The fiscally prudent are still reaping their reward on the football field – among European countries, at least. Down to 52 per cent from 70 per cent last week, the correlation between points and fiscal prudence remains significant. (And if it weren’t for Spain currently beating Honduras 2-0, which I’ve taken as a Spanish victory, we’d be at 59 per cent.)
With Portugal beating North Korea earlier 7-0, the big question of the day is: which country is more saintly, fiscally speaking? Read more
The Austerati and the Stimulati
My contribution to Mark Thoma and Motoko Rich‘s call to label the two sides in the raging fiscal stimulus debate. Motoko Rich writes:
The raging debate over what to do about the deficit is now getting its own lingo. Read more
If no more contenders come forward, these four candidates will form the list of governor hopefuls, which is due to be handed to the finance minister next week. They are in the frame to replace Thai central bank governor Tarisa Watanagase, when her four-year term ends in September.
Guidelines state that candidates must be less than 60 years of age, possess extensive economics or financial knowledge, and must not have worked in any political appointment for at least a year. The list thus far: Read more
One of the big risks for the Chinese authorities in beginning to gently appreciate the currency is that they set up a one-way bet for investors who believe that the renminbi can only get stronger from now on. Large inflows of hot money could make it difficult to conduct monetary policy, officials fear, and might potentially aggravate inflation.
That explains why there has been much more talk since Saturday about volatility in renminbi trading and using a currency basket as a reference. When China abandoned its currency peg in 2005, it said the renminbi would trade against a currency basket of its main trading partners, but in reality it trailed the US dollar and was much less volatile than the 0.5 per cent daily trading bands allowed.
“In one area, the emphasis will be different this time,” says Li Daokui, a central bank advisor who believes the authorities will pay more attention now to the basket in which the euro plays a large role. Economists who have been briefed by the central bank say that there will also be more daily volatility, in order to keep speculators on their toes.
This means that in principle, says Mr Li, that if the euro gets much weaker, the renminbi could fall against the dollar. Richard Yetsenga at HSBC says something similar: Read more
Has philanthropy been overlooked as a means of consolidation? Not in Germany. Fifty-one millionaires and billionaires have apparently formed a ‘Club of the Wealthy’. That club has written to chancellor Angela Merkel, offering 10 per cent of their income for 10 years, in a ‘rich tax’.
Such acts of kindness are all the more rare for being collective. Forming a club, rather than donating individually and noisily, speaks volumes about its members. It also increases the members’ chances to do good, now and in the future, by creating a structure that could attract more people over time, and even survive the 10-year time horizon of its founders. Who knows, the idea might catch on. Read more
Renminbi
UK Emergency Budget Read more
ECB seeks tougher eurozone rules
Jean-Claude Trichet is expected to throw down the gauntlet to the eurozone’s political leaders by setting out extensive proposals for preventing future financial crises in the 16-country region. The ECB president is due to speak to the European parliament today, expanding on a document released last week.
The ECB wants to rule out any expulsion from the eurozone, as even admitting the possibility could undermine its stability. Eurozone finance ministers would become “the guardian of fiscal sustainability”, with governments’ tax and spending decisions policed by an independent agency. There would also be more penalties for fiscal miscreants – and a “traffic light” system of intensifying surveillance for countries losing competitiveness. Read more
Forward prices for the renminbi are surging even though there is no exchange rate shift yet from the People’s Bank of China, which announced on Saturday it would “enhance flexibility” of the exchange rate. In a defensive statement lacking detail, the Bank said it would:
“further enable market to play a fundamental role in resource allocation, promote a more balanced BOP account, maintain the RMB exchange rate basically stable at an adaptive and equilibrium level, and achieve the macroeconomic and financial stability in China.”
But two things suggest this change will not prove as significant as it could be. First, the language. The statement talks of ‘furthering’ and ‘enhancing’ the current policy, rather than changing it. The only change word, ‘reform’, is used to refer to a continuing process.
Second, the defensive tone and text. “The basis for Read more
How the Budget is shaping up
This morning the Financial Times is running quite a few Budget stories. My favorites are the pieces about the regional effect of spending cuts, which we have simulated (click on the beautiful maps). These show very simply that whether public spending is cut from social security or from government consumption, it will hit growth harder in the North than South and harder in poorer than in richer areas.
George Osborne’s constituency of Tatton in Cheshire suffers the least of any region on one of the comparisons. The chancellor will like that. Others might take a different view.
Some may say that is a description of the bleeding obvious since everyone know that public spending tends to follow need. Of course it is also not a dynamic model, just some very simple calculations, but they are important in showing the first-round effect of cuts. I have not seen anyone else doing this sort of thing. It might even make Nick Clegg, deputy prime minster, stop and pause before describing spending cuts as fair and progressive. The cuts might well be necessary, Read more
| About this blog | Blog guide |
Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
