Neelie Kroes cuts bank in half

 

While governments still think that large banks are good for their countries, the European Commission has decided to cut a large bank in half, when it forced ING to sell of its insurance and US banking business, as a result of which the Dutch bank is left with a 45% reduction in the size of its balance sheet. The FT writes that the decision will have repercussions for banks in other parts of the world.

 

Bersani is Italy’s opposition leader

We have not written much about the Partito Democratico, Italy’s united centre-left opposition movement after the resignation of Walter Veltroni. The party has now chosen Pier Luigi Bersani, who served as industry minster in the last Prodi cabinet, in a primary vote of 3m Italians. The party has failed to benefit  from Berlusconi’s troubles, and the party places all its hopes on the new leader, who replaces Dario Franceschini, who took over from Veltroni. See Corriere della Sera for more.

 

More powers to Tremonti

A power battle has broken out at the top level of the Italian government, as Lega Nord leader Umberto Bossi wants to install finance minister Giulio Tremonti as deputy prime minister, a post he once held in a previous Berlusconi government. Tremonti is a member of Berlusconi’s party, but politically close to the Lega, and to Bossi. Bossi wants to have someone to control the eccentric prime minister, and to be in a better position to control spending. La Repubblica writes that Termonti’s elevation is resisted by several senior ministers in the Berlusconi cabinet, who fear that Tremonti might constrain their spending plans further.

 

German banks face difficulties securitising loans

FT Deutschland reports about a survey among German investors, who are reluctant to invest in securitised products. A majority of those polled say they would not invest in such products, and the insurance industry is the most sceptical of all. The German banks warns that a failure to revive the securitisation market would sharpen the credit crunch.

 

A strong euro is better than none at all

An interesting headline in the FT’s editorial, which argues that the appreciation of the euro is a good thing for a number of reasons. Most importantly, it helps rebalance the world economy. The euro area which is running a small current account deficit, “must take care not to swing into surplus as its more profligate members tighten their belts. In fact it would do the world a lot of good to increase the eurozone deficit as the US and UK move towards surplus.”

 

Calvo on the emerging market link in this crisis

Guillermo Calvo wonders in VoxEU, how did turmoil in the US subprime mortgage market ignite a global crisis? He explains how emerging markets’ voracious appetite for international reserves coupled with record-low US policy interest rates and lax financial regulation to produce the large-scale creation of quasi-money subject to self-fulfilling-expectations runs. The theory suggests significant changes in Fed and regulatory policy are needed.

 

Vittori on Germany’s tax stimulus

In Les Echos, Jean Marc Vittori argues that Germany’s tax cut of €24bn does not make much sense nor does it mean a real policy convergence between France and Germany. Germany’s economic activity rebounded like in France without the need for a third stimulus. Germany’s deficit will be more or less the same as in France around  8%, its tax cuts are similar to the ones introduced 2007 by Villepin and 2008 by Sarkozy.  But Germany will remain committed to cut expenditure once the economy is better, in stark contrast to France, where no one seem to care about a galloping deficit.

 

A socialist from the North, and a woman from the east...

Jean Quatremer quoted a French diplomat as describing the appointment process for the president of the European Council as follows (our translation):

"Let's be scientific: we must have, for the three main positions, two personalities from right and one from the left, two men and a woman, from one the south, the north and the east. Greece is excluded because of Turkey; Danmark because of Nato, and Carl Bildt et Jean-Claude Junker are dead. With Barroso at the Commission, we have a man of the right and from the south; we are looking for a woman and a man, from the left and the right, from the north and the east. Blair is a practical choice: from the left and north. This leads us to Ursula Plassnik, foreign minister of Austria, from the right and a woman. The game becomes difficult without Blair. Balkenende? Verhofstad? And where to find a woman from the left in the east? We may end up on an obscure Syldavian or Bordurian. All this means that the menu will be long, with fun and surprises. "

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