Out of control: credit

By: Casper de Vries, Erasmus University Rotterdam

The Fed deliberately ignored traditional indicators that provided early warning about the credit crisis to come.

Ben's depression

By: Wolfgang Münchau

A return to a monetary policy to stabilise prices ended the Great Depression in the 1930s. This time it will work the other way round. Once the Fed is forced back onto a path of price stability, our depression will begin.

Austria’s Grand Coalition collapses after EU referendum row

New election will be held in September; Chancellor Alfred Gusenbauer will definitely quit; the G8 has reached a climate deal breakthrough with a commitment to a 50% cut in emission targets by 2050; German coalition quarrels over nuclear energy; German industrial production, meanwhile, falls sharply in May; Nicholas Sarkozy, meanwhile, suffers his first presidency defeat.

$1.6 trillion – the estimated costs of the credit crisis are rising by the week

Most of the pain in the credit crisis is still ahead of us, according to a Bridgewater study; Abu Dhabi may drop the dollar peg, and link to a basket instead; Kenneth Rogoff says recession is necessary for the world to avoid a big political and economic crisis; Germany’s finance minister Peer Steinbruck, meanwhile, says French EU presidency degenerates into crisis management.

A rate rise, plus a neutral bias – a typical European compromise

ECB raises rates to 4.25%, Riksbank raises to 4.5%; euro falls against the dollar, as policy bias becomes neutral; ECB expresses concern about wage indexation in euro area; there is rising popular support for nuclear energy in the EU; Poland’s President Lech Kaczynski, meanwhile, explained his refusal to sign the Lisbon treaty as a means to protect Ireland from being bullied.

Draghi criticises Berlusconi's economic policy

Bank of Italy governor attacks Robin Hood tax, and failure to cut and reform public spending; Spain’s labour market worsens dramatically; Ireland revises growth forecast to 0.5% this year, price indexation will drive up Belgian prices and wages by close to 5% this year; Lech Kaczynski, meanwhile, said he will only sign the Lisbon treaty after Ireland has done so.

ECB’s rate rise – critisised by Sarkozy, backed by Merkel

Ahead of the immanent interest rate rise Sarkozy started another attack on the ECB while Merkel gave some support; IMF says the euro's share in global reserves is now 26.8%; Poland's president Lech Kaczinski refuses to ratify of the Lisbon Treaty; remarks by French officials, meanwhile, that EU enlargement was a catastrophic mistake have failed to raise Polish enthusiasm.