ECB

Esther Bintliff

Reinhart-Rogoff Redux

♦ The FT’s Robin Harding and Chris Giles look at the perils of austerity theory, and argue that “the essential problem is limited data.”

♦ To catch up on the debate thus far, check out our reading list.

♦ Over on Counterparties, Felix Salmon has helpfully summarised a long blog by an econometrician, Arindrajit Dube. As Salmon puts it: the causation here seems about as clear as causal analysis can ever be: low growth causes high debt, rather than high debt causing low growth.

Elsewhere

♦ The FT’s Tom Mitchell, a Bostonian, writes about his response to the bombs at Monday’s marathon – “An attack on much more than a race.”

♦ A new Israeli guidebook “offers maps, tips, and tours through 18 areas of Israel where Palestinian villages once stood”. The Economist reviews it.

♦ Obama’s administration appears to hold varying views on the Syrian opposition, something that became obvious on Wednesday when Secretary of State John Kerry and Defense Secretary Chuck Hagel made separate appearances before Congress, reports the New York Times.

♦ The European Central Bank’s newest game [wait, they do games?] was released on Wednesday. Alphaville’s Lisa Pollack has played it.

♦ Silicon Valley is welcoming a new kind of business pilgrim – “itinerant company executives who come from the benighted analogue world”, writes Richard Waters. Read more

Ferdinando Giugliano

The Italian dog that did not bark is one of the great untold market stories of the past month. The yield on Rome’s 10-year bonds is around 4.3 per cent, a level not seen since the end of January.

Chart: Italy’s 10-year bond yield (black line) over the past five years; blue line shows the yield on the German 10-year bund

chart courtesy of Reuters

(Chart courtesy Reuters)

The spread with the Bund, which has obsessed Italians since the market panic at the end of 2011, has narrowed to just above 300 basis points. It almost looks as if February’s inconclusive election and the accompanying political uncertainty do not matter. This is puzzling, so here are a few tentative explanations:

1) Mario Draghi’s magic. The pledge by the president of the European Central Bank last summer to do “whatever it takes” to save the euro is the single most important explanation for the relative quiet on Italy’s bond market. The Outright Monetary Transactions scheme, whereby the ECB will purchase unlimited quantities of debt of countries in difficulty, has so far proven a remarkably resilient firewall. Read more

Gideon Rachman

Mario Monti exits a voting booth on February 24 (AFP/Getty)

Mario Monti exits a voting booth on February 24 (AFP/Getty)

Paul Krugman has got in early to comment on the political demise of Mario Monti – who now seems certain to trail in fourth in the Italian elections. According to Krugman, Monti’s reputation for wisdom is wildly overblown. On the contrary, he more or less deserves his fate because he was “in effect, the proconsul installed by Germany.”

Worse, according to Krugman, Monti’s policies did not even work. As in the rest of southern Europe, the economy has shrunk and so debt-to-GDP ratios have risen. There was only one “piece of good news” in the Monti era – that “bond markets have calmed down.” However, Monti cannot claim the credit even for this, because it is “largely thanks to the stated willingness of the ECB to step in and buy government debt when necessary.”

As ever, with Krugman, the argument is forcefully made. But it misses out a crucial stage in the argument and therefore unfairly denigrates the role of Monti in stabilising the Italian economy. Remember, when Monti came to power, the steady rise in the interest rates that Italy was having to pay to finance its debt was eating up more and more of the Italian budget. There was a real prospect that Italy might simply be unable to finance itself through the bond markets – and that might have sparked a terminal crisis in the euroRead more

 Read more

(AP)

Friday’s events from the World Economic Forum feature an address by Mario Draghi, president of the European Central Bank, and sessions looking at the challenges faced by, and presented by, the fast-changing Arab world. Reports from FT writers in Davos and by Ben Fenton, Lina Saigol and Lindsay Whipp in London

17.03: The Davos Live Blog is closing down now but for more reading and insight on today’s events, please visit the FT’s in depth page on the World Economic Forum.

16.41: Gideon Rachman, titular proprietor of this blog, has written his surmise from the earlier session on Syria.

16.16: Asked by the Amercian moderator of his panel session about corruption and banking regulation, Nigeria’s central bank governor Sanusi displays a little frustration:

He said: “We are the only country which has taken people out of banks and put them in jail. No bankers in your countries have gone to jail.”

16.12: Martin Wolf has recorded his view on the politics and economics at play in a “low-intensity” Davos this year:

 Read more

Tom Burgis


Welcome to our live coverage of the eurozone crisis. We’ll bring you all the developments. By Tom Burgis and Ben Fenton in London with contributions from FT correspondents across the world. All times are GMT.

 

 

17.37: As the EU’s political leaders get down to talks, we are closing down the live blog for today, but it will be up again bright and early tomorrow to pick up on whatever is decided overnight. Meanwhile, elsewhere on FT.com you’ll be able to find coverage of the summit kept fresh by our sleep-deprived Brussels team.

17.29 More bleak news for the UK’s Triple A credit rating, via FT markets editor Chris Adams:

[blackbirdpie url="https://twitter.com/chrisadamsmkts/status/279275102162522112"]

17.24 More twists and turns in this tale of what said what to whom about the Italian elections at the centre-right EPP’s pre-summit meeting today (see 15.49 and 17.06).

Antonio Tajani, the Italian EU commissioner and a Berlusconi ally, is quoted by Italian news agency Adnkronos as saying that none of the leaders of the EPP “expressly asked Monti to be a candidate”.

“Everyone spoke well of Monti but no one wants to interfere.”

 Read more

The polls have opened in the US and our liveblog is up and rolling. Here is some reading to get you through until the numbers start coming in:

 

Germany’s Angela Merkel, left, and France’s François Hollande at the EU summit in Brussels.

With the eurozone crisis response slowing to a crawl, Friday’s early-morning agreement setting a timetable for a new single eurozone bank supervisor is probably best judged with textual analysis, since the deal is so incremental it’s hard to really judge without a close look at the details.

The key change between the communiqué agreed in June and the one agreed Friday is the firming up of when, exactly, the new supervisor, to be run by the European Central Bank, will start and how long it will take to be phased in. The June deal was immensely vague on this point:

 Read more

By Ruona Agbroko

Today’s selection of interesting articles from around the web: