EMEA

Euro bailout fund could survive French downgrade

15 Aug 2011

France’s triple-A rating is the weak link in the soon-to-be-expanded European Financial Stability Facility. A downgrade would almost certainly dent the rescue fund’s top rating, pushing up borrowing costs for bailed-out countries. But this need not be a disaster.

Russia needs to kick-start pension reform

15 Aug 2011

A rapidly rising state pension bill will become a crippling burden without serious reforms. The latter is the key not only to addressing deteriorating public finances, but also to developing flimsy capital markets. A pity Russia’s leaders are so shy about the sensitive issue.

Korea’s leveraged bets put it at risk of contagion

12 Aug 2011

Seoul’s stock market fell further than the U.S. this month - 16 pct. South Korea relies heavily on European credit and a U.S. recession would threaten its exports. But the popularity of loans and derivatives to bet on stocks makes Seoul susceptible to even more dramatic declines.

Split EU regulators weakened by dubious short ban

12 Aug 2011

Without the cover of European unanimity, countries that imposed short-selling curbs have made it look like they have something real to worry about. Bank shares are still gyrating - hardly evidence of a more stable market. Watchdogs risk suffering a hit to credibility.

France needs resolve to avoid losing triple-A

11 Aug 2011

Debt and the deficit are high, regardless of the cost of euro zone bailouts. France has a tough plan. But extra measures, like reforming local government and removing VAT exemptions, are needed. Regrettably, as in the U.S., there are political obstacles and an election looms.

Financial lifeboats starting to get crowded

11 Aug 2011

Safety from sinking stocks has been sought in Treasuries, and even bonds backed by U.S. homes. But other places of refuge like the Swiss franc and gold showed on Thursday how quickly they can be rocked when too many investors pile in. Havens aren’t immune to mania either.

European market meddling would not be worth it

11 Aug 2011

Shares have jumped on expectations that some countries will impose short-selling bans. The desire to protect banks from a potentially self-fulfilling loss of confidence is understandable. But changing the rules in volatile times would risk damaging markets in the longer term.

Sweet Swiss-German tax deal will be hard to repeat

11 Aug 2011

Bern has agreed to collect tax and penalties from accounts held by tax-dodging Germans. But Swiss bank secrecy remains intact, and lenders will avoid prosecution for past crimes. The revenue hit is also manageable. An investigation by U.S. authorities is unlikely to end so well.

Central banks at the limits

10 Aug 2011

QE or not QE? Fears of renewed global recession come as central bankers seem short of options. Money printing carries big risks, and failed currency interventions add to the impression of impotence. The radical solutions are there. But they might be better kept locked away.

Italy still vulnerable despite ECB covering fire

9 Aug 2011

The European Central Bank’s bond buying has brought down Italian yields, yet Rome is still in markets’ sights. The government plans to accelerate fiscal measures and labour reform, but real change could take time, and growth may disappoint. Italy cannot afford to delay.

London’s safe-haven status faces another threat

9 Aug 2011

Images of rioting across the capital have been beamed around the world. It’s another factor that could make London less attractive for globally mobile workers and investors. Though the government should not hesitate in its austerity policies, it needs to prove the city is safe.

London riots strike another blow to confidence

8 Aug 2011

A third day of violent clashes and looting around the city are being put down to anti-police sentiment, social division, summer boredom and BlackBerry-coordinated unrest. Whatever the causes, the images from the financial capital can only hurt already fragile markets.

ECB’s bazooka has a limited shelf life

8 Aug 2011

The central bank’s decision to buy Italian and Spanish bonds has calmed investors’ nerves. But the ECB is only buying time until the euro zone governments’ bailout facility is ready to step in. And the repercussions of Friday’s U.S. ratings downgrade could limit future rescues.

Panic and crisis need different solutions

5 Aug 2011

Markets are panicking amid fears of world recession. That looks overdone for now, and falling commodity prices support growth. So policymakers should keep cool. The euro zone faces systemic crisis but conventional policy would help: Italy and Spain must tighten fiscally - fast.

RBS’s uncertain road ahead gets even bumpier

5 Aug 2011

Though the UK bank met expectations in the first half, its shares are being savaged in the broader market sell-off. The balance sheet clean up is going well, but euro zone exposure is starting to hurt. The bank’s goal of 15 pct return on equity by 2013 is also looking vulnerable.

EU bank funding headed back to emergency room

5 Aug 2011

The 2008 liquidity squeeze triggered a credit crunch and massive bailouts. Though Europe’s banks are in better shape today, turmoil in the euro zone means some lenders can once more only get overnight funding. That leaves the European Central Bank squarely on the hook - again.

Lloyds’ battering may have silver lining

4 Aug 2011

Huge one-off charges, higher funding costs and moribund markets made a mess of the UK lender’s first half. But Lloyds is weaning itself off state funding. And its depressed share price may prompt politicians to back away from plans to force the bank to sell more branches.

Euro zone isn’t ready for true euro bonds

4 Aug 2011

Could a common bond solve Europe’s sovereign crisis? The region’s bailout fund is already functioning like a joint debt issuer. But for now the zone lacks the political unity needed for a proper debt union. Euro bonds can’t be a quick fix.

Trichet is right to make Italy sweat

4 Aug 2011

The ECB is turning a deaf ear to the Italian finance minister’s suggestion that it buy the country’s bonds. In a further snub, the central bank resumed its bond-buying programme - for Irish and Portuguese securities. Italy must reform before it asks for help.

StanChart investors should not get carried away

3 Aug 2011

The lender’s income is growing at a double-digit clip and it is hiring, not firing. Even better, costs are under control. But StanChart’s premium valuation leaves little room for error. A first-half hiccup in India is a reminder that emerging market growth is seldom linear.