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from MacroScope:
Reform hue and cry
Spanish Prime Minister Mariano Rajoy meets labour union and business leaders to discuss reforms to pensions and public institutions. After some fairly brutal cutting, Rajoy has grown more cautious. He is negotiating a new formula for calculating pension payoffs but is wary of going further for fear of sparking greater protest. And all the time, recession put the country’s debt targets further out of reach.
There’s still some pretty serious stuff on the table. Rajoy's cabinet has proposed a "stability factor" for the pension system, which would periodically adjust pay-outs and retirement age based on economic performance, demographics and other factors. The government is also studying a major reform to public administrations that could mean numerous job cuts in the public sector at a time when unemployment is at 27 percent.
The EU has granted France, Spain and others more time to meet their deficit targets in an attempt to foster some growth. But it is also insistent the pace of structural reforms must be stepped up. The French parliament voted through labour reforms on Tuesday which will make hiring and firing somewhat easier. President Francois Hollande will hold a rare news conference having travelled to Brussels yesterday to declare he would use the leeway to boost competitiveness and growth. Details? There were none. The European Commission will spell out its recommendations at the end of the month.
Labour reform, along with public spending cuts and steps to plug a funding shortfall in France's pension system, are among measures the European Commission is seeking from Paris in return for granting it two more years this month to bring its public deficit down to below 3 percent of national output.
from Breakingviews:
Chinese reforms could trigger domino effect
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
What does China want? Sustained growth, and happier citizens. How will it get there? Through economic reform. It sounds simple enough.
from MacroScope:
MIT’s Johnson takes anti-Dimon fight to Fed’s doorstep
Simon Johnson is on a mission. The MIT professor and former IMF economist is trying to push JP Morgan CEO Jamie Dimon to resign his seat on the board of the New York Fed, which regulates his bank. Alternatively, he would like to shame the Federal Reserve into rewriting its code of conduct so that CEOs of banks seen as too big to fail can no longer serve.
Asked about Dimon’s NY Fed seat during testimony this month, Bernanke argued that it was up to Congress to address any perceived conflicts of interest.
from Breakingviews:
Spain can’t avoid austerity conundrum
By Fiona Maharg-Bravo
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
It’s hard to get the population revved up for a general strike in a country with a 23 percent unemployment rate. Indeed, the one in Spain on March 29 - aimed at stopping the country’s recent labour reform - was relatively subdued. There is an air of inevitability about the upcoming austerity, to be outlined on March 30 in the conservative government’s first full-year budget. Too much austerity could be self-defeating and even unrealistic, but Prime Minister Mariano Rajoy doesn’t have much choice.
from Breakingviews:
China reform may require a deeper crisis
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
“Reform” might turn out to be this year’s most overused word in China. The country’s outgoing premier Wen Jiabao, and his likely successor Li Keqiang, have both recently spoken of the urgent need to change. Even Communist Party mouthpiece People’s Daily advised last month that it’s better to have imperfect reforms than a crisis caused by none at all. The trouble is that China lacks external creditors or voters to hold leaders to account and make these reforms a reality.
from MacroScope:
An eerie euro zone calm
I don’t want to be the idiot who asked “is it all over?” … but is it all over?
Almost certainly not, is the answer. Greece is shored up for now but Portugal will probably need to follow it in seeking a second bailout and Spain, heading back into recession, will have to make deep, deep cuts over the next two years to meet EU deficit targets. Greek and French elections could easily upset the apple cart, the former producing a fractured government with less will to tread the austerity path, the latter a new president who wants to renegotiate the bloc’s new fiscal rules (though neither are guaranteed).
from Breakingviews:
Japan quake anniversary shows lessons unlearned
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Japan’s remarkable recovery from last year’s tragic earthquake leaves big lessons unlearned. The economy bounced back more quickly than expected after March’s earthquake, tsunami and resulting nuclear leak. But the government flunked a bigger test by failing to push through painful reforms. Now Japan is a year older, deeper in debt and facing the same economic downward spiral it was in before the catastrophe.
from Mike Dolan:
Sparring with central banks
Just one look at the whoosh higher in global markets in January and you'd be forgiven smug faith in the hoary old market adage of "Don't fight the Fed" -- or to update the phrase less pithily for the modern, globalised marketplace: "Don't fight the world's central banks". (or "Don't Battle the Banks", maybe?)
In tandem with this month's Federal Reserve forecast of near-zero U.S. official interest rates for the next two years, the European Central Bank provided its banking sector nearly half a trillion euros of cheap 3-year loans in late December (and may do almost as much again on Feb 29). Add to that ongoing bouts of money printing by the Bank of England, Swiss National Bank, Bank of Japan and more than 40 expected acts of monetary easing by central banks around the world in the first half of this year and that's a lot of additional central bank support behind the market rebound. So is betting against this firepower a mug's game? Well, some investors caution against the chance that the Banks are firing duds.
from MuniLand:
Rhode Island’s awful investment returns
It's getting a little tiresome to hear all the adulation that's being heaped on Gina Raimondo, the Rhode Island General Treasurer. She's been praised in the Wall Street Journal, Time, and now CNBC as some sort of fiscal Joan of Arc who rescued the state's public pension system from insolvency. I'll give Raimondo credit for leading the charge to reduce benefits to Rhode Island public workers and increasing their retirement age, but she's far from a pioneer in making tweaks to state pension plans -- 17 other states have also made changes recently.
More importantly, the problems Raimondo addressed were not the biggest that the state faced. The main problem with Rhode Island's pension system is that it has very poor investment returns on its $6.5 billion portfolio of assets. Over the past ten years the state's investments returned 2.47 percent compared with the national median of 3.4 percent (page 6). These returns are in the lowest tier of state pension plans, and this chronic underperformance is causing a substantial shortage of assets to pay retirees.
from MuniLand:
Mary Williams Walsh, asleep in Rhode Island
In her 2,500 word feature on the pension reform process in Rhode Island, New York Times reporter Mary Williams Walsh seems to have found more color than facts. The piece reads more like a campaign profile of Treasurer Gina Raimondo than an assessment of the gritty fight over public pensions in the nation's sixth smallest state:
Ms. Raimondo also learned early on about economic forces at work in her state. When she was in sixth grade, the Bulova watch factory, where her father worked, shut its doors. He was forced to retire early, on a sharply reduced pension; he then juggled part-time jobs.
