Ülo Ennuste Economics

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Shouldn’t we arrive at the truth

Letter to the Editors of The Financial Times and The Economist (Draft 17 August)

Shouldn’t we arrive at the truth: Polish political-economics is excellent and so is Finnish statistics?

 From Prof Ülo Ennuste

Sir, almost everybody in this August is exceptionally comfortably and optimistically discussing the Eurostat newsrelease euroindicators 120/2010 – 13 August 2010: „Flash estimates for the second quarter of 2010. Euro area and EU27 GDP up by 1.0%. +1.7% in both zones compared with the second quarter of 2009”   (http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-13082010-BP/EN/2-13082010-BP-EN.PDF) mainly in the style as how vigorously and successfully in the II quarter first of all e.g. Germany (3.7%) and Sweden (3.6%) had been going out of crisis. Comfortably indeed, as this publication contains only one separate politically convenient indicator (GDP) and even this data without any politicians „disturbing” stability and quality assessments.

But shouldn’t we even in silly month forget at least that Poland had exceptionally eschewed this crisis altogether in the GDP evolution and demonstrated outstanding and non-comparable stability. And more importantly, shouldn’t we also not forget that simply-separately the national output growth is not enough to say that crisis is over if this is not complemented by recovery of fallen employment, investments and sustainability, and recovery of deteriorated external financial positions, economic unequally etc. E.g. Estonia second quartile +3,5% GDP growth seems superficially really good if to forget about cumulative crisis-fall ca 20%, and that still had significant employment decrease taken place ca 6% , unemployment certainly about 18%, not to speak about investments recession and foreign financial position and potential retreats, probably economic inequality worsening (official statistics years lagging behind) etc.

And why everybody is avoiding to take notice in that publication that among others e.g. Finland and Polish second quartile data is missing, although e.g. Finland is domestically exceptionally timely publishing national output growth statistics (QII domestic estimate 4.8%) timely. By the way, and Finland is excellently and very wisely in the crisis conditions even publishing national output growth on monthly basis, and publishing two different inflation indicators that makes many problems more transparent etc.

The last perhaps makes me think that Finns prudently avoided this 4.8% publication not to be confusingly taken to be more qualified as Poles in the economic policy and governance, and/or not to put their statistics in the same Table with Greeks, at least without confidence intervals? And perhaps Poles refused to give their relevant data as their second quarter growth data is in stability absolutely not comparable to the other member countries in this format – as they superiorly with their high quality economics and economic policy have had by now no dips in this crisis at all.

And most importantly, shouldn’t Commissioner Olli Rehn to start to publish more sophisticated complex (not separate) tables that will conform a bit more to the concepts of excellent top-level modern “political-dismal” economic governance sciences based mainly on Bayesian probabilities and rigorous coordination mechanism theories(e.g. in the format as partly many relevant macro-economic tables in The Economist: growth, unemployment, inflation, and possibly + investments, economic potential, external financial position, stability, inequality etc) and statistics and in the dissemination speed context in conformity to contemporary information technology (not lagging years behind in many sections and containing quality indicators of the data etc)? Just timely to prepare better knowledgebase complex euro-statistics for the prevention of crises and for the implementation of the relevant mechanism – the European Semester, and last not least, to make for the Union public intellectually more interesting reading in this pickled cucumber seasons.

By the way, almost many parallel remarks in the Union financial/fiscal statistics and surveillance field, and need for structural reforms – Jürgen Stark. FT 16 August 2010 „The idea of Euro-paralysis is an illusion”:

And there is a clear mandate for the Task Force on Economic Governance, established by the European Council and chaired by President Herman Van Rompuy, to push forward with reforms. We will see an enhancement of fiscal surveillance, a more stringent implementation of multilateral surveillance to correct excessive deficits and debt, and better instruments for the prevention and resolution of crises.”

Ülo Ennuste,

Tallinn, Estonia

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August 17, 2010 - Posted by | Uncategorized

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