Chart of the Day- Interest Rate Spreads

The incentives for governments to stay current on what they owe are hard to measure, but financial market indicators provide a way to gauge investors’ perceptions of the willingness to repay debt. International investors became reluctant to lend to the troubled European governments, especially Greece, as indicated by interest rates on government borrowing. In particular, interest rate spreads for these countries’ debt relative to safer German issuance rose dramatically. Chart 3 shows 10-year bond spreads—the difference between the interest rate on each country’s 10-year bond minus the rate on Germany’s relatively safe 10-year obligations. Movements in these spreads in recent months show that international investors required a much higher rate of return to buy each country’s debt.

Suppose investors can buy a German bond at an annual interest rate of 4 percent with practically no risk, or a Greek bond that has a 3 percent chance of default. Investors will go with the German bond unless the Greek government offers an interest rate around 7 percent—a spread of about 3 percent—to cover the probability of default. Such a relationship can’t be expected to hold exactly in the data, but interest rate spreads can still be used to learn about the likelihood of default.[2] Chart 3 shows that in May 2010, investors’ perceived risk of default increased drastically for Greece and rose by a lesser degree for the other four countries

Bosnia and Herzegovina: Selected Issues

Bosnia and Herzegovina: Selected Issues

Contents

1. Post-Crisis Growth Prospects And Supporting Policies
2. External Sector Stability and Competitiveness
3. Cyclical Developments And Fiscal Policy Design
4. The Case for Pension Systems Reform

Albania - V Shaped Recovery ahead

IMF Article IV Staff Report on Albania is released;

Outlook: The baseline is for a V-shaped recovery, albeit to a lower potential growth than before the crisis, with low inflation and external imbalances narrowing. However, downside risks are significant
and elevated budget financing requirements under unchanged policies will crowd out private investment,thereby undermining potential growth over the medium term.

Policy Discussions: A tighter fiscal stance with improvements in productivity and competitiveness is a superior adjustment strategy, and consolidation could serve to enhance, rather than damage, growth
prospects. The authorities’ fiscal adjustment strategy is based on over-optimistic revenue and growth expectations. There was agreement of the benefits of a clear, credible, and monitorable fiscal rule to safeguard fiscal sustainability. Monetary policy should remain cautious and supervisors remain vigilant, given heightened regional uncertainty. Improvements in the business environment are critical to harvest the benefits from closer EU integration.


Links on Albanian data:
Ministry of Finance
Bank of Albania

Ministry of Economy, Trade and Energy

Institute of Statistics

Economic Literacy with Cartoons

One way being tried to improve economic literacy in Poland;

Last year, for instance, the "inflation" prize went to a three-page comic strip about a king who was so prodigal when it came to reimbursing dragon-slayers for their services with his daughters' hand in marriage that soon an apple would set you back twelve and a half units of royal female progeny.Presenting economic principles in quirky comic form has clearly struck a chord, especially with children who adore the genre. Economists the world over bemoan their compatriots' dismal grasp of the dismal science. Implemented on a large scale, FOR's idea could help fix that.

Related:
Civil Development Forum
Polish Central Bank's Economic Education Portel;

* Distance learning - comprehensive multimedia e-learning courses, accompanied by illustrations, animation clips, and films.
* Teacher's Centre - a service designed for teachers of economics or economics-related subjects at lower and upper secondary schools in Poland. It contains teaching aids in the form of ready-to-use lesson plans, and practical tips on efficient and unconventional methods of conducting lessons.
* Fun - numerous decision-making quizzes, skill-enhancing and strategic games, crossword puzzles, and jigsaws. This part of the portal has been created for those who want to acquire basic information on economics while having fun.
* Knowledge Mines - made of two parts: the Virtual Library, and the glossary of economic terms. The Virtual Library contains electronic versions of academic publications, including the Bank's publications, as well as publications by external institutions co-operating with NBPortal.pl. The glossary features over a thousand entries, explaining the meaning of economic terms.
* News - both business headlines and larger articles and papers, presenting current economic and business issues in an intelligible way.