Monthly Archives: November 2012

The new Energy Bill that the government has introduced into parliament appears to pass the main tests that will ensure that the UK’s electricity system keeps the lights on while also reducing its impact on our climate. The basic principles are sound and there is a clear and encouraging sense of direction.

However, it still sends worrying signs that the internal bickering within the government over the future direction of energy policy may continue, undermining the confidence of potential investors in the power sector.  Continue reading »

For the first time in a very long time, average Egyptians feel empowered and able to influence the destiny of a country that they now own. To outsiders, this comes across as loud and messy. And it is. But it is also an indication of Egypt’s new checks and balances and, more broadly, its bumpy journey towards a vibrant democracy. Continue reading »

In any event, it is hard to see that Hollande’s reforms amount to a Copernican revolution, as Finance Minister Pierre Moscovici characterised it. French policy remains built on an assumption that the sun will continue to circle France, and that investors will continue to look benignly on the state’s 56 per cent share of the economy. Continue reading »

Over the past week both sides have provided blow-by-blow Twitter updates on each missile and rocket fired and the damage done. More powerful and pervasive than the official tweets, however, has been the verbal and visual war unleashed on both sides, as Israelis, Palestinians and their respective supporters around the world posted pictures, blog accounts, news articles and opinions. Each detailed the blood and grief on the ground and ties it to a larger narrative of terrorism and indiscriminate rocket fire, from the Israeli perspective, and occupation, blockade and targeted killings, from the Palestinian side. Continue reading »

Israel needs to put Hamas to the test. It can do this by putting forward the outlines of a fair and comprehensive settlement and a reasonable path for getting there. The US should work closely with Israel in framing this proposal. Secretary of state Hillary Clinton should use her time in Israel to urge this course at the same time she helps piece together a truce. Her goal should be to stimulate a debate in the Arab and Palestinian worlds that would pressure Hamas to change its ways or risk being caught between those who even more radical and those prepared to compromise. Continue reading »

Despite a courageous public stance by the International Monetary Fund, European officials failed again on Tuesday to deal with the critical issue of Greece’s debt sustainability. If this continues, they will undermine yet another bailout package for Greece and suffer further erosion in credibility, especially in the eyes of their own citizens. They also risk seeing another hard-fought cash infusion do little more than buy a few months for a struggling Greek population. Continue reading »

Washington will defend its old friend. President Obama has made crystal clear that Israel’s operations in Gaza have his full support. Hillary Clinton, the US secretary of state, is expected to travel to the region today. Yet, the US is not the power looking to become more active in the Middle East in years to come. That country is China, a still-emerging power that has no cultural and ideological ties with Israel to protect as it looks to ensure the steady long-term flow of crude oil. Continue reading »

If a central bank gives the impression that it stands ready to be the “only game in town”, it will end up being played. The other policy makers will have no incentive to take on their own responsibilities. This will ultimately drag the central bank into monetising the debt and lose its reputation. Continue reading »

The three independent reviews of the Bank of England’s performance before and during the financial crisis must have been sobering for the court, its governing body. In polite but pointed language the reviews confirmed that the BoE was ill prepared to recognise or deal with the crisis in its early days. They provided many detailed recommendations but also made it clear that a full-scale cultural change is needed to address the root causes of the UK central bank’s problems. This will be a high priority for the next governor. Continue reading »

The minutes of the US Federal Reserve released on Wednesday are an essential read for those interested in a real time snapshot of the complexity of modern day central banking. They are also a cautionary note for all who believe that, acting on their own, today’s hyper-active central banks can engineer good economic outcomes. Continue reading »

In a sense, this government has turned the country toward the left. It is thus reasonable to expect that the next government of Xi Jinping and Li Keqiang would go back to the reform track. The political report of the 18th congress did not mention the payroll reform, a mandate carried out by the current premier Wen Jiabao in the hope to correct China’s enlarging income inequality. Clearly, the next leadership does not want to continue the left-leaning policies of the current administration. Continue reading »

Mistakes happen, even in great news organisations like the BBC. If they are bad enough, heads will probably have to roll. But what matters much more than the bloodletting is that lessons should be learnt from what went wrong, so that the error is not repeated. In the case of the most recent Newsnight affair, there are three main conclusions to be drawn.  Continue reading »

Pakistan and Afghanistan look on the spectacular landslide re-election of Barack Obama for a second term as US president with some trepidation. Pakistan has just come out of a nine-month breakdown of all talks with the US, the worst state the two countries relationship has been in for 60 years. Pakistan thinks the US under Mr Obama has no strategy, while the US thinks Pakistan lies as it continues to harbour extremists. Mr Obama has frequently called Pakistan his biggest headache but he has been unable to come up with a satisfying painkiller. Continue reading »

Jeffrey Sachs, of Columbia University, tells the FT’s John McDermott that the president’s strengthened position is an opportunity to repair the US economy Continue reading »

The US election was fought on first principles: should government be strengthened or dismantled? The answer was resounding. The public wants better government, not less government. Continue reading »

Ian Bremmer, president of Eurasia Group, tells Frederick Studemann, the FT’s comment and analysis editor, that he sees more tension to come between China and the US Continue reading »

