Elusive future gas riches can’t help Cyprus now 20 Mar 2013 Even if early estimates of huge gas reserves prove right, recent finds off the Mediterranean island’s coast will take time and money to exploit. The dicey politics of exporting gas from Cyprus also poses risks to development. For now, Cyprus’ natural gas potential remains just that.
Hugo Dixon: All Cyprus plan Bs look dreadful 20 Mar 2013 Unless Germany bends over backwards and gives a big grant to Cyprus, the tiny island has three main options: sell its soul to Russia; default and possibly quit the euro; or patch together a new deal with the euro zone. The last option is the least bad for all.
China rail reform skirts big question: who pays 20 Mar 2013 Building high-speed railways makes sense. Burdening the new operator with $420 billion of debt doesn’t. Passengers aren’t rich enough to bear the investment costs. Yet with some creative financing, it’s possible to tap those who benefit most: industry and local governments.
India’s banks stuck in a monetary trap 20 Mar 2013 A quarter-point rate cut, designed to spur lending, has little chance of reaching borrowers. Banks need all the income they can get to attract depositors and lay aside provisions for bad debt. Only when inflation is tamed, and banks recapitalised, can credit flow efficiently.
Cyprus crisis shows unwelcome return of randomness 19 Mar 2013 The specifics of straightening out the Mediterranean island’s banking system matter less than the way policymakers are making things up as they go along. They seem to backtrack and abandon principles. It’s all too reminiscent of the shifting responses during the 2008 crisis.
Cyprus must accept a less Russian future 19 Mar 2013 Nicosia is negotiating with Moscow on how to tax Cypriot bank account holders. If insured funds are spared, the island’s Russian depositors would end up paying 60 pct of its bailout bill. Beyond that, de-russification is the price Cyprus has to pay for staying in the euro zone.
Ethical economy: Cyprus and the danger of promises 19 Mar 2013 Under the current plan, Cypriot savers’ deposit guarantees will not be truly honoured. Countries with negative real interest rates already violate the spirit of their commitments to savers. Rather than hold governments to impossible promises, it would be better not to make them.
UK cannot afford a budget giveaway 19 Mar 2013 George Osborne is public enemy number one. Critics want him to reverse austerity. He would do better to reinforce it in health and education. But that’s a political no go. The best he can do is provide a mini stimulus via more housebuilding and tax cuts for the low paid.
The cost of Qatar’s punchy spending style 19 Mar 2013 The Gulf state is splashing cash everywhere. The strategy is part financial, part geopolitical - each investment forges a new link to the global system. But tiny Qatar may be overstretching itself in its determination to cultivate alliances.
India in depth: Gold is not the villain 19 Mar 2013 The finance minister’s claim that a “passion” for imported gold widens the trade deficit misses the point. Demand for the yellow metal is a symptom of fears the government will print money to finance deficits. A broader tax base would ease Indians’ demand for an inflation hedge.
Philippines has an unhealthy upgrade obsession 19 Mar 2013 Manila is on a low-debt diet as it pursues an investment-grade sovereign rating. But with foreign money pouring in, the government needs to sell more bonds to mop up excess liquidity. Mistimed austerity creates the risk of mispriced bank credit and asset bubbles.
Cure for U.S. housing malaise may sustain disease 18 Mar 2013 A Senate bill seeks to forbid Congress from raising Frannie’s fees to pay for federal spending. It sounds sensible. But in the alternate universe that is Washington, it may kill one of the few ways available to reduce taxpayer support for housing and bring back private capital.
Bank rule loophole on mortgages should be a no-no 18 Mar 2013 Basel III could allow banks like Wells Fargo to push hard-to-value mortgage servicing rights off balance sheet without giving up the lucrative business of processing home loans. Such financial engineering, however, could add even more confusion to an already complex market.
… Meanwhile, Cyprus’ real bailout remains fuzzy 18 Mar 2013 Euro zone finance ministers approved a 10 billion-euro bailout for Cyprus after it agreed to the deposit levy, which will raise 5.8 billion euros. Beyond that, many questions remain about how the burden will be split among Europe, the IMF, Cypriots and the banks.
Germany atones for alleged current account sin 18 Mar 2013 The country’s current account surplus with the euro zone has shrunk from 4 pct to 2 pct of GDP in five years. Germany is contributing to intra-European rebalancing. Quicker progress would be hard to achieve. European policymakers should stop obsessing about German surpluses.
Hugo Dixon: Cyprus deposit grab sets bad precedent 18 Mar 2013 Money had to be found to prevent its financial system collapsing. But imposing a 6.75 percent tax on insured deposits is a type of legalised robbery. Cyprus should instead impose a bigger tax of about 15 percent on uninsured deposits and not touch smaller savers.
Muted markets still speak loud about Cyprus 18 Mar 2013 Investors did not seem much moved by the news of a Cypriot bank raid. Don’t mistake that calm for equanimity. European equities trade at a hefty discount to U.S. and Japanese peers - precisely because of the sort of risk that this crisis chapter makes manifest.
China’s new market watchdog may lack teeth 18 Mar 2013 As chairman of Bank of China, Xiao Gang’s job was to lend. As head of the securities regulator, his challenge will be to take on vested interests and make state banks weaker. Xiao has the right experience, but discouragingly, his rise looks partly down to doing as he’s told.
Euro zone gambles on depositors’ trust in Cyprus 16 Mar 2013 Depositors in Cypriot banks will contribute one third of the island state’s euro zone bailout. The country’s debt now looks sustainable, but it could spook bank account holders in other indebted countries. The move highlights the need for a euro-wide bank resolution authority.
ETF miracle work in junk bonds comes at a cost 15 Mar 2013 Exchange-traded funds have made illiquid high-yield bonds as easy to trade as stocks. But such alchemy doesn’t come for free. When the underlying securities take a tumble or become hard to trade, investors in the $38 billion high-yield ETF market will pay the price.