Opinion

Hugo Dixon

Moral hazard is clue to solving euro crisis

Hugo Dixon
May 20, 2011 18:20 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON — Moral hazard is the clue to solving the euro crisis. The idea that entities don’t learn lessons unless they feel pain is valid in the euro zone — but only if the blame is shared properly. The mess isn’t just the responsibility of profligate Greeks, but also of foolish banks and hypocritical Germans and French. Each needs to suffer.

One of the main reasons the region’s financial crisis is so intractable — with endless wrangling over what is the best way forward — is because the different players haven’t fessed up to their own sins. There is therefore a tendency to proclaim their own virtue and pin the blame on others. This makes it hard to come up with a fair settlement.

The main fault line is over whether it is the borrowers (Portugal and Ireland, as well as Greece) who were to blame or the lenders. If, like the German tabloid press, one thinks that it is just the borrowers’ fault, the natural remedy is to crack down on them by imposing stringent austerity programmes in return for bailouts. If one is too lax, they will sin again.

But the lenders were also foolish. That’s something the population in peripheral countries, especially Ireland, increasingly appreciates. Germany and France, though, whose banks are exposed to the euro zone periphery, haven’t faced up to this truth. This causes its own moral hazard: unless banks suffer write-downs as a result of debt restructuring, how can they be expected to learn the appropriate lessons?

The China files, postscript: Feisty females

Hugo Dixon
May 12, 2011 12:40 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon

My first visit to China was in 1979. I was a schoolboy. It must have been one of the earliest Western school trips to the mainland. Mao Zedong had died three years before, Deng Xiaoping had launched the country on three decades of supercharged growth and the one-child policy had just been initiated. I hadn’t been back until this March.

Back then, Mao’s image was plastered everywhere and almost everybody wore Mao suits. I even bought one for myself. I also bought a Mao poster and stuck it in my bedroom at school. Nowadays, the posters have virtually vanished, along with the suits.

The China files, Part 3: Crony capitalism

Hugo Dixon
May 11, 2011 13:29 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon

China’s economy is riddled with vested interests, while free speech is suppressed. This potentially explosive mixture sounds similar to Hosni Mubarak’s Egypt, though Beijing has been much more successful at promoting economic growth than Cairo in recent decades. No wonder the regime is cracking down on dissent — including arresting Ai Weiwei, the internationally renowned artist. But it won’t be easy to maintain the current political model — or to reform it. And failure to do either could knock the economy off its extraordinary trajectory.

The country is officially run by the Chinese Communist Party. But, apart from the suppression of individual rights, it is hard to see much about it that is communist. Inequality is high and rising. The Gini Coefficient, a standard measure of income inequality in a society, is over 0.4 and, by some measures, is close to 0.5 — high figures normally associated with sub-Saharan African countries.

The China files, Part 2: Brave new economic model

Hugo Dixon
May 10, 2011 13:16 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon

The Chinese government knows it’s time for a change. The old economic model based on cheap exports and eye-popping investment can’t be sustained.

Fortunately, politicians aren’t sitting on their hands. The latest five-year plan, covering 2011-2015, aims to boost internal consumer demand as the main engine of growth. It envisages a bigger share in the economy for services, which are currently only 43 percent of GDP — barely half America’s level. The plan calls for more high-tech industry and for greener, less carbon-intensive growth. There’s also to be a big push into social housing, so the poor can afford somewhere to live.

The China files, Part 1: How fast can China grow?

Hugo Dixon
May 9, 2011 13:30 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon

How fast can China grow over the next decade? Nowhere near the breakneck speed it has enjoyed over the past three decades. Multiple economic, environmental and political challenges will slow it down.

The capitalist revolution launched by Deng Xiaoping after Mao Zedong’s death still has a long way to go. But it is now in its early middle ages rather than its infancy. The government recognizes that the old model driven by exports and investment is running out of steam; indeed, its recently unveiled 12th five-year plan tries to grapple with that challenge.

Portugal’s bank rescue plan has one hole

Hugo Dixon
May 4, 2011 20:57 UTC

By Hugo Dixon and Neil Unmack
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

LONDON — Portugal’s bank rescue scheme has one big hole. The European Union and International Monetary Fund have come up with a punchy blueprint to restore confidence in the financial system, as part of the country’s 78 billion euro bailout. The plan includes recapitalisations, stress tests and privatisations. But there’s one weakness: funding. Allowing banks to issue state-guaranteed bonds, as envisaged by the plan, is only a partial solution so long as the government’s credit is still weak.

