Money market on strike

By: Casper de Vries (Erasmus University Rotterdam) and Jon Danielsson (LSE)

A proposal on how to address information asymmetry.

The case against a Grand Coalition in 2009

By: Wolfgang Münchau

Forget all this hogwash about the responsibility of the cenrtre. Grand coalitions are undemocratic.

Next crisis wave on horizon as car bailout fails

Senate fails to agree on rescue package for Detroit; US papers report that the prospects of a large car bankruptcy have increased strongly; EU leaders agree the rescue package, and reports suggest a climate deal is likely today; IFO predicts a deep recession for Germany until the end of the 2010; Zapatero rejects IMF calls for structural reforms, in London, meanwhile, the government was reeling over comments by the German finance minister, Peer Steinbruck.

German institute forecast minus 2% economic growth

German forecasters are getting increasingly pessimistic over exports and employment in 2009; IMF predicts a long L-shaped recession for Spain; China’s export figures suggest that world economic growth is probably contracting already; Peer Steinbruck accuses Gordon Brown of fiscal irresponsibility; the Italian, meanwhile, have passed a stimulus package with the curious effect that it has a negative cost to the state.

BIS criticises ECB’s money market policies

Extreme generous liquidity polices reduce incentives by banks to tap the money market both on the supply and the demand side; 4-week US Treasury bill yield falls to 0%; EU will abandon reform of Commission to woo Irish to accept the Lisbon Treaty; the German constitutional court indirectly imposes a stimulus package; the French deficit is projected to reach 4% in 2009; in Belgium, meanwhile, most of the economic stimulus takes place at the level of the regions.

Japan falls into deep recession

Economy was falling at an annual rate of 1.8% in Q3; more bad news on the way; US Treasury bill rate falls to 0.005%; Trichet opposes the idea of a pan-European bond; German car makers makes drastic cuts in working hours; the Dutch, meanwhile, say they oppose any notion of a guaranteed Irish commissioner as this would make the EU less effective.

Merkel flip flops on EU climate policy

Merkel threatens to veto any deal that endangers German jobs, as Brown, Sarkozy and Barroso hold summit on how to deal with an out-of-control German chancellor; German government ponders another stimulus package, but no implementation likely until April; President-elect Obama said his stimulus will focus on a giant public works programme; Allianz predicts a massive rise in European bankruptcies; former German chancellor Helmut Schmidt, meanwhile, criticises Merkel and Sarkozy over a lack of political leadership.