China’s water crisis to test “decisive” markets 11 Apr 2014 China’s urban water bills are rising. It’s a nod towards curbing overuse, but too little to defuse a brewing crisis. A real fix requires market prices for thirsty industrials and agriculture. This will be a trial by water for the country’s supposed market reforms.
Africa’s growth spurt challenged by twin deficits 10 Apr 2014 The IMF and World Bank are basking in Africa’s success – devoting much of their meeting this week to discussing the region. Sub-Saharan Africa is enjoying the fastest growth since independence in the 1960s. But profligate spending and current account deficits could spoil the party.
Greek bond fever may do economy few favours 10 Apr 2014 Greece’s first bond in four years has met roaring demand. The 3 bln euro deal suggests past bondholder losses and present economic woes are forgiven and forgotten. But the country still has big problems. Excessive investor enthusiasm could reduce the pressure to reform.
UK wage growth is healthy rather than inflationary 10 Apr 2014 Pay for British new hires is rising faster than inflation. That may sound like a harbinger of accelerating prices, but it is actually just a healthy catchup. Real earnings have fallen heavily in the crisis. On wages, the Bank of England has a few years of respite.
Time to bust China’s “omniscient regulator” myth 10 Apr 2014 The country’s dueling financial watchdogs are undeniably smart. But as shadow banking runs amok, they have limited tools to fight problems they didn’t create. Some reforms are beyond their power, others are tied up in red tape. It undermines the theory that China is crisis-proof.
Japan index: Economy is ready to take on tax hike 10 Apr 2014 The Breakingviews Abenomics Index climbed to a six-year high in February, suggesting the economy has enough strength to withstand this month’s sales tax increase. Wages and inflation expectations firmed up, while hopes of further monetary easing pushed bond yields lower.
Detroit’s bond deal spells relief for muni markets 9 Apr 2014 The bankrupt city has agreed to pay insurers of $388 mln in general obligation debt at least 74 cents on the dollar, far more than the 15 cents proposed before. A judge must still approve the plan, but it should calm investor nerves and boost Motown’s chances of raising funds.
Tart goodbye from SEC’s Goldman nemesis rings true 9 Apr 2014 A retiring lawyer who helped sue the bank slammed the U.S. regulator for going easy on Wall Street bosses. The criticism backs widespread suspicion that watchdogs were timid in pursuing financial-crisis misconduct. His words are a useful warning for the agency’s current regime.
Germany takes anti-debt cult a step too far 9 Apr 2014 For the first time since 1969, Germany’s budget will be balanced next year. Some fiscal consolidation is welcome, but Angela Merkel has got her timing and priorities wrong. Super-low interest rates, laggard public investment and Europe’s economic woes call for more spending.
Edward Hadas: When credit is too much of a good thing 9 Apr 2014 What does credit do after it has funded productive activity in the economy? It fuels asset price inflation and funds profligate governments. Leverage increases, bringing crisis and recession. If only policymakers showed more awareness of the line between useful and useless debt.
Money market fund clarity could beat conformity 8 Apr 2014 U.S. watchdogs are considering floating values, limits on withdrawals and other measures to crisis-proof the investment vehicles, often seen as a nearly riskless alternative to cash holdings. But simply requiring each fund to pick – and publicize – its path could do the trick.
Damn statisticians with at least faint praise 8 Apr 2014 It’s easy to mock belated number nerd discoveries, for example that British savings and Nigerian GDP missed by almost a factor of two. Blushing and correcting beats persisting in error. Better still is to ignore the spurious precision of many calculations in the first place.
Russia would pay steep price for Ukraine invasion 8 Apr 2014 The pro-Russian agitation in eastern Ukraine has rekindled fears of an intervention from Moscow. But even if Vladimir Putin is tempted, the economic implications will hopefully bring second thoughts. Any Russian invasion would spur costly sanctions and massive capital flight.
Hugo Dixon: Greek rebound is astonishing 8 Apr 2014 Two years ago, the country looked like it was set for a messy default and exit from the euro. Now it is on the verge of returning to the bond market. There are still political and economic risks. But the financial turnaround of Greece is truly impressive.
Modi win is blow for Tesco, good for investors 8 Apr 2014 The Indian opposition leader’s party has vowed to ban foreign retailers. With that exception, its manifesto strikes the right notes on the economy. If Narendra Modi does become prime minister, shareholders will expect a major improvement in the country’s investment climate.
Memo to global bank regulators: stop bullying Asia 8 Apr 2014 The Financial Stability Board is supposed to coordinate global oversight of banks. But in key areas like avoiding another AIG and resolving cross-border busts, Asian countries are sidelined. They need to speak with one voice – and Europe and the U.S. need to start listening.
Renzi’s Senate reform could prove mission possible 8 Apr 2014 The Italian premier hopes that turkeys will vote for Christmas, and the Senate will agree to be shrunk with limited powers. That would make governments stronger. Renzi has two big sticks: the threat of a referendum, and the populist pressure of comedian Beppe Grillo’s party.
Baiting the EU will only go so far for Hungary 7 Apr 2014 Viktor Orban won re-election with Brussels-condemned policies such as a flat tax, a floating exchange rate and levies on foreign companies. But his populist disdain for property rights can do long-term damage and his big Russian deals are risky. More orthodoxy will work better.
Hugo Dixon: Spain’s recovery clouded by politics 7 Apr 2014 Prime Minister Mariano Rajoy has achieved a lot in just over two years and growth has finally returned. But as Spain enters a new electoral cycle, the appetite for reform is waning. What’s more, in two years, there is a big question mark.
Open Britain offers China a shopping bonanza 7 Apr 2014 Mainland conglomerate Sanpower has put House of Fraser in its shopping basket for 450 million pounds. The UK’s welcome mat for Chinese buyers is well trodden. Some targets are cheap; some are venerable brands, others look like trophies. The department store is a mix of all three.