Comment, analysis and other offerings from Tuesday’s FT,
Nouriel Roubini: Irish woes should speed Europe’s default plan
As the EU attempts to force Ireland to accept an aid package, Dublin is close to being unable to sell its debt on the open market, a fate that befell Greece last spring, writes Roubini, professor of economics at New York University, chairman of Roubini Global Economics and author of “Bailouts or Bail-Ins?“. In the short term the EU will kick the can down the road via a temporary Irish bail-out, just as it did with Greece. It is likely to do the same with Portugal. But it has finally dawned on the EU that a rolling process that places private bank losses on to public balance sheets could leave its governments insolvent too.
Sebastian Mallaby: Currency warriors should look at India
After last week’s disappointing G20 summit, a full-blown currency war may look unavoidable. But consider India, writes Mallaby, a senior fellow at the Council on Foreign Relations and author of ‘More Money Than God: Hedge Funds and the Making of a New Elite’. When more and more nations are resorting to capital controls and currency intervention, India has, since a change of heart nearly two years ago, shown there is another way.
The Short View: Financial alchemy
Commodity prices have been hitting all-time highs of late. But as James Mackintosh, investment editor, explains, it’s not just the Fed’s quantitative easing that’s been turning base metals into gold. Investors should be watching for any wobble in Chinese manufacturing.
Lex: Dublin or quits
In bail-outs, usually the debtor goes cap in hand to the creditor. In Ireland, it is the reverse, notes Lex. The would-be creditor, the EU, is doing the asking, and Ireland, at least for now, is refusing a bail-out. This is the logical consequence of two assumptions. First, that the way out of the crisis is to put governments’ sovereign credit rating behind debts held by banks. Second, that losses for banks’ bondholders must be avoided at all costs. These co-exist – very badly – with a desire to avoid creating moral hazard.
Analysis: Immigration – tensions unveiled
Looking at recent political developments across Europe, it is tempting to conclude that rightwing populist parties are on the march, reshaping the continent’s politics by ruthless exploitation of the themes of immigration, Islam and native identity, writes the FT’s Tony Barber. Should these parties make more progress, it may prove difficult for governments to contain the damage that risks being inflicted on Europe’s image and interests in the wider world.
Market Insight: Currency bargain risks an EM bubble
The casual observer can be forgiven for believing currency imbalances are at the centre of the international financial crisis and their correction the salvation of the world economy. This would be an error, warn Karim Abdel-Motaal and Bart Turtelboom, portfolio managers at GLG Partners. Ultimately, however, we are heading towards precisely the potential bubbles that have caused emerging market crises.
BeyondBrics: Google vs China, continued…
The bitter dispute between Google and China rumbles on. In the latest episode, the company has released a white paper urging the international community to fight internet restrictions, which it calls the “trade barriers of the 21st century”, writes Ranjit Lall. Google has struggled to establish a foothold in the Chinese market, in no small part thanks to Beijing’s censorship. Indeed, even if free trade were the biggest winner of a relaxation of China’s internet controls, Google would be a close second.
MoneySupply: Baby BoE steps to the exit
The Bank of England on Monday took three baby steps towards normality in its liquidity operations, writes the FT’s economics editor Chris Giles. None of these is significant in size, but together they show that Britain is, like the eurozone, seeking an exit from some of the unorthodox monetary policy.