Euro woes continue as Grexit edges closer to reality: Can the currency survive? Photo credit: Matze Ott

The background

Commentators, central bankers and bookmakers alike think a Greek exit from the European Union’s monetary union is a sure thing. The indebted nation has been fumbling towards an exit ever since introducing some of the most severe austerity measures any euro nation has faced two years ago and what was once talked about in hushed tones is now on everyone’s lips.

Greece’s future in the euro rests on the outcome of its upcoming June 17 election, a vote that EU officials and commentators are seeing as a referendum on Greece’s remaining in the monetary union. If Greek voters back politicians who support austerity and therefore the rescue package as determined by the troika (the European Commission, the European Central Bank, and the International Monetary Fund), Greece may remain in the euro; if they vote against, Greece is out.

Ditch the euro? The Associated Press reports that some Greek are rejecting the euro before it rejects them

But Greece isn’t the only nation in the euro, a monetary union cobbled together from very different countries with very different economies, in debt – Spain, Italy and Portugal all seem poised for a fall, as well. If Greece goes, can the single currency survive?

The euro is doomed

“The euro is doomed to fall apart: no, not because I’m some nasty man in UKIP but because the basic idea was such a terrible one,” declared Tim Worstall, Senior Fellow at the Adam Smith Institute in London, at The Telegraph after the Greek elections on May 6 failed to deliver a mandate to Greek Parliament to persist in austerity. Worstall continued, “[I]t’s a blitheringly stupid idea to try and push countries into the same currency just because they happen to be next door to each other.”

Grexit is a moment of truth for euro

Noting that there is “no formal mechanism” for leaving the single currency, The Economist claimed that Grexit is going to cost European banks, firms and taxpayers a lot of money, not to mention the worries about contagion. A run on the Greek banks is a distinct possibility. Greece, therefore, is bringing forward a “moment of truth” for the monetary union, forcing the “financial re-engineering of Europe” that “is a prerequisite for the euro to survive”.

Eurozone credit downgrade likely

If Greece doesn’t come up with a stable, austerity-backing government in this next election, there is a greater than 50 percent chance that all 17 nations in the monetary union will face a credit downgrade, ratings agency Fitch said last week.

Grexit devastating for Greece – manageable for rest of euro

French bank Societe Generale, in a note issued by its economics team last week, claimed, “The direct costs of Greek euro exit would be huge for Greece, but manageable for the rest of the euro area. Our concern is contagion.” The bank was positively optimistic, declaring that a “speedy and forceful response” would be required to avert euro-wide disaster, but that luckily, “an extensive toolbox is already in place”. That “toolbox” could be further strengthened by allowing the European Financial Stability Fund, the mechanism that would handle bailouts, to become a bank in its own right, with access to European Central Bank funding. Too bad politicians don’t seem to be up for that.

ECB must be prepared to step in with funding

With contagion a big concern with a Greek exit, the European Central Bank must be on hand to stop the infection, wrote John Mauldin at Minyanville.com: “If and when Greece exits the euro, the ECB must be prepared to step in with massive funding of peripheral-country banks and sovereign debt. That is not within their charter today, but when the euro is at total risk, that is the only way to save it.”

More on the Greek debt crisis

• Grexit fears mount as coalition talks fail
• EU elections: The end of austerity?
• Markets jittery after French poll
• Lessons from the Greek election

Mark Zuckerberg, 28-year-old Facebook founder, is a rich man after social network hits $38 a share. photo: deneyterrio

The background

On Friday, 28-year-old Facebook founder Mark Zuckerberg remotely rang the bell for the start of trading at Nasdaq from his Silicon Valley fortress – signalling the social networking site’s first foray into the world as a publicly traded company. Trading as “FB”, and with the largest technology company initial public offering (IPO) in history at $100 billion, the individual share price stands at $38, up from the $28 to $35 offered earlier in the week.

So, is the share price worth it? The hype and the company’s uncertain future has many people worrying.

Overpriced and overvalued?

