the Chinese economy has come off the boil since the Communist Party conclave last November. The delayed effect of credit curbs are biting. Beijing is trying to get a grip on its fiscal deficit, now 12pc of GDP (IMF definition).

Proxy measures put together by Capital Economics suggest that the true rate of economic growth in China has dropped to near 4.5pc, a "growth recession" in Chinese terms and a far cry from the "smoothed" official figure of 6.6pc.

The IMK said a confluence of US-China trade jitters, a decline in German industrial output, and a 7pc fall in the DAX index of equities since mid-January – led by bank stocks – were all feeding off each other.

The recession indicator was briefly higher during the Chinese currency crisis in early 2016. That storm passed for two key reasons: the US Federal Reserve backed away from monetary tightening, which eased pressure on the yuan and rescued China; and oil prices were then crashing due to a surge in supply, generating a $2 trillion windfall stimulus for global consumers.

The picture is very different today. The Fed is on the warpath. Joint production cuts by Opec and Russia have cleared the global oil glut. Brent crude prices have climbed back to $72 a barrel and may spike further if Donald Trump re-imposes sanctions on Iran in early May.

Crucially, the global money is slowing as quantitative easing goes into reverse, and as the Fed lifts global borrowing costs. Three-month Libor rates have jumped 60 basis points this year, hitting $9 trillion of floating contracts worldwide.

Simon Ward from Janus Henderson said the global economic slowdown was baked into the pie months ago when the money supply began to falter. His key indicator – six-month real M1 money – touched a nine-year low of 1pc in February.

Early data suggest a slight pick-up in March. This signal tends to lead the economy by around six months, suggesting that the global economy may remain trapped in the doldrums through the second and third quarters.

The monetary figures for the eurozone buckled last year. What is most striking is that the growth rate of real M1 deposits in France has dropped to 2.4pc from 7.3pc in September, and in Spain to 2.7pc from 6pc. Such falls do not in themselves imply a recession but they warrant caution.

It is clear that the eurozone boom in 2017 has fizzled out. There has been a blizzard of disappointing figures on industrial output, retail sales, and business confidence over recent weeks.

The European Central Bank faces a treacherous task as it prepares to phase out QE altogether this year. It has already cut bond purchases from €80bn (£69bn) to €30bn a month. Nobody knows for sure how much damage is being caused by this reduction in the "flow" of stimulus, since few can agree intellectually on how QE actually works. The risk is that the ECB could tighten too hard and cause the current soft patch to metastasize into a full-blown downturn.

Monetarists argue that the US liquidity squeeze is already having powerful effects. The Fed has pencilled in four rate rises this year. It is currently shrinking its balance sheet by $30bn a month. The pace of quantitative tightening (QT) will rise to $50bn a month in the fourth quarter. This is will slow the growth of the broad M3 money supply almost mechanically.

The Powell Fed no longer pays attention to monetary data and seems not to regard QT as significant, despite warnings from former Fed chairman Ben Bernanke that it was safer not to try at all. The Fed is therefore almost certain to keep tightening and keep raising rates until the economy breaks. This is the time-honoured cause of recessions.

The International Monetary Fund is expected to paint a rosy picture of accelerating global growth in its world economic outlook (WEO) this week, with the caveat from Christine Lagarde that the international trading system is “in danger of being torn apart”.

Yet the Fund has a mixed record of catching key turning points. Its forecast in January 2008 – a few months before the Great Recession – was for global growth of 4.2pc that year and 4.4pc in 2009. It seemed to have no inkling of trouble in the eurozone, yet we now know that Germany and Italy tumbled into recession in the second quarter of that year, long before the Lehman crisis itself.

The hedge fund CrossBorderCapital said its global liquidity index has dropped to a six-year low of 25.3, nearing levels last seen during the onset of the European banking crisis in 2011.

“The odds of a serious market correction remain high. Our models have been warning of sharply deteriorating risks from the second quarter of 2018. The latest tariff tensions are not the main issue, because we live in a world dominated by capital flows not trade flows. The next bear market may be underway,” it said.

The picture is fluid. Opinions differ widely, with most analysts still predicting healthy global growth this year. Some expect a blow-off boom as the stimulus from Donald Trump’s tax cuts feed through into fresh spending.

