Confidence best built without tricks 17 Nov 2011 Confidence surveys do well at predicting near-term trends, but economic moods mostly reflect economic reality. Emotions matter more in finance. Still, the best way to calm today’s roiled markets – and raise low animal spirits – is for the euro zone to address its real problems.
Ethical economy: euro caught in historic battle 16 Nov 2011 The current crisis is not simply about finance or even politics. It’s about the direction of history. The great forces that brought Europe together, fear of war and hope of prosperity, have lost strength. Something more relevant is required to preserve the euro from nationalism.
French election could help propel reform 16 Nov 2011 The presidential contest could waste precious time – and scare investors – by unleashing rival populist proposals. But if Sarkozy and Hollande agreed that more growth is needed, the debate on the how best to reform the economy would be productive for the nation and the euro.
Spanish debt storm piles the pressure on Rajoy 16 Nov 2011 At current yields, Spain would need a primary surplus of 1.8 percent just to keep its debt/GDP stable in the long run, according to a Breakingviews calculator. Madrid is forecast to have a deficit of 3.5 percent in 2012. The next PM will need to re-establish confidence fast.
U.S. economy still blessed with loose policies 15 Nov 2011 Unlike Europe, the United States has avoided crushing austerity and tight monetary policy, while tapping housing agencies for added support. That has juiced growth, as Tuesday’s data indicate. Yet it also makes a potential hit to Uncle Sam much bigger if the tactics don’t work.
Greek standoff has explosive potential 15 Nov 2011 The new coalition’s second party says it would be humiliating to sign a declaration of support for the latest bailout as demanded by the European Commission. If neither side backs down, Athens will be heading for a disorderly default the rest of Europe is ill-prepared to contain.
India is still rising, but it is not shining 15 Nov 2011 The World Economic Forum - best known for its Davos shindig – is holding a summit in Mumbai for the first time. The rhetoric from participants suggests the “India Shining” story is still burning brightly. But the refrain is failing to resonate. The numbers tell a different story.
Noose set to tighten around Syrian economy 15 Nov 2011 Not only does the Arab League’s move to suspend Damascus further isolate the country diplomatically. It may pave the way for crippling sanctions, which in some scenarios could shrink GDP by 10 percent.
European bond buyers: often wrong, never in doubt 14 Nov 2011 Bond market investors are a fickle lot. They were too complacent for years and now they may be too demanding – though their reformist zeal is welcomed by most. As a result, politicians and the ECB, which might have anticipated the risks, have more complex problems to deal with.
Euro fate hangs on Super Mario Bros 14 Nov 2011 Even if Mario Monti can form a strong government in Italy, the euro zone is vulnerable to bank runs and a deflationary spiral. Stopping that is the role of the ECB’s Mario Draghi. The zone needs reform but looser monetary policy. With Berlusconi gone, maybe they can do a deal.
Another European credit crunch looks unavoidable 14 Nov 2011 A wholesale funding drought, dollar shortage and demands for higher capital ratios are forcing banks to shrink their balance sheets. That’s bad news for companies and consumers who depend on bank credit. The only question is how long the crunch lasts – and how widely it is felt.
Berlusconi ouster isn’t like Arab Spring 14 Nov 2011 Some Italians see similarities with Mubarak or Gaddafi in the toppling of their PM. But while Berlusconi distorted democracy, he wasn’t a dictator. And he was removed by bondholders, not the people. If Italy is to reform, voters must acknowledge their complicity in his regime.
Fellow Greeks: don’t be cast as lazy donkeys 10 Nov 2011 Apologise to Europe for past failings, welcome foreign experts to help build a functioning state and embrace reform whole-heartedly. Or get kicked out of the euro. Hugo Dixon imagines what Lucas Papademos, the new prime minister of Greece, should tell his compatriots.
Euro zone mustn’t rush towards two-speed union 10 Nov 2011 Paris and Berlin want the monetary union to integrate further, and even talk about a “core” euro zone. A two-speed EU is already emerging. But forcing the pace will needlessly antagonise non-euro members. And reforms in the pipeline should first be given a chance to work.
Ethical economy: Greed is not limited to bankers 9 Nov 2011 Barclays’ Bob Diamond is right that his industry needs an ethical rejig, but the problem of wanting too much from finance is everywhere. To get to a healthier system, homeowners, investors and politicians need to learn moderation.
Italy faces nerve-racking game of chicken 9 Nov 2011 Bond yields have shot through 7 pct. The PM’s resignation doesn’t instantly lead to a national unity government able to grasp the country’s problems. Bickering politicians will have to be brought into line by markets – and continued pressure from the rest of the euro zone.
Euro zone should prepare post-Berlusconi bazooka 8 Nov 2011 Germany and the ECB have been right to keep Italy on tenterhooks so long as it had a delinquent government. But even a credible new government will probably need help to get its borrowing costs under control. That means unleashing the central bank’s firepower in one form or other.
New U.S. poverty tally offers budget cuts warning 8 Nov 2011 Revamped poverty data show an extra 3 mln Americans barely scraping by. Yet the figures also suggest that federal programs targeted by cost-cutters do actually help. Trimming help for the poorest risks worsening poverty and stoking the disquiet evident in Wall Street protests.
Spanish campaign can’t keep ignoring euro crisis 8 Nov 2011 A televised debate this week between the two contenders for the Spanish prime minister’s job only made passing reference to the euro zone crisis, even as it engulfs Italy. Spain should realise it is beholden to forces outside its borders.
No magic number can solve Italy’s bailout riddle 8 Nov 2011 Some investors think the country’s debt load will become unmanageable when bond yields hit 7 percent. Others worry about margin calls when spreads rise 450 basis points above risk-free debt. But both numbers can be confusing. Besides, the Italian bailout has already begun.