Comment, analysis, and other offerings from Tuesday’s FT,
Big audit firms face Brussels onslaught
The business model of the Big Four accounting firms is under attack from the European Commission, which is pushing for tough rules that would force the firms to abandon their consultancy businesses and share audit work with smaller rivals, write the FT’s Alex Barker and Jennifer Hughes. A draft regulation, seen by the Financial Times, aims to transform the accounting sector in the wake of the financial crisis and restore “trust” in financial reporting. It has the backing of Michel Barnier, internal market commissioner, whose officials have decided the audit world is in the grip of an oligopoly.
More QE will give us more inflation, not growth
It is sometimes said that bad news comes in threes. That certainly applies to global financial markets over the summer. In late July, the US budget deficit crisis erupted, followed by the downgrade of US sovereign debt by S&P in early August. That helped to reignite the most recent phase of financial market anxiety about high deficits and debts in the euro area. Most recently we have had gloomy statements about world growth by global financial leaders,writes Andrew Sentance, former member of the Bank of England’s monetary policy committee.
Germany and the eurozone: Besieged in Berlin
The woman who is at the heart of the struggle to calm the financial markets, and stabilise the common currency shared between 17 members of the European Union, is facing the most critical week of her chancellorship, just halfway into her second four-year term, writes the FT’s Quentin Peel. For the past 10 days Angela Merkel, the German chancellor, has been engaged in a frantic round of campaigning to reassure her grassroots supporters of the need to pledge more German money to underpin future rescue programmes for members of the European monetary union.
ECB signals liquidity boost for banks
The European Central Bank is likely next week to extend significantly its provision of liquidity to banks as it seeks to counter the escalating eurozone debt crisis, but it is still an open question whether it will cut official interest rates as well. Comments by ECB governing council members suggest their October 6 interest rate setting meeting in Berlin – the last to be chaired by Jean-Claude Trichet, president – will consider a package of measures to reassure investors about the stability of eurozone banks and to head-off recession risks, writes the FT’s Ralph Atkins.
Lex: Eurozone crisis, facility management
Every new disease sets off the hunt for the blockbuster remedy. Policymakers seem to think they are on the brink of discovering a miracle cure for the eurozone sovereign debt crisis, in the shape of the European financial stability facility, writes Lex. The EFSF was created to fund countries shut out of the markets. It can do more – including recapitalising Europe’s banks – but only if it is restructured. However, policymakers need to be honest with taxpayers about the risks involved.
How at last my fellow Italians fell out of love with Silvio
Italians are fantasists. Reality’s not good enough for them. In his latest novel, The Pregnant Widow, Martin Amis describes Italy in the eventful early 1970s. Forty years later, it may seem that things haven’t changed. We – Italians – have long been escapists, ruled by the ultimate political escape artist. Silvio Berlusconi is not only our longest serving postwar prime minister; he is also an illusionist, who knows his audience well. But he be may be starting to lose his touch, writes Beppe Severgnini, a political commentator.
The A-List: Only the IMF can solve the eurozone crisis
The world markets expected concrete steps from Washington over the weekend on how governments would resolve the European crisis. They did not get it. Instead, the International Monetary Fund’s policy setting body asserted that the “Euro-area countries will do whatever is necessary to resolve the euro-area sovereign debt crisis”. Unfortunately, this statement seems to be based more on hope and prayer than on evidence, writes Raghuram Rajan, professor of finance at the University of Chicago’s Booth School.