France tempted by foolish balanced-budget rule 20 May 2010 Nicolas Sarkozy, the French president, wants to enshrine fiscal discipline in the constitution albeit with a lot of caveats. Following Germany's reform earlier this year may sound alluring, but such rules lack longterm credibility. Budgets must reflect political choices.
U.S. reforms will nick, not nuke, big banks 20 May 2010 The end of the Senate s debate over financial reform came just in time for Wall Street. The bill got tougher as the talk dragged on. But it could have been worse. While banks future activities and profitability may get pinched, their core business model appears intact.
U.S. elections show distaste for party lines 19 May 2010 Get ready for more upsets. Tuesday's primary and special election results show voters impatient with Washington on the economy and tired of both major party establishments. Congressional incumbents up for a vote in November's midterms should watch their backs.
American political risk eclipsing value at risk 18 May 2010 So much so that banking masters of the universe care about local races in Kentucky or Arkansas, where today s primary is a referendum on derivatives regulation. Despite perfect trading days in the markets, shifting political fortunes could bring huge changes to business models.
IMF needs more well-endowed sugar daddies 18 May 2010 U.S. Senate plans to curb foreign bailouts miss the point. The fund always gets its money back. The problem is its overreliance on the U.S. and troubled Western Europe for funding. Leaning mostly on indebted nations hardly seems sustainable. The IMF needs more savers.
In defence of Angela Merkel 17 May 2010 The German chancellor has been criticised by some for being too slow to rush to the aid of southern euro zone countries and so making the crisis worse. Others have lambasted her for being too willing to bail out prodigal sons. In fact, she has probably got it about right.
UK chancellor has mixed message for gilt investors 17 May 2010 George Osborne says the UK finances are in even worse shape than thought. A new fiscal watchdog will tell him just how bad things are giving scope for brutal cuts. At least the problem is being tackled, the gilt market will probably think. But the mediumrun risks look big.
The money markets made the president do it 14 May 2010 It's doubtful that Barack Obama urged European leaders to pass a showstopping Greek bailout package simply because he loves the grand idea of a single currency. A more plausible explanation lies in the weeds of the U.S. money market funds business.
New UK government set for bonus tax windfall 14 May 2010 Britain's bonus tax could raise more than 2.5 bln pounds, according to a Breakingviews analysis of banks' disclosures. That's twice the Treasury's most recent estimate. Banks will try to reduce their payments. But the windfall is still a pleasant surprise for the new government.
Credit rating proposals both funny and serious 14 May 2010 Al Franken has fans. Yet lawmakers shouldn't take the comedianturnedsenator's amendment to financial reform legislation too seriously. It would embed government more deeply in ratings. Luckily Senator George LeMieux s plan which would do the opposite is popular too.
Chavez drops nuance of financial reform 14 May 2010 Venezuela s president threatened to shut down brokers, or the rich moneybags practicing a savage capitalism that has undermined the bolivar. The rhetoric may only be a little more extreme than populists elsewhere. Aping Chavez s policy, however, would be far more dangerous.
UK has rare opportunity to reform pensions 13 May 2010 The new coalition has provided the raw material for a real reform of British pensions. Today's public sector promises are unaffordable, while tax rules for private sector pensions favour the better paid. The government's ideas can, with imagination, address both injustices.
U.S. budget deficit shows urgency of need for cuts 13 May 2010 The shortfall in April was double what economists expected. The bad surprises won't end there, at least if you go by Uncle Sam's forecasts of future deficits, which are traditionally rosetinted. Expenses need cutting with an ax, not a scalpel and sooner rather than later.
UK high-flyers should brace for bad news 13 May 2010 Britain's coalition may be led by the Conservatives. But capital gains tax is going up, perhaps to 50 percent; income tax will effectively rise to 52 percent; the inheritance tax limit will stay; bankers' bonuses are under attack; and private jets could soon cost more.
Spain’s Zapatero finally gets tough on spending 12 May 2010 Under the glare of world markets, Spain's prime minister is taking tough budget decisions: cutting public sector wages by 5 pct and freezing pensions. This looks achievable. But the next big challenge is labour and financial reform. The urge to act should be just as strong.
New UK coalition deserves 7/10 12 May 2010 The ConservativeLib Dem pact seems determined to address the country's most important problem the deficit. That's positive for sterling. Some good ideas are emerging on tax and spending. But others look odd and there are doubts about how these bedfellows will work together.
EU crisis prevention plan isn’t scary enough 12 May 2010 Hard on the heels of last weekend's massive rescue, Brussels has set out plans to prevent future crises including stronger fiscal discipline and swifter penalties for wayward members. That sounds good, but so did the old stability pact.
BoE’s advice role drags it into UK politics 12 May 2010 The Bank of England's governor says cutting the fiscal deficit is Britain's top priority. But if the BoE is dragged into advising the new coalition it risks becoming less independent. Meanwhile its grip on inflation its core mandate looks increasingly unconvincing.
Ticking bomb under UK’s rainbow coalition 11 May 2010 Horsetrading between Labour and the LibDems is a distraction from the urgent need for spending cuts. A cobbledtogether coalition including Britain's Scottish Nationalists risks a loss of confidence in debt markets, which as Greece has discovered, can happen without warning.
Con/Lib pact has attractive 1930s precedent for UK 11 May 2010 Britain's last coalition of Conservatives and Liberals was the 1931 National Government. Its foreign policy went wrong, but its economic policy was remarkably successful. The same alliance today could offer a similar majority of voters behind tough economic decisions.