Von Rompuy is the right man for the job

By: Wolfgang Munchau

Forget about a traffic-stopping leader. The EU has bigger problems.

The Stability and Growth Pact

The Stability and Growth Pact (SGP) forms part of the rules and procedures for fiscal policy of the member states of the euro area. The SGP has been subject to criticism long before it was officially agreed at the EU summit in Dublin in 1997 and ever since. The debate about the SGP reflects some of the deep ideological divisions that have accompanied the creation of economic and monetary union. The opponents of the SGP have criticised inter alia that it is pro-cyclical and anti-growth.

The rise in long term bond yields comes at a good time for the euro area

We always thought that the ECB will probably not have to go all the way 4.5% or even higher because the required monetary tightening would come from other sources - the exchange rate and higher bond yields.

How to read the ECB latest comments

We are looking at rates of 4.25% sometime in the autumn, but no more this year. What also lends support to our dovish view is our perception that the ECB's governing council is no longer as unanimous as it used to be.

Our position revisited - The case for raising interest rates beyond 4%

Unexpectedly strong economic growth in the euro area during Q2 - likely to persist into Q3 - justifies a rate rise beyond 4%. There are no indications of significant cost-push inflation, but capacity constraints are building up in some sectors.

Some notes on the return of inflation

Jim O'Neill of Goldman Sachs last week argued why there will be no return of global inflation. We disagree with him.

Axel Weber versus the Vigilantes

What is Axel Weber trying to tell us when he hints that the ECB will no longer be using code words as the interest rates cycle nears its peak? Is he talking about a new communication strategy? Of course not. He is telling us something that is glaringly obvious: He is simply saying that interest rates must be getting closer to their peak!