“There is no crisis of the euro,” Liikanen told a public seminar at the Bank of Finland in Helsinki yesterday. “Look at the exchange rate, it’s remained quite stable.”

Liikanen, who is also governor at the Finnish central bank, said it’s up to the euro region’s individual members to keep their public finances in order. The comments come as Finland’s April 17 election saw the country’s anti-bailout party become the third-biggest in parliament and a likely partner in a coalition between Finance Minister Jyrki Katainen’s National Coalition and the Social Democrats.

The euro gained 0.2 percent against the dollar to trade at 1.4675 at 7:07 a.m. in London. It has strengthened 9.7 percent against the greenback this year.

The True Finns, whose leader Timo Soini says taxpayers shouldn’t have helped rescue Greece or Ireland, surged almost 15 points to 19 percent in the election. Katainen’s pro-euro group won 20.4 percent to become Finland’s biggest party for the first time. The Social Democrats, which also opposed bailouts for the two countries, won 19.1 percent.

The European Union won’t prepare an alternative package to aid Portugal if Finland doesn’t participate, European Commissioner for Economic and Monetary Affairs Olli Rehn said yesterday, according to Finland’s state-owned broadcaster YLE.

Euro-Area Yields

Yields on government securities from Greece, Ireland and Portugal reached records yesterday amid speculation the heavily indebted nations won’t escape restructuring.

Ireland’s two-year yield reached a euro-era record 12.08 percent after the European Union said the nation’s debt burden surged the most in the currency area last year. Greek two-year yields have climbed almost 870 basis points this month, reaching 24.45 percent yesterday as investors priced in losses, or so- called haircuts, they may incur in the event of a restructuring. Lars Feld, a member of German Chancellor Angela Merkel’s council of economic advisers, said Greece cannot avoid restructuring its debts.

source from: bloomberg

HERE’S the European crisis in a nutshell:

Got it?

IF YOU’RE like most people you’ve not saved enough for retirement. There’s a good chance your savings and state pension (such as Social Security) will not provide enough income to live in the manner in which you’ve become accustomed for up to thirty years. But don’t feel too bad, many of us have been sold an unrealistic vision of retirement. The idea, for obvious reasons, has taken hold that after forty years of work we are entitled to spend a few decades of our life in leisure. And why not; who wouldn’t want to spend their golden years in a warm climate, playing golf, surrounded by peers who also have ample free time? It’s like being on spring break until you die.

But this is not realistic financial goal for most people. No matter how keen a saver you may be, raising children and maintaining even a modest lifestyle often does not leave enough money to spend a third of your life on holiday. Also, many people are simply not saving enough, forget the endless vacation—they will probably face a large cut in their standard of living after they retire.

From a historical perspective the entire retirement concept it is relatively new. For most of civilisation the average person worked until they became too sick or feeble, or died. According to Dora Costa’s book on the history of retirement, in 1880′s America more than three-quarters of men over 64 and half of 85-year olds still worked. When people did retire they had little wealth and often were dependent on relatives. The growth of retirement was driven by changes in the labour force (a move away from family farms and toward production and services), new social norms (which made retirement the expectation and created a critical mass of retirees), and financial incentives (income from state pensions and private pensions from employers). The introduction of state pensions was significant because it provided retirement income for everyone (including those too poor to save). This allowed elderly people to cease work and not be dependent on their families. To this day, many people rely on state benefits as their primary source of retirement income.

In late 19th-century Germany, Otto von Bismarck first introduced the concept of receipt of a state income after a pre-specified age. But keep in mind—he set the retirement age to 70, well beyond the average life expectancy then. Twenty-seven years later that age was lowered to 65. It’s extraordinary that the 65 retirement age seems to have stuck, or even been lowered, while life-expectancy has steadily increased. This means each generation gets successively longer retirement. Retirement, like other post-industrial inventions like electricity or television, has become a luxury we’ve come to expect and rely upon. Like consumption of other goods, as technology advances and we become wealthier, we expect more and better retirement. This is not entirely unreasonable. Western countries have more wealth than before and better technology to save, invest, and redistribute income. There is no need to go back to the work-until-you-die model. But this does not mean current retirement expectations are reasonable either, especially when so many depend on the government to provide their retirement income.

Demographic pressures on state pensions further complicate retirement planning. Individuals are more responsible than ever for saving and investing for their own retirement. Most people have individual accounts instead of defined-benefit pensions. Saving enough and investing to provide for a long retirement is a complex financial decision with many uncertain variables, like life expectancy and asset returns. State pensions are supposed to provide an income floor, keep you out of poverty, and provide some certainty. But there exists a great deal of uncertainty about how state pensions will continue to be financed. At least if you invest your pension assets in the stock market you have history of price movements to gauge and an ability to adjust your portfolio to your risk tolerance. But if a large chunk of your retirement income comes from the state, which is the case for many Americans and Europeans, it remains unclear how, if and for whom benefits will be cut.

Which is why governments must address their demographic time bombs sooner rather than later. Not only to get their fiscal houses in order, but to re-adjust retirement expectations. A later retirement age, indexed to life-expectancy, should be part of any plan. This will give individuals more certainty about one significant part of their retirement income and the appropriate retirement age. These facts are necessary to make a good decision about how much you need to save. For most people working longer and saving more is their only shot at a comfortable retirement.

