Towards Default

By: Wolfgang Münchau

The European response to the Greek crisis is at least in part to blame.

Globalisation - a primer about the European Debate

Globalisation is the probably the single biggest issue that hit the European Union in this decade. A present but ill-defined fear of globalisation was one of the main reported reasons why the French electorate rejected the European constitutional treaty in 2005. There is a sense in Europe that globalisation is a force that will end up impoverish the continent, that it will destroy its values, and its way of life. It is unlikely that European integration will continue further unless and until the Europeans come to terms with globalisation, and devise a strategy.

Germany and France call on a ban on speculative trading in CDS

Merkel and Fillon reach agreement over CDS; both ask Barroso to launch a full investigation into the role of CDS in sovereign bonds in the EU; FT says Europeans are deflecting from their inability to deal with the Greek debt crisis; Geithner warns EU of a regulatory transatlantic drift if it goes ahead with hedge fund regulation; The French political establishment is neutral to mildly sceptical on the idea of an EMF; Greece is breasting for further strikes today; A majority of Greece fear that the recession will last many years; Luis Garicano says Spain has the potential to avoid the Greek fate, but only if it undertakes serious reforms; credit market valuation, meanwhile, return to their long-term average after the girations of the last few years.

Rebalancing at Europe's expense

By: Kevin O'Rourke

There is widespread agreement that one of the root causes of the Great Credit Crisis of 2008 was the interaction between global imbalances and under-regulated financial systems. The savings of surplus countries created a wave of money which washed into deficit countries, looking for high returns while simultaneously helping to keep interest rates low. Where financial industries were allowed sufficient latitude, the result was excessive leverage and risk-taking, and ultimately catastrophe.

An Alternative to a Tobin Tax

By: Charles Goodhart

The most efficient taxes are those which are imposed on payers who are not mobile enough to avoid the tax. Capital and rich people are more mobile than land, housing and poor people, which is why high marginal tax rates on capital and the rich are self-defeating, but taxes on consumer purchases, labour incomes and housing are efficient. The Tobin tax – a tax on financial trasactions -is not efficient as exchange operations can be easily done anywhere in the world. Why radical and consumer groups go on backing the Tobin tax idea, rather than, for example, the much more promising land tax proposals has always surprised me.

Back to the Future

By: Satyajit Das

China’s economic model is reminiscent of 17th century mercantilist policies. Thomas Mun, a Director of the East India Company, in England's Treasure by Foreign Trade (1664), wrote that the purpose of trade was to export more than you imported. At the same time, a country should amass foreign ‘Treasure’ that would be the basis of acquiring foreign colonies to allow control of essential natural resources. The strategy required reducing domestic consumption and imports and export of goods manufactured with imported foreign raw materials. China’s strategy coincides almost entirely with Mun’s views.

The Chinese Recovery: Stepping on A Bounding Mine

By: Satyajit Das

In the second instalment of the series, the author says China's dollar trap is like a mine that does not go off when you step on it, but when you try to get off.