Comment, analysis and more from Monday’s FT,
Wolfgang Munchau: Greece really needs a year to prepare for total default
We are now going to go through the motions but Greece will default, one way or the other, writes the FT’s Munchau. The question is when and how. Paul Krugman observed in his New York Times blog that Greece was trapped between an austerity programme that forever aggravates the debt problem, and a default that will not be feasible until the country reaches a primary surplus – a budget surplus after payment of interest on debt. This is not expected to happen until 2013. As a result, he wrote, the Greek political establishment would have no choice but to wait and see. This is right, but it could do more: it could prepare for a total external default next year.
Lawrence Summers: The US tax system needs rebuilding
Whoever wins this year’s US election, the combined effect of three events – the expiry of former president George W. Bush’s tax cuts, a renewal of the legally binding limit on federal borrowing and the start of a Congressionally mandated sequester, a mechanism that will automatically cut domestic spending from 2013 – will force the president and Congress to engage deeply with fiscal issues, writes Summers, the Charles W. Eliot university professor at Harvard University and a former US Treasury Secretary. The decisions made will do much to determine the country’s future.
Global Insight: Draghi must be wary of Ltro elixir’s power
A trillion euros? Half as much – or less? The level of demand in the European Central Bank’s second offer of cheap, unlimited three-year loans to eurozone banks this week will be watched with trepidation by some in Frankfurt. It could shape the presidency of Mario Draghi and his relationship with Germany and its Bundesbank.
Tony Jackson: We need new thinking to bring home the UK bacon
There seems no escape these days from what used to be called industrial policy. The UK prime minister talks of “rebalancing” the economy. The US president calls for “making stuff” as opposed to “phoney financial profits”. If the debate seems wearyingly familiar – even sterile – it has acquired a new reality. Consider the case of the UK…