It’s EUROPE’S SCARIEST CHART (against some pretty stiff competition): Spanish youth unemployment above 50 per cent! One in two young Spaniards on the scrapheap! Packs of ravening wolves roaming the streets of Madrid!
Prepare to be terrified:
Some renewed interest in this perennial surprise fact, which apparently busts national stereotyping WIDE OPEN – the diligent Greeks work more (average 2109 hours/year) than the OECD average (1749 hours/year), second only to the South Koreans. And the idle Germans are among the lowest (1419 hours a year).
Amazing? Not really. These numbers clump together part-time and full-time workers, and Greece has proportionately more full-timers than part-timers (89.8%) compared with the OECD average (84.4%), which bumps up the number. Read more
Surprise choice for US nominee – and thus, let’s face it, immediate frontrunner - to be president of the World Bank. Jim Kim is a technocrat rather than a politico, so the White House has refreshingly eschewed partisan patronage if not nationality, and has deep (if somewhat narrow, being restricted to public health) development experience. Together with the traditional US lock on the position, those are very likely enough to carry him over the finishing line to the presidency. Read more
Not only is the Greek programme itself on a knife-edge – super-sensitive to yet more growth shortfalls, doubts over political commitment to implementation, the usual – but the Fund is close to the limits of its own flexibility on how much it can lend to a single country, under its snappily-named “exceptional access” criteria. Read more
Exaggeration and contradiction, fairly obviously, but hear me out. As various people have pointed out, the rare earths case threatened at the WTO comes at an odd time given what is happening in the real world. Rare earth mineral prices have plummeted (h/t FT colleague Ed Crooks) and supply is coming on stream from elsewhere – indeed, Molycorp, the big US producer, is gearing up to export to China.
The timing has more to do with domestic politics in the US and the fact that the US and EU just won a similar case to establish precedent. (Precedent isn’t legally binding in the WTO dispute settlement process, as it isn’t a common law-type system, but it is certainly helpful.) Read more
Robert Zoellick goes from the World Bank, no doubt biding his time and eyeing up the possibility of a job as secretary of state or Treasury secretary in a future Republican administration (most likely Romney – he’s not really a Santorumite), and for the second summer in a row, the starting flag drops on the race to run one of the world’s top financial institutions.
Given that the quid of the Euro-American stitch-up worked to install Christine Lagarde at the IMF last summer, the pro, as it were, will most likely drop into place with an American appointment this year. To John Cassidy’s list of possibles I’d add John Kerry – international name recognition, interest in development, administrative experience – though that could depend on whether he has something else in mind. Read more
Lest it be thought that I regard all global economic governance as a crock and don’t give credit where it’s due, congratulations to the US for accepting that “zeroing” – a way of blocking imports by disregarding evidence you don’t like – is dead. In theory Washington will try to negotiate its reacceptance in multilateral talks at the World Trade Organisation, but everyone knows those are going nowhere.
It’s another illustration of two general principles: 1) WTO rules might be patchy, but where they exist, they have held up pretty well, certainly a lot better than protectionism doomsters have been warning; 2) say what you like about the Americans but when they sign up to a trade treaty, eventually, even after a lot of bitching and moaning, they generally stick to it.
“Outside” being the WTO, in this case.
Dave Camp and Max Baucus, Congress’s two top dogs on trade, want the administration to try to make currency misalignment a WTO matter (originally Brazil’s idea). Good luck with that one. Since the WTO works by consensus, China can block this issue on its own. Regarding the renminbi, the consultancy fees for working out just how undervalued is undervalued would put international economists’ kids through college for decades to come. Read more
A year ago, Barack Obama’s 2011 State of the Union address contained a laboured gag about salmon being regulated by a different US government agency when they were in the sea to when they swam into fresh water. This bureaucratic horror story was related to plug the idea of reorganising the agencies that regulate and promote trade. When that proposal finally saw the light of day this month, it managed a rare bipartisan achievement of uniting Republicans and Democrats on Capitol Hill in opposition. Read more
The euro has fallen to a 16-month low below $1.27 – run, run for your lives! Or recognise that it’s still around the trade-weighted average for the past decade and only slightly weaker in real terms than when it launched, that a weaker currency is just what a stricken economy needs and that there isn’t much sign that the fall is disorderly and hence generally hitting confidence in eurozone assets. (The eurozone authorities are doing that.) Read more
It is not for the first time that late-night eurozone summit announcements are looking ragged in the daylight.
The €200bn the EU was supposed to contribute to the IMF (€150bn eurozone, €50bn non-eurozone) turns out not to include certain contributors (for example the UK, until the initiative turns into a global funding round, and Estonia).