The Guardian reported that “the hype surrounding the launch has drawn scepticism from some analysts”. The paper flagged up comments from Sam Hamadeh, founder of the analysis firm PrivCo, saying he “has argued that Facebook is worth a fraction of the estimates”. On the company’s website, Hamadeh says that at $34 to $38, Facebook is “overvalued”, citing Facebook’s “slowing growth”. The Guardian’s Dominic Rushe confirmed that in its most recent quarter, Facebook’s growth had slowed from the previsou quarter (to 44 percent), and noted that Facebook would need “to take a quarter of the online ads in the entire world to justify its present price.”

Analysts sceptical about Facebook’s growth potential

Many commentators are sceptical that Facebook can continue to maintain a good return on investment for its shareholders. The Computer Business Review claimed that Facebook is “immature when it comes to advertising, which is problematic since it’s where the majority of its revenue come from”; other have noted that a real challenge for Facebook will be maximising advertising revenue without alienating users. Forrester analyst Nate Elliott wrote on his blog: “We wish… that a new focus on becoming a grown-up business would inspire the company to put even half the energy into serving advertisers that it does into serving users. But we doubt Zuckerberg’s going to wake up any day soon having acquired a taste for advertising, or even a proper understanding of it.”

Investors running for the hills

Dominic Rushe also observed that “Facebook’s early investors are some of the most successful in Silicon Valley, and on Wednesday a lot of them decided to dump a lot more shares”, which makes the environment seem risky for new potential investors.

A hole in their business model? No mobile monetization plan

By their own admission in the company’s stock market prospectus, Facebook cannot make any money from their 425 million mobile users due to the lack of advertising on this platform. In the prospectus, they say that if Facebook was “unable to successfully implement monetization strategies for our mobile users,” the company’s revenue growth could be harmed. The Guardian observe that “Life moves quickly online. Facebook is a product of the laptop/PC age. It’s not yet proven it can make it in the mobile era”, whilst the LA Times agree, saying “the absence of a strong mobile advertising platform could prove to be the social network’s Achilles’ heel”.

How Zuckerberg reacts to float is key

The Guardian argued that the fate of the company’s future relies on how Mark Zuckerberg, the company’s largest shareholder, reacts to the flotation: “Wall Street investors soon tire of wunderkinds who don’t deliver quarter after quarter after quarter.” Of the decision to open the Nasdaq from Silicon Valley, they say “it’s clear where his loyalties lie”. It remains to be seen whether the company will stay true to its “Move Fast and Break Things” hacker culture mantra after its flotation.

Potential upsides for investors

Despite the negative hype surrounding the flotation, PrivCo also cite Facebook’s “user stickiness”, their huge network effects, the potentially huge untapped market of “500 million internet users” in China, and the Facebook App Centre as unmodelled areas for growth in the future. This, combined with the fact that the company is only 8 years old, could tempt investors.

More on Facebook

• Will Facebook destroy Instagram?
• Facebook to float lower than $100 billion
• Facebook and the loneliness question
• Is Facebook fatigue felling the social media giant?

JP Morgan: $2 billion trading loss photo: DragonFlyEye

The Background

JP Morgan chairman and CEO Jamie Dimon has kept his job and $23 million pay package in the wake of a $2 billion trading loss. Dimon survived an attempt to oust him from his positions at the head of the bank thanks to a closer than expected shareholder vote at the company’s annual meeting.

The CEO apologised for the trading disaster at the meeting: “This should never have happened. I can’t justify it. Unfortunately these mistakes were self-inflicted,” said Dimon, reported CNN. The bank’s chief investment officer, Ina Drew, quit on Monday in the wake of the massive loss.

Despite the $2 billion error, JP Morgan is still expected to report a profit this financial quarter. But Dimon’s troubles are far from over. The FBI and Justice Department have launched an investigation into whether the trading loss is linked to any criminal wrongdoing.

Michael Tomasky: Dimon should quit

If JP Morgan had enough capital to use on risky trades, why didn’t they use it to help the ailing economy, such as lending to businesses? “I’m no expert on J.P. Morgan’s business, but I’ll hazard an educated guess that maybe there was more money to be made gambling in the derivatives casino than straightforwardly and boringly lending money to businesses,” wrote Michael Tomasky at The Daily Beast. And this is the issue with the current banking system: it encourages risk and offers no incentive for “civic obligation or civic morality”. There’s no chance Dimon will actually take responsibility and quit, said Tomasky, “but maybe someday someone in his position will… And maybe, eventually, we’ll become a society again, not just an amalgamation of consumers.”