Authorities and central banks can switch tack at any time and change the outcome. What is clear is that the voices of dissent are growing louder and more numerous.

2. The Macron-Merkel EU reform engine is spluttering: Leopold Traugott, a policy analyst at Open Europe

As the UK is on its way out, the rest of the EU is seeking to move on. With a transatlantic trade war looming, Russia looking increasingly aggressive, and the Eurozone still on the path of recovery, the case for the EU to be made more resilient still stands strong.

The electoral victory of Emmanuel Macron in the French Presidential Elections in May 2017 caused optimism – with an ambitious pro-European in the Elyséee, so the narrative went, France would once more lead the vanguard of EU and Eurozone reform.

Even the initial doubts over whether Berlin would join in on the reform ride seemed dispelled when the German Social Democrats teamed up once more with Merkel’s conservatives in a ‘Grand Coalition,” making a European renewal their flagship policy.

Fast forward a couple of months, and hopes are dampened. It seems increasingly unlikely that Franco-German cooperation on EU reform will live up to the high expectations initially set on it.

Germany’s new government openly endorsed many of Macron’s reform ideas in its coalition treaty, knowing that it needs to work with Paris to get much-needed reforms going. Yet, so far it seems unwilling to commit to the compromises necessary to achieve much of this.

On some reform projects, it is no surprise that neither Berlin nor any other significant number of member states is backing Macron. His plans to install a Eurozone finance minister overseeing a large budget was never easy to achieve, even if Berlin initially indicated tacit support. The ideas of transnational lists for European elections and a down-sized European Commission also were neither new nor particularly popular.

In other areas, progress has been made, but not necessarily in the direction intended. The French push for a European military avant-garde force was cut short when Germany pushed for the EU’s Permanent Structured Cooperation (PESCO) to include as many member states as possible – currently 25. And while PESCO itself may well prove beneficial, France now looks at setting up its European intervention force outside of EU structures.

Having a European military intervention force outside the EU may facilitate post-Brexit security cooperation between Western Europe’s two biggest military players, France and the UK. But it raises doubts over the EU’s ambition to become a serious security actor in its own right.

Much remains unclear however on the reforms that matter most. The Eurozone is recovering, but little has been done so far to weatherize it from potential new storms. One potential way to improve its stability would be to transform the current European Stability Mechanism into a beefed-up European Monetary Fund. There is general support for this. But Eurozone members are still far away to agree on the details of its setup and functioning. Plans to finalise the banking union suffer from similar problems.

Successfully reforming the Eurozone will be crucial for Macron. It was at the heart of his agenda. It is also closely entwined with his domestic reforms, e.g. on the French labour market. If one fails, momentum on the other will be lost.

The big question for Berlin will be whether it can afford to let Macron to fail. Consequences for France and Europe could be grave.

In the 2017 French Presidential elections, which Macron won, more than 40% voted for deeply Eurosceptic forces from the far left (Jean-Luc Mélenchon’s France Insoumise)  and far right (Marine Le Pen’s Front National) in the first round. These forces would only grow stronger if Macron’s Eurozone reform plans fail.

Even a united France and Germany could not simply force their reforms on the rest of the EU and Eurozone. Whatever they agree, other member states will need to be brought on board as well. Many of these states, such as the Netherlands or Finland, have already painted their own deep red lines and will fight to keep them.

But without a Franco-German joint position to begin with, the battle would already be lost.

3. Shadow profiles: How Facebook tracks you even when you don't have an account

Facebook will hold data about you even if you have never made a profile

The backlash against Facebook has had some people hunting for the "delete" button on the social network, but even privacy conscious internet users most don't realise that even if you've tried to stay a stranger to Facebook the social network still knows a whole lot about you.

Yesterday in a hearing in the US Congress, Facebook chief executive Mark Zuckerberg was pressed over the company's tracking of users outside of Facebook. Politicians questioned how Facebook gathers data from non-users, so-called "shadow profiles", or data on people outside the social network.

Zuckerberg has repeatedly said that Facebook users alone have control over what data they choose to share with Facebook. But US representative Ben Lujan of New Mexico, berated Zuckerberg over the lack of transparency over third-party tracking.

