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from Breakingviews:
Cyprus will struggle to make gas math work
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Cyprus’ latest ideas for wiggling out of its financial fix include bundling future gas revenues into a national “solidarity fund”. But Breakingviews calculations suggest the gas discovered to date isn’t worth enough to plug the country’s 5.8 billon euro ($7.5 billion) funding gap.
Drillers operating off the Cyprus coast think they’ve found 196 billion cubic metres of the fuel lying under deep water. It’s a big find, but the gas isn’t worth anything stuck in the ground. Cyprus wants to build an LNG facility to extract it. The value of such a project depends on gas prices, the size and cost of the infrastructure that eventually gets built, the margins received on gas produced, and the discount rate applied to future cashflows.
On optimistic assumptions for project costs and gas prices, an 18 billion cubic metre per year LNG facility - big enough to supply about a quarter of Germany’s current annual gas needs - might be worth about $7.8 billion today.
from Breakingviews:
UK policy rhetoric flies in the face of reality
By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
When words and actions don’t match up, the problem is usually overly ambitious promises. In the debate on economic policy in the UK, the failure is in the present - the government’s description of fiscal and monetary policy flies in the face of reality.
from Breakingviews:
U.S. budget cuts more blip than bomb
By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
For all the rhetoric from both political parties, the impending U.S. budget cuts are more a blip than a bomb. An initial $100 billion-worth of federal spending reductions won’t do much real damage to the growing economy.
from Breakingviews:
U.S. deficit dynamic duo remain uncontested champs
By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Alan Simpson and Erskine Bowles remain the uncontested champions in crafting compromise in Washington. The original bipartisan plan to rein in America’s fiscal deficit which the dynamic duo spearheaded in 2010 became part of the vernacular - though was rejected by policymakers. Now they have come up with a revised $2.4 trillion compromise. Like the original, it contains plenty of items not to love. Yet balanced alternatives to restrain the national debt remain elusive.
from Breakingviews:
G7 only adds to global currency confusion
By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The G7 has spoken about the troubled foreign exchange markets, and the world is marginally less secure for it. In Tuesday’s four-sentence statement, the finance ministers and central bankers of the world’s leading economies managed to ignore the problem of inadvertent competitive devaluations, contradict themselves and make an empty promise.
from Breakingviews:
Flu epidemic exposes U.S. risk management flaws
By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
In a typical year influenza inflicts about $90 billion worth of economic damage and kills about 36,000 Americans - and this year’s epidemic is shaping up to be worse. Yet Uncle Sam spends far more on homeland security than on flu prevention. Poor resource allocation can be a hard thing to cure.
from Breakingviews:
Chuck Hagel is good choice for U.S. deficit hawks
By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Chuck Hagel, President Barack Obama’s pick for U.S. defense secretary, is a good choice for deficit hawks. He mixes dovish foreign policy views - at least for a Republican - with budget-cutting fervor. The combination could actually slash Pentagon spending. Reducing it to the proportion of GDP seen in the late 1990s would save Uncle Sam a quarter of a trillion dollars a year.
from MacroScope:
Japan finally takes Bernanke-san’s advice – 10 years later
This post was based on reporting by Leika Kihara in Tokyo
Japan has crossed the monetary rubicon: the government is actively intervening in the affairs of the central bank, pressuring it to more aggressively tackle a prolonged bout of deflation and economic stagnation. The Bank of Japan is expected to discuss raising its inflation target from the current 1 percent level during its next rate decision on January 21-22.
Overnight, a Japanese newspaper reported the finance ministry and the central bank were considering signing a policy accord that would set as a common goal not just achieving 2 percent inflation but also steady job growth.
from MacroScope:
‘Cliff’ deal is one part relief, one part frustration for Fed
When Federal Reserve Chairman Ben Bernanke was last in New York, he joked about his past research into the effect of uncertainty on investment spending. "I concluded it is not a good thing, and they gave me a PhD for that," he said, drawing laughter from a gathering of hundreds of economists in a packed Times Square conference room.
Laughter probably wasn't echoing through the halls of the U.S. central bank on Wednesday. Late on Tuesday, Congress struck a last-minute deal that only partially and temporarily avoids the so-called fiscal cliff. Bernanke and other Fed policymakers - frustrated that it took politicians so long to address tax and spending levels in the first place - were hoping Washington would agree to a bi-partisan, longer-term plan to narrow the country's massive deficit with only modest near-term fiscal restraint. While no deal on taxes would have been far worse for the economy, the fact that Congress put off decisions on government spending and the debt ceiling for another two months simply prolongs the uncertainty that many feel is holding back investments by businesses and households.
from Breakingviews:
Europe’s two challenges: economy, unity
By Pierre Briançon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own
The euro crisis will morph into a European crisis in 2013. The survival of the common currency is not in question any longer, but European economies, after two years of crippling and contra-cyclical austerity, are stuck on flat. Furthermore, the question is not so much whether any country will exit the euro but whether the further integration of the zone will lead to the exit or de facto ouster of a non-euro member from the European Union. In 2013, Europe will be weakened by its economy and threatened in its unity.
