Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Why Ireland’s crisis is such a huge test for the eurozone
The fault lines in the currency union stand revealed, the FT columnist writes. The promise was that the eurozone would deliver its members from currency crises. But, as I, and others, warned, be careful what you wish for: credit crises would replace currency crises – and these are likely to be even worse. This is a political more than an economic issue. It is possible for a currency union to survive sovereign defaults. The question is, rather, whether members believe the arrangement remains beneficial.
John Plender: Euro debt yields show investors are unconvinced
The parallel with 1931 looks unbearably close, says the FT columnist. Then the rot started with Austria after the collapse of the Creditanstalt bank. The country’s creditors pulled out, triggering similar runs on other countries including Hungary, Czechoslovakia, Poland, Romania and Germany. When markets are minded to behave this way, it becomes singularly difficult to draw a line. Yet in the present case the markets are not being notably irrational, as they respond to a halting ‘fiscal Europe’ and a world beset by deflation.
Gavyn Davies: European sovereign debt is not really sovereign
The markets, which for a long time had no effective way of undermining Europe’s monetary union, now recognise that it can be done, writes the FT columnist. And so far the response of European policy makers to this new threat has been inadequate. No one wants to accept fiscal transfers, and no-one wants to see the monetary union breaking up. Something, somewhere has to give.
Short View: Investors must pay attention to country risk
Weimar Germany tried to solve its problems in 1923 by seizing precious metals and foreign currency, even sending police to raid the cafés of Berlin’s Kurfürstendamm and empty customers’ wallets, writes the FT’s James Mackintosh. It has not come to that in the eurozone. But the Weimar tragedy illustrates the power of even the weakest states, a power being ignored by investors in many of the peripheral eurozone countries.
Lex on Italy: victim or suspect?
US diplomats think Silvio Berlusconi’s “frequent late nights and penchant for partying hard mean he does not get sufficient rest,” the WikiLeaks documents show. If anything should keep Italy’s prime minister up at night, though, it is his country’s defences against contagion from the eurozone crisis, says Lex. Nevertheless, Italy should be a bulwark against eurozone contagion, not a victim of it.
Analysis: Carmaking — A drive to Lego land
Behold the automotive “megaplatform” – the clearest sign yet of a race for scale that promises to shake up one of the world’s largest industries, the FT’s John Reed reports. After a crisis that shook carmaking to its foundations, the contours are emerging of a new order that will reward only those producers that are able to make cars in seemingly endless varieties but with more than ever in common under the skin.
Luke Johnson: Tragic tale of the vanishing IPO market
As a stockbroker in the City of London in the 1980s, one of my hobbies was “stagging” hot new issues, writes Luke Johnson, who runs private equity firm Risk Capital Partners. Applying for shares in a company going public for the first time was hugely exciting. Tragically, this phenomenon has almost died out – because the initial public offering market itself has almost disappeared – in the west at any rate.
John Gapper’s Business Blog: Google and Groupon
I am struggling to believe in Groupon, which Google is reported to be considering buying for $5.3bn, making it the company’s largest acquisition, says the FT columnist. Despite Groupon having some social media trappings, and being profitable, it feels oddly old-fashioned. In fact, Groupon — amasses groups of users to take part in mass one-off discounting programmes by retailers – feels more like a way for bricks-and-mortar retailers to compete with the Amazons of the world.