Economics

Russia needs to straighten economic kinks

9 Jun 2010

Russia's corporate tax system and utility regulation are arbitrary and illogical. The result is extensive capital misallocation, underinvestment in infrastructure, wasted resources and too much lobbying for government largesse. And improvements are likely to be painfully slow.

France should act soon to keep spreads down

9 Jun 2010

Alone among the big European economies, France is not undertaking a serious deficit reduction plan. Investors have started to notice. Debt spreads have doubled, although the level is still low. But the longer Sarkozy procrastinates, the harsher the market's punishment will be.

Slovakia could be riskier than Hungary

8 Jun 2010

Political shenanigans in Budapest have scared investors, but they should watch out for bad news from Bratislava. Slovakia has less public debt than Hungary, but worse payments and budget positions. Currency and government comparisons also point towards more problems in Slovakia.

Every little helps with U.S. budget

8 Jun 2010

Cutting 5 percent of optional government spending won't plug America's fiscal hole. Still, President Obama's proposal may buy a bit more time with nervous financial markets. It could even kickstart a needed rationalization of government outlays. But Obama needs to go further.

Keynesian stimulus may be counterproductive

8 Jun 2010

Large fiscal deficits can clearly cause problems, but can they really cure them? Keynes said governments should borrow to spend, but he was much more cautious than current politicians, since borrowed money has to come from somewhere. Over time, lower deficits can boost growth.

Euro zone bailout vehicle recalls CDO boom

8 Jun 2010

The EU's new rescue package draws on the techniques that fuelled the structured finance boom. It will make loans to struggling borrowers, packaged in a special purpose vehicle with a tripleA rating. Investors should make sure this SPV is more robust than its toxic predecessors.

Merkel bets on euro slide to buffer spending cuts

8 Jun 2010

The German chancellor wants to shrink the country's budget deficit by 80 billion euros over four years. This austerity will mostly hurt the stillstruggling economies of its euro zone partners. Meanwhile, exportdependent Germany is the main beneficiary of the weaker euro.

Plan for EU ratings agency is crazy

8 Jun 2010

Some member states want to create a taxpayerfunded EU ratings agency to make up for the Big Three's failings. But such a body would lack credibility and be seen as a tool for governments to manipulate markets. The EU should focus on better regulation and cheering new entrants.

China is learning the Henry Ford lesson

7 Jun 2010

When Ford doubled workers' wages to $5 a day in 1914, he was accused of reckless socialism. But he was only recognising and sharing the power of productivity. Chinese wages are rising fast, and have a lot further to go. Almost everyone should be grateful.

Markets are back in control – and in a bad mood

7 Jun 2010

A year ago, governments looked like the true masters of the universe rescuing banks and economies and vowing to humble financiers. But it's once again investors who are calling the tune, which has rapidly shifted from a stimulusallegro to a cacophony of fear.

Hungary reminds banks of their eastern forex woes

7 Jun 2010

Analysts say Hungary is not as bad as Greece. But its problems are different. The government has caused alarm. And euro zone banks in Hungary and other east European countries have lent in euros and Swiss francs and are dangerously exposed.

Europe’s bank tests need capital backstop

7 Jun 2010

The EU seems to be coming round to the idea that stress tests on its banks should be published. That may help restore confidence but only if EU governments can show how they'll recapitalise banks that don't make the grade. Otherwise, stress tests could sow panic.

China’s labour market becomes more complicated

4 Jun 2010

Suicides and strikes are signs that the days of an unlimited army of unbelievably cheap and pliant labour are over. If the shrinking pool of employees gets too powerful, the country's competitiveness could be hurt. As workers get less flexible, managers have to get more so.

U.S. recovery is jobless – so far

4 Jun 2010

The 431,000 new jobs in May included only 41,000 in the private sector. That looks anemic, perhaps due to huge federal deficits and a steep yield curve. But it s too early to write off job creation altogether. Normally it takes more than a year after the bottom to gather steam.

China should use yuan, not SDR, as political tool

3 Jun 2010

China would like to avoid losses on its gigantic foreign currency portfolio and increase its global clout. It has hopes the IMF's Special Drawing Rights could do both, but the plan looks unrealistic. Beijing should focus on making the yuan an effective politicalfinancial tool.

Putin’s reformers look back in sorrow

3 Jun 2010

A decade ago, Russia adopted a bold 10year reform agenda. The plan's authors have not lost influence, but now say only 40 percent of the goals have been reached. The failures reflect Russia's chaotic government, strong vested interests and complacency bred by high oil prices.

UK emergency budget may strain coalition

3 Jun 2010

Britain's new coalition which has already lost one promisingly hawkish member has three weeks to come up with a budget, working with a new independent body which may force it to cut more than it wants. The challenge looks enormous and potentially divisive.

Kan will struggle to change Japan’s fiscal course

3 Jun 2010

The likely new prime minister may personally be in favour of lower spending and higher taxes. It may even be politically possible to make a first step, a return to Koizumi's more modest borrowing limits. But elections loom. Kan will probably follow the big deficit tradition.

PM resignation brings Japan’s fiscal crisis closer

2 Jun 2010

For the fifth time in four years, a new leader will take charge of the world's second largest economy. Or fail to. The country is number one in fiscal deficits and debt loads, yet budgetcutters always lose out to Keynesians. Disaster may be only one more weak leader away.

ECB struggles to buck the markets

2 Jun 2010

The European Central Bank's bondbuying programme is having little success in supporting government debt markets. Italian and Spanish bonds are still being hit, and peripheral governments are becoming more dependent on domestic savers. The ECB may have to step up its purchases.