Euro zone isn’t ready for true euro bonds 4 Aug 2011 Could a common bond solve Europe’s sovereign crisis? The region’s bailout fund is already functioning like a joint debt issuer. But for now the zone lacks the political unity needed for a proper debt union. Euro bonds can’t be a quick fix.
Japan stems yen’s rise but only buys time 4 Aug 2011 Selling the currency saw the central bank push its price down. But with the EU, U.S. and China looking frail, global investors still want yen. Slowly, companies are adjusting to a stronger yen. That’s wise. Intervention can bring some relief but Japan needs deeper reform.
Global fear could force Fed’s hand on QE3 3 Aug 2011 Markets are panicking. Safe-haven assets reflect extreme risk aversion, pushing Switzerland and possibly Japan to intervene. Asia fears a weak U.S. and worsening euro zone. Macro worries look overdone; more money printing would be regrettable. But the Fed may feel it has to act.
Debt deal suggests ideal successor for Geithner 2 Aug 2011 The U.S Treasury boss may go now that Congress has reached agreement. But the conclusions of last year’s deficit commission, jointly led by Erskine Bowles, are back in focus. Obama snubbed the former Clinton official’s fiscal ideas then - but might see the value of a rethink.
UK should tax the rich more intelligently 2 Aug 2011 Fresh calls for the 50 pct top rate to be abolished ignore political reality. Financially, tax cuts for the poor would do more to stimulate the economy. The real issue is that the tax system is a mess, and a property levy might tax the rich more effectively.
Italy overtakes Spain as euro zone’s main worry 2 Aug 2011 Yields on Italian bonds are soaring as the political vacuum fuels fears the government won’t be able to implement its fiscal plans. Spain is suffering too. But Madrid is tackling its problems, while Rome is stalling. Given the sheer size of Italy’s debt, that’s a major concern.
Weak U.S. growth could swamp $1 trln deal on cuts 1 Aug 2011 The debt ceiling is set to rise. But Friday’s anemic GDP report casts doubt on the associated deficit reductions. On a simple analysis, if the official 3.25 pct economic growth assumption for 2011-16 falls short by 0.5 percentage point, the expected initial cuts disappear.
Bipartisan dislike of U.S. budget deal a good sign 1 Aug 2011 If a sign of compromise is a frown from both sides, then Congress is close to an equitable agreement. Members of both parties have major gripes about the debt deal cooked up by their leaders. Importantly for markets, the compact would maintain momentum for further fiscal fixes.
Can non-violent struggle bring down Syria’s Assad? 1 Aug 2011 Maybe not if it was purely spontaneous. But, in Syria, the campaign shows it can think strategically and organise effectively. In a style that departs from the typical Breakingviews approach, Hugo Dixon tells the tale through the eyes of a leading activist, Ausama Monajed.
Syria matters beyond Syria 1 Aug 2011 Unlike in Egypt and Tunisia, protestors are facing tanks. Unlike in Libya, they are barely resorting to violence. If Syria’s nonviolent demonstrators can topple such a repressive regime, many non-democratic governments - including Iran and even China - will feel vulnerable.
Rajoy needs to tell Spain some home truths 1 Aug 2011 The country’s probable next PM shouldn’t wait until after November’s election to level with the Spanish people about the actions needed to avoid getting sucked into the euro zone crisis and to restore competitiveness. Here’s the speech he should give now.
Republican infighting not fatal to reaching deal 29 Jul 2011 The political circus in Congress makes for marvelous spectacle. The Republican House speaker is fighting for an agreement to save his job, while some Tea Partiers claim God is telling them to prevent one. Markets are growing weary of the theater, but a finale looks near.
Prokhorov plays allotted role in Russian politics 29 Jul 2011 The billionaire has become the most prominent oligarch to enter politics since illfated oil magnate Mikhail Khodorkovsky. But the cases have little in common. Prokhorov is not opposing Russia's leaders, who may welcome him as a harmless alternative to more serious challenges.
Next Spanish PM must hit the ground running 29 Jul 2011 Outgoing socialist Prime Minister Zapatero has rightly called early elections. But it means Spain will have four months of electoral campaigning with a lame duck government at a critical time. The leader of the favoured conservatives should clearly state what he wants to do.
American GDP figures show need for policy rethink 29 Jul 2011 While legislators fiddle over the debt ceiling, the real economy is struggling to emerge from the Great Recession, growing just 1.3 pct in the second quarter. Fiscal and monetary policies have proved unproductive. It's time for policymakers to get serious and even a bit radical.
Markets could be making a Lehman-like mistake 29 Jul 2011 Investors have displayed remarkable calm over the US debt ceiling fiasco. Most seem convinced lawmakers will come to a lastminute agreement by Aug. 2. Default, after all, is unthinkable. But so, too, was the failure of Lehman. The markets' faith may again prove to be misplaced.
Saudi economic might more fragile than it looks 28 Jul 2011 High energy inefficiency and government spending will start eating into the kingdom's petrodollars within a decade. The government doesn't have its head stuck in the sand. But major economic reforms are needed to put the country on a healthier financial path.
Cyprus looks like next euro bailout candidate 28 Jul 2011 A power explosion has triggered a political crisis, but Cyprus's underlying problem looks like Greece's. A bailout appears inevitable. But with nonresident, nonEU bank deposits at 120 percent of GDP, the euro zone may feel it is rescuing the Russian mafia's offshore haven.
S&P throws up another securitization roadblock 28 Jul 2011 Commercial mortgage financing has had a tough road to recovery. Pulling a $1.5 bln bond deal thanks to a Standard & Poor's rating snafu won't make it any easier. It's reassuring to see raters being more rigorous, but sideswiping deals in the process should make investors wary.
France may bear brunt of euro zone friendly fire 28 Jul 2011 The euro zone has revamped its bailout fund, but needs to finance it. To meet its tasks of buying government bonds and recapitalising banks, the EFSF may need to issue more debt, competing with euro zone sovereigns and pushing up their borrowing costs. France looks vulnerable.