Government & Agencies

Labour’s business-speak shows new priorities

27 Apr 2005

In 2001, the UK s governing party emphasised "competition" and "Europe" in its business manifesto. This time it s "employment" and "local". Freemarketers and proEuropeans will be disappointed. But there s a silver lining. "Freedom" has entered the vocabulary.

Higher renminbi would not end US trade deficit

25 Apr 2005

China processes much more than it produces for export. A cheaper dollar would mean lower costs for components imported into China. So Chinese exports to the US will stay quite competitive. The US needs much more than a currency tweak to get back into trade balance.

French referendum non would threaten euro

21 Apr 2005

The markets are calm about the prospect of France rejecting the EU constitution. But the consequences for the euro could be grave. The single currency s credibility depends on strong political support and shared fiscal responsibility. It can no longer count on either.

Italian PM Berlusconi resigns

21 Apr 2005

Berlusconi may be able to form a new government, staving off the risk of snap elections. But the resulting coalition will be even weaker and more divided which has bad implications for fiscal discipline.

It’s time for investors to support Argentina

20 Apr 2005

Both the IMF and the US Treasury say Argentina should reopen its debt swap to include holdouts. This is a terrible plan. If it succeeds, investors in sovereign debt can wave goodbye to marketbased restructurings.

Inflation takes hold in UK

20 Apr 2005

It has been lurking for years in service prices, but covered up by falling costs in manufacturing, and a wise choice of index. The veil is lifting. And as expensive oil works through the system, inflationary psychology could make a comeback.

UK considers 50-year inflation linked bond

12 Apr 2005

The government wants to help insurers match their liabilities. Investors should be grateful inflation makes ultralong bonds highrisk. But the measurement of inflation can be quite political. Investors have to be willing to believe that the statisticians will stay honest.

M&S tax ruling not as federalist as it looks

8 Apr 2005

Allowing companies to offset losses anywhere in the EU against their taxes sounds like a case of vanishing borders. But the ruling, which still needs ECJ approval, is in practice much narrower. National tax rules will still predominate.

UK Tories lack policies to match popularity

5 Apr 2005

They are doing better in the polls as the May 5 election approaches. But the gains mostly reflect hostility towards incumbent Blair. Conservative leader Michael Howard s heart might be with small government. But he thinks it would lose the election. So he is being vague.

Berlusconi suffers crushing setback

5 Apr 2005

In the regional elections, the opposition appears to have wrested six regions from the Berlusconi government and won more votes overall. This defeat will likely make Berlusconi s coalition even more fractious, and doesn t bode well for the elections in 2006.

Greenspan’s ideology may not help US economy

3 Mar 2005

He is focusing on privatising the US Social Security system. And as for the more serious trade deficit, he wants to see the markets rule. That fits with the radical antigovernment thinking of Greenspan's youth. And it may also be why he is reluctant to deliver higher rates.

Ukraine’s anti-oligarch plan sounds very Russian

16 Feb 2005

Yushchenko wants to take back companies from cronies of the former government. That is much like Putin and Yukos. Investors like the Ukrainian move, because Yushchenko is viewed as a prowestern hero. But capitalism does not work by changing the laws.

Politics are big block to Asian currency unity

31 Jan 2005

But it is hard to link currencies. Europe needed the memory of war and 20 years of preparation. Asia is not even close. JP Morgan argues that an Asian exchange rate mechanism would offer regional selfreliance and an escape from the sinking dollar.

Eurozone instability risk is rising

24 Jan 2005

Finance ministers may strike a compromise to revive the eurozone stability pact. But their dispute shows the ethos of restraint is fading. The habit of excessive borrowing could easily become an inflationthreatening addiction. Bond investors might be too complacent.

More investors should fear dollar crisis

20 Jan 2005

The consensus is that currency adjustments will not block global growth in 2005 and 2006. Even professional dollar pessimists agree. The markets believe the decline in US currency will have little impact on global growth in 2005 and 2006. But this may be too optimistic. But this optimism has more to do with trends than with logic. A dollar collapse could cause a major economic disruption. The markets believe the decline in the US currency will have little impact on global growth in 2005 and 2006.

Russia backtracks over benefit reform

19 Jan 2005

True, the measure was botched. But backtracking by Russia's "tough guy" president may make future reform more difficult. That may not matter now when oil prices are high. But Russia's ramshackle system of government may be exposed if things deteriorate.

US deficit misunderstood

18 Jan 2005

Conventional wisdom has it that overconsumption causes the trade deficit. Poor manufacturing is actually the root cause. The implications are that the dollar will be weaker for longer than most pundits expect and that the US economy will endure more pain.

UK parties promise assault on waste

17 Jan 2005

The Tories' £35bn estimate is the opening salvo in the election context. But it is wishful thinking. Sure, efficiency can always be improved. But the electorate s hunger for government services will wipe out any gains.

KfW sells Deutsche Post bond to Japanese

13 Jan 2005

By selling an exchangeable bond to retail investors in Japan, the German state agency sidesteps a lockup on potentially attractive terms. It s a clever move. The snag is that it may not work.

US government should bail out pension deficits

13 Jan 2005

The US government is worried it will be saddled with the bill for America's $450bn corporate pension fund deficits. But it should be more worried about the deficits' effect on US industrial competitiveness. The government should act to reduce this burden.