EU’s Crimea sanctions only good as opening gambit 17 Mar 2014 Vladimir Putin won’t care much about the travel bans and asset freezes imposed by the EU on 21 Russian individuals. But these sanctions only make sense as a first-step response to Moscow’s actions in Ukraine. It’s now up to EU leaders to get serious about retribution.
Hugo Dixon: Cameron lowers Brexit risk 17 Mar 2014 The UK premier’s wish list for EU reform is pretty moderate. Given that he will campaign to stay in the EU if he achieves his goals, the risks of Britain exiting Europe – already cut after the opposition virtually ruled out an In/Out referendum – have fallen further.
UK budget set to focus on all the wrong areas 17 Mar 2014 The coalition is set to extend housing subsidies and is likely to tinker with tax thresholds. But sorting the UK economy’s biggest issue – anaemic productivity – requires business investment. The government could do more, if it admitted there was more spare productive capacity.
Market adjustment is not over yet 17 Mar 2014 Gold’s rise to a six-month high indicates rising fear and coincides with a retreat to assets seen as safe, including the yen and bonds. Emerging market woes may now hit developed markets more keenly. But the Fed seems intent on tapering, which will eventually be bad for gold too.
Hugo Dixon: Europe should give Cyprus a hand 17 Mar 2014 One year after a shock plan to raid bank deposits, capital controls remain in place. The economy hasn’t shrunk as much as feared, but the recession is still deep. The euro zone should help – principally by enabling the lifting of capital controls and the creation of a bad bank.
Review: An unreliable guide to inequality 14 Mar 2014 Thomas Piketty’s chunky book on “Capital in the 21st Century” has been widely hailed. But his key equation is faulty, his sociology crude and his historical analysis doubtful. Still, there are good ideas, and the big policy suggestion – a progressive tax on capital – is sensible.
Rouble hard to defend against Putin’s attacks 14 Mar 2014 The takeover of Crimea has sent the currency down, along with Moscow stock markets. The president’s erratic moves are hurting an already slowing economy, even before Western sanctions isolate Moscow. Soon even the central bank will find it hard to defend the rouble against Putin.
Spain’s economic growth is robust – yet fragile 14 Mar 2014 After seven lean years, the Spanish economy is doing better than expected and looks set to beat current growth estimates. Yet fault lines remain, and show the need for both serious reforms and a sensible fiscal policy.
Puerto Rico bond hopes may be self-fulfilling 13 Mar 2014 Investors’ warm reception for this week’s $3.5 bln issue looks strange given the island’s junk rating and rocky finances, not to mention that existing bonds trade at a big discount. But the issue funds deficits long-term and keeps the market open, giving Puerto Rico a lifeline.
ECB needs cunning plan to join currency wars 13 Mar 2014 The euro is at two-and-a-half-year highs, a strength that could drive ultra-low inflation even lower. In principle, the European Central Bank is squeamish about blatantly targeting a weaker euro. But it need have no qualms about picking policy tools that maximise currency damage.
Central bank transparency is overrated 13 Mar 2014 The Bank of England destroys recordings of its rate-setting meetings. That’s a blow to future historians, and frustrates traders who mine information for profit. But in central banking, confidence is crucial. Too much candour about fears and hopes can be counterproductive.
Scots’ devolution makes more sense than secession 12 Mar 2014 The revelation of an 8.3 pct fiscal deficit in 2012/13 is a reminder of how ropey an independent Scotland’s finances would be. Ex-Prime Minister Gordon Brown reckons that instead of betting the loch, Scots would be better off clinching back more powers for Edinburgh. He’s right.
Edward Hadas: Russia and the unreliable West 12 Mar 2014 Ukraine has revived tensions between Russia and the West. The clash is geopolitical, but bad economics lurk in the context. Russia has suffered from two ideological imports, first communism and then ultra-free markets. Now it is harmed by Western easy money and capital flight.
Copper and iron ore roil China capital controls 12 Mar 2014 The fear that metal-backed Chinese financing tricks won’t work is pushing down copper and iron ore prices. The drops only encourage further sales. China’s capital controls are supposed to ward off such vicious cycles, but in this case they have probably exacerbated them.
Hugo Dixon: Labour has just shrunk Brexit risks 12 Mar 2014 UK opposition leader Ed Miliband has virtually ruled out a vote on Britain’s EU membership if he becomes PM in 2015. David Cameron will need to win an overall majority and then lose a referendum for the UK to quit before 2020. This is good news for business.
Russia harms the BRICs and adds to global risks 12 Mar 2014 The intervention in Ukraine is bad for Russia’s own economy and will do further harm to emerging economies as they struggle with reduced capital inflows and weak exports. Investors are shifting to developed markets, increasing the risks there.
Japan’s deflation apathy has lessons for euro zone 12 Mar 2014 The country’s history shows even small price declines are risky. Falling wages depress consumption and rising real interest rates suppress investment. Pensions suffer while diplomatic clout erodes. Andy Mukherjee says Japan’s mistakes are a cautionary tale for Europe.
Japan is imperfect deflation model for euro zone 12 Mar 2014 When economists project low or falling prices in the euro zone, they often look to Japan for lessons. Some Japanese experience is undoubtedly relevant. But Edward Hadas says differences in stock markets, workforce, and financial politics are greater than the similarities.
Colombia’s market-friendly governance looks secure 11 Mar 2014 None of the top finishers in weekend elections presents an obvious left-lurch challenge to the country’s current free-market course, which has powered growth that makes Colombia the envy of its neighbors. Investors can approach May’s presidential ballot with some comfort.
Detroit turns bankruptcy precedents upside down 11 Mar 2014 Motown’s plan for restructuring $18 bln of debt envisions paying equity holders – i.e. ordinary Detroiters – at the expense of secured creditors. This shareholder-friendly approach might save the city, and make Judge Rhodes a hometown hero. But markets may yet exact a price.