Germany’s economic miracle is past its peak 22 Oct 2014 Germans are flirting with a recession that may usher in a new era of feeble growth in Europe’s largest economy. Many reasons for past performance are fading away, and misguided policies add extra burdens. Angela Merkel can still change tack before it’s too late.
Review: The worst of both Mao and markets 17 Oct 2014 Nicholas Lardy’s new book describes a China in which the state is retreating. He has the numbers to demonstrate the private sector’s steady gains, but official statistics are deeply misleading. In the PRC, the public-private line is blurred by the triumph of crony capitalism.
Greece between ECB good-cop and markets bad-cop 17 Oct 2014 Athens’ threat to leave its bailout programme sent its yields shooting up. The euro zone central bank relaxed its collateral requirements for Greek lenders, but the assistance is contingent on Greece toeing the line. The tension isn’t over.
Japan index: Economy stumbles on faltering wages 10 Oct 2014 The Breakingviews Abenomics Index fell for a second month in August. Consumer spending, output and wages sputtered. A six-month-old sales tax increase and a weak yen have pushed prices higher, but household incomes aren’t rising in tandem. Private demand has turned sluggish.
Edward Hadas: Call that money-printing? 8 Oct 2014 The supply of the raw material of finance can be varied far more easily than any physical commodity or human skill. If central bankers really grasped that, monetary policy could have been far more radical – both pre- and post-crisis.
German love of austerity trumps downturn angst 8 Oct 2014 Europe’s largest economy is shaken by a bout of bad data. But economic woes aren’t yet serious enough to trigger a rethink of priorities putting budget consolidation first, both at home and in the EU. Only a full-blown employment crisis would usher in looser fiscal policies.
Asian fight against capital flight helps dollar 8 Oct 2014 The region’s central banks fear foreign capital will flee when U.S. rates start rising. They hope higher rates at home will stem the flow. But domestic investment dips when interest costs rise. The result: spare Asian savings go into safe dollar assets, pushing the greenback up.
France needs deficit relief to save reform 7 Oct 2014 Manuel Valls wants to convince international investors that the country is serious about growth-friendly policies. But the French prime minister can’t win at home unless Brussels is flexible on fiscal discipline. He has his priorities right, but he’s racing against time.
Banking quandary weighs on Catalan debate 3 Oct 2014 Catalonia’s independence looks remote. But Spain’s central bank has already said secession would mean the region losing the euro. Top domestic lender Caixabank would find it hard to relocate, as Scotland’s banks warned ahead of the recent referendum. But it would have little choice.
ECB keeps hands free with proxy QE 2 Oct 2014 President Mario Draghi gave little new detail on the ECB’s private debt purchase programme, and no hints that sovereign bonds will ever follow. Yet the central bank’s asset purchases could be large, and have major “spillovers.” That would indirectly help governments too.
Deficit-worry is so last decade 2 Oct 2014 David Cameron talks fiscal restraint, but the British PM is dangling tax cuts as a vote-winner. Other EU leaders are also eyeing political gains in unbalanced budgets. They’re not in denial. Rates are low and unemployment is high. For now, there’s room and reason to spend.
Edward Hadas: In praise of restrained enterprise 2 Oct 2014 Business bosses tend to admire free enterprise. But in a complex economy, too much freedom leads to ruinous competition and persistent under-investment. Corporates appreciate the value of controlled rivalry. That’s why episodes like the current UK supermarket price war are rare.
Governments are real targets in Apple’s tax case 30 Sep 2014 The European Commission thinks that the iPhone maker has received preferential treatment from the Irish government. Both Apple and Dublin beg to differ. At least Brussels has put member governments on notice that tax leniency could amount to state aid.
Sometimes business can’t avoid talking politics 30 Sep 2014 A British lawmaker reckons business should stay out of the debate over UK membership of the EU. Staying above politics may usually be the mark of a good board. But it would be negligent to ignore any material impact on owners and workers from a one-issue referendum.
FX benchmark reform plan can only go so far 30 Sep 2014 A Financial Stability Board report on reforming FX benchmarks strikes a decent balance between the needs of users and those of banks. But in the end, it’s up to the latter to clamp down on illicit activity – and up to governments to make sure there is an interest in doing so.
Welfare cuts betray UK’s lingering weakness 30 Sep 2014 George Osborne says the economy is stellar yet benefit cuts are needed. The picture is worse than the finance minister admits. As Britain’s deficit stays high, debt soars and weak wages persist, the government faces more harsh choices. The UK is far from paying its way.
Rouble slide puts central bank in a bind 29 Sep 2014 The Russian currency’s fall will make runaway inflation worse and force monetary authorities to act. It will help the central bank resist political calls to loosen policy to fight the sanctions-induced slump. But it could deal the economy another nasty blow.
Commodity bear market looks entrenched 29 Sep 2014 A rising dollar, the prospect of U.S. rate rises, and moderating Chinese growth are casting long shadows over the asset class. The threats to the bear case are strong supply-side responses, or successful economic stimulation by the ECB. Neither looks very likely.
Vindication is bitter for Royal Mail privatisation 29 Sep 2014 The froth is off. Forget the 87 pct pop: a year after its frenzied IPO, shares in the UK postal service hover 20 pct above its float price. That feels about right. The snag for the state and its bankers is that it will be fiendishly difficult to shift the unsold stake.
Power to borrow is vital for proper UK devolution 26 Sep 2014 Prime Minister David Cameron plans to devolve more tax and spending to Scotland after it voted to stay in the United Kingdom. For the process to be really meaningful, though, the Scots must be free to issue debt. That’s risky, but there are ways to limit the dangers.