Fiscal Policy

China currency move reflects realism over idealism

11 Aug 2015

A surprise 1.9 percent devaluation of the yuan won’t have much effect on the real economy, but may show willingness to help exports through a cheaper currency. To unwind global imbalances, the yuan really needs to be stronger. China just isn’t yet ready to take that medicine. 

BoE manages to be transparent yet unpredictable

6 Aug 2015

The UK central bank has for the first time simultaneously released its policy decision, how rate-setters voted, and its inflation report. It’s transparent. But investor shock that only one person voted to hike rates suggests greater openness doesn’t mean greater predictability.

Euro zone economic bright spots conceal a malaise

30 Jul 2015

The region’s recovery continues, with extra sunshine in Spain. However, inflation remains disturbingly weak, and monetary union is failing at its most basic task, economic convergence. A new ECB study shows that differences between members’ real GDP per person have grown.

Clinton half-hearted on helping labor over capital

29 Jul 2015

The would-be U.S. president wants to tackle inequality. Proposals to tweak capital gains taxes, for example, are part of that. Things like raising minimum wages or abolishing the interest deduction might do more. Clinton’s problem is she can’t afford to knock business too hard.

New York commuter crisis may be good for America

28 Jul 2015

Major delays on some of the busiest rail lines into Manhattan from New Jersey have incited outrage. The overhead wires being blamed are emblematic of the decrepit infrastructure across the country. After so much partisan bickering, this episode could focus minds on funding.

Hugo Dixon: The optimist’s guide to Greece

27 Jul 2015

There are so many ways things could go wrong in Greece that it’s easy to miss how things could also go right. The good scenario involves the ECB buying up Greek bonds, the lifting of capital controls and a deal on debt relief – all by year-end.

No room for complacency on Spanish jobs

24 Jul 2015

Spain is creating a near-record number of sorely needed jobs. This is great news. But the unemployment rate is still 22.4 percent and nearly half the jobless are long term. There’s still a long way to go. The labour market remains stubbornly split between insiders and outsiders.

IMF’s new head economist is imaginative realist

21 Jul 2015

Maurice Obstfeld will bring a nuanced approach to the global lender. The Berkeley professor emphasises the importance of strong institutions and is doubtful about pure market dogma. His pragmatic respect for the nuances could help both developing economies and the euro zone.

UK wage plans are bad fit for low-skill workforce

21 Jul 2015

Raising the minimum wage is a fine idea on paper. Workers earn more without adding much to inflation or subtracting much from growth. But reality may be less benign. Chancellor George Osborne’s desired wage floor could be too high for the relatively low-skilled British workforce.

German anti-euro infighting boosts single currency

20 Jul 2015

While the euro zone is holding together, feuds over Islam and xenophobia have torn apart Germany’s anti-euro AfD. That leaves pro-European voices unchallenged in Berlin. There are sharp debates on how Europe should work, but the country remains an anchor of political stability.

ECB faces tricky call on Greek bank solvency

20 Jul 2015

With Athens’ lenders open again, attention now shifts to Frankfurt’s supervisory test of their capital strength. Half of their buffer is deferred tax credits, which supervisors hold in low regard. But taking a tough approach makes a painful bail-in of depositors more likely. 

UK seeks watchdog: must be tactful, tough and able

17 Jul 2015

Britain is searching for a new regulator after Chancellor George Osborne ousted Financial Conduct Authority boss Martin Wheatley. His replacement will need to avoid mistakes and forge a conciliatory pact with financial institutions while also protecting consumers. It’s a big ask.

German labour costs rise at just the right pace

17 Jul 2015

A new minimum wage, an increasing shortage of skilled workers and palpable pay hikes are pushing German wage costs upward. But the trend is gentle enough for the labour market to cope while exporters’ excessive competitiveness is eroded safely. The whole euro zone benefits. 

The dubious maths behind UK non-dom tax clampdown

17 Jul 2015

Britain reckons it can raise 1.5 billion pounds by limiting a loophole that allows wealthy residents to avoid tax on overseas income. The country’s budget watchdog is sceptical. Regardless of the merits of changing an archaic system, it’s just as likely to lose as make money.  

Rob Cox: The world’s hardest central bank job

16 Jul 2015

It’s not Yellen’s, Draghi’s or Kuroda’s. Russian central bank chief Elvira Nabiullina faces a unique bouquet of challenges. On top of a weak oil price and ruble, nettlesome inflation and Western sanctions, there’s Vladimir Putin. Under the circumstances, she deserves a medal.

Greek anger reflects fall, not level, of income

16 Jul 2015

The bailout plan was approved, with bitterness all round. Economist Branko Milanovic’s comparison with Portugal helps explain the ire. The average Greek has consumed more over the last 20 years, but now has less. The political effect of the drop is much worse than the economics. 

Schaeuble looks immune to Varoufakis-style exit

15 Jul 2015

Like his former Greek colleague, Germany’s finance minister has become a liability. After openly calling for Grexit and then questioning an agreed deal, he is not the man to lead future negotiations. The catch is German political realities mean Angela Merkel needs him.

Greek exit talk leaves euro investors unperturbed

15 Jul 2015

A taboo was broken when Germany suggested Athens could leave the European monetary union, albeit temporarily. In theory, if one country can exit, so can another. But markets aren’t pricing in any redenomination risk. Greece is being treated as an exception, not a precedent.

IMF gives Greek debt relief a helpful shove

15 Jul 2015

The International Monetary Fund’s conclusion that Greece’s debt is less sustainable than it was is a statement of the obvious. It’s unlikely to prevent Angela Merkel from winning approval for the country’s latest bailout. But Germany will eventually have to accept the hard truth.

Hugo Dixon: Greek PM shouldn’t waste crisis

15 Jul 2015

Now that Alexis Tsipras’ Syriza party is splitting, he can form a credible and stable new government. That could put relations with Greece’s creditors onto a constructive footing and turn the economy around. If Tsipras squanders the chance, the country will be doomed to failure.