Friday, February 26, 2010

February Snippets

A400M Saved

EADS has agreed a plan with European governments to save the A400M. This is a good thing as, even though C-17s are lovely and carry huge amounts (~170,000lbs), we can't afford more than half a dozen of them... which means that our air bridge might have lots of capacity, but not enough actual planes to use it. The A400M is half the size (~82,000lbs capacity) and half the price of the C-17, so the capacity is less "lumpy" - rather useful with our diverse commitments. We need something to replace the clapped-out C-130Ks and C-130Js - the Hercules was a fine aircraft, but the oddly-shaped cargo space and now rather small carrying ability means it's well past its sell-by date. The A400M will fill that role nicely, giving more lift into the bargain.

Plus, of course, keeping the ability to build large cargo transports is useful if we don't want to have to rely on the US.

Iceland bankruptcy

The Icelandic negotiators have walked away from meetings with the British and Dutch, refusing to pay anything above LIBOR on the €4bn Icesave debt. Since LIBOR measures short-term rates (various components from overnight to 1 year), Iceland is demanding long-term repayments below the yield curve - i.e. they want to turn their defaulted debt into a loan at below normal market rates.

Iceland is unable to access IMF cash until it reaches an agreement on repaying its debts, and - as the CityAM article notes - this walk-out is likely to result in their sovereign debt being downgraded by the ratings agencies. After all, if someone has just walked out on one obligation, wouldn't you want to charge a bigger risk premium to deal with them?

UK General Election

With Q4 GDP now revised to being +0.3% on Q3, and Labour closing the poll gap despite Bullygate, there is a lot of talk about whether the election will be called this weekend. This has to be at least 17 working days in advance, and a visit to the palace this weekend would mean a March 25th General Election.

I've got a bet on this, doubled since the GDP revision was announced, but we shall see. There are good reasons for a snap election - avoiding the Chilcot inquiry (and hence questions about how he slashed defence budgets and vetoed helicopter purchases), no need to present a Budget, the Q2 GDP figures (likely to show a double-dip from the VAT rise and snow hitting sales) won't be out until late April, and the tax rises on April 5th announced previously still won't have kicked in - but the Labour party is still skint and has to fight local elections on May 6th no matter when the general election happens. Plus there's Gordon Brown's personality - he "bottled" the 2007 election, and I don't think he's in any hurry to face the electorate. Could go either way.

My head says that it'll still be May 6th, but my heart says the election will be called this weekend.

- KoW

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