Money‚ Markets & Macroeconomics

Many hurdles to pumping up euro bailout fund

16 Sep 2011

Leveraging up Europe’s Financial Stability Facility would give it the firepower to buy Spanish and Italian government debt more aggressively. But the ECB and Germany would have to play along. The chances of either doing so look remote.

Germany sends hopeful signals on euro future

16 Sep 2011

Berlin’s attitude towards the euro zone has become more positive, and less inconsistent, in recent weeks. Its partners should welcome the change and be encouraged. Germany, however, is still to fully appreciate that austerity for all will mean recession for everyone.

Egypt’s clash with Israel puts investors on guard

15 Sep 2011

The attack on the Israeli embassy in Cairo underscores the dislocation between youth and ruling military. U.S. funding for the army is tied to the peace treaty. But the army’s future role is unknown. The latest row adds to the growing list of foreign investors’ worries.

Prokhorov pays the price for irking Kremlin

15 Sep 2011

Three months after launching his political career, Russian tycoon Mikhail Prokhorov has been forced out as the leader of a pro-business party. Even the tame oligarch was too independent for the Kremlin, belying hopes that President Medvedev can or will hasten political reform.

UK, ECB spat highlights derivatives arms race

15 Sep 2011

The UK says the ECB’s policy on central clearing breaks EU law. The ECB’s requirement that euro-denominated products be cleared in the euro zone may be as much control-freakery as realpolitik, but London has reason to fear it could damage the City’s grip on derivatives dealing.

Iraq’s oil ambition looks fragile

15 Sep 2011

The oil-rich country is on the verge of lowering its official output targets and exports have been disrupted. Infrastructure is a major problem. But the politics at home and away mean Iraq’s path to becoming a global oil giant again is set to get longer and tougher.

Euro-mess exposes Asia’s hot money soft spots

15 Sep 2011

A stampede for safety has sent many of Asia’s currencies diving and the cost of insuring its debt soaring. The retreat says less about Asia’s financial health than Europe’s. It’s a reminder that hot money is most dangerous not when it pours in, but when it pulls out.

Solyndra debacle reveals poor means to policy end

14 Sep 2011

The U.S. solar firm’s bankruptcy shows how poor risk assessment and crony capitalism undercut government loan guarantee programs. Germany’s mandated 20-year fixed-rate contracts for clean energy work better. They shrink the state’s role picking winners and maximize market forces.

Hostile bidder tries for poison-pill knockout

14 Sep 2011

The takeover defense was left on the ropes when a Delaware judge reluctantly allowed Airgas to fend off an unwanted suitor. Omnicare, smelling blood, is going back to the court to challenge PharMerica’s recalcitrance. But patience may work better than aggression in this fight.

UK will get QE2 – but may need fiscal help too

14 Sep 2011

Britain’s growth problems are being made still worse by euro zone crisis. The case for a second round of money printing is likely to convince the Bank of England this winter. The question is whether unconventional monetary policy will be enough to ward off recession.

Italian mega-tax would be game-changer

13 Sep 2011

Alessandro Profumo, the former UniCredit boss, suggests a one-off wealth tax of 400 billion euros. This would solve Italy’s debt problem, but could also reverse the euro crisis. Italians are wealthy enough to afford it. But Silvio Berlusconi would first need to be turfed out.

Grim Guatemala is demographic, security nightmare

13 Sep 2011

The two leading candidates in the Central American country’s election offer reasonable economic policies and small government. But with population growth nearly double Mexico’s, combined with poor literacy and a security problem, making the economy work properly will be tough.

Greece’s austerity cure can’t go on forever

13 Sep 2011

A last-minute property tax could help Athens secure its next bailout tranche, averting a crisis. But it may not defer default for long. The option is no longer taboo, and Greek austerity is hitting a wall. The fear of contagion may postpone a restructuring, but only for so long.

China has too many graduates, not enough workers

13 Sep 2011

Supply of college graduates in China far exceeds demand. Blue collar workers are much less plentiful. Beijing is right to invest in human capital but university expansion has caused distortions in the job market. It needs to work on the imbalances created.

Greek default wouldn’t mean quitting euro

12 Sep 2011

A default is both likely and desirable, provided it is orderly. Bringing back the Drachma is neither. Not only would it be bad for Greece, but it would signal a major row within the euro zone, and trigger a more virulent phase of its debt crisis.

New U.S. patent law whiffs on system’s top flaws

12 Sep 2011

The measure may discourage dodgy filings and square American rules with those abroad. But it hurts small inventors and fails to curb vague and overlapping patents. It’s a blown chance for real reform and probably means more infringement fights for the likes of Google and Apple.

Crude traders vulnerable to sudden falls

12 Sep 2011

With rich-nation growth slowing to a crawl, crude should be getting cheaper. Instead at $112 a barrel, Brent oil is not much down on recent peaks. While Chinese demand remains strong and Libyan output may revive only sluggishly, crude is susceptible to a rapid reversal.

One piece of Obama’s jobs bill looks stimulating

12 Sep 2011

Paying for the president’s $447 bln plan could risk crowding out other activity, causing job losses rather than gains. But the proposed cut in employer payroll taxes would cheapen labor and may create jobs. That’s a piece of the puzzle Congress should support and even extend.

Euro fall could be steeper as Greece weighs

12 Sep 2011

The euro defied gravity this year, despite the persistent debt crisis. But it has now slipped and could fall further. Renewed talks about a Greek default will weigh on the common currency. Furthermore, growth and interest rate prospects are no longer in the euro’s favour.

Stark resignation won’t alter ECB policy

9 Sep 2011

The unexpected departure of its chief economist is only the latest sign of ECB divisions on the debt crisis. His opposition to bond buying was already public. Stark’s decision will accelerate the changing of the guard in Frankfurt, but it won’t affect the ECB’s course.