What do Poland, the European Union’s brightest economic light, and Greece, its dimmest, have in common? Both have plans to cut their budget deficits to the Union’s prescribed 3 percent level by 2012, and both of those plans depend on a lot of ifs.
from Global News Journal:
In the space of a few weeks, the idea of creating a European Monetary Fund to rescue financially troubled EU member states has gone from being a high-level brainwave from a pair of economists to a major policy initiative backed by powerbroker Germany. In EU terms, that's Formula One fast.
Member states of the European Union like to think of themselves as partners, sharing in a common future. But when it comes to business, things tend to go by the board. Consider, for example, the scramble to outdo each other in attracting investment from outside the bloc.
“I’d be Carrie, I guess, since I like to write,” he told the Finnish newspaper Helsingin Sanomat when asked about which character in the show he most resembles.
Any doubts about financial markets’ faith in European Central Bank President Jean-Claude Trichet’s cure-all ability should have been put to rest after a euro flurry over Trichet cutting short a visit to Sydney to return to Brussels for a meeting of European Union leaders.
The reality of ‘political economy’ is something that irritates many economists – the ”purists”, if you like. The political element is impossible to model; it often flies in the face of textbook economics; and democratic decision-making and backroom horse trading can be notoriously difficult to predict and painfully slow. And political economy is all pervasive in 2010 – Barack Obama’s proposals to rein in the banks is rooted in public outrage; reading China’s monetary and currency policies is like Kremlinology; capital curbs being introduced in Brazil and elsewhere aim to prevent market overshoot; and British budgetary policies are becoming the political football ahead of this spring’s UK election. The list is long, the outcomes uncertain, the market risk high.
Juergen Stark , Germany’s ECB executive board member, is well known as a true believer in tight fiscal discipline, so his reported comments in Italy’s Il Sole 24 Ore about not bailing Greece out of its financial difficulties are not out of character. But the market reaction must have at least given pause for thought to EU leaders wondering how far to go in coddling their wayward child.
from Global Investing:
Wolfgang Munchau, co-founder and president of Eurointelligence, has raised an uncomfortable prospect for investors in Greece. In a Financial Times column today, the long-time Europe commentator argues that Brussels may not be willing to bail Greece out if it were to default on its debt à la all-but sovereign Dubai World is about to.
How well is your finance minister doing as the global economy comes tumbling around your ears? Finns, at least, can hold their heads up with pride: Jyrki Katainen (pictured on ice) has topped The Financial Times’ annual rankings of European finance ministers.