Economics

Political weakness adds to UK economic dangers

7 May 2010

The election nonresult is troubling. The next government is likely to be too weak to tackle the fiscal deficit with sufficient vigour. The uncertainty may hurt growth and prod rating agencies towards downgrades. The greatest threat: that gilts follow the pound and slump.

Euro may be due for rebound

6 May 2010

The Greek crisis has made the single currency less safe, but market talk of dissolution is exaggerated. Politicians are waking up and growth will be helped by the euro's fall. The ECB may change its rules but that should be seen as a sign of flexibility rather than weakness.

What Lazard should say to Greece

5 May 2010

The investment bank can't help Athens deal with fatal protests, but those only make the government's fiscal challenge greater. The bailout will not solve Greece's problems. Default belongs on the grim menu of options, along with devaluation, drastic change and despair.

Chinese stocks start to look cheap

5 May 2010

Mainland indices have performed badly this year, on a par with Spain and Greece. But valuations now look cheap by past measures. While fears over inflation and property bubbles remain, ample liquidity should help equities recover some momentum.

Euro zone faces Bear Stearns moment

5 May 2010

After Bear was rescued, there was six months of drift and then Lehman popped. Will Spain, Portugal and others drift now that Greece has been bailed out? If they do, the consequences could be horrendous. To avoid being sucked into the whirlpool, weak countries need to act now.

Greece vindicates UK on euro but warns on debt

4 May 2010

Crisis in Greece and other euro zone economies shows the UK was wise to stay out of the euro experiment. But the UK's fiscal deficit, almost as bad as Greece's and bigger than in Spain and Portugal, shows the UK is in a mess of its own and risks a debt downgrade all the same.

Crisis may be golden opportunity for euro

3 May 2010

The Greek drama has been messy, painful and isn't yet over. But Athens has been forced to embark on radical reforms. If that effort spurs other PIGS on to avoid a similar fate, the euro zone could get the streamlined competitive structures it has long needed.

U.S. growth suggests a Bourbon economy

30 Apr 2010

Moderate Q1 GDP improvement looks less attractive when more closely examined. Half the growth was inventories, while the inadequate saving and payments deficits of 200307 are reappearing. Like the French royal family, the U.S. economy has learned nothing and forgotten nothing.

Whatever the name, sovereign defaults bring pain

29 Apr 2010

As market talk turns to Greek nonpayment, the euphemisms are coming out. But without support from the EU and IMF, Athens would be unlikely to get by with mere restructuring. Creditors would end up suffering, perhaps deservedly. But the pain of default varies widely.

Brazil needs to run a budget surplus

29 Apr 2010

The central bank raised interest rates to fight inflation even though real rates are already high. The currency is overvalued and getting more so as the government runs a budget deficit even during a boom. A Chilean fiscal policy and rainyday fund would be advisable.

Merkel’s heat on Greece makes euro zone sweat

26 Apr 2010

Spreads on Greek debt are soaring again, but the EU rescue isn't coming. German chancellor Angela Merkel has reasons to delay, including a local election. But she also wants Greece and others to know that reform comes before aid. The heat will intensify, and the euro may suffer.

Weak UK recovery argues for consensus on cuts

23 Apr 2010

With the election near, each party will try to twist the meagre 0.2 percent firstquarter GDP increase in its favour. But the real lesson is that recovery is slow, making painful deficitcutting moves harder to avoid. With or without a majority, the parties should work together.

Bailout money will buy Greece only a year

23 Apr 2010

The Greek prime minister's request for 45 billion euros from the euro zone and IMF should deal with immediate needs. But there's still no hard promise of cash for year two. And until Athens can show how its debt/GDP will fall, default fears will linger.

Could Greece follow Newfoundland’s path?

23 Apr 2010

Burdened with weak government, an overvalued currency and huge debts, the North Atlantic nation gave up economic and political sovereignty in 1934. Greece's situation is similar, though the IMF and EU will be more discreet and Athens may not get enough aid to prevent default.

Greek agony must galvanize the euro periphery

22 Apr 2010

Yields on Greek debt are soaring. The country needs rapid help from the EU and IMF. Yet whether it can avoid default is questionable. Other deficitridden euro zone economies risk suffering contagion and may be less likely to get EU aid. Greece s pain must spur them to selfhelp.

IMF taxes should spare insurers and hedgies

21 Apr 2010

If it looks like a bank, it should be regulated as a bank. That s a sound rule. But it doesn t justify crudely slapping the IMF s planned bank taxes on every hedge fund and insurer. A more targeted approach could still prevent banking activity migrating to unregulated territory.

Portugal must tighten now — and so must the EU

21 Apr 2010

Spreads on Portuguese debt are widening as investors begin to see another Greece. It's hardly surprising. The government's stability plan, approved by the European Commission, foresees soaring debts. The EU should get tougher. Portugal needs to cut spending now to avoid a crisis.

U.S. derivatives rules still near starting gate

21 Apr 2010

Reform has momentum and the Senate Agriculture Committee has now upped the ante with some aggressive proposals. But the devil will be in the details, and even the broad strokes are still contentious. Breakingviews provides a guide to the key issues at stake.

Inflation impoverishes Britons the easy way

20 Apr 2010

High oil prices and a weak pound pushed the UK inflation rate up to 3.4 percent. Wages are not keeping up, so the nation is losing spending power. More direct hits from fiscal cuts are coming soon. But the Bank of England is probably right to expect inflation will come down.

U.S. financial reform is still a matter of faith

19 Apr 2010

The SEC's suit against Goldman may sway some doubters. But ending government bailouts of banks relies heavily on Wall Street believing rules will be enforced and failures will be allowed. For skeptics, though, the current Senate bill leaves enough wiggle room to induce doubt.