Economics

UK’s encouraging GDP leap looks like the last

23 Jul 2010

Suddenly it's boom time UK. The 1.1 percent growth in the second quarter seems encouragingly strong. But the best news construction jumping out of recession and rising government spending looks temporary. From here on, sharp fiscal cuts are set to bring meagre growth.

Brazil’s monetary and fiscal policies square off

22 Jul 2010

With a further rate hike to 10.75 pct, money is tight in Latin America's biggest economy by global standards. However, Brazil still has big spending plans through state companies and loan grants. After the October election, the country faces a fiscal clampdown or high inflation.

EU banks must come clean on sovereign debt

22 Jul 2010

The 91 lenders subject to Europe's stress tests have been asked for detailed information on their government bond holdings. The body overseeing the exercise has promised not to publish it. But if some banks come clean, others will face immense pressure to follow suit.

China can’t totally ignore foreign critics

21 Jul 2010

GE and BASF have boldly criticised the country's increasing protectionism. They need to accept that the old way, where companies gave technology in return for market access and cheap labour, has ended. A richer China can be more demanding. Yet foreigners still hold some cards.

Poor disclosure a bad omen for EU stress tests

21 Jul 2010

Friday's announcement of stress tests results are supposed to comfort investors. But hints of a neartotal pass rate have spawned fears of a whitewash. Now it seems investors will not get enough information to make up their own minds. This exercise is in danger of being a flop.

Bank of England worries as UK and world weaken

21 Jul 2010

Only one MPC member wants a rate rise, despite high inflation. No wonder, when lending data is poor, house prices seem set to fall and wages may drop. Besides, few countries are set to chop fiscally like the UK. Britain looks especially vulnerable in a wobbly global economy.

BBVA bond shows not all Spanish banks are equal

21 Jul 2010

The lender has issued a 2 bln euro covered bond, the first by a Spanish bank since April. The cost is greater, but higher mortgage rates mean BBVA can still make a decent profit. That gives it a big advantage over Spain's smaller savings banks, which are shut out of the market.

Complexity of tax simplification may baffle UK

20 Jul 2010

The Commissioners for the Reduction of the National Debt were established in 1786. That didn't quite work out. The new Office of Tax Simplification's aim is similarly worthy, but tax simplification can only make political progress when there are tax cuts to ease the losers' pain.

Ireland must cut its mega-deficit

19 Jul 2010

The country had to rescue banks, to avoid systemic collapse. But the bursting of the property bubble and the rescue have hammered state finances. The fiscal deficit is close to one fifth of GDP. Further cuts are needed, but at least an exportled recovery seems to be taking hold.

Hungary looks for trouble as Orban sends off IMF

19 Jul 2010

The prime minister and former football player has given red cards to the IMF and EU, which have been lending to the country since 2008. The ungrateful populism pleases the crowd, but Hungary is frail and has a lot of debt to roll over. Orban might have to play ball again soon.

Ukraine plays hard-to-get as Eurobond stalls

19 Jul 2010

Despite high investor interest, the two sides couldn't agree on the price. Such pickiness shows how quickly Ukraine's fortunes have improved. Recent progress on structural reforms, and cheap funding from both the IMF and Russia, means Ukraine can afford to keep investors waiting.

Japan embraces needed M&A – but slowly

16 Jul 2010

Companies are starting to do deals at home and overseas. But volumes are small. For many, M&A is still a last resort for failed firms and a drain on precious cash. Things are changing, but crisis elsewhere makes the usual Japanese objections to dealmaking harder to criticize.

UK budget watchdog finally looks independent

16 Jul 2010

The UK's new Office for Budget Responsibility got off to a rocky start. But the government has agreed to allow members of parliament to vet the appointment of its chairman. It's a pity that ministers won't let them do the same for the Bank of England governor and other key posts.

Japan embraces needed M&A – but slowly

16 Jul 2010

Companies are starting to do deals at home and overseas. But volumes are small. For many, M&A is still a last resort for failed firms and a drain on precious cash. Things are changing, but crisis elsewhere makes the usual Japanese objections to dealmaking harder to criticize.

China slowdown won’t placate its critics

15 Jul 2010

Cooling domestic demand brought the GDP growth rate down to 8 percent in the last quarter. But exports are still roaring ahead and lower inflation means currency reforms may now be put on ice. With the U.S. economy still in the mire, Washington won't like that one bit.

Russia still needs to develop culture of savings

15 Jul 2010

Bank deposits have jumped by 40 percent in 18 months. That's a tribute to Russian banks' relatively good performance through the crisis, and reflects the public's fears about the downturn. But the country is still far behind other BRICs in longterm savings and investment.

Post-crisis hybrid capital still just a prototype

15 Jul 2010

Unicredit has just sold 500 mln euros of a new kind of bond designed to meet regulators' desire for capital that can absorb losses in times of stress. The success of the Italian bank's deal is a good sign. But banks have yet to develop a postcrisis hybrid with universal appeal.

China could give Argentina example as well as cash

14 Jul 2010

Beijing's $10 bln investment in Argentine railroads brings back memories. In the 19th century, it was Britain that financed and built Argentina's railroads, and gave development advice. Now China has the money and the economic record. Buenos Aires should follow the Chinese track.

ECB’s bond binge leaves market half-healed

13 Jul 2010

The central bank is winding down its government debt purchases. The 60 billion euro spree helped calm markets, but they still aren't functioning fully. The ECB's withdrawal shouldn't send Europe into a tailspin just now. But its wallet and resolve could be tested again.

China’s hot money flows unexpectedly dry up

13 Jul 2010

Undervalued currencies tend to attract speculative funds. Yet none came China's way over the last three months. Foreign investors may be more risk averse, or deterred by Beijing's antispeculator policies. But some wealthy Chinese could also be looking for safe haven insurance.