from Global News Journal:
Half time at the euro zone cup final
Covering a summit of European leaders is a bit like covering a soccer match with no ticket for the stadium and no live TV broadcast to watch. The only way you have an idea of the scoreline is from the groans and cheers from inside the ground.
With EU leaders meeting on Brussels on Sunday and again on Wednesday to try to resolve the region's debt crisis, the emergency back-to-back summits look like a game of two halves.
A European Commission spokeswoman said as much on Monday, trying to explain why there had been no major announcements so far on solving the debt crisis: leaders had gone in for half time.
So who is playing whom? "Euro zone versus financial markets" would seem to fit the bill, although mostly it feels it is France against Germany, with European Council President Herman Van Rompuy the referee, and French President Nicolas Sarkozy getting caught out by Germany's off-side trap every time.
Even from outside the stadium, you can hear the adulation from the Finnish and Dutch fans when they see coach Angela Merkel on the touchline, although some Greeks are angry she won't pay for more first aid for their injured players.
The euro team has become infamous for own goals of late and the pressure is on to avoid regulation.
from Global News Journal:
Waiting for Europe’s “appropriate response”
Will the euro zone finally act decisively?
Investors are hoping for something big from European leaders at the EU summit on Oct. 23 and of the Group of 20 on Nov. 3. But they also know the 17 nations of the euro have a habit of offering delayed, half-hearted rescues that have cost them credibility.
So there's been a lot of "urging" and "warning" in Brussels lately -- politicians and central bankers have all been demanding Europe act as international alarm grows that its sovereign debt problems may drag the world into recession. "Further delays are only aggravating the situation," said European Central Bank President Jean-Claude Trichet on Tuesday in his last appearance at the European Parliament, before he hands over the post to Mario Draghi on Nov. 1.
from Global Investing:
We’re all in the same boat
The withering complexity of a four-year-old global financial crisis -- in the euro zone, United States or increasingly in China and across the faster-growing developing world -- is now stretching the minds and patience of even the most clued-in experts and commentators. Unsurprisingly, the average householder is perplexed, increasingly anxious and keen on a simpler narrative they can rally around or rail against. It's fast becoming a fertile environment for half-baked conspiracy theories, apocalypse preaching and no little political opportunism. And, as ever, a tempting electoral ploy is to convince the public there's some magic national solution to problems way beyond borders.
For a populace fearful of seemingly inextricable connections to a wider world they can't control, it's not difficult to see the lure of petty nationalism, protectionism and isolationism. Just witness national debates on the crisis in Britain, Germany, Greece or Ireland and they are all starting to tilt toward some idea that everyone may be better off on their own -- outside a flawed single currency in the case of Germany, Greece and Ireland and even outside the European Union in the case of some lobby groups in Britain. But it's not just a debate about a European future, the U.S. Senate next week plans to vote on legisation to crack down on Chinese trade due to currency pegging despite the interdependency of the two economies. And there's no shortage of voices saying China should somehow stand aloof from the Western financial crisis, even though its spectacular economic ascent over the past decade was gained largely on the back of U.S. and European demand.
Despite all the nationalist rumbling, the crisis illustrates one thing pretty clearly - the world is massively integrated and interdependent in a way never seen before in history. And globalised trade and finance drove much of that over the past 20 years. However desireable you may think it is in the long run, unwinding that now could well be catastrophic. A financial crisis in one small part of the globe will now quickly affect another through a blizzard of systematic banking and cross-border trade links systemic links.
The thin line between love and hate
The opinion on Turkey’s unorthodox monetary policy mix is turning as rapidly as global growth forecasts are being revised down.
Earlier this month, its central bank was the object of much finger-wagging after it defied market fears over an overheating economy by cutting its policy rate. It defended the move, arguing that weaker global demand posed a greater risk than inflationary pressures.
Investors were not persuaded. When I told one analyst about the Turkish rate move, he practically sputtered down the phone: “You’re not kidding?!”
Banking on a Portuguese bailout?
