Sure, sounds good, but will it be effective?
That’s the question everyone’s asking today about BP’s latest effort to stem the tide of oil gushing into the Gulf of Mexico. But it could just as appropriately be asked of the progress of the US HIRE Act, past in March, which gives employers tax credits of up to $1,000 per worker and provides a payroll tax exemption for employer social security payments. Read more
The Fed is taking a Shakespearean attitude toward the exit: monetary tightening, a necessary end, will come when it will come.
But while the US central bank has made clear that the timing of the exit is still unknown, it’s taking steps to get ready for it when it comes. Read more
The eurozone crisis rages on.
Fitch downgraded Spain’s debt ratings today, cutting the country’s long-term foreign and local currency ratings by one notch to AA+ from AAA. Read more
The boyish* Tim Geithner was in Europe this week blowing strangely warm about financial regulation and praising Germany’s leadership in the area. Given the short-selling ban imposed by Berlin, and the hedge fund directive currently passing through the bowels of the European decision-making process, this looks a bit odd.
Consensus among Treasury-watchers in DC is that it’s almost certainly a tactical move designed to get the EU and particularly Germany onside for future issues, akin to the ratcheting down of pressure on the Chinese which preceded Mr Geithner’s trip to Beijing. No point in poking Angela Merkel in the eye unnecessarily. But what issues? A likely candidate is the Basel III capital accords. If the US (particularly some elements in Congress) gets its way in toughening the standards, European banks are going to have to hold more capital. Not the easiest time to encourage European banks to accept another hit. Read more
Lorenzo Bini Smaghi, European Central Bank executive board member, has attacked financial market analysts for not doing their homework properly on Greece. Many have jumped to the conclusion that the country will default or have to restructure its debt at some point, he said in a speech in Morocco today. But the International Monetary Fund, eurozone governments and the ECB have taken a different view. “They all consider that a default is not a viable solution.”
His explanation is that private sector economists have simply looked at horrific projections for Greek debt-to-GDP ratios and not studied carefully enough the details of the country’s rescue package. “I have not seen a serious analysis of the 120-page report produced by the IMF which looks at the various aspects of the programme, including the impact of structural measures on growth, the sustainability analysis or other features of the programme”. Read more