Commentaries

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from Rolfe Winkler:

Could England be headed for a “sudden stop?”

From Landon Thomas at NYT: In Britain, visions of Japan's decade of stagnation

Britain may finally be emerging from recession, but many analysts warn that it is a false dawn. In fact, they argue, the economy here is so ravaged by growing debts and ruined banks that it could well be following in the steps of Japan’s lost decade of the 1990s.

I still don't understand why we refer to Japan's "lost decade," singular. The country is now moving into its third consecutive lost decade.The Nikkei is still at 1984 levels.

But back to the UK: the NYT piece quotes the latest research from Variant Perception (no link). I got it in my inbox earlier this week and it's a fascinating (though not pleasant) read. Notably, they talk about the outside possibility of a "sudden stop" event. As mentioned in this space before, a "sudden stop" is what happens to emerging economies when they lose access to capital markets. Confidence is lost in the government's ability to pay back debt and everyone races to get out of the system. See Argentina.

The problem is acute for indebted emerging markets because they don't borrow in a currency they can print. So, the argument goes, you can't have a sudden stop in Britain, or the US, because we print the currency in which our debt is payable.

Should he stay or should he go? Miliband ponders

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OUKTP-UK-IRAN-NUCLEAR-BRITAINShould he stay or should he go?

British Foreign Secretary David Miliband could be Europe’s first foreign minister in all but name, with one of the most influential jobs in shaping the place of the 27-nation bloc on the world stage, if he is willing to risk leaving British politics for the next five years. That’s a big if.

Miliband is half of a “ticket” concocted by French and German diplomats to fill the two new top jobs created by the Lisbon treaty. The other half is Belgian Prime Minister Herman van Rompuy, the preferred candidate for president of the European Council. Officially, Miliband says he is ”not available” and is backing Tony Blair’s forlorn bid for the presidency. If he turns the role down, it could well to go to former Italian Prime Minister Massimo d’Alema.

Lower Opel costs to help government aid

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General Motors’ decision to scrap the sale of Opel rests on the carmaker’s calculation that the hole in its European unit’s finances is not as deep as previously feared.

Governments should welcome the lower demands on taxpayers with open arms. But there is still some horse trading to be done to get everyone on board. 

SPD debacle shows agony of European centre-left

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sozisIt was a black night for Germany’s Social Democrats. Their catastrophic general election score of just 23 percent was by far the worst since the creation of the Federal Republic in 1949. It was more than 11 points worse than their result in 2005, and nearly 6 points worse than their poorest post-war showing in 1953.(Picture shows party activists at SPD headquarters watching first exit polls on television)

Their shattering defeat was the latest in a series of debacles for the European centre-left since the onset of the financial crisis. Just when the social democratic outlook of a strong state to regulate and curb the excesses of the markets and protect workers from the rough edges of capitalism has made a comeback around the developed world, its original proponents are in disarray.

West raises stakes over Iran nuclear programme

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big-3President Obama and the leaders of France and Britain have deliberately raised the stakes in the confrontation over Iran’s nuclear programme by dramatising the disclosure that it is building a second uranium enrichment plant. Their shoulder-to-shoulder statements of resolve, less than a week before Iran opens talks with six major powers in Geneva, raised more questions than they answer.

It turns out that the United States has known for a long time (how long?) that Iran had been building the still incomplete plant near Qom. Did it share that intelligence with the U.N. nuclear watchdog, and if not, why not? Why did it wait until now, in the middle of a G20 summit in Pittsburgh, to make the announcement — after Iran had notified the International Atomic Energy Authority of the plant’s existence on Monday, after Iranian President Mahmoud Ahmadinejad had delivered a defiant speech to the U.N. General Assembly on Wednesday and after the Security Council had adopted a unanimous resolution calling for an end to the spread of nuclear weapons on Thursday?

Germany will have to change Opel deal after election

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opelanerIt looks increasingly clear that Germany will have to change its deal to aid carmaker Opel once Sunday’s general election is out of the way.

The European Commission has signaled to Berlin that promising 4.5 billion euros in loan guarantees to only one of the two bidders for General Motors’ European arm to preserve all four German production sites and most Opel jobs in Germany may breach EU rules on state aid to industry. EU regulators want to know why Chancellor Angela Merkel and four German states offered the money to back car parts maker Magna’s bid but not for financial investor RHJ International’s, and on what conditions. 

“Tobin tax” gaining ground in Europe

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No longer just a hopeless cause for anti-capitalist activists, the idea of a global tax on financial transactions is gaining ground in Europe.

European Union leaders could not agree to put it on the agenda of this week’s G20 summit on reforming the financial system in Pittsburgh, but the leaders of France, Germany and the European Commission endorsed the concept.
(more…)

Steinmeier’s recipe deceptively seductive

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merkel-steinmeierIt was about as scintillating as a discussion among accountants, but Social Democratic challenger Frank-Walter Steinmeier outshone conservative Chancellor Angela Merkel in Germany’s only general election television debate.

True, Steinmeier failed to land the knockout punch he needed to overcome a 12-point deficit in opinion polls two weeks before the Sept. 27 vote. But he did score a points win that makes Merkel’s preferred option of a centre-right pact with the pro-business Free Democrats slightly less likely, and another glacial Grand Coalition of the two major parties more likely.  And that is concerning.

Time for Britain to close the GAPS

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Britain’s asset protection scheme, invented to protect the banking system, is morphing into a bureaucratic monster. It’s time to kill it off. Though state support is still needed, there are simpler ways for the government to prop up its ailing lenders.

More than seven months after it was conceived, and five months after Royal Bank of Scotland and Lloyds Banking Group signed up to use it, details of the APS have still not been agreed. The sheer task of sifting through 585 billion pounds worth of loans to be insured by the government means any final agreement is months away.

GM dumps Chinese in Opel race, standoff looms

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Two things Opel junkies need to know in today’s news.

1) General Motors has dumped Chinese state-owned carmaker BAIC’s long-shot bid to take over GM’s main European arm. That leaves a two-horse race between Canadian-Austrian car parts maker Magna and Belgium-based financial investor RHJ, loosely associated with U.S. private equity firm Ripplewood.

2) The two trustees appointed by the German authorities to a board overseeing Opel in its transition to new ownership are refusing to toe Berlin’s line that Magna’s bid is the only game in town (according to an intriguing Reuters sources story).

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