Comment, analysis and more from Monday’s FT,
James Kynge: Cracks in Beijing’s financial edifice
The last time – in late 2008 – that economic peril was stalking the US and Europe, China marshalled the might of its state-directed economy and engineered a muscular rebound that led the subsequent global recovery, writes the FT China Confidential editor. This time, though, Beijing is feeling a lot less muscular. The exertion of its last effort has sapped internal resources so thoroughly that the pertinent question today is not whether China can once again guide the global economy away from the rocks but whether Beijing retains decisive control over its own economic levers.
Wolfgang Munchau: Eurozone quick fix will create political monster
If the optimum is not attainable, we are tempted to settle for the second best, writes Munchau. The optimal response for the eurozone would be to turn it into a fiscal union. But it might not happen – or not in time. In that case, the question naturally arises: what would constitute a minimally sufficient solution to the crisis? There is an emerging consensus that bank recapitalisation lies at the heart of any solution short of a fiscal union. Few would claim it is sufficient. It would have to be somehow embedded into a system of cross-border financial insurance. Member states would remain sovereign, but the eurozone would make sure that all systemically important banks are properly capitalised, supervised and, if necessary, forced to close or merge. For this to work, all systemically relevant banks would have to come under the eurozone’s umbrella, not just those operating across borders.
Ian Bremmer: Hungary’s new path is the hidden danger to Europe
Viktor Orban, Hungary’s prime minister, triumphantly declared recently that the country was firmly on a different path to Greece, writes the Eurasia Group president. With a package of fiscal reforms announced in March, Hungary’s outlook has improved and the economic fate of the country remains squarely in its own hands, but a much more troubling shift is under way. The Fidesz government has leveraged its ability to warp the constitution, cementing institutional and democratic rollbacks into the rule of law. Mr Orban’s consolidation of power at the expense of democratic institutions exposes a fundamental challenge for the EU as a whole – it cannot enforce the very credo that spawned it. Hungary’s disregard for democracy and civil liberties could threaten the European brand in the eyes of potential new members and the world at large.
Editorial: Save Europe’s unity now
Repairing the monetary union will require hard labour for years, but the alternative is worse, says the FT. The economic costs of a break-up would be staggering for creditor and debtor nations. The political consequences are as grave. The euro was portrayed as the last step to rid Europe of the demons of nationalism and war. Cracks are already visible in the edifice of European unity – witness the strain on the Schengen visa-free travel scheme. The euro’s collapse could bring it down altogether.
Lex: Goodwill
If history is a guide, investors need not worry about unexpected goodwill write-offs this year, says Lex. During the depths of the financial crisis in 2008 and 2009, the International Monetary Fund cut its expectation for European gross domestic product growth out to 2013 from 15 per cent to 5 per cent. Yet despite this drastic cut, just 5 per cent of Stoxx 600 companies’ goodwill was written off.