The global funding round won’t happen until the eurozone gets its act in gear, and the odd numbers that are dribbling out of capitals so far — maybe €10bn from Moscow, maybe €8bn-€10bn from Brasilia — are underwhelming. Read more
So the ECB and the Bundesbank don’t want to bail-out Italy via the IMF. But could national eurozone central banks do it? They already lend to their own commercial banks through the Emergency Liquidity Assistance programmes and there is nothing to stop the IMF accepting loans from any central bank. Could this be behind Jean-Claude Juncker and Olli Rehn’s cryptic comments on Tuesday night?
Obvious huge snag: such lending would have to be OK’d by the ECB, since it ultimately stands behind all the national central banks. But if the ECB (and the Bundesbank) want to give way on their “No pasaran!” on lending to the IMF, letting the eurozone national central banks do it might be a convenient way of retreating with a shred or two of dignity intact. Read more
One intriguing idea floating around Washington: if the ECB can’t bring itself to bail out Italy direct (sovereign credit risk, no expertise in setting lending conditions) it could in theory, according to Article 23 of its protocol, lend vast amounts to the IMF.
Ouch. The International Monetary Fund can’t be happy (and, rumours have it, are seriously unhappy) with the suggestion and then rapid retraction from the head of its Europe department that it could intervene to buy sovereign bonds – presumably Italian and Spanish – to help the eurozone debt crisis. It would have had to do this via eurozone governments in any case as the IMF can’t intervene directly in markets, which would have been an odd way of going about things.
But a couple of other things Mr Borges said, or were reported as saying, were more interesting: Read more
The answer is “not Tobin”, no matter what this might seem. The Tobin tax is specifically a tax on foreign exchange transactions, originally designed to damp down movements in a notoriously volatile market rather than to raise money. Campaigners for a Financial Transactions Tax(FTT) have sensibly switched attention from said currency tax – which, given the lack of regulation of FX trading, is susceptible to traders simply switching jurisdictions – to levies on bonds and equities sales. Bill Gates, who was asked to look into this issue for the G20, sounds like he will be in favour of something similar, together with eminently sensible ideas such as raising tobacco taxes in developing countries and levies on shipping and airline fuel.
That said, the EU FTT doesn’t look particularly workable – and I’ve even heard rumours it was made deliberately so by sceptical Commission officials trying to sabotage it from within. A tax on transactions in a particular exchange, if it can’t be bypassed, makes perfect sense at least as a money-raising device. The UK, despite its continual whingeing and mewling about an FTT, has taxed British stock transactions through Stamp Duty for a very long time – and added a new version to cope with sales of uncertificated stock. A levy based on the tax residency of the investor looks more difficult to implement, as it is subject to the usual shifting of registration offshore. Read more
The news that the “troika” – the EU, the ECB and the IMF – will be returning to Athens on Thursday is a pretty strong signal that the next tranche of the current rescue programme is going to be released – a small mercy for Greece, at least, even if the next version of the bail-out is mired in division and uncertainty.
Among the various other displays of poor coordination in the bail-out is the difference of style: the IMF tends to send its mission chief back to a borrower country only when the negotiations are pretty much done and the fund is ready to disburse the next tranche; the EU thinks substantive negotiations should be done in-country and generally wants to send its top officials in at an earlier stage. Read more
Great back-and-forth from the Europeans on how much of a writedown they want private bondholders to take in the Greece bail-out but, as far as I can tell, not much of a strong opinion being expressed by the International Monetary Fund (and publicly none at all). Given that the IMF once expended a lot of political capital valiantly, though ultimately unsuccessfully, trying to institute a kind of sovereign Chapter 11 mechanism to allow private investors to be “bailed-in” to any rescue, this seems slightly odd. Read more
Some concern among Republicans about the anti-China belligerence in Mitt Romney’s big jobs speech on Tuesday. (Ironically it was Greg Mankiw, one of Romney’s economic advisers, who said one of the bravest and most sensible things on economics to come out of the Bush administration, and was forced to apologise for it.) Read more
Dominique Strauss-Kahn popped back into the headquarters of the International Monetary Fund Monday afternoon to say goodbye to staff. I am as supremely unqualified to comment on the events in New York which led to his resignation as were many of those who did chip in. But, with his successor making waves in Europe with a pointed speech on bank capital, here is a brief thought on his tenure.
The standard view (which I largely share) is that a smart political operator seized the opportunity of the global financial crisis to turn round an organisation bereft of purpose and beset by drift. But having adroitly manoeuvred the fund into involvement in the Greek bail-out, DSK also risked it being dragged along in a rescue programme driven – incompetently – by the eurozone. Read more
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Welcome to the World blog. Gideon Rachman and colleagues offer commentary on international affairs.