“If the CEO is also the chairman, as is the case here, then Mr. Dimon is effectively in charge of monitoring his own performance. The stakes are too high to continue where an all-powerful CEO is his own boss,” said shareholder Lisa Lindsley at the JP Morgan annual meeting, reported The Washington Post.

Put Dimon’s apology to shareholders in context

Dimon has recently slammed Democrats for creating a “climate of resentment towards successful people” and described criticism of big banks as “infantile”, pointed out James Moore in The Independent. “Set against this sort of rhetoric, Mr Dimon’s apologies don’t so much look like expressions of regret as they do the first phase in a very deliberate and carefully crafted damage-limitation exercise whose ultimate aim is to keep him in his job,” Moore said.

Dimon still trying to limit regulation

According to Michael Hiltzick at The Los Angeles Times, the JP Morgan CEO’s defence essentially amounts to: “Hey, everybody makes mistakes — sure, we lost $2 billion, but we’ve still got billions more, and we’ll figure out this one ourselves without the need for any further regulations, thank you.” But in fact, argued Hiltzick, the $2 billion loss demonstrates the pressing need for the exact regulation Dimon wants to avoid: “The only way to make this sort of risk-taking safe for the financial system is to make it illegal in the first place.”

How much did the regulators know?

Writing in The Christian Science Monitor, Ron Scherer explored how much US financial regulators Office of the Comptroller of the Currency (OCC) and the Federal Reserve Bank of New York knew about JP Morgan’s impending losses. “In the future, the OCC has indicated it will be closely monitoring JP Morgan as well as other financial institutions,” Scherer wrote.

More on finance

• Greek euro exit fears grow
• Warren Buffett has prostate cancer
• Facebook to float lower than £100 billion

Is Greece heading for a euro exit? Photo credit: Stephanie Jones http://flic.kr/p/awo1jA

The Background

Greece remains in political deadlock after negotiations failed to produce a coalition government. Parliamentary elections saw a significant drop in support for mainstream parties New Democracy and Pasok as voters expressed their fury at the stringent austerity measures that are a condition of Greece’s EU bailout deal. Anti-austerity far left coalition Syriza surged to second place.

The deadline for forming a new government is 17 May; if talks founder, this will trigger fresh elections. And commentators predict the result would be greater support for anti-austerity parties – making the prospect of a Greek exit from the euro ever more likely. The Financial Times reported that European central bankers have started talking publically about the consequences of Greece leaving the single currency.

According to The Guardian, 78.1% of Greeks want any new government to retain the euro at all costs, despite the prevailing anti-austerity mood.

Is this the end of austerity? Read more at The Periscope Post.

Bailout plan was always doomed to failure

“The complete fragmentation of Parliament and the power vacuum that has followed this process should hardly come as a surprise,” wrote Nikos Xydakis at Ekathimerini. The punitive conditions attached to the EU bailout deal meant the rescue plan was “so one-sided and so tightly organized in terms of scheduling that no country would have been able to implement it without exhausting its people”.

The election result does not show that Greek voters are anti-eurozone, wrote Prince Pavlos of Greece at The Periscope Post: “They have decided to be anti-establishment and punish the traditional two parties and now just don’t know where to look for guidance and security.”

Greece political crisis part of wider austerity antipathy

“Greece’s problems are merely an intense manifestation of an allergy to austerity which is breaking out everywhere,” said a Guardian editorial. A Greek euro exit would cause chaos in the country; “but when the pensions of older Greeks have already been cut by a quarter, and when half their young compatriots are unemployed, it is getting tricky to argue that things would necessarily be worse.”

Default would be dangerous but not necessarily disaster

“I would risk leaving the euro if I were Greek,” wrote Bill Emmott in The Times (£). “Greece’s economic predicament is so bad that it is hard, probably impossible, to see how it can continue on its current course.” Leaving the euro and defaulting on sovereign debts would certainly be “dangerous” for Greece, but at least it would allow the possibility of international investors returning to the country, Emmott argued.