Reuters polls of economists over the last few weeks have come up with some pretty firm conclusions about both Ireland and Portugal needing a bailout from the European Union.
Portuguese 10-year government bond yields have hovered stubbornly above 7 percent since the Irish bailout announcement, hitting a euro-lifetime high and giving ammunition to those who say Lisbon will be forced into a bailout.
And of those who hold that view, it’s clear that bank economists have been most vocal in expecting Ireland and Portugal to seek outside help.
The nuclear option for financial crises
They finally realised how serious it was. With stock markets tumbling, bond yields on vulnerable debt blowing out and the euro in danger of failing its first big stress test, the European Union and International Monetary Fund came out with a huge rescue plan.
At 750 billion euros (500 billion from the EU; 250 billion from the IMF), the rescue package is the equivalent of taking a huge mallet to a loose tent peg. Add to that an agreement among central banks to help out and the actual purchase of euro zone bonds by Europe’s central banks and you turn the mallet into a pile driver.
That tent is not going anywhere for now.
Germany 1919, Greece 2010
Greece’s decision to ask for help from its European Union partners and the International Monetary Fund has triggered a new wave of notes on where the country’s debt crisis stands and what will happen next. For the most part, they have managed to avoid groan-inducing headlines referencing marathons, tragedies, Hellas having no fury or even Big Fat Greek Defaults.
Perhaps this is because the latest reports are pointed. They focus on the need to solve the Greek debt crisis before it spreads to bring down others and even shake Europe’s monetary framework loose.
Barclays Capital reckons the 45 billion euros or so of aid Greece is being promised is a drop in the bucket and that twice that will be needed in a multi-year package. JPMorgan Asset Management, meanwhile, says that to bring its 130 percent debt to GDP ratio under control Greece will need the largest three-year fiscal adjustment in recent history.
More German misery for the Greeks
The rescue plan put together for Greece by its European Union partners was not working anyway — at least as far as financial market speculation was concerned. But then up pops Axel Weber, Bundesbank chief and European Central Bank governing council members.
Athens, Weber is said to have told German politicians, may need up to 80 billion euros in assistance in the coming years. That’s quite a bit more than the 30-billion euro aid mechanism agreed about a week ago.
Confidence vs. reality on Europe’s fiscal front
What do Poland, the European Union’s brightest economic light, and Greece, its dimmest, have in common? Both have plans to cut their budget deficits to the Union’s prescribed 3 percent level by 2012, and both of those plans depend on a lot of ifs.
I can already hear cries of protest from Poland, the only EU member to show any growth at all last year. It that has taken great pains to distance itself from more troubled EU states and is extremely proud of its growth results, with Prime Minister Donald Tusk recently telling the Financial Times: “Who would have thought we would see the day when the Polish economy is talked about with greater respect than the German economy?”
But the comparison still works, not only because Poland and Greece have promised to shrink their deficits so quickly — Greece from an expected 12.7 and Poland from around 7 percent this year — but also because they are depending on growth forecasts that may not materialise. Both stories are also emblematic of a theme sweeping across Europe — an effort by governments to build confidence over fiscal consolidation plans in an uncertain recovery.
from Global News Journal:
What flesh will be put on the bones of an EMF?
In the space of a few weeks, the idea of creating a European Monetary Fund to rescue financially troubled EU member states has gone from being a high-level brainwave from a pair of economists to a major policy initiative backed by powerbroker Germany. In EU terms, that's Formula One fast.
Yet while German Chancellor Angela Merkel appears to be behind the concept, even if she has concerns about a possible need to change the EU's treaty, no one has put much flesh on the bones of the idea apart from the original proponents -- Daniel Gros of the Centre for European Policy Studies and Thomas Mayer, the chief economist of Deutsche Bank.
Gros and Mayer set out their proposal in an academic paper and synthesised it in a column in The Economist last month. In essence the idea -- and it remains to be seen if EU policymakers take it up wholesale or develop something along different lines -- is fairly straightforward.
