G20 ministers agree on nothing

 

Another G20 meeting, this time at St Andrew’s. In  the midst idyllic setting Gordon Brown suggested a financial transactions tax, causing an outcry among delegates, including apparent among his own delegation. Brown called for a new social contract between the finance sector and the rest of society. The FT reports that Mr Brown’s proposal of a global financial transactions tax was immediately rejected by the US, Canada, Russia, the IMF and the ECB.  Tim Geithner said a day-by-day financial transaction tax is not something he was prepared to support, and Domique Strauss-Kahn called it an old idea whose time had passed. The meeting also failed to agree a global target of finance to combat climate change. The reports said finance ministers not only failed to agree how much money developed countries pay to developing countries to encourage them to reduce their carbon emissions, there was also failure to agree on how the money would be spent, if such agreement were ever to occur.

 

 

Frankfurter Allgemeine makes the point in a comment that Brown’s endorsement of a financial tax and Geithner’s immediate dismissal of the idea shows that the G20’s pretended unity is now nearing its end. The more concrete the proposals become, the more illusory the probability of agreement.

 

 

 

EU Commission proposes an EU tax

This is meant to serve as an opening gambit. It will not happen, of course. The EU Commission has drafted a discussion paper, not to be published until next year according to Frankfurter Allgemeine, according to which the UK’s rebate and other rebates be phased out after 2014, while the EU should get a direct source of revenue that is independent of the member states. The paper makes the point that an EU tax would have the advantages that one can no longer calculate which country is a net recipient, and which country is a net beneficiary. But governments are still deeply opposed to any such changes.

 

 

EU debt-to-GDP ratio could rise to 100% by 2014

The European Commission has warned that public debt could go up to 100% of GDP, in a report that is due to be presented to finance ministers today. The FT reports that this latest report presents a more pessimistic analysis than the latest ecnomic forecasts, as it shows that debt levels would continue to rise even beyond 2014 unless counteractive measures are taken.

 

 

Strong signals of growth in Italy

Finanlly, the recession seems to be ending in Italy as well. Il sole 24 ore reports that the OECD’s economic index showed a strong rebound in September, with an increase by 1.3 points on August to a level of 105.6 points. The index has also risen for other OECD economies, and is consisted with other indicators showing a moderately strong rebound.

 

 

Moody’s puts Greece on review for downgrade

Ratings agency Moody’s raised concerns about whether Greece will be able to generate economic growth over the next 10 years and a fiscal adjustment that stabilises debt levels reports Kathemerini. Moody’s has Greece on review for a possible downgrade. Debt levels are the highest in the euro zone with 120.8% while GDP is forecasted to shrink by 0.3% next year. The Greek government presented its plan to cut deficit from 12.7% to 9.4%, but economists warn that the plans are not convincing. Following Moody’s statement s, credit default swaps for Greece raised, it now costs €152000 to protect €10m in Greek bonds.

 

 

 

 

Irish take to the streets

The FT reports that the Irish Congress of Trade Unions had organised a day of action in protest against Brian Cowen’s €4bn spending cuts that would hit public sector workers particularly hard. Ireland is the country with the biggest recession among all industrialised economies, according to the IMF, and the ICTU warns the spending cuts will act pro-cyclically. David Begg, ICTU general secretary, said: “By deflating the economy so quickly and strongly, they will push it towards a prolonged slump.” Police said the Dublin protest was supported by 20,000 marchers.

 

 

A critique of Schauble

Frankfurter Allgemeine prefaces its critique of Germany’s new finance minister with the observation that it would normally be a little premature to pass judgement on a minister who has only been in office for one week. The paper seems annoyed about Wolfgang Schauble’s dithering. One day he promises tax cuts, the next the days he says it cannot be done. Schauble himself has said that at the age of 69 he has nothing lose (and nothing to gain either), but the paper believes this is wrong. He could lose his good reputation unless he ringfences his financial policies more clearly.

 

 

 

The qualities of the first president of the European Council

In his FT column, Wolfgang Munchau looks at the qualities the first president of the European Council needs to have to make his job a success (these are not the same qualities that gets him the job in the first place). These qualities are: abilities for crisis management, ability to formulate and implement strategic economic policies, and representations skills, both internally and externally. He disagrees with the extreme large country and small country proponents, who either say that the job should be only representational, or not representational at all.

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