First, look at the good part of the blueprint. Banks will have to boost their core Tier 1 capital ratio to 9 percent by the end of 2011 and 10 percent by end-2012. That’s above the 7 percent agreed under the new global banking rules. If the banks can’t raise this capital on their own, the state will provide up to 12 billion euros.

Exclusive: Geronzi payoff, expenses in focus at Generali

Hugo Dixon
Apr 27, 2011 06:55 UTC

LONDON/MILAN (Reuters) – Cesare Geronzi’s apparently hefty payoff and his seemingly lavish expenses during 11 months as non-executive chairman of Generali (GASI.MI: Quote, Profile, Research, Stock Buzz) are set to come under the spotlight at the insurer’s shareholder meeting on Saturday, several directors and other sources said.

Geronzi, a powerful Italian corporate insider who has been close to Prime Minister Silvio Berlusconi, resigned in the face of a boardroom coup on April 6. He was awarded a payoff of 16.6 million euros ($24.3 million) upon leaving Europe’s No.3 insurer, several Generali directors and other high-ranking Generali sources told Reuters on condition of anonymity.

Geronzi also ran up bills to cover extensive use of private jets, five secretaries, multiple cars and drivers in four cities, the rent for a flat in Milan, a public relations team separate from the company’s main communications office, and sponsorship of events and media outside the company’s normal advertising program, according to the sources.

Geronzi payoff, expenses in focus at Generali

Hugo Dixon
Apr 27, 2011 06:54 UTC

LONDON/MILAN, April 27 (Reuters) – Cesare Geronzi’s
apparently hefty payoff and his seemingly lavish expenses during
11 months as non-executive chairman of Generali (GASI.MI: Quote, Profile, Research) are
set to come under the spotlight at the insurer’s shareholder
meeting on Saturday, several directors and other sources said.

Geronzi, a powerful Italian corporate insider who has been
close to Prime Minister Silvio Berlusconi, resigned in the face
of a boardroom coup on April 6. He was awarded a payoff of 16.6
million euros ($24.3 million) upon leaving Europe’s No.3
insurer, several Generali directors and other high-ranking
Generali sources told Reuters on condition of anonymity.

Geronzi also ran up bills to cover extensive use of private
jets, five secretaries, multiple cars and drivers in four
cities, the rent for a flat in Milan, a public relations team
separate from the company’s main communications office, and
sponsorship of events and media outside the company’s normal
advertising programme, according to the sources.

Exclusive – Geronzi payoff, expenses in focus at Generali AGM

Hugo Dixon
Apr 27, 2011 06:43 UTC

LONDON/MILAN (Reuters) – Cesare Geronzi’s apparently hefty payoff and his seemingly lavish expenses during 11 months as non-executive chairman of Generali (GASI.MI: Quote, Profile, Research) are set to come under the spotlight at the insurer’s shareholder meeting on Saturday, several directors and other sources said.

Geronzi, a powerful Italian corporate insider who has been close to Prime Minister Silvio Berlusconi, resigned in the face of a boardroom coup on April 6. He was awarded a payoff of 16.6 million euros (14 million pounds) upon leaving Europe’s No.3 insurer, several Generali directors and other high-ranking Generali sources told Reuters on condition of anonymity.

Geronzi also ran up bills to cover extensive use of private jets, five secretaries, multiple cars and drivers in four cities, the rent for a flat in Milan, a public relations team separate from the company’s main communications office, and sponsorship of events and media outside the company’s normal advertising programme, according to the sources.

Special Report: Inside the Egyptian revolution

Hugo Dixon
Apr 13, 2011 08:32 UTC

CAIRO (Reuters) – In early 2005, Cairo-based computer engineer Saad Bahaar was trawling the internet when he came across a trio of Egyptian expatriates who advocated the use of non-violent techniques to overthrow strongman Hosni Mubarak. Bahaar, then 32 and interested in politics and how Egypt might change, was intrigued by the idea. He contacted the group, lighting one of the fuses that would end in freedom in Tahrir Square six years later.

The three men he approached — Hisham Morsy, a physician, Wael Adel, a civil engineer by training, and Adel’s cousin Ahmed, a chemist — had all left Egypt for jobs in London.

Inspired by the way Serbian group Otpor had brought down Slobodan Milosevic through non-violent protests in 2000, the trio studied previous struggles. One of their favorite thinkers was Gene Sharp, a Boston-based academic who was heavily influenced by Mahatma Gandhi. The group had set up a webpage in 2004 to propagate civil disobedience ideas in Arabic.