Not a milestone to rejoice in. Japan’s debt has tipped into the “quadrillion” zone for the first time. That is, as of the end of June, central government debt, looked like this: Y1,008,628,100,000,000, or $10.4tn.
It surely could not be a clearer message to Japanese Prime Minister Shinzo Abe that shilly-shallying over fiscal consolidation is no longer an option? Second-quarter economic output figures due on Monday are key to Abe’s decision about whether to raise consumption tax from 5 per cent to 10 per cent by 2015. Back in June in a speech in London, he pinned any decision to raise the tax – one he must make by October – on the strength of the economy in the second quarter. Read more
Austerity appears to be an increasingly dirty word in Europe. The past week alone has seen European Commission President José Manuel Barroso, Bill Gross of Pimco and Italy’s new prime minister Enrico Letta calling for an easing of austerity.
Spain’s surpassing of the 6m unemployed mark on Thursday added fuel to the debate. But even in Germany, the austerity police of the eurozone, cracks are beginning to show ahead of the elections with the emergence of an anti-euro party.
a) Are there any austerians left? Yes. Here are some of them.
- UK: Chancellor George Osborne hit back at criticism over his apparent excessive austerity by claiming there is no other alternative. And after a tough week when he was criticised by the IMF over the excessive pace of his austerity programme, this week has brought better fortunes for his stance as figures showed a lower deficit and the economy expanded 0.3 per cent in the first quarter.
- Germany: Chancellor Angela Merkel’s view as articulated this week couldn’t be clearer: “I call it balancing the budget. Everyone else is using this term austerity. That makes it sound like something truly evil.” Germany is the only eurozone country with a 2012 budget surplus.
- US: The situation here is different because of sequestration, which triggered automatic spending cuts and tax rises. And the White House faces a July deadline to raise the borrowing limit or default on its debt.
- Latvia: The tiny Baltic state is emerging from a state of uber austerity – part of its bid to join the euro later this year – and it could end up being seen as a poster child for successful deficit cutting implementation, with real growth of more than 5 per cent in 2011 and 2012, despite the broader recession in Europe.
- Spain: The push by Europe’s fourth-largest economy to cut spending and raise taxes has led to record unemployment topping 6m for the first time in its recent history. The government of Mariano Rajoy announced economic reforms and structural measures on Friday.
- Italy: The technocrat government of Mario Monti has been steadfast in carrying out fiscal consolidation. All eyes will be on Mr Letta, who has already said: “Europe’s policy of austerity is no longer sufficient”. Read more
If commodities exporters were pinning hopes on an acceleration in Chinese growth, Monday was not a good start to the week. The disappointing gross domestic product statistics for the first quarter give the likes of Australia, Brazil and Indonesia plenty to be worried about.
As one investor put it: “For the global economy this data is bad news. Commodity exporters are screwed (especially those needing exports to China as key component). I would be very worried about places like Brazil, Indonesia, Australia and the like. The current level of GDP growth in China is OK with China but not OK for the currencies above.” Read more
Two days is apparently not enough for all the talking that needs to be done, so here we are entering Davos Day Three. But as our morning reading shows, there are some worries that delegates are not ready yet to discuss.
Gillian Tett in her column this week highlights cyber attacks. She compares the “whispers in the corridors” with that of 2007, when there was a similar fear of articulating the credit bubble.
Here’s more from the WEF (you can find the FT stories on our in-depth page and many blog posts, including our live coverage on our World blog):
David Cameron, UK prime minister, had more to say on the country’s relationship with the EU and sought common ground with German chancellor Angela Merkel among others.
The FT’s Martin Wolf takes Cameron to task when he blogs that the prime minister may have set the UK on the path to an exit although he really wants to remain within the EU. Read more
IMF chief Christine Lagarde at Davos (AFP)
As our colleagues in the mountains don boots, bobble hats and gloves for day two of Davos, here’s some reading material from the comfort of the FT’s London office to help you limber up for Thursday’s talk-fest.
David Cameron’s speech yesterday on Britain’s future in Europe provided much fodder for journalists – with reaction from leaders across the continent and further. Le Monde’s Marc Roche takes the theme of tact to interpret his speech, while in Der Spiegel Christoph Scheuermann argues that Cameron “missed an opportunity on Wednesday to haul Britain back to the centre of Europe“. The New York Times’ Andrew Higgins writes that “while the acute phase of the financial crisis has passed, the challenge to Europe’s mission and even its membership has not”. Cameron will be taking to a podium again this morning, this time in Davos. Read more
The Davos conference centre (AFP).
The World Economic Forum’s 43rd annual shindig is kicking off in Davos this morning and to get you started ahead of our live blog, here’s some reading to accompany your morning coffee. You’ll find all the FT pieces on our WEF page. And here’s the WEF home page. Enjoy.
From our A-List blog of guest writers Howard Davies, who will be blogging for from the conference, in an amusing take on why the forum is like Scientology.
Peter Vanham guides us through what is being touted as one of the main themes at the bash - how to capitalise on the strength of emerging markets over developed ones – on our Beyondbrics blog.
On Alphaville, David Keohane, gives us the Davos D-List, and introduces the lovely Mdm D. Deville as the blog’s own special correspondent. Do follow her on @DavosDeville. Read more
As if concerns over whether Syria’s chemical weapons might fall into the wrong hands amid the increasingly violent civil war weren’t enough to worry about, behind the scenes nuclear experts are now expressing fresh fears over the security of what may be 50 tonnes of unenriched uranium in the country.
As the FT’s diplomatic editor James Blitz reported on Wednesday, concerns centre on the whereabouts of this as yet unconfirmed stash. It is believed by some to have been meant for Syria’s supposed al-Kibar nuclear facility – before Israel destroyed it in a secret mission back in September 2007, a mission that David Makovsky dissected in the New Yorker last September.
For its part, Syria has always denied ever having a nuclear programme. So, did it have one or not? Below are some interesting articles that wade into these extremely murky waters. Read more
Controversy has swirled around the candidacy of Chuck Hagel as secretary of defence, centred on past comments the Republican former senator made about the “Jewish lobby” intimidating congress, sanctions and military action against Iran, and the Pentagon budget.
Amid the his nomination, there have also been an increasing number of opinion pieces in the US press dissecting what James Fallows in The Atlantic describes as a “de-legitimizing campaign” against the decorated Vietnam veteran.
- Fallows uses a headline from the US satirical news website The Onion to suggest that the imminent nomination could be a “this is bullshit” (‘this’ being the campaign against Hagel) moment for President Barack Obama.
- Commentary fiercely critical of the nomination has been published, among others, in the neo-con Weekly Standard, citing a top Republican Senate aide emailing: “Send us Hagel and we will make sure every American knows he is an anti-Semite.” In the Wall Street Journal, Brett Stephens also aired his disapproval at Hagel’s perceived prejudices against the Jewish community.