Breakingviews

Qatar’s debt bonanza stores up problems for future

May 27, 2016

Too much of a good thing could be bad for the Gulf state. It has just raised a whopping $9 billion in the bond market thanks to investors’ hunger for yield. Loading up on debt will help Qatar cope with lower energy prices, but just dodges its biggest problem: lavish spending.

Greek deal is rational, predictable, messy

May 25, 2016

Both the IMF and Europe have compromised in Greece’s new debt plan. Athens’ fiscal targets are looser, but less so than the IMF wanted. Its debt costs will fall, but the relief is vague. There’s a hoary cliche about kicking the can down the road. This doesn’t even go that far.

Illinois governor all but summons bond vigilantes

May 17, 2016

In an interview with Breakingviews, Republican Bruce Rauner challenged a pervasive belief in markets that governments can always just raise taxes to plug deficits. The issue resonates beyond his state’s $140 bln fiscal mess. Debt investors have neglected to focus political minds.

Chancellor: UK housing crisis isn’t supply problem

May 17, 2016

British home prices are higher than ever relative to incomes. But nosebleed values aren’t a sign of inadequate supply. It’s all about ultra-low interest rates and foreign capital flows. When Chinese capital flows reverse, the London property bubble will burst.

Money trail shows China sticking to bad habits

May 16, 2016

Total credit jumped again in April, suggesting Beijing is making little progress weaning the economy off its addiction to debt. Infrastructure and property investment are still expanding quickly. Despite renewed talk of reform, growth still seems to be the main priority.

India shows China the way to deal with bad debt

May 6, 2016

State-backed banks in both countries have lent too much to politically connected companies that are now in trouble. While India is pushing lenders to come clean, China is still not admitting the extent of the problem. Future growth depends on a proper cleanup.

Time for banks to go cold turkey on sovereign fix

April 18, 2016

Europe is considering tightening rules that make it easy for lenders to own government debt. Banks addicted to sovereign punts would suffer, and governments lose wiggle room. Yet reform could hasten euro area integration, while ECB bond-buying makes it a less scary prospect.

China’s credit hose leaves many firms parched

March 29, 2016

Though banks doled out $540 billion of new loans in January and February, companies are saving cash by delaying paying bills. Surveys show the credit drought is worst for small businesses. Extra liquidity is not reaching the parts of the economy that create the most jobs.

The bright side of India’s bad-debt witch hunt

March 16, 2016

Liquor baron Vijay Mallya’s exploits have triggered wider scrutiny of the country’s tycoons and those who enabled their excessive lending. Auditor Grant Thornton is the latest target. Though the sudden frenzy seems arbitrary, the result may be a faster cleanup of balance sheets.

China debt swap could leave banks in capital hole

March 11, 2016

A new rule will allow banks to exchange loans for equity. If used on a large scale it would ease pressure on ailing companies. But lenders would also have to recognize losses, hitting their capital ratios. As the banks’ major shareholder, Beijing will end up footing the bill.