Lujan said that even when users who don't have a Facebook account who want to find their data the site may hold on them, Facebook redirects them to a page where they have to log-in to their, non-existent, account to find out what Facebook knows.

Here is some of the data Facebook can scrape from you, even if you don't have a profile:

Name, email and phone number from your friends

When a user signs up for Facebook, the site prompts them to upload a list of contacts so Facebook can try and find friends for you. There is also a tab in the Facebook app for uploading contacts from your smartphone.

When starting up the app, one of the first things Facebook suggests is syncing your contacts with the app - including data on names, email and phone numbers.

While this may seem innocuous, as it allows Facebook to send out invites to other friends, importantly it means it has already started building up the first pieces of profile data about people who have never consented to have their data shared.

Setting up a new Facebook app account, you are immediately asked for contact access

Facebook also uses this data to build up its People You May Know service, which tries to link you to people it thinks are friends. Again, this comes under Facebook's "mission" of connecting people, but not everybody will want that personal data to be accessed by the social network.

And, when you go to Facebook to try and check if it has collected this data, the site directs you to your Facebook profile, even if you have never created one in the first place.

Data from Like and Share buttons on other websites

There is another way that Facebook can pick up information about you, even if you don't sign up to the site. Have you seen those little Like and Share buttons on most websites? Those are Facebook buttons, installed on websites to make sharing of articles and links easier.

Of course, these buttons are hosted by Facebook itself. So if you visit a page with one of these buttons, the likelihood is Facebook can see data about where you have been browsing and what other Facebook linked sites you have visited. It won't give up any personally identifiable information, but it is your browsing data that Facebook is able to see.

Data from Facebook Pixel and web trackers

Even more hidden than these sharing tools is Facebook Pixel, a web tracker that lives in many third-party Facebook pages. The Pixel is a tool for advertisers, designed to measure all kinds of analytics, and again is in common use by the industry.

However, the Pixel makes it possible to track Facebook users even if they are logged out of Facebook by monitoring data like their IP address. This can be used, for example, to follow a user and target an advert them if they have added an item to their shopping cart in an online store, but not decided to buy it yet.

That said, lots of websites use similar tools and trackers, but for Zuckerberg to claim the user has significant control over this is not correct. Facebook has been engaged in a legal dispute against Belgium over the very use of these trackers, and it remains to be seen if GDPR will require changes in how this works.

It can't be denied that Facebook is an advertising giant and that data is its currency (despite one senator appearing confused and asking how Facebook makes money without subscriptions), but it will worry some not on Facebook that the site can build up a profile of them without their knowledge.

As Rep. Lujan put it: "You’ve said everyone controls their data, but you’re collecting data on people who are not even Facebook users who have never signed a consent, a privacy agreement."


Eamon said...

The Spanish customs sticker CN 22 is green. What is a blue customs sticker? Like Spain, Britain, is in the European community and no customs checks apply. Is there something special about "certificada"?

Colin Davies said...

OK, green. But bluey green. Viewable on G Images . . .

Colin Davies said...

Are you pretending to be Mr Mittington today, Eamon???

Eamon said...

Not really I was just curious after reading your account at the Post Office. As an ex telegraphist I am aware of how destinations and countries are listed in some official lists. I went to my local Correos to post a letter to Douglas, Isle of Man. When the lady tried to find it listed on the computer there was nothing and she said I needed to have a country for delivery. I said look under La Isla del Hombre but there was nothing. After a short explanation I settled on Inglaterra for delivery. A similar experience in my local bank. I wanted to send money to a person in Holland. Well everyone in Spain knows where Holland is but the girl couldn't find it listed on the computer so it meant the transaction could not take place. I said look under Los Paises Bajos "the low countries". Which is how Holland is listed. Sure enough there it was waiting to be clicked. The people who write these computer programs for firms have no idea how ordinary people live. Like you say Colin it only takes a few minutes to fill in a form but ages on a computer where the operator has to spend time messing about guiding the cursor around the screen filling in boxes and possibly other menus that crop up.

Colin Davies said...

I've had the IoM experience at Correos too . . .