Greek exit could have ‘horrible’ consequences for Eurozone

“For Europe’s banking system, once the Rubicon has been crossed of a country leaving the euro, once it is demonstrated that there is an exit, all sorts of horrible things follow,” wrote Robert Peston at the BBC. One possible consequence is that companies would swiftly withdraw money from banks in countries perceived to be at risk of following Greece’s exit example. “The most likely outcome is that the banking system of the eurozone would become significantly more nationalised, kept alive on the drip of exceptional central bank credit. This is neither healthy or sustainable,” Peston said.

More on the eurozone crisis

• EU elections: The end of austerity?
• Markets jittery after French poll
• Lessons from the Greek election

A helping hand for working parents? photo: SanShoot

The Background

Government plans for a shake-up of Britain’s parental leave system are proving controversial – even though the exact nature of the change has yet to be finalised.

The move towards more flexible parental leave was announced in the Queen’s Speech, and will be part of a new Children and Families bill. It is expected that mothers will be able to transfer some of their maternity leave entitlement to their partners.

Currently, women are entitled to take nine months paid maternity leave, with another three months unpaid; fathers can take two weeks of paid paternity leave. A ministerial consultation on the subject proposed extending paternity leave to six weeks, while reducing automatic paid maternity leave to five months, reported The Daily Mail; “the couple will then be allowed to divide up a further seven months of parental leave between them.”

Read more about how the Queen’s Speech got the commentariat talking at The Periscope Post.

A triumph for equal rights

“This barely noticed ingredient in the Queen’s Speech will do much more for equal rights than gay marriage,” wrote Mary Ann Sieghart in The Independent. Currently, women outperform men at university and in their early career years; this stops as soon as they have children: “Employers are worried that women will take ages off work when they have babies or not come back afterwards, so they either don’t hire or don’t promote them,” said Sieghart. Extending paternity leave will therefore address this discrimination.

Not appropriate in the current financial climate

“Since we are in a doubledip recession, anything that loads more costs on to businesses is a bad idea,” said Eleanor Mills in The Times (£). “Extending maternity/paternity rights in this climate seems not just a bit self- indulgent — as it did last January — but seriously flawed.” According to Mills, the British maternity leave system is already too generous and can be ruinous to small businesses.

Benefits outweigh the costs

“Parental leave may sound like a burden, but the social benefits of happy babies and close-knit communities extend to us all – men and women, bosses and employees alike,” wrote Jemima Lewis in The Telegraph. If parental leave was shared between mother and father, women would need to take less time off work, which would be less disruptive to employers than long blocks of maternity leave.

More on UK politics

• Queen’s Speech: Was that it?
• Clegg and Cameron under fire
• Britain back in recession

Eurozone crisis: Austerity bites photo: Tax Credits

The Background

The Greek and French election results have raised serious doubts over the future of austerity policies in the eurozone – and some commentators are questioning whether the euro will survive the latest turmoil.

Socialist Francois Hollande saw off incumbent Nicolas Sarkozy in the French presidential elections. A major part of Hollande’s campaign centred on pushing through growth stimulation policies and renegotiating the austerity-centric European budget discipline treaty his predecessor had agreed with German Chancellor Angela Merkel.

Read more about the French presidential elections at The Periscope Post.

In Greece, voters showed their displeasure at conditions imposed as part of the EU bailout deal by flocking en masse to anti-austerity candidates in the latest parliamentary elections. Pro-bailout party New Democracy came first but took just 19 percent of the vote, while leftist anti-bailout coalition Syriza surged into second place. Centre-right New Democracy has been unable to form a coalition, raising the prospect of new elections and further political turmoil. “We are going to experience some difficult days and months ahead,” wrote Alexis Papachelas at Kathimeneri. “This is what always happens when a rotten system collapses without something replacing it.”

Learn more about the austerity measures dividing Greece at The Periscope Post.

