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Oct. 29, 2010
What does People's Bank of China's latest rate hike tell us?
On 19 October, the People’s Bank of China announced a series of rate hikes. Although economists have been arguing for monetary tightening for months, this move was a surprise to many in the market. This column argues that the moves were aimed at combating domestic inflation and addressing the risks of an asset bubble. (French version on Telos, English version on VoxEU). read more
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Oct. 15, 2010
The Two Rebalancing Acts
A “strong, balanced, and sustained world recovery” as demanded by the G20 is a daunting challenge for policymakers. This column argues that two rebalancing acts are required: internal rebalancing – replacing government spending with private-sector demand, and external rebalancing – addressing the global imbalances between exporting and importing countries. These two rebalancing acts, it adds, are taking too long. (French version on Telos, English version on VoxEU). read more
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Oct. 1, 2010
Beyond New Labour?
This week, the Labour Party’s annual conference was marked by the inaugural speech of its new leader, Ed Miliband. The campaign for the leadership of the Labour Party had been perilously close: Ed Miliband only emerged as leader after four rounds of voting. His brother, David Miliband, former Foreign Minister in the government of Gordon Brown, had been the favourite to win the election. Keen to appease the tensions that the campaign had unleashed within the Party, Ed Miliband’s first speech as leader was a reconciliatory affair: the Guardian newspaper warmly described him as staking out the reformist centre-ground, much like Tony Blair had done in the mid 1990s. But what of New Labour? And what future for the British left? read more
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Sept. 29, 2010
EU: new ways of the small and middle economies
A quick trip through the Czech Republic, Sweden, Slovakia and Poland offers curious impressions of economic situation. All these countries are seeing a fast economic recovery of around 4 percent this year, and the contrast could hardly be greater to the current US depressed mood. Unemployment is the main concern but bubbles are on their way. One can also wonder about the policies carried in these countries whose leaders speak a new language. read more
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Sept. 22, 2010
‘Roma crisis’ and EU’s neighborhood
In a spectacular move, France, a founding member State, has been sharply criticized by European MPs over its Roma expulsion policy. Since the beginning of the crisis, President Sarkozy is standing firm on its tough immigration policy, in spite of a wave of criticisms both within France and abroad. Starting as a French issue, it has had an impact on the French-Romanian relations, two traditional allies. At a European level, it may be not without serious implications for a country like Ukraine, which seeks a prospect of integration within the EU. (in French) read more
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Sept. 16, 2010
Iraq: US troops leave, violence remains
Since August 31, there are no more U.S. combat forces in Iraq. However the complete drawdown of U.S. troops won't occur before December 2011. In Baghdad, Prime Minister Nuri al-Maliki said he was confident in the ability of Iraq’s new security forces to take the lead, adding that he was delighted by Iraq’s recovery of « its independence and sovereignty. » But does this guarantee the return to stability and the end of violence? This is far from certain. read more
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Sept. 16, 2010
Bank regulation reform: moving, ever so slowly in Europe
Three years after the bank crisis began, two years after it exploded, the policymaking response is moving forward, but surprisingly slowly. Two important steps have just been taken, a superficial one at the European level, a more fundamental one at the international level. In the EU politicians seem unable to resist the powerful lobbying of the banking industry while Basel III has so far side-stepped the all-important issue of systemically-important financial institutions. (in French) read more
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Sept. 16, 2010
Is G20 economic coordination already passé?
Since the G20 leaders first met in Washington in November 2008, much hope has been placed in this new coordination group for the global economy. The G20 summit meeting in London in April 2009 will especially go down in history as the moment when leaders from the world successfully united forces to ward off depression. But times have changed and after a rather disappointing summit meeting in Toronto last June, there are grounds to ask whether international economic coordination among G20 countries is already passé. read more
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Sept. 12, 2010
Taking Stock of Europe's Financial Reform
Financial regulation, more than other domains of economic policy, is open to misinterpretation. Since most economists abandoned it for a long time, it lacks solid analytical and empirical foundations. Since it affects directly the actors of the powerful financial industry, it has to bear an excessive and constant lobbying that influences the terms of the debate. And since it applies to activities often hyperspecialized and geographically concentrated, its ins and outs are rather difficult to understand for outsiders. (in French) read more
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July 19, 2010
EU economic governance needs more democracy
May 2010 will go down in history as the beginning of greater economic solidarity in the European Union as a result of the one-two punch of the Greek loan agreed on May 3 and the massive loan guarantee mechanism of May 9-10. But what shape that union will take remains unclear. German Chancellor Merkel wants more governance by rules, to enshrine restrictive budgetary discipline and draconian punishments for violators. French President Sarkozy wants more governance by leaders, with Eurozone countries to form a kind of economic government that determines Eurozone policy on an on-going basis. Neither will work, the first because it is too rigid as well as economically problematic, the second because it is too flexible as well as politically problematic. Neither, moreover, is very democratic. read more
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July 16, 2010
EU: let's create independent, national budget committees
The sovereign debt crisis revealed the institutional weaknesses of fiscal policies in Europe. To an institutional weakness, it must be given an institutional response. How? We propose the creation of independent, national budget committees, as well as a European committee that would evaluate, on the basis of the information provided by the national committees, the impact of national fiscal policies for the Eurozone. Comparable to the European organization of competition or financial regulation, such an architecture would preserve national sovereignty in fiscal policies while offering a European diagnosis on the economic policy. (in French) read more
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June 23, 2010
Emergency vs. Emergency
In 1980, the French public debt amounted to 20% of GDP. In 2007, before the crisis, it had risen to 65%. By 2011, it could exceed 85%. The time has come to roll the debt back. It is an urgent task to design a process that reverses the political failures of the last thirty years. But it is equally important to ensure that the weak recovery under way does not stall or, worse, that we end up with a new recession. Thus we face two seemingly incompatible emergencies. Governments seem owed by the financial markets’ “request” for stern deficit-cutting measures, but the markets seem to understand that a new recession will deepen the deficit. This article argues that there is no such incompatibility. (in French) read more
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June 20, 2010
Senior Workers: Less Charges, More Jobs?
