Greek haircut only resets crisis clock to 2009 27 Oct 2011 Banks have agreed to a 50 pct haircut on Greek government bonds, clearing the way for further euro zone support. But Greece’s debt burden remains higher than when the crisis began, and the country faces years of challenging austerity. Another restructuring may still be necessary.
Ethical economy: Debt is a moral matter 26 Oct 2011 Aristotle said interest-bearing loans are unfair to borrowers. Many Greeks these days feel the same way. But some Germans – and Chinese – worry that it’s the lenders who get an unjust deal. In a debt crisis, rights and wrongs can make all the difference.
Orderly euro exit virtually impossible 26 Oct 2011 A UK businessman has promised a 250,000 pound prize for the best explanation for how a country could quit the single currency in an orderly fashion. Hugo Dixon gives his best shot, but still concludes there would be mayhem.
Banks have two aces in Greek default poker 25 Oct 2011 The euro zone wants private creditors to take a 60 percent haircut on Greek debt. But this negotiating position is undermined by an irrational fear of triggering CDS, and reluctance to take a loss on governments’ Greek exposure. Banks may use this to go for a sweeter deal.
Euro-recession, not rebellion, is what boxes UK in 25 Oct 2011 An EU protest vote by members of his own party has knocked the UK prime minister. But David Cameron has a bigger and more immediate European problem. An already-weak UK economy is likely to be dragged into recession by the euro zone. Fiscal policy revisions may be necessary.
India’s inflation fight lacks credibility 25 Oct 2011 The central bank’s latest rate hike won’t tame stubborn inflation of over 9 percent. The urgent task now is to reduce expectations of more price increases with a more explicit inflation target. It might mean GDP slows a bit, but that’s an acceptable price to pay.
Economic stress adds to Turkey’s quake woes 24 Oct 2011 The human cost of the Ercis disaster comes as Turkey fights to keep its once-booming economy on track. Ankara is playing a high-risk game by intervening in markets. It needs higher interest rates to shore up the lira, but the cost may be recession.
It’s Italy, stupid 24 Oct 2011 The big issue dwarfing all others now in the euro crisis is how to save Italy. Financial engineering of the sort discussed at the weekend summit will, at best, buy time. Ultimately, Rome needs to save itself. With political will, it can.
Internal devaluation: it’s worth a try 24 Oct 2011 Big wage cuts should be almost as good as currency devaluation at reducing large trade deficits – in theory. In Europe, no one knows if practice will follow conjecture. But Latvia is trying and Greece is likely to follow. It’s not nice, but it might be a least bad alternative.
Tunisian economic recovery is reason for optimism 24 Oct 2011 Barring a violent backlash against the likely Islamist party victory, Tunisia can hope for a strong rebound following the country’s first ever democratic elections. Libya’s liberation might also help. For now, that outweighs the looming risks posed by the European slowdown.
France can’t afford major euro split with Germany 21 Oct 2011 Divisions over the euro zone’s bailout fund have delayed the much-ballyhooed Franco-German “grand plan”. Nicolas Sarkozy seems ready to compromise yet again to keep Angela Merkel on board. He knows the euro zone wouldn’t survive a major split between Paris and Berlin.
Spain hasn’t seen the end of its pain 21 Oct 2011 Profligate regions may push the country’s budget deficit above the 6 percent-of-GDP target. The electoral cycle isn’t helping. A minor slippage doesn’t matter much, but in the current slump, anything more than a percentage point will make next year’s goals particularly challenging.
Postponing Greek pain will be costly for taxpayers 20 Oct 2011 To get Greece’s debt under control, the private sector and EU governments have to take a haircut. If a restructuring happened now, private bondholders would bear most of the losses, according to a Breakingviews calculation. But if the euro zone delays, taxpayers will suffer more.
Delhi has home-grown options to tackle slowdown 20 Oct 2011 India’s finance minister says that economic growth will fall below 8 percent this year. He blamed global turbulence. External factors do hurt, but India can reinvigorate itself with domestic structural reform. The key is to spur business investment.
Markets can cope if euro zone bazooka fires blanks 19 Oct 2011 There has been talk of a full solution to the euro zone debt crisis emerging from this weekend’s EU summit. Politicians are trying to lower expectations. Europe is more like a tortoise than a hare. Investors would like more, but they won’t panic as long they see clear progress.
Inflation may join jobs in 2012 presidential race 19 Oct 2011 On its own, a 3.9 pct annual rise in U.S. CPI won’t raise big inflation fears. But M2 data suggests price rises will accelerate further. If so, by next summer CPI increases could potentially hit red-zone levels. That would inject inflation, and Fed policy, into the electoral mix.
Sarkozy’s euro warning smacks of desperation 19 Oct 2011 As Moody’s says it might change its view on France’s triple-A ratings, the French leader warns gravely about the euro ahead of next week’s EU summit. But seven months before the presidential election, it’s his future he’s really talking about.
Occupy Wall Street is poor vessel for discontent 19 Oct 2011 The protesters may be channelling justified public anger against high finance, but they are too intellectually incoherent to start any sort of revolution. Edward Hadas suggests the mourning over Apple’s Steve Jobs is a better cultural indicator than the Wall Street movement.
India-Pakistan trade deal just a first step 18 Oct 2011 Likely trade liberalisation between the two traditionally hostile nations has been rightly called historic. It’s part of India’s attempt at more economic engagement with its neighbours. The whole region will benefit, but current trade is so meagre that progress will take years.
Slower Chinese GDP growth adds to financial risk 18 Oct 2011 In the past, strong growth has helped Beijing smooth over problems with bad loans. But 9.1 percent may not be fast enough to deal with excesses in non-bank lending and real estate. It sounds like U.S. subprime – the financing that supported growth now threatens to undermine it.