Election results are a reality check for the EU

“The euro has always been an anti-democratic project,” wrote Simon Heffer in The Daily Mail; now, EU leaders are facing a reality check over their contempt for democracy. Rich nations are tired of bailing out those they perceive as less hard-working, said Heffer, and poorer countries deeply resent the stringent conditions attached to financial bailouts. “If they continue to force austerity down the throats of crippled European economies, they will have revolution on their hands,” predicted Heffer.

Austerity is inevitable, voters need a reality check

“The weekend’s elections show that a great many voters are now happy to suspend logic and go for the soft option, which will of course cost them far more dearly in the long run,” lamented a Telegraph editorial. According to the editorial, any eurozone plan is necessarily dependent on Germany’s willingness to bail out struggling countries – and that willingness comes with austerity strings attached. “Why should the German taxpayer, in whom the concept of prudence is deeply ingrained, continue to write cheques for people who are not prepared to accept the consequences of their own fiscal irresponsibility?”

Austerity alone does not work

“Economic austerity is a dangerous, self-defeating intellectual fad,” wrote Eugene Robinson at The Washington Post – so hurrah for Greek and French voters, even though the result probably comes too late to help Greece’s economy. “Putting a chokehold on government spending at a time when economies are just sputtering back to life — as the austerity fetishists have tried to do in Europe, and as Republicans solemnly pledge to do in the United States — is monumentally self-defeating,” Robinson insisted.

The future for the euro looks bleak

“Unless the terms of Greece’s bailout are made less onerous, it is heading for the euro exit door,” said Larry Elliott in The Guardian. The austerity diet force-fed to voters in the wake of the financial crisis has been an economic and political disaster. And the situation is now so dire that EU leaders no longer have the luxury of taking a wait-and-see approach: “Europe is heading deeper into a double-dip recession, the banks are on life support, and there is nothing resembling a Plan B as opposition to austerity stiffens.”

More on the eurozone crisis

• Markets jittery after French poll
• Athens: A view from the rubble
• Greece’s second bailout

Titanic II: Unlikely to be made of Lego photo: Bosta

Billionaire Clive Palmer has announced plans to build Titanic II, a full-size replica of the doomed liner. As the dust settles after the 100th anniversary of the sinking of the famous ship, the Australian property and coal magnate said the new Titanic will set sail in 2016.

Unlike the original ship, which was built in Northern Ireland, Titanic II is set to be constructed in China, and will be escorted on its maiden voyage by the Chinese navy, reported Bloomberg.

Will it sink? Over 1,500 people lost their lives after Titanic struck an iceberg in 1912. Perhaps inevitably, the most pressing question over Titanic II is: will it sink? “It will be every bit as luxurious as the original Titanic but of course it will have state-of-the-art 21st Century technology and the latest navigation and safety systems,” said Palmer, reported the BBC. But the Australian billionaire did sound a note of caution: “Of course it will sink if you put a hole in it,” Palmer reminded reporters.

Titanic II is also the title of a 2010 straight-to-video film, which sees members of a doomed Titanic replica fight to save the ship from sinking. Presumably Clive Palmer has not seen the movie. Watch the trailer below.

A tribute? Palmer described the project as “a tribute to the spirit of the men and women who worked on the original Titanic,” according to The Daily Mail. The announcement comes after concerns were raised during the Titanic anniversary over “cashing in” on the ill-fated ship, as The Periscope Post reported.

Interesting timing. Australia’s fifth richest man “made the announcement on the same day he revealed his hopes to contest the next federal election in the Queensland seat of Lilley, held by Deputy Prime Minister and Treasurer Wayne Swan,” pointed out The Sydney Morning Herald. “Quite an incentive for votes, don’t you think?” mused Matt Brian at The Next Web.

Trouble ahoy? “His desire to see his version of Titanic sail past the Statue of Liberty alongside a Chinese naval escort could raise a few eyebrows in the U.S. where Mr. Palmer has previously accused the Central Intelligence Agency of funding clandestine campaigns in Australia,” said The Wall Street Journal.

More on Titanic

• Is cashing in on the Titanic disaster a bad thing?
• Titanic: The anniversary
• Was Titanic sunk by the moon?

Anthony Haldane at INET Berlin.