In order to increase the proportion of employed senior workers, it has been suggested to cut their and their employers’ social security contributions. That proposal deserves attention, since it acknowledges the necessity of raising the senior workers’ employment rate, still very low in France. But such a policy may be flawed and in the context of the pension system reform one may think twice before implementing it. (in French) read more
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June 18, 2010
A Downgraded Europe?
In 2007, a group presided by Felipe González was set up to write a report on “the future of Europe”, which was delivered to the European Counsel on June 17th. One understands that right now the priorities may be concentrated on finding parades to the attacks of the markets, rather than to envision the distant future of the Union. But this report is capital in more than one way. First because the relief that followed the signature of the Lisbon Treaty gave place to the question of what to do in the next twenty years. Second because the financial crisis obviously imposes to reform the European model of governance and the European policies. (in French) read more
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Feb. 17, 2010
When Ukraine meets with China
No wonder that Ukraine remains a country profoundly torn between a pro-West and a pro-East vector, i.e. EU and Russia. Beyond this oft-described black-and-white opposition, the striking geopolitical reality for the coming years may not be the swing toward one or the other pole, but rather the arrival of China as a central player in the EU neighbourhood. read more
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July 8, 2009
Attempting the Impossible: constructing Life out of Digital Records
Human living and knowing are bound to vacillate between the sensible and the intelligible, what can be experienced through the senses and what can be thought (including counting and calculation) without immediate reference to palpable reality. Perception is a vital and inseparable component of living and, though shaped by culture, it is firmly anchored into the human sensorium. At the same time, living and knowing always transcend the givens of perception and entail cognitive operations that lack ostensive reference, being conceptual or abstract. read more
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March 18, 2009
The WTO’s transparency challenge
Multilateral liberalization has often been described as a bicycle that has to keep moving to maintain stability. Undeniably, the bicycle has come to a standstill: as the Doha Round drags on since 2001 with little result, countries have worked off their liberalization commitments from the Uruguay Round (1986-94) and face few incentives to reform their policies in preparation of new WTO obligations. read more
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Jan. 28, 2009
Illusory Virtue
The European Commission has just released gloomy, updated macroeconomic forecasts, with Euro area GDP now projected to decline by 1.9% in 2009. In eleven out of 16 Member states, GDP is expected to fall in 2009, with an especially sharp decline in Ireland (-5%). Due to automatic stabilizers and fiscal stimulation plans, half of the countries are expected to run fiscal deficits exceeding the 3%-of-GDP red line. The European Commission forecasts very large deficits in Ireland (11% of GDP) and in Spain (6.2%). Strikingly, these two countries used to be part of the most virtuous members of the Euro area until 2007. Indeed, from 1999 to 2007, none of these two reached or even approached the 3% bound. General government budget was close to balance on average in Spain while Ireland ran a 1.6% surplus on average. All other Euro Members except Belgium, Finland and Luxembourg crossed the red line at least once, and five of them (France, Germany, Greece, Italy, Portugal) did it several times. read more
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Oct. 30, 2008
Not another Bretton Woods
The Washington meeting of the Heads of State to take place shortly reflects recognition of the need for international cooperation in the regulation of financial institutions and markets. There has been international cooperation in recent months, mainly among the major central banks, notably the coordinated interest-rate cuts that took place recently, and the provision of dollar financing by the Federal Reserve to the European Central Bank, which needed dollars to relend to European banks that could not obtain them commercially. read more
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Oct. 30, 2008
Despite the history of a weak dollar would you rather buy a Mercedes or a Ford?
We are entering in different phase in stock market weakness, one that gives me some cause for optimism. I believe that in recent weeks what we have witnessed is a transition from “liquidity fear” to “recession fear” or for the more technical, from liquidity risk to credit risk. It may be hard to notice the difference. Both forces are bad for stock markets in general. But they have a different impact on individual stocks and therein lies the opportunity for opportunistic investors who don’t mind a bare-knuckle ride in search of superior returns. read more
