Britain joins sovereign wealth party too late 26 Nov 2015 Creating a 1 billion pound sovereign wealth fund to encourage shale gas drilling in the UK could fail on two fronts. It won’t sway opponents of fracking in the UK countryside, and a financial windfall is unlikely given a global gas glut and unattractive shale economics.
France can afford budget-busting security spend 17 Nov 2015 Prime Minister Manuel Valls says the deficit is bound to miss EU targets as security spending rises after the Paris attacks. Brussels is unlikely to kick up a fuss over this exceptional overspending. Nor will investors, who are used to serial French fiscal slippage.
Cerberus finds workaround for Northern Rock mess 13 Nov 2015 The private equity firm is paying a premium for 13 bln stg of assets from the collapsed UK lender. It helps the state’s finances, but leaves Cerberus to fund a big portfolio itself. Selling a 3 bln stg chunk to TSB, and better securitisation markets, suggest a way to do so.
Qatar’s austerity drive will be felt beyond Doha 5 Nov 2015 Despite being among the wealthiest people on the planet, Qataris must cut “wasteful” spending as low energy prices squeeze revenue, their ruler has warned. Years of high-profile investments including VW, Glencore and Barclays mean it may not just be Qataris who feel the pinch.
U.S. election complicates Puerto Rico repair job 3 Nov 2015 President Obama wants Congress to help the island out of a $72 bln hole. His calls for debt restructuring, better oversight, tax and healthcare tweaks make sense, but risk falling prey to candidate posturing. It may take a full financial meltdown for D.C. to roll up its sleeves.
Mixed economic messages complicate Carney’s job 3 Nov 2015 Timing the UK’s first rate rise in eight years is especially tough for Bank of England Governor Mark Carney. Recent economic signals are muddy. Old certainties, such as links between unemployment and inflation, are in doubt. Hesitant central bankers make for choppy markets.
Greek banks get marginally more investable 2 Nov 2015 ECB stress tests revealed a 14 bln euro capital hole. The tests were doubly tough: the pass mark was high, and the state will not prevent shareholder dilution. Yet banks are stuck with bad loans and the economic outlook is unclear. Greek bank equity is still a bet for the brave.
Dixon: Tsipras’ biggest stress tests yet to come 2 Nov 2015 A central bank verdict that the top Greek lenders must raise only 14.4 billion euros is welcome news for the prime minister. But he has to implement more tough measures before he can secure debt relief from his euro zone creditors. Until then, he faces political risks.
French labour market is lose-lose for Hollande 27 Oct 2015 President Francois Hollande was hauled over the coals when the jobless total hit a record high in August. Yet a just-reported hefty fall in unemployment won’t save him from a backlash in December’s regional elections. The temptation will be to dilute reforms and deficit cuts.
Osborne’s new deficit: his own credibility 27 Oct 2015 The UK chancellor’s cut to tax credits has been thrown back by the upper house. The claim that cuts were offset by higher minimum wages always looked hollow. The hit to Osborne’s deficit reduction plan looks bearable. At worst, it dents his hopes of being the next prime minister.
Argentines may risk austerity to get change 26 Oct 2015 Presidential elections will go to a runoff after business favorite Mauricio Macri surprised ruling-party candidate Daniel Scioli in Sunday’s vote. Scioli will now say Macri wants to slash social programs. But voters may rather see Cristina Fernandez’s economics as unsustainable.
Icahn takes $150 mln of activism to political realm 22 Oct 2015 The investor wants to help U.S. companies bring back $2 trln of overseas cash in return for a reduced tax that will fund infrastructure. A massive so-called super PAC will back like-minded candidates in 2016 elections. The idea makes sense, but a longer-term fix would be better.
Euro zone rediscovers sloppy fiscal policy 15 Oct 2015 Deficits are creeping up in Spain, Italy and even growth star Ireland. Reasons include easy money and pre-election spending. As yet, the gaps aren’t dangerously big. What’s more worrying is poor spending decisions, slowing reforms and fiscal dissonance between member states.
Madrid could go from star pupil to class dunce 9 Oct 2015 Spain is likely to miss its EU-agreed budget deficit targets this year and the next. Arguably, the bar was set too high and economic growth is quite promising. Even so, Spain can do more to put its finances on a more sustainable path.
Emerging market debtor crisis likely and needless 1 Oct 2015 An IMF study shows that emerging market borrowers have taken full advantage of stimulative post-crisis monetary policy. Higher rates are set to bring more defaults and a liquidity squeeze. Such woes could be avoided easily, if companies and investors turned away from debt to equity.
Draghi lacks arrows to hit ECB’s inflation target 30 Sep 2015 Euro zone consumer prices are falling again, putting near-2 percent inflation further out of central bank President Mario Draghi’s reach. He could ramp up asset buying, but inflation seems ever less responsive to monetary policy globally. Higher prices might be beyond his gift.
Hollande risks political hara-kiri for French good 29 Sep 2015 France’s Socialist government is trying to push through the sort of spending cuts and regulatory reforms which have eluded centre-right predecessors in the past. President Francois Hollande may have to wait for posterity to thank him. Today’s voters probably won’t.
Edward Hadas: Migration unpicks globalisation myth 23 Sep 2015 Some economists see the unexpected inflow into Europe as an easy win, adding to GDP and countering ageing. But those changes hardly matter. More important is that migration challenges the idea of a global economy. Political borders still set the economic agenda.
Chicago’s lack of crisis makes fiscal rehab harder 21 Sep 2015 Mayor Rahm Emanuel wants a big property tax hike to shore up underfunded pensions. It’s an important move to get the city out of a $40 bln hole. Perversely, without lenders freaking out, as happened to New York in the 1970s and Detroit more recently, the job is actually harder.
Europe’s fuzzy capital markets union takes shape 4 Sep 2015 The European Commission is mulling a directive to harmonise member states’ various insolvency regimes. If common principles can be nailed down, bankruptcy will get smoother. And the Juncker commission’s goal of better integrated capital markets would have a hope of success.