Anthony Haldane, Executive Director for financial stability at the Bank of England, is one of the very best speakers on financial matters. Presenting ”Creating a Socially Useful Financial System” at the Institute for New Economic Thinking’s (INET) Paradigm Lost Conference in Berlin, 14 April 14, he was at his wise and witty best. Consider: “Return on capital is no longer investors’ priority. Return of capital is.”

Or: “While bank performance has fallen off a cliff, executive pay remains close to pre-crisis Himalayan heights.”

He even opened his presentation on a slide of a very large bull elephant seal: “Elephant seals have got too big for their beaches… Large males fight for the right to mate with a whole beach full of females. For elephant seals it is, quite literally, winner-takes-all. And the key to winning is simple – size.” He equated the mentality of the elephant seal with financial firms — and their obsessive desire to “keep up with the Goldmans”.

Trading at the speed of light
The heart of the speech was an eloquent review of the financial arms race that led to the credit crisis and continues to threaten markets today. A new and very interesting threat has emerged: Speed. “Over the past decade, trading in financial markets has undergone a technological revolution. The frontier of this revolution is defined by speed,” Haldane said. “A decade ago, trade execution times were measured in seconds. A few years ago, they were measured in milliseconds. Today, they are measured in microseconds.  Tomorrow, it will be nano-seconds or pico-seconds.”

Trading speeds it seems played a key part in the so-called flash crash of May 6 2010 (or “The Crash of 2.45”), in which the Dow Jones plunged a 1000 points and then gained a 1000 –  all in a few instants. High speed automated trading caused the entire US system to seize. Since then, Haldane sanguinely remarked, there have been “a large number of mini flash crashes in markets as varied as Japanese yen and cocoa futures.”

A new techno language
None of that made me feel any better; and it was notable through this section that Haldane’s terms changed. The languid references to “Darwinian tournaments”,  and Alice in Wonderland’s “Red Queen Race” of the opening sequences of the speech, gave way to a very different techno-babble now – terms such as “quote stuffing”,  “zero latency” and “message traffic congestion”. As the terms became more technical, more silicon, it became clear that human control over the trading, as over the language, is becoming less and less; rather the technology is moulding the language.

The great threat of a market crash engendered by computer trading is become more likely. And with that something more disturbing evolved from his remarks – the realisation that none of this market making is actually real any more – it can’t be when trades are happening in “pico-seconds”. It all takes place in a silicon space. Haldane actually recognised this in his words: “The mirage of liquidity proved just that. That evaporation appears to have played a key role in propagating stress during the flash crash.”

It is an extraordinary phrase, “the mirage of liquidity”, and it does exactly capture both the nature of automated markets and also why we are now in a new phase of finance.

For all the delightful references to peacocks, elephant seals, and Darwinian tournaments, we are no longer in a world driven by recognisable natural forces, such as the survival of the fittest. We are in a new world that does not recognise the blind watchmaker that does not obey Darwinian rules, that like, The Terminator, just keeps coming on, in trades “faster than the speed of light”. These are new areas where regulators do not hold sway.

Haldane’s speech opened with a Darwinian curiosity, the great survivor, the elephant seal alone on the beach. Somehow that seemed a telling image for a regulator. But his phrase the “mirage of liquidity” will haunt me more.

Haldane at INET in Berlin

To read a full text of Anthony Haldane’s speech, visit VoiceGig.

Lucy Kellaway: Over 50s should retire. Photocredit: JLA

There aren’t enough jobs in the the world. Young people are facing unemployment in huge numbers: within a decade, there will be 1.2 billion youngsters looking for jobs – but only 300 million jobs to go around. This has been a major issue at the World Economic Forum in Davos, which says that we are “sitting on a social and economic time bomb.” In some areas of the Arab world, 90 per cent of 16-24 year olds are unemployed; in the US it’s 23 per cent; in Spain almost 50 per cent; in the UK 22 percent. Some call it the “lost generation.” The WEF has called for essays answering the question – and Lucy Kellaway has provided a contentious answer.

So what’s the deal? 

