Catalonia tests Spain’s flawed regional model 24 Aug 2012 The fiscal woes of Spain’s regions could make it miss its deficit targets. But profligacy only tells part of the story. Catalonia, now pushing for greater fiscal independence, is the clearest example of why the semi-autonomous provinces model needs a revamp.
It’s risky to be big fish in murky Vietnam markets 24 Aug 2012 The arrest of tycoon Nguyen Duc Kien has roiled the country’s tiny stock market. Never mind that he no longer controls the bank he founded: with weak banks, widespread corruption and poor governance, investors fear that if he goes down, he may take the financial system with him.
The old, the poor and U.S. healthcare explained 23 Aug 2012 Republican presidential hopeful Romney’s choice of running-mate Paul Ryan has put government programs like Medicare and Medicaid in the spotlight. Their cost – over $1 trln combined in 2011 – is spiraling. Breakingviews outlines the problem and the different candidates’ fixes.
Disputes give WTO chance to prove it has cojones 23 Aug 2012 Complaints lodged with the trade body have doubled this year, including a big case against Argentina. That’s to be expected as economic woes encourage protectionism. But with Russia joining, the WTO now includes the top 30 exporters. That may lend it some much-needed influence.
Playing nice may suit Greece’s official lenders 23 Aug 2012 Athens wants to delay austerity. Its lenders won’t give it more money. Various schemes could shift the burden to the IMF and allow euro zone leaders to dispense with Parliamentary approval. Greece’s ace is that Europe needs time before it can take losses on its bailout loans.
Thais should tone down populist rhetoric 23 Aug 2012 A top official says the country’s foreign reserves are doing “nothing useful.” A swap of low-yielding U.S. Treasuries for roads and bridges sounds tempting. But the actual economics are doubtful, Thailand isn’t secure enough for the risks and the timing is terrible for investors.
Korea, Taiwan are global stimulus weather vanes 23 Aug 2012 The two export-reliant economies are suffering as global growth slows. Yet foreign investors have been snapping up their stocks to wager that China, Europe or the U.S. will respond with major stimulus measures. If they do, Asia’s exports could be among the first beneficiaries.
U.S. housing watchdog wise to go long on short sales 22 Aug 2012 The federal agency that oversees mortgage behemoths Fannie and Freddie is making it easier for underwater borrowers to sell homes at current prices. That’s better than cutting the amount owed as it should enhance housing market stability without introducing moral hazard.
Brazil’s infrastructure plans look rose-tinted 22 Aug 2012 President Rousseff hopes private investors will help provide $66 bln for rail and roads over the next 20 years, boosting growth - and that’s just a start. But past state-led efforts have fallen short of expectations. Now, red tape is still a problem and financing is a challenge.
Market could overrule U.S. court on coal pollution 22 Aug 2012 An appeals panel has put the brakes on the EPA’s effort to cut emissions from coal-fired power plants. That could keep the dirtiest U.S. smoke stacks going a bit longer. But at least for now, cheap gas is doing the environmental watchdog’s work, whether judges like it or not.
Ethical economy: The false idol of free trade 22 Aug 2012 Much of the economic rhetoric around subsidies for solar power suggests that free trade is paramount. But even economists admit that free trade isn’t an absolute good. Besides, trade can never be truly free and unencumbered trade between unequal partners is often oppressive.
Italy still vulnerable to Spanish flu 22 Aug 2012 Italy could avoid Spain’s bailout shame. Mario Monti is intent on more reforms and privatisations. If investors think that Italy is on the right track, they might view Spain’s bailout as a trigger to buy its bonds. But next year’s election remains a big question mark.
China has no liquidity problem. That’s a problem. 22 Aug 2012 Beijing has managed to keep credit and cash growing despite falling property, profit and slowing growth. That may help China avoid the kind of liquidity trap that made the U.S. recession so painful. But it could encourage the behavior that has kept Japan in a slump for so long.
South Korea can’t kick debt habit 22 Aug 2012 Loan limits for younger homebuyers have just risen by about 15 percent, thanks to a decision to let lenders estimate borrowers’ future incomes. More credit might help counter the current weakness in demand, but will only increase the stress on Korea’s over-indebted households.
Muni investors shouldn’t be spooked by Buffett 21 Aug 2012 The Oracle’s decision to unwind $8.25 bln of derivatives deals is being interpreted as a bearish sign on America’s states and cities. Investors are better off keeping their own counsel on a market so broad and diverse. It’s a lesson learned from muni doomsayer Meredith Whitney.
Malaysia might escape middle-income trap 21 Aug 2012 The government’s efforts to support the Malay majority have hollowed out the nation’s talent pool and hurt growth. Encouraged by a boost in public spending, private sector investment rose at a 25 percent rate in the second quarter. That could make faster growth self-sustaining.
Time to draw a line under India’s crony capitalism 21 Aug 2012 India’s national auditor has once again highlighted too-cheap sales of state assets. Going forward the answer is simple: auctions that are transparent and profit-maximising. The past is harder to clear up. The government and business community need to show they’re sorry.
U.S. money market funds can’t have it both ways 20 Aug 2012 Lobbyists are trying to stifle reforms in the $2.7 trln industry, while the New York Fed boss has lent his support to changes the SEC chairman wants proposed. The funds can’t go on claiming ultra low risk while having no obligation to hold a buffer. Something needs to give.
Greek lesson encourages can pay, won’t pay states 20 Aug 2012 Belize is trying to force a restructuring. The Caribbean nation is more or less solvent, but its cash is precious and its debt expensive. Foreign creditors have limited leverage, as the Greek and Argentine examples show. They can lose their shirts even if countries don’t go bust.
Gu Kailai verdict may play better than Pussy Riot 20 Aug 2012 In some ways, China’s hasty murder conviction of a politician’s wife resembles Russia’s farcical prison sentence for a punk protest. But the Russian case inflames fear of excessive state control, which is bad for markets. In China, investors may be happy that order has prevailed.