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.

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.

Weber hints at another rate increase

ECB makes concerted effort to dispel notion of a rate cut; Weber and Stark say economic downturn will be short and shallow; euro strengthens on comments; Germany’s IG Metall is asking for an 8% pay increase; an Irish delegation, meanwhile, has paid a visit to Denmark to study the political and legal implication of the various Danish EU treaty opt-outs.

German economy close to recession

The Ifo index crash for the third successive month, raising fears that the euro area's largest economy is about to fall into a recession; Allianz is edging towards merging its Dresdner Bank unit with Commerzbank to create a giant national champion as a deal with the China Development Bank is running into political opposition; in the US, meanwhile, real house prices are now 25% down from their peak, and falling further.

New collateral rules to drive up financing costs for euro area banks

A change in the ECB’s refinancing rules is intended to reign in excessive use of ABS as collateral; Ireland’s Europe minister says a second referendum was the only way to solve the Lisbon crisis; German economists warn of a serious increase in recession risk; the French budget and economy ministers, meanwhile, appear divided over the 2009 economic forecast.

All well in Jackson Hole

Complacency rules at the world’s annual junket of central bankers – interrupted only by a rancorous intervention of a European economist; Robert Mundell calls for a global conference to stabilise exchange rates; Jean Peyrelevade criticises Nicholas Sarkozy of repeating the economic policy errors of Francois Mitterrand; the ECB, meanwhile, is considering to tighten its liquidity rules.