Comment, analysis, and other offerings from Tuesday’s FT,
Gideon Rachman: America and Europe sinking together
In Washington they are arguing about a debt ceiling; in Brussels they are staring into a debt abyss. But the basic problem is the same, says the FT’s Gideon Rachman. Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem. America and Europe are in the same sinking boat. The debt debates underway in the US and the EU are so inward-looking and overwrought that surprisingly few people are making the connection. Yet the links that make this a generalised crisis of the west should be obvious.
Sir Martin Jacomb: Greece has no future within the eurozone
The Greek parliament has voted, but the crisis goes on. The European Union’s current policy has been driven by the political imperatives of preserving the euro and avoiding another banking crisis – but it will not yield an enduring solution, says Jacomb, chairman of Share plc and former chancellor of the University of Buckingham. The EU’s future depends on enabling its poorest member countries to regain their competitiveness – and this requires a very different approach. Everyone knows that lending more money to someone who is already heavily indebted, and has few realisable assets and woefully inadequate income or earning power, creates problems. Putting the repayment date off for 30 years simply ensures that no one in authority today will be around when the time comes.
The A-list: Nicholas Stern – China risks overtaking Europe in green economic revolution
The European Parliament will on Tuesday be asked to endorse an increase in the European Union’s target for greenhouse gas reductions, from 20 to 30 per cent by 2020, compared to 1990. This makes good economic sense, and would be a major step forward in the battle against climate change — but 20 per cent is not enough, and the EU must now move quickly to make more ambitious cuts in their emissions, says Stern, I.G. Patel Professor of Economics and Government and chair of the Grantham Research Institute on Climate Change and the Environment at the LSE.
Peggy Hollinger: Weakness must be overcome on road to high office
Dominique Strauss-Kahn said it himself just days before being arrested for alleged assault on a New York chambermaid in May. His weaknesses as the Socialist party’s candidate to challenge Nicolas Sarkozy in next year’s election were “money and girls”. Now that the charges appear to be crumbling, many expect Mr Strauss-Kahn to return to his rightful place as one of France’s most popular politicians, writes the FT’s Hollinger. In one poll on Monday, 42 per cent of those questioned said he would make a good president – a high approval rating in a fractured political electorate. The Socialist party, for its part, said it would not stand in his way if he decided to go for its nomination.
Editorial comment: Proceed with care
How to provide care for the elderly in a fast ageing society is one of the thornier issues in British politics. Twice in the past 12 years, reforms to the system in England have been floated without result. Andrew Dilnot’s proposals deserve to fare better. The government should be wary about his ideas to change the way the system is funded, however.
Paul Marshall and Amit Rajpal: Brazil risks tumbling from boom to bust
Back in February, in an earlier Insight column, we highlighted the major build up of consumer debt at extremely high rates of interest, putting a significant cash flow burden on the repayment capacity of borrowers. Since then, the situation has deteriorated further. Pressures are building in the Brazilian credit cycle. In short, the cash flow burden is astronomical and rising, say Marshall, chief investment officer at Marshall Wace and co-manager of the Eureka Fund and Rajpal, portfolio manager of MW Global Financials Funds.
Jonathan Soble: Japan’s changing ‘gaijin’ CEOs
On April 1, Japan’s small fraternity of foreign chief executives became a little bigger. Michael Woodford, a soft-spoken 51-year-old Briton, became the first non-Japanese president of Olympus, a manufacturer of cameras and medical imaging equipment founded in 1919. It was less than three weeks after Japan’s devastating earthquake and tsunami, and gaijin (foreign) CEOs were making news.
Lex: S&P calls a spade a spade
Be careful what you wish for. Those European politicians who cheerfully criticised rating agencies for falling under the influence of their structured credit clients might now wish that the arbiters of debt quality were a little more pliable. Standard & Poor’s, arguably the leader of that small and still powerful pack, has thwarted the latest euro-scheme to keep Greece from being declared in default on its sovereign obligations. S&P explained on Monday that a flat rectangular steel blade attached to a long wooden handle is indeed called a spade.