Papandreou’s climbdown brings high-priced relief 3 Nov 2011 The Greek prime minister’s referendum call amplified an already severe crisis. But the gambit may have pushed the opposition to endorse the latest EU austerity demands. If so, it’s a big relief. It is less consoling to think how much brinkmanship was needed to gain so little.
Euro zone not yet ready for Greek game of chicken 3 Nov 2011 Merkel and Sarkozy have threatened to cut Greece loose if it doesn’t back the latest bailout plan. But Europe isn’t prepared to handle the backlash. With barely a month to get its act together and a history of dysfunctional decision-making, there’s a big risk of a mega crash.
BNP debt sale bad news for euro zone governments 3 Nov 2011 The French lender has slashed its exposure to Greek, Spanish and Italian debt at a cost of 3 bln euros. Though BNP can afford to take the hit, smaller rivals are less robust. Banks’ aversion to sovereign bonds is also bad news for governments that need to finance their deficits.
Tobin tax is confused in principle and practice 3 Nov 2011 Taxing financial transactions looks a neat way to raise revenue from an unpopular sector. However, reducing liquidity won’t make markets more efficient. It also won’t make banks any safer, or stop asset bubbles. There are better ways for politicians to get their pound of flesh.
China must hurt the rich to save the rich 3 Nov 2011 Half the country’s well-off want out, a recent survey argued. Despite their considerable wealth, it’s not so bad if they go. More important is ensuring China creates a new generation to replace them. That means making reforms that might speed the old hands on their way.
Greek politics rocks Europe’s leaky lifeboat 2 Nov 2011 The European Financial Stability Facility has scrapped a 3 bln euro bond for Ireland’s bailout. Though the delay is prudent, uncertainty caused by Greece’s referendum isn’t the only problem. Investors don’t know what the EFSF will do with its cash, or how much debt it will issue.
Ethical economy: The 7 billion people question 2 Nov 2011 The world’s population has increased seven-fold since Thomas Malthus first predicted demographic disaster. And misery is receding. Economists should stop thinking of population growth as an economic drag. They should join parents in considering new life a cause for celebration.
Fiscal union not the answer to euro problems 2 Nov 2011 Conventional wisdom has it that there are only two ways forward for the euro zone: fiscal union or breakup. But there’s a third, preferable option based on market discipline and tough love. In a crab-like manner, Europe may even be heading there.
Korea may change monetary tack to placate young 2 Nov 2011 Exports are slowing. That used to be a signal for the central bank to ease interest rates to help the big exporters cope. But they are no longer creating jobs young Koreans want. Political pressure from the young may push the bank to be tighter – even if that slows growth.
India ratchets up currency pressure on China 2 Nov 2011 Tired of a ballooning trade deficit, Indian trade negotiators are threatening duties on Chinese goods, starting with power equipment. Tit-for-tat tariffs are fruitless, but as a fellow emerging giant, Indian calls for China to revalue its currency would add weight to the debate.
Euro zone should prepare to let Greece go 1 Nov 2011 The EU has tried to help Greece deal with insolvency, but a country cannot be saved from itself. The right response to a possible referendum on austerity is to draw up plans for a Greek exit from monetary union. With the right firewalls, that might even make the euro better off.
Elections are least bad option for Greece 1 Nov 2011 A collapse of the Papandreou government followed by early elections, as now seems possible, would be fraught with problems. But it wouldn’t be quite as suicidal for Greece as a referendum. At least elections would be quicker and less likely to lead to a disorderly default.
Becalmed UK in danger of double dip 1 Nov 2011 British GDP grew by 0.5 percent in the third quarter – and over the past year. A recession looms as the euro zone crisis brews up another storm. The government and the Bank of England hope credit easing will stave off the worst – but a fiscal U-turn may be hard to avoid.
Euro crisis back to square one – or worse 1 Nov 2011 Greece’s planned referendum on last week’s bailout, announced as polls show its citizens reject it, has thrown the whole pack of cards up into the air. Bank runs, disorderly default, an exit from the euro and vicious contagion elsewhere are no longer wild scenarios.
Capitalism takes three big hits in one day 1 Nov 2011 Blame past exuberance for the grim headlines. It created the Greek mess. Dangerous optimism also made investment banks too large. And now private equity hubris has led to the failed ISS sale. These monuments of financial folly are falling apart. The debris is hazardous.
New Delhi’s fiscal profligacy starts to bite 1 Nov 2011 India is set to bust its fiscal deficit/GDP target. Half way through the year, it has used two-thirds of the sums set aside. With inflation close to 10 percent and growth sluggish, there is an urgent need for the government to get a grip of public spending.
Spain isn’t as uncompetitive as you think 31 Oct 2011 The country’s unemployment rate scales new heights even as Spain’s exporters seem surprisingly resilient. The snag is that there aren’t enough of them to get the country growing again.
Greek privatisation could produce double bonus 31 Oct 2011 Flogging the country’s state-owned businesses and land is mainly viewed as a way of reducing its crippling debt. But if properly handled, the process could also be a spur for broader economic reform. Dag Detter, who led the restructuring of Sweden’s public assets, explains.
Greek creditor losses could top 50 percent 31 Oct 2011 Banks have provisionally agreed to haircut their bond holdings by half, but the coupon on the new bonds they will get is still being negotiated. If the euro zone plays hardball, losses could reach 60 percent, Breakingviews latest calculator shows.
Japan acts alone in global financial mess 31 Oct 2011 Monday’s unilateral effort to keep the yen from rising will probably work as well as the last one – not very much. Tokyo can’t easily resist the pressure from foreigners fleeing troubled currencies. The G20 could move the world towards financial balance, but won’t try hard soon.