AMERICA’S jobs machine is still broken. As the economy slowly recovers, the labour market is struggling to follow suit. Unemployment remains stubbornly high, at 9.9% nationally, and full employment is years away.

To understand the labour market’s slow response to the recovery, The Economist went to Rhode Island, which entered the recession six months before the rest of the country. Its unemployment rate, one of the nation’s worst, peaked at a seasonally-adjusted 12.7% in December 2009 and remained there until February of this year. In Rhode Island, as in many states, cyclical problems including low consumer spending and tight credit markets only added to long-ignored structural issues, like dwindling manufacturing industries, an abyssal budget deficit, a poorly trained workforce, and a graying population. What we found is that unemployment cannot be resolved through national policies alone. State and local governments must also help themselves.

AT VOX, Mirco Tonin and Michael Vlassopoulos describe two kinds of altruism:

• A worker may enjoy contributing to a cause he or she cares about. This joy that arises from the act of contributing is referred to as “warm glow”…For example, a nurse may enjoy to be actively involved improving the lives of sick people.
• A worker may be directly concerned about the well-being of others. Such individuals are referred to as “pure altruists”. For example, a nurse may be interested in the fact that patients’ health improves, regardless of whether he or she has a personal role in this.

And they discuss their research:

We find that women’s effort is positively affected by an environment that induces warm-glow altruism, while there is no additional impact due to pure altruism. In particular, in the treatment condition eliciting warm-glow altruism, women increase their productivity between the two sessions by an additional 10% compared to women in the control group.

On the other hand, we find no statistically significant differences in productivity changes between the control and any of the treatment groups for male subjects. This unresponsiveness suggests that pro-social preferences are less relevant for men than for female workers in our sample. This finding is consistent with other research on gender differences in social preferences…

The finding of a gender difference in pro-social behaviour in a workplace setting may have important implications for understanding women’s economic outcomes. If women are indeed motivated by a concern for the social cause pursued by the organisation they work for, then they will be more likely to enter occupations and sectors with characteristics that engender pro-social behaviour (such as health, education and social care) and will require less monetary compensation. Gender differences in pro-social motivation might therefore help explain the observed occupational segregation by gender that accounts for a substantial portion of the overall gender earnings gap.

It’s an interesting result, but one should be very careful in drawing conclusions about occupational segregation. In particular, it’s worth pointing out that gender segregation is self-reinforcing. Fields with a large share of female workers will feature less on-the-job discrimination and harrassment, benefits packages will better incorporate female priorities, and so on.

Click on grapic to enlarge.  Source: Scott Hodge from Tax Policy Center estimates.

Images: 

AMERICA’S economy performed just a little worse in the first quarter of 2010 than the Bureau of Economic Analysis previously estimated. Economists were expecting a slight upward revision to growth in the BEA’s second estimate of first quarter GDP, from the initial 3.2% expansion to 3.4%. Instead, growth was nudged downward, to 3.0%. The American economy expanded in the fourth quarter of 2009 by 5.6%.

As disappointing as the downward revision is the source of the changes to the estimate. Key growth components like personal consumption and spending on business equipment contributed less to the first quarter performance than originally estimated. This was partially offset by a better than initially reported number for inventory investment. Inventory changes typically boost output figures early in recovery but are not a source of sustainable GDP growth. Both imports and exports were revised upward, making for a wash for net growth.

The bigger picture is of an economy working to return to self-sustaining growth. Residential investment and state and local government spending continue to be a drag on growth. Inventory changes and federal spending have offset these effects, but their contributions will wind down throughout 2010. And that will place the burden of growth on private households and businesses. Expansion is expected to continue at a near-3% pace through 2010. But there are real risks to this outlook. Household balance sheets remain in bad shape, and savings rates are once again falling. Without big improvements in labour markets, it may be tough for consumers to keep up spending. Meanwhile, troubles in Europe and an appreciating dollar could dent export growth. And with home prices falling once more, recovery in housing markets could be farther off than anticipated, and residential investment could prove more of a drag than initially foreseen.

Still, these are small revisions to what was a generally good first quarter GDP report. The American economy has now expanded for three consecutive quarters, as of March of 2010. New reports on durable goods orders and manufacturing activity show continued growth in April. This will slowly but surely translate into rising employment, which will ultimately feed back to rising spending and investment.

America’s recovery remains young and fragile. Still, many developed nations would be happy to have a nine-month performance like the one the American economy has managed since returning to growth.

HOPEFULLY, you’ve had a chance to click over to the latest Economist debate, on the motion: This house believes the euro area will fragment over the next ten years. There have been some very good contributions from Martin Feldstein and Charles Wyplosz. Tomorrow will feature commentary from Barry Eichengreen, with Daniel Gros to follow on Monday. I think Mr Wyplosz is on solid ground in arguing that the euro is likely to endure. Exit from the currency zone by a southern European economy would be chaotic and potentially economically devastating (with the benefits of currency depreciation offset by capital flight, financial crisis, increased borrowing costs, and inflation). And European leaders have so far proven willing to commit vast sums to keeping to the area together. In my mind, the most likely scenario for a break-up is one Mr Feldstein posits, in which German citizens decide they have had enough and opt out of the currency. But that, too, strikes me as an unlikely outcome.

So far, readers agree with me. The numbers are running 59% against the motion to 41% for it. The punters over at Intrade see it the same way. What do you think? Have your say in comments here and at the live debate.