The ECB and the Fed

By: Charles Wyplosz, Graduate Institute of International Studies

Facing different situations, the Fed and the ECB muddle through, each in its own way.

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.

ECB to raise haircut for mortgage-backed liquidity operations

Central bank plans to raise haircut for mortgage-backed securities from 2% to 10-15%; Juncker is almost certain to be re-appointed eurogroup chief after securing support from Germany; the euro area service economy is already in recession; in France, meanwhile, President Sarkozy has surprised his own party with a capital income tax to pay for a welfare-to-work programme.

OECD cuts euro area growth forecast to 1.7%

Germany holds up, but the rest of the euro area falters; US growth is revised upwards; oil falls back to just over $100, amid relief about the mild impact of hurricane Gustav; in Italian variable mortgage rates exceed 6%, the highest level since 2002; Ireland, meanwhile, is heading for a Maastricht Treaty busting deficit this year.

Spanish and Italian car sales collapse in August

More bad news for the euro area economy with dramatic falls in car sales in Spain and Italy; Francois Fillon revises French growth forecast for 2008 downwards, as budget deficit threatens to exceed Maastricht limit; in the UK, meanwhile, the foreign exchange market got spooked when a finance minister told the truth.

Juncker to remain as eurogroup chief

Luxembourg premier under pressure to accept eurogroup secretariat as a price for his renomination; Commerzbank buys Dresdner as Germany secures a second national banking champion; the French Socialists remain confused about their future strategy; Germany’s Left Party, meanwhile, is ready to support the SPD, as new political alliances are building up in Germany.

The big adjustment is starting to happen

US economy expands by 3.3% in Q2, mostly due to higher exports and lower imports; central banks plan a scheme to provide cross-border liquidity; German finance ministry rejects a fiscal stimulus both domestically and for the euro area; in the UK, meanwhile, house prices are falling at the fastest level in several decades.