Economics

France is a safe investment. Or is it?

1 Jun 2010

The French budget minister put his foot in his mouth by voicing his concern that the country's ratings situation was tense. France still is the euro zone's safest investment after Germany. But it won't retain its status if it keeps doing nothing about its budget deficits.

Canada should lead interest rate vanguard for G7

1 Jun 2010

The central bank s 0.25 pct rate rise, the first in the G7, owed much to GDP growth, rising inflation and a declining savings rate. Other countries may be growing more slowly but their fiscal positions make ultralow rates riskier. Canada s may be an example worth following.

Spain’s labour reform could be missed opportunity

1 Jun 2010

The weakened socialist government is uncomfortable with radical reform, and so are the unions. So the changes will probably not make much difference in the country's dysfunctional job market. But if this crisis doesn't spark major change, it's hard to imagine what would.

Borrowers innovate to attract savers’ interest

27 May 2010

How do you pull in cash with interest rates close to zero? The UK's Nationwide Building Society has a bond which will pay a higher rate if England wins soccer's World Cup, while Hotel Chocolat is offering a bond paying interest in chocolate. Expect more interesting innovations.

China can’t easily break Faustian pact with euro

27 May 2010

The single currency may be joining the dollar on Beijing's list of doubtful assets. But without China's financial backing, Europe would have struggled to sustain last year's 90bln euro bilateral trade gap. Such vendor financing is risky, but change requires painful adjustments.

Russian privatisation renaissance could go further

26 May 2010

After a fallow period, Russia is preparing to restart privatisations. That could raise billions to plug a budget hole, and deliver bumper fees to investment banks. But the state is set to retain control of what it floats, so the full benefits of privatisation will prove elusive.

Geithner presents timely challenge for EU banks

26 May 2010

The U.S. Treasury boss plans to urge a generalised EU stresstest. That could help ease the current crisis, if governments could credibly promise to close any capital gaps. Arranging tests is tricky, but they are more urgently needed than bank taxes, the EU's current obsession.

China’s asset price mania gets spicy

26 May 2010

A pungent version of tulip mania is on display in China. Garlic was possibly the country's top performing asset in 2009, up more than 500 percent. Prices have softened a bit after Beijing threatened to intervene. But if liquidity keeps flowing, there will be all sorts of bubbles.

Germany’s next misguided clampdown: currencies

25 May 2010

The finance ministry is proposing a possible ban on some currency derivatives in Germany's latest example of regulatory sturm und drang. It's easy to see why Berlin wants to curb euro volatility. But again, its proposals would be hard to implement and have damaging side effects.

Putin shows political mettle in steel probe

25 May 2010

Russia's premier may have economic grounds for accusing metal producers of unfair pricing. But even if there is no collusion, leading steelmaker Evraz, which faces an investigation, should worry. Putin's crackdown probably reflects the lobbying power of struggling steel buyers.

Korea embargo adds to market’s political fear

25 May 2010

South Korea's economic retaliation against the North is both merited and minor in economic terms annual trade is only $286 mln. But the military tension will raise risk premiums in South Korea, and gives already frightened investors around the world a fairly big new worry.

California still showing the way on U.S. housing

25 May 2010

A key index of U.S. home prices dipped in March. But Californian cities, among the hardest hit by the credit crunch, posted gains. Yearonyear, they have appreciated far faster than the 2.3 percent seen nationally. The Golden State could pull the rest of the country along.

Italy tightens belt a notch, mum on growth

25 May 2010

The Italian government plans to cut its budget deficit by half to 2.7 percent in 2012 thanks to cuts in regional subsidies and attrition in the state bureaucracy. It hopes to calm market jitters about its debt level. But in the longer term, it shouldn't forget about growth.

Global markets may be overdoing euro panic

25 May 2010

Investors seem to think the single currency will go multiple as the world enters into crippling deflation. Maybe, but the zone has circled its wagons. The euro should survive, even if a periphery member departs. And the recovery in the U.S. and Asia remains in place.

How bad could it get?

25 May 2010

Germany s shortselling ban provokes renewed banking crises, domino default in sovereign debt, disintegration of the euro, protectionism and global depression. Read our imaginary account of how the euro zone crisis turns into a horror story.

How bad could it get? Part 3: Auf Wiedersehen, euro.

24 May 2010

The final episode of our financial horror story depicts the disintegration of the euro, rife protectionism, the global economy sinking into depression and moderate governments getting toppled.

Colombian voters may put recent successes at risk

24 May 2010

Polls suggest that the opposition s Antanas Mockus may win May 30 s presidential election. The populist mayor of Bogota has put forward no concrete policies other than an increase in corporate taxes, popular among Colombia s poor. His accession could be bad for business.

How bad could it get? Part 2: The bond market strike.

24 May 2010

The second installment in this threepart fiction imagines a euro zone bank bailout triggering panic in the government bond market.

China needs monetary discipline, not stimulus

24 May 2010

Chinese policy makers think the recovery is fragile and are calling for global efforts to boost growth. Austerity in the euro zone is a concern. Yet China's property prices are still rising and inflation is a risk. China needs monetary discipline to combat domestic exuberance.

How bad could it get? Part 1: It’s the banks, stupid.

24 May 2010

In the first episode of this fictional threepart tale of how the euro zone crisis turns into a horror story, Germany s shortselling ban provokes a renewed banking crisis.