It’s a real problem, said Tim Weber on the BBC. If you’re unemployed for a long time, you’ll be “less employable”, and will lack skills; and you’re more likely to have “long-term health problems.” It can also “cause social unrest.” There are many reasons for this – automation, structural problems; the education system, lack of life skills; cultural issues. But perhaps the best solution lies in small steps: the Ten Programme, which encourages members to employ 10 youngsters and train them up.

What was Kellaway’s solution?

A succint one: “Resign,” she wrote on the BBC. She kept meeting youngsters keen for a job in journalism, and had to face the “inescapable, awkward truth”, that “the real reason they can’t do my job is that I’m doing it myself.” The only solution is to make anyone over 50 “walk the plank.” She’s going to hang on to her own job “for dear life,” though. She said that it was better to be unemployed at the end of your life than at the beginning; and that her generation had had it too good for too long. “I’m not saying I like the idea. I’m just saying I believe it.”

But it’s more complicated. 

When you get old, said Theodore Dalrymple on The Telegraph, you like to think you’re “irreplaceable.” One thinks that young people are so “pushy.” But actually, it will be quite nice to retire – no more work, being able to do things you’ve always wanted to do. We’ve become used to the idea that we can’t be dismissed “just because we have reached a certain age.” But the young “need their chance of employment.” What it boils down to is “are the old or ageing selfish for continuing to work? Or are they selfish for having retired too soon? Now one, now the other; both and neither. The problem is that the circle cannot be squared, not even with age and experience.”

What are the other reactions? 

Telegraph Columnist Daniel Knowles was not impressed. He tweeted that he was “screaming … at the screen right now for this drivel from Lucy Kellaway.” Businesswoman Fiona Spencer ‏ @fifi1051 added: “Hopefully Lucy Kellaway will take her own advice but no doubt she will still be able to pay her bills.”

More on social issues

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• House of Lords rebellion over benefits cap
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Chancellor George Osborne: Under pressure? Photo credit: Paul Toeman

It’s official: Britain is back in recession. New figures from the Office of National Statistics (ONS) show that GDP shrank by 0.2 percent between January and March 2012. The UK has now had two consecutive quarters of negative growth, the definition of recession.

According to The Guardian, the news has shocked City analysts, who had expected a small return to growth. In the face of a double-dip recession, will the UK government back down from its economic austerity drive or stick to the plan?

Not time to panic. “These figures are slightly worse than many expected, but the fact that the UK is now technically back in recession should not detract from the underlying reality, which is very much as predicted,” wrote Stephanie Flanders at the BBC. According to Flanders, it has been clear for some time that the UK economy is “struggling to gain momentum”, and that recovery is likely to be weak.

Government under pressure. “This is a terrible blow for the coalition, which now stands accused of over-cooking austerity and thus killing off the tentative recovery that was under way when Labour left office almost two years ago,” wrote Larry Elliott on The Guardian’s Economics blog. Of course, said Elliott, the blame cannot be placed squarely with Chancellor George Osborne, as he inherited an economy with a huge deficit – but Labour will still seek to make political capital from the news. And the future looks uncertain: “Slow growth makes it harder for the government to hit its deficit-reduction targets and may well result in the UK having its credit-rating downgraded,” Elliott wrote.

Osborne must hold fast. “Stagnation in the UK economy is not the result of government policy as such, but is part of the adjustment process to the financial crisis,” argued Jeremy Warner in The Telegraph. Changing course now would be a mistake, whatever the clamouring from Labour: For the moment, the UK still has the confidence of markets; it’s being given the benefit of the doubt in that, rightly or wrongly, investors believe it can eventually get on top of its debts.

Hope for the future? “The main cause of the slump in the first quarter was a sharp dip in construction. But other parts of the economy including services and manufacturing remain in much better shape that it was reasonable to hope given the current state of the global economy,” pointed out Alex Brummer in The Daily Mail. Nevertheless, there are still difficult times ahead, due in part to the ongoing eurozone crisis and rising oil prices. According to Brummer, Osborne now needs to take the initiative and take advantage of Britain’s low borrowing costs by investing in infrastructure: “This government by sitting on its hands risks looking like a one trick pony with only cuts in borrowing on its agenda.”

More on economic woes

• Charity tax cap: The backlash
• UK on negative watch
• Is the UK economy doomed?