By turning its back on white working-class men the Democratic party created a political vacuum Republicans have been all too eager to fill. Whether through racism, xenophobia, or homophobia, or by means of right-wing evangelical Protestantism, the GOP have found scapegoats. Blacks, immigrants, gays, and women seeking abortions aren’t responsible for the declining real wages of white men without college degrees, of course, but they are convenient targets of their anger. Continue reading »

In the past, incumbency was an advantage, not just in US elections but in every advanced industrial democracy with a reasonably robust economy. Since the 2008 crisis, incumbency hasn’t proved such a prize – with the notable exceptions of Angela Merkel, who limited her calls for austerity to other countries, and Barack Obama, who would have spent even more on stimulus if congressional Republicans had let him. Now, he has no more elections to face, freeing him to make tough choices. When it comes to enabling austerity, term limits are not such a bad thing.  Continue reading »

Mr Obama is not careful, he could sink into a quagmire of problems. Yet there is a solution to each big challenge he faces. In the Middle East, he should revisit the speeches he made in Cairo and Istanbul – and implement them. In China, Xi Jinping wants nothing more than a deep economic engagement with America. And if Mr Obama has to cut US defence budgets, there could not be a more propitious moment to do so. The stars are aligned in his favour: all he has to do now is to lead.  Continue reading »

What bit the dust on Tuesday was the world of denial in which Republicans have immured themselves ever since the rise of the Tea Party in 2009. This is a universe in which the financial crash was caused by over-regulation; one in which, despite years of brutal drought and violent weather patterns, climate change is a liberal hoax; a country that can correct a vast structural deficit without ever raising additional revenue, while expanding the military budget beyond anything sought by the Pentagon; a belief system in which Mr Obama was the source of all economic ills rather than the steward of the most intractable crisis since the Depression. The mantra was that a business executive would, simply by virtue of that fact, effect a magical rejuvenation of the staggering American economy. Continue reading »

What ought to pain Republicans most about Barack Obama’s victory is that 2012 was entirely winnable for them. In European elections over the past few years, voters have thrown out leaders who were in charge during the worst of the financial crisis, whether those leaders deserved the blame or not.

Macroeconomic indicators in the United States, where an unemployment rate of 8 per cent is highly correlated with defeat for the incumbent party, pointed in the same direction. Mr Obama himself had proven a disappointment to many of his former supporters, going from a beloved symbol of generational and social change in 2008 to a detached and remote figure, with limited ability to touch an emotional chord in the electorate.

That Mitt Romney lost nonetheless is in part a tribute to his own weaknesses as a candidate. The Obama campaign put Mr Romney on the defensive early about his work at Bain Capital, and left him there. The Republican nominee made any number of horrendous gaffes. He ran a disastrous Republican convention. He never found a way to talk about himself or his agenda that middle-class voters could relate to. Continue reading »

There is nothing better than the widespread perception of a close election for the full spectrum of “experts” to get carried away with what might occur under alternative outcomes. And carried away they were.

Many argued that the two presidential candidates would implement meaningfully different economic policies and, thus, trigger different market reactions. But now that the election outcome is known, it will soon become apparent that the main risk is that investors’ prospects remain hostage to the same issues that existed long before the election. Continue reading »

However strong the contrast between the two candidates’ economic plans, readers need not fear that Tuesday’s vote will herald either the end of the Federal Reserve system, or a massive expansion in government. The reality is that the victor will not have the power to change the nation’s economic direction, at least in the short run Continue reading »

Compared to previous natural disasters, the compensating factors for the economy from reconstruction after Hurricane Sandy may not arrive as soon as expected, or be as comprehensive in reach. Federal, state and local budgets are already stretched, undermining their ability to assist uninsured businesses and households, which is critical for limiting the damage from the hurricane to economic activity Continue reading »

The state’s battleground status should not be a surprise: it has backed the winner in every presidential vote since 1960. What is unusual this time around is the suggestion of opinion polls that President Barack Obama may win a larger slice of the vote in Ohio than he does nationally; in all but one election since 1976, the Democratic presidential candidate’s performance in the state has lagged behind his national showing.

Should the reverse indeed happen this year it could only be attributed to one factor: the president’s decision to rescue the US car industry. That act has led Ohio from a double-digit unemployment rate as recently as October 2010 to a jobless rate of 7 per cent today, below the national rate of 7.8 per cent. Continue reading »

The European Union budget is a runaway monster, and Brussels must embrace the austerity it is forcing on others. But the Commons vote for a real terms cut in the EU budget was a mistake. If the Westminster political class has given up on the EU why should European leaders bother to placate them? There may seem little point in giving anything to the prime minster of a country that appears to be walking away from Europe anyway. Continue reading »

As America slouches towards the final days of a dismal presidential campaign where too many issues have been fudged or avoided, the one question on which the candidates have provided a clear choice is whether the rich should pay more tax.

That choice will determine whether the US falls over a “fiscal cliff” in January, when $400bn of tax increases and spending cuts are scheduled to kick in. It will also dictate the terms on which Congress and the President (whoever he is next year) must reach a “grand bargain” for taming the nation’s growing budget deficit. Continue reading »