Fiscal Policy

Athens and Europe should rethink their Greek myths

15 May 2015

Both debtor and creditors are telling tales which leave out key facts. The incomplete and incompatible narratives make agreement on the next bailout harder, and the risk of a crisis greater.

Edward Hadas: Productivity is a nonsense measure

13 May 2015

Output per hour made sense when paid labour was mostly in fields or factories. But now that work is computer or people-focussed, counts of productivity growth are largely statistical guesses. Policymakers should ignore this chimera and focus on things they can influence. 

Hugo Dixon: Greece seemingly has no Plan A or Plan B

11 May 2015

It owes around 324 billion euros. The government doesn’t seem to have a credible plan for reaching agreement with its creditors. Nor does it appear to have thought out how to default while containing the collateral damage.

ECB’s bank board-crashing makes sense – to a point

7 May 2015

The euro zone’s financial stability gnomes will observe board meetings. Handled right, the ECB should glean extra insight – after all, corporate culture starts at the top. But regular sessions with board committees may reveal more about how Frankfurt’s 123 charges really operate.

U.S. Congress is in danger of looking functional

28 Apr 2015

First, it renewed the federal terrorism insurance program. Then it permanently fixed a long-running Medicare problem. Now it may even hand the president broad power to ink trade deals. Maybe this year’s debt limit fight won’t happen – even if big reforms remain out of reach.

Economy can neither make nor break UK elections

28 Apr 2015

Britain’s quarterly growth rate has halved to 0.3 percent. The figure will become a political football days before a tight election. But it is not high enough for the ruling Conservatives to inspire voters with their economic track record and too high for rivals to damn them.

Varoufakis finds economics PhD gives little wisdom

27 Apr 2015

The Greek finance minister is learning that politics requires different skills from graduate school and media success. Some economists, from Imperial Russia to modern Indonesia, have done brilliantly, but Yanis Varoufakis could help write a book on what a doctorate isn’t good for. 

Euro zone needs to reinforce its founding myth

21 Apr 2015

The single currency is supposed to be irreversible. Yet European policymakers regularly conjure up the risks of Greece’s euro exit. No wonder potential Greek IOUs elicit vastly divergent reactions to actual Californian ones. This difference suggests how the euro zone can change.

Banks show they can do something right

16 Apr 2015

Bank accounts and electronic money improve personal financial security. So the global finance industry can take a well deserved pat on the back for a 700 million increase in the number of people with accounts. But new data shows the United States has some problems. 

Fat fiscal surplus will eventually weaken Germany

16 Apr 2015

Berlin is squandering the biggest windfall in a generation. Its annual budget surplus will be north of 20 bln euros both in 2015 and 2016, think tanks predict. Angela Merkel favours debt reduction over plugging the chronic investment gap. This can only harm long-term growth.

Europe’s credit boom locks in mediocre returns

15 Apr 2015

Investors are throwing money at European companies. Carrefour and Danone paid little over 1 pct a year to borrow for a decade; Novartis got 20-year funds at similar levels. A Breakingviews calculator shows how bond buyers’ generosity could backfire.

Edward Hadas: Don’t moan about secular stagnation

15 Apr 2015

The idea that economic growth has shifted stubbornly downwards has gained currency. But flawed measurements and demographic shifts undermine the diagnosis. In any case it’s better to address specific problems than to predict doom.

Europe’s lending boom shows power and limits of QE

14 Apr 2015

The ECB’s bank survey shows how loose monetary policy is boosting demand for credit in Europe, helping small companies. That is good for growth. Yet the results are uneven, and investment is not driving demand. The central bank’s policies work, but governments need to do more.

Fixing tax flaws can kick-start German investment

14 Apr 2015

A report commissioned by Berlin suggests equity capital should get debt-like tax privileges. That would be a radical reform. But Germany’s private investment slump is so deep that it requires bold steps. 

Hugo Dixon: Squaring the UK’s non-dom tax circle

13 Apr 2015

Current rules give some rich people an unwarranted tax break. But Labour’s plan to reform the system for those living in Britain with “non-domiciled” tax status could deprive the country of valuable talent. New levies on non-doms’ UK residences would bring a fair compromise.

Grenada offers debt restructuring model for Greece

9 Apr 2015

The Caribbean island is close to agreeing a deal with creditors after years of wrangling. The deal structure, including warrants and phased debt relief, is equitable, and provides incentives for reform. It looks like a decent model for Ukraine—or even Greece.

Asset managers are an unpredictable liability

8 Apr 2015

A new IMF report says these institutions pose risks to financial stability which are hard to pigeonhole. The biggest funds are not necessarily the biggest perils. And some simple investment products carry risks because of herd behaviour. Regulators should be uncomfortable.

Europe’s scars from Greece would run deep

7 Apr 2015

Warren Buffett is among those who reckon a Greek exit could make the euro zone stronger. Losses are manageable, other countries won’t follow immediately, and the shock may even prompt excess debt to be tackled. But political and economic tensions would be dangerously magnified.

Hugo Dixon: Greece has two weeks to produce red meat

7 Apr 2015

The default scenario is off the table for the time being after Athens confirmed it would meet a payment to the IMF on April 9. But it will probably be back by late April if Greece doesn’t come up with some serious reforms on pensions, tax and banking.

Greece comes kicking and screaming to reform table

2 Apr 2015

The Syriza government’s latest reform proposals include some concessions to its public creditors. The plan still lacks detail, and reneges on past promises. The government is fiddling while Athens burns, and the risk of an accidental euro zone exit is rising.