Fiscal Policy

Review: The flimsy finances behind China’s miracle

9 Mar 2018

The People’s Republic has long defied the economic doom-mongers. In “China’s Great Wall of Debt”, Dinny McMahon exposes the fragility and contradictions of the country’s growth model. It’s a detailed and original reality check on the latest bout of China hype.

Viewsroom: Trump slaps tariff fear on markets

8 Mar 2018

Imposing levies on steel and aluminum has lost the president his economic adviser, ex-Goldman No. 2 Gary Cohn. That has shocked investors out of complacency. Also: Italy’s elections leave fringe parties in charge. And big deals may be back on the agenda for the mining industry.

Hadas: Doughnut economics needs a new flavour

7 Mar 2018

Author Kate Raworth’s image refers to both the hole of deprivation and ecological disaster beyond the outer rim, both of which are to be avoided. But her recipe is contaminated with eco-left prejudice. A more wholesome blend would start by recognising the current system’s gains.

Debt straitjacket will confine Italy’s next leader

2 Mar 2018

Candidates in Sunday’s election promise to spend more. But the winner won’t have much wiggle room. If Italy’s primary budget surplus dips below 1 pct of GDP, cutting overall debt will be hard, a Breakingviews calculator shows. Rising interest rates are a further constraint.

India lacks ingredients for next leg of growth

28 Feb 2018

The economy expanded 7.2 pct in the fourth quarter as it continued to recover from Premier Modi’s shock therapy. Even stronger growth would require healthy banks. A massive fraud makes this harder to believe in, and a fresh embrace of protectionism will be another drag.

South African bond rally has further to go

22 Feb 2018

The republic’s first budget under President Cyril Ramaphosa hiked taxes, an encouraging sign of fiscal rigour. South Africa still has to tackle its structural problems and avoid a junking of its debt. But with reform momentum gathering pace, its debt still looks attractive.

Hadas: Put stock markets in their modest place

21 Feb 2018

Share price movements garner headlines and excite politicians, but not for good reasons. Equity markets play a minor and easily replaceable role in funding investment, and the effect of current values on wealth is almost entirely psychological. They deserve less attention.

German politics has become Europe’s weak link

15 Feb 2018

The country’s Social Democrats will ballot members on their coalition deal with Chancellor Angela Merkel. Party infighting means approval is not assured. A rejection could lead to a new vote or a minority government. Either would make it harder to push through European reforms.

Trump budget is mostly fan fiction for Republicans

12 Feb 2018

The administration called for cuts in non-military programs in its $4.4 trln budget for 2019. Last week’s two-year spending deal effectively dooms the plan, though it may offer a blueprint for GOP budget hawks. A new infrastructure push offers one hope of bipartisan dealmaking.

Mark Carney’s next rate rise rests on Theresa May

8 Feb 2018

The Bank of England boss says UK interest rates may rise further and sooner than previously anticipated. But that assumes a smooth exit from the European Union. If the prime minister fails to secure a transition deal in the next few months he will have to backtrack.

America’s real infrastructure need is a repair kit

7 Feb 2018

President Trump wants to build gleaming new highways and railways with his $1.5 trln infrastructure plan. But the U.S. already has most of the networks it needs. Repairs and upgrades aren’t flashy, but they would produce a bigger bang for the government’s limited bucks.

Italy’s flat-tax talk rests on shaky ground

26 Jan 2018

Silvio Berlusconi and his centre-right allies want to replace progressive income taxation with a flat levy. Italy’s fiscal code needs a revamp: it’s unjust and complex. But the idea won’t fly without budget cuts. A serious pledge to fight tax cheats is also missing from the debate.

Make in India clashes with America First in Davos

23 Jan 2018

Narendra Modi and Donald Trump share strongman characteristics and both have a zero-sum approach to trade. The Indian premier needs to boost manufacturing just as the U.S. president wants to do the same. The Asian nation has the most to lose if it fails to realise its vision.

Guest view: Market rocket fuel will run out

18 Jan 2018

Investors are pushing up U.S. equities with little regard for an array of warning signals, writes former Citibank executive William Rhodes. The Federal Reserve is running out of time to warn them about their “irrational exuberance” before a probable market correction this year.

Carillion mess puts Corbyn a step closer to power

18 Jan 2018

Even before the contractor imploded, the public contracts it operated were known to be expensive. After Carillion it’s hard to argue private sector efficiency justifies the cost. UK Opposition leader Jeremy Corbyn’s preference for a bigger public sector is increasingly in vogue.

German economic success lays trap for Merkel

11 Jan 2018

The strongest growth in six years and the rude health of public finances may tempt a weakened Chancellor Angela Merkel into budget giveaways. But low interest payments flatter the fiscal picture and won’t endure. Better to invest in infrastructure and education than to cut taxes.

Hadas: Fiscal debts are not our children’s burden

10 Jan 2018

When this generation dirties the water, the next has to pick up the tab. Debt is different. When governments borrow from taxpayers, the children will both pay the bill and enjoy the proceeds. The real deficit dangers lurk in foreign debt and distributional distortions.

Trump will be party pooper-in-chief at Davos

10 Jan 2018

The U.S. president’s “America First” agenda is the antithesis of the Swiss conflab’s global ethos. His visit to the mountain resort may be a bid for reconciliation, or a pitch for strongman status. Either way, his presence is a stark rebuke to Davos elites who got him badly wrong.

Italy’s pension U-turn would try markets’ patience

10 Jan 2018

Centre-right parties, frontrunners in March elections, have vowed to scrap a key pension reform passed during the 2011 crisis. The law is rigid, but axing it would hurt young Italians and widen Rome’s fiscal deficit. Investors would have a reason to avoid Italian debt.

Italy will go back to its old ways in 2018

2 Jan 2018

The country’s flawed electoral law will produce a hung parliament in national polls. Reformist forces will be weaker while former Prime Minister Silvio Berlusconi will gain traction. A return to the frail coalitions of the past makes it harder to cut public debt and red tape.