Economics

Design faults of euro-craft are being exposed

11 Feb 2010

Eleven years into its existence, the euro's construction is looking a bit unsound. The new vehicle was innovative but its owners have ignored its user manual. Putting the defects right is going to be difficult. Greece is unlikely to be the last member economy that needs help.

UK hostile bids are hard enough already

10 Feb 2010

Cadbury's outgoing chairman thinks UK takeover rules slightly favour hostile bidders, and give shortterm speculators too much power. His remedies, which include disenfranchising arbitrageurs, are provocative. But reducing the threat of a takeover could protect bad management.

EU help would allow Greece to prove markets wrong

10 Feb 2010

By hinting that it will stand by Greece, the EU has already got part of the way to its goal: relieving market pressure. If EU leaders can agree on a credible set of policies at this week's summit, Greece will have the time it needs to implement its tough deficit reduction plan.

BoE’s reliance on weaker sterling has risks

10 Feb 2010

Central bank governor Mervyn King is looking to the devalued pound to generate an exportled UK recovery. But relying on devaluation when the fiscal deficit is enormous has its risks. If the pound's fall gets out of hand, inflation and financing could become problematic.

Stock investors relax: Long term, it will work out

9 Feb 2010

It has been a rough decade, but the century is still looking good. Credit Suisse says a global buyandreinvest stock strategy since 1900 provided a 5.4 percent annual return after inflation. If more investors were happy with that level of gain, there might be fewer crises.

UK mustn’t be STUPID

8 Feb 2010

The PIGS (Portugal, Italy, Greece and Spain) are old hat. The new acronym for dominoes if Greece should fall is STUPID (Spain, Turkey, UK, Portugal, Italy, Dubai). Given the way such acronyms can become contagious, the UK needs to distance itself from the others. Here's how.

CICC can gain most by playing China card

8 Feb 2010

China s top investment bank has poached talent from top foreign firms. It will bring international expertise for Chinese clients and is a small step on the rocky road that to global status. For now, it needs to focus on selling foreigners its China insight and connections.

Execution deal shows continuing allure of London

8 Feb 2010

The boutique London investment bank is selling a 50.1 pct stake to Banco Espirito Santo. The deal shows that even independent brokers want access to a big balance sheet. The Portuguese interest proves there are still foreign banks willing to pay up for a City name.

SAP’s shock CEO switch is a missed opportunity

8 Feb 2010

Replacing Leo Apotheker may be the right move for the German software group. But installing two coCEOs instead is not ideal. SAP may have prospered with dualheaded governance in the past. But split leadership could see the real power stay with SAP's founder and chairman.

At least America still looks productive

21 Jan 2010

Those betting on a U.S. decline may have to postpone their economic Götterdammerung. Thanks to flexible labor markets, productivity rose 2.5 pct in 2009, compared to a Eurozone decline. European, not American, living standards look more vulnerable to emerging market competition.

Inflation leads UK to corrective impoverishment

19 Jan 2010

British prices were expected to spike and have done. The rise reflects a weak pound, higher taxes and loose global money. Inflation makes Britons poorer and makes the government pay more on its debt. The adjustment is painful, but the UK must live within its means.

Watch leveraged Chinese buyers for bubble signs

19 Jan 2010

It may seem odd that a country with high savings also has a mounting debt problem. Yet consumers are borrowing to buy inflated assets like property. If lending isn't reined in, China could end up with worst of both worlds: excessive savings and too much debt.

US CPI and industrial production pose warning

15 Jan 2010

U.S. inflation is convincingly positive, whether measured gross or net of food, energy and shelter. Strong industrial production and soaring commodity prices suggest price pressures will intensify, not decline. That risks pushing inflation high enough to rattle bond markets.

Bankruptcy would only be first step for JAL

15 Jan 2010

Asia's biggest carrier is likely to try out a Japanese variety of the U.S. go bust, stay airborne model. In theory, bankruptcy could offer a brand new start. But some rather unJapanese decisions are required, such as letting foreigners in and squeezing shareholders out.

Leaving the euro? Only in fantasy land

15 Jan 2010

Worst case scenarios about Greece leaving the euro zone make nice reading in the fiction category. It may be technically feasible, but the financial and political costs of the move on the departing country far outweigh the hypothetical benefits. It simply won't happen.

Copying U.S. bank tax will be tempting, but hard

15 Jan 2010

The Obama administration wants others to follow its lead by taxing bank liabilities. The idea of raising revenue while bashing banks may appeal. But smaller countries will find it harder to act alone. Besides, copying the U.S. levy could lead to some banks being taxed twice.

Germany can’t lead euro zone out of trouble

15 Jan 2010

After the sharpest decline since World War Two, growth will return to Germany in 2010. But while exports are strong, Germany's cautious consumers leave europeriphery countries such as Greece and Spain without a growth engine to help pull them out of trouble.

European banks won’t be able to dodge Obama levy

15 Jan 2010

The region's big four investment banks Barclays, CS, Deutsche and UBS will each be stung by about $5 bln. They'll undoubtedly look at lots of wheezes to avoid the tax. But the best they are likely to be able to do is trim it.

Venezuelan economic policy reverts to jungle

11 Jan 2010

The country s twotier exchange rate will increase oil revenues in bolivar terms. But rising inflation, threats to local businesses passing on higher costs and the corruption resulting from a gamed system will worsen chaos. While Hugo Chávez remains, jungle law will prevail.

Aftermath of this US recession will linger on

8 Jan 2010

December showed jobs still being lost now 7.2mln, three times the next worst postwar recession. And with productivity rising fast, they won t rematerialize soon. Stubbornly high US unemployment and the associated social and political pathologies are here for some time to come.