Economics

New Greek plan deserves German blessing

4 Mar 2010

The latest deficitcutting measures show that George Papandreou gets it. The Greek government is doing the right thing. Now it's the EU's turn to act. The Germans are reticent, but their demands have mostly been met. They should drop their objections to a financial aid package.

Transparency better than a ban for sovereign CDS

4 Mar 2010

European policymakers have summoned bankers to a meeting to probe sovereign creditdefault swaps. There is political appetite for action. But identifying speculators is tricky, and a ban would merely shift activity to other instruments. A better option is to improve disclosure.

ECB should start worrying about deflation

4 Mar 2010

JeanClaude Trichet, the European Central bank president, is right that euro zone inflation is well anchored. It is half the ECB s target and risks going lower as countries make big fiscal cuts. The ECB ought to be considering further efforts to avert deflation and spur growth.

HK exchange can’t count on China IPOs forever

4 Mar 2010

AIA's failure to list could cut Hong Kong's 2010 IPO pipeline by half. The exchange needs Chinarelated business to fill the gap but faces increasingly stiff competition from Shanghai. The answer could be edgier products, such as commodities and offshore yuan securities.

China prefers weapons of an economic kind

4 Mar 2010

The state defence budget grew less than GDP. That might be an understatement from a secretive country that wants to look like a benevolent superpower. But China's most powerful weapon right now may be its $2.4 trillion of currency reserves. There's no need to think nuclear.

Markets may be regaining too much equilibrium

3 Mar 2010

Fears are receding that tiny Greece will bring down the huge euro zone. That justifies some renewed investor optimism. But recent corporate moves suggest excessive confidence. Economic news is generally disappointing and fiscal challenges remain large. Caution should still rule.

China’s state budget deficit is tip of iceberg

3 Mar 2010

The reported budget deficit is a modest 3 percent of GDP. Add in frantic borrowing by local governments, though, and the total comes to something like to 15 percent. If those debts go bad, banks will initially take the losses, but Beijing could ultimately end up on the hook.

Banks see silver lining in sovereign debt woes

3 Mar 2010

Western government deficits will weigh on the markets for a while. That doesn't bode well for investment banks issuing junk bonds or underwriting IPOs. However, there is plenty of business in helping countries finance their deficits, and in trading currencies and sovereign debt.

ECB, and Greece, need fairer rules on collateral

2 Mar 2010

As it stands, one big downgrade would oblige the central bank to stop taking all Greek debt as collateral at the end of the year. That ratings cliff is unfair and unnecessary. The ECB could ease the tension by adopting a sliding scale of higher haircuts for lower ratings.

Pound begins what may be a deep pre-election dive

2 Mar 2010

A weekend poll showing a tight election is the main immediate cause of sterling's new weakness. The odds are now stacked against the currency. An enormous deficit, political uncertainty and the risk of a return to recession and money printing could send it below its 2009 lows.

Turkey will need luck to prosper

1 Mar 2010

The Erdogan government has done a decent economic job since 2002. With the budget deficit under control, healthy growth should resume soon. But the longer term path is rocky. The Greek crisis makes EU membership unlikely and domestic politics are likely to stay tense.

Paris, Berlin might find Greek bailout profitable

1 Mar 2010

France and Germany are mulling finance guarantees, backed by their stateowned banks, to ensure Greece can keep borrowing. If the EU and Athens can agree on a tough deficitreduction plan, and if trust returns, the rescuers could end up profiting at the expense of speculators.

Pudong Bank finds industrial white knight

26 Feb 2010

The bank may shore up capital by selling a 20 percent stake to China Mobile for $5.9 billion, rather than turn to current shareholder Citigroup. An industrialfinancial link would be in line with Chinese traditions. That's great for Pudong, but may do less for China Mobile.

UK M&A watchdog wisely pre-empts political prying

25 Feb 2010

The Takeover Panel is reviewing its rules amid concern prompted by Kraft's hostile offer for Cadbury. There's a case for updating some of the rubric, chiefly regarding virtual bids. And by taking the initiative, the panel may prevent politicians trying to twist its rules.

Canada may lose at hockey but win in economics

23 Feb 2010

Like Sunday s Olympic hockey game with the U.S., the fiscal competition between the countries appears closefought. But Canada has achieved similar results without a large bank bailout or excessive stimulus. The end result of the economic match should be a Canadian victory.

Bigger state role in banks might hurt UK taxpayers

23 Feb 2010

Vince Cable wants to force statecontrolled RBS and Lloyds to increase lending. The plan of the Liberal Democrat's economics thinker, and potential UK Chancellor, might help some small firms. But the increased meddling would make it harder to sell the bank stakes at a profit.

Japan’s experience should comfort policymakers

23 Feb 2010

Japan may sound like an economic horror story: huge fiscal deficit, minimal GDP growth and constantly looming deflation. But look on the bright side. A huge asset crash has hardly dented prosperity and bond yields remain low. Western countries will be fortunate to do as well.

BoE’s willingness to print still more looks risky

23 Feb 2010

The UK central bank's governor caused a sharp fall in the pound by suggesting that a weak economy could lead to further moneyprinting. That may not do much to turn around the deleveraging private sector. But more QE could weaken the pound and put government financing at risk.

UK can’t wait for strong growth before it cuts

22 Feb 2010

Some leading economists say the UK should wait for robust growth before cutting government spending. The wait could be too long. While strong growth looks distant, contagion from the euro zone could easily prompt crisis. Perhaps only markets can prompt painful reform.

Benign U.S. inflation data conceal turbulence

19 Feb 2010

Consumer prices rose 0.2 pct in January, less than expected. Excluding food and energy, prices actually declined. But there are some artificial oddities underneath the data. And with import and producer prices up sharply, inflationary pressures are building.