The Cypriot and EU flags. PATRICK BAZ/AFP/GettyImages
The same place it was in the 2008 Iceland bailout and that China took in the financial rescue of Pakistan: providing only a supporting role, and showing that cash-for-geopolitical-influence has yet to replace multilateralism as the dominant mode of crisis lending.
In all three cases, there was lots of excited chatter in the run-up to the bailouts about aid-for-influence deals to avoid the strictures of an IMF rescue. Russia was going to bail out Iceland and keep Cyprus out of the clutches of the EFSF/IMF in return for naval bases; Islamabad appealed to China to use some of its huge forex reserves to help out its old foreign policy pal.
Thoughtful speech today by Pascal Lamy, who has signalled he will step down as director-general of the World Trade Organisation when his term finishes in August 2013, and thus, we journalists fervently hope, will be speaking more and more bluntly as the end approaches.
Lamy compares the general shambolic state of multilateralism (last week’s utterly futile Rio+20 climate change summit perhaps setting a new low) with the difficulties with governing the eurozone:
Perhaps the only item of proper concrete news on Tuesday from the G20 in Mexico was that Canada (along with Mexico, announced yesterday) will be invited to join the nine-member Trans-Pacific Partnership (TPP) trade deal, writes Alan Beattie.
The process of writing a farm subsidy bill for the next five years is currently under way in the US Senate with the speed and efficiency for which both agriculture and that particular house of Congress are famous. Today’s news was that an attempt to reform the US sugar subsidy programme – which, unusually for American farm support, raises rather than lowers domestic prices – was rejected by 50 votes to 46, a narrower margin than in previous episodes but still a failed effort.
Another amendment, this one to radically reform the the Supplemental Nutritional Assistance Programme (Snap) – commonly known as food stamps – lost by a much bigger margin, though the current version of the Senate farm bill does include cuts to that budget. It is perhaps under-appreciated outside the US that Snap, which helps nearly 50m poorer Americans buy food, makes up the large bulk of payments under the farm bill.
Yields on Spanish 10-year bonds over the past month – Bloomberg
The market reaction to the Spanish bailout continues to validate the infallible eurocrisis trading rule of “buy on the summit, sell on the communiqué”. Why so negative, especially for Spanish sovereign debt?
As has been extensively pointed out, the Spanish rescue is a roundabout way to do a bank recapitalisation. Instead of taking direct equity stakes in the banks, the EFSF/ESM has had to lend via FROB, Spain’s bank rescue fund, thus increasing Spain’s sovereign debt load and raising all sorts of tortuously tricky questions about seniority.
So why do it this way? It’s the old story of policy architecture not reflecting the realities of the world economy.
One of the very few bright spots in governments’ generally grim recent performance of managing the world economy has been that trade protectionism, rampant during the Great Depression, has been relatively absent.
That may no longer be the case. The WTO, fairly sanguine about the use of trade barriers over the past few years, warns today that things are getting worrying. The EU made a similar point yesterday. And this monitoring service has been pointing out for a long time that a lot of the new forms of protectionism aren’t counted under the traditional categories, thanks to gaping holes in international trade law.
Could the IMF help bail out Spain? Tricky one. As goes the EU, so goes the IMF, only more so.
A new lease of life in an old idea? The EU and the US are talking about some kind of bilateral trade agreement – as, to be fair, they have been for about the past 20 years. This time, so the optimistic argument goes, it is helped along by the fact that almost no-one can be bothered to pretend that the Doha round is alive any more, thus neutralising the criticism that the two biggest trading powers are stitching up deals between themselves and undermining the multilateral system.
The problem with the deal, though, as USTR Ron Kirk recently hinted, is that the Europeans want to go for a comprehensive deal covering as many sectors as possible. US business groups privately have similar worries about the overoptimistic views of their European counterparts.
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.