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Analysis and Comment (59)

No need for doom and gloom. No need for doom and gloom. Mauricio Macri

For Argentina, debt default is a solution not a problem

Unless you just returned from holiday in some ultra-remote region lacking newspapers, television or internet access (is there such a place?), you will be aware the government of Argentina has defaulted…
In the eye of the beholders, dollar dominance rules. In the eye of the beholders, dollar dominance rules. peasap

Why dollar dominance is secure despite growth of global rivals

In imploring the world to be less dependent on the US dollar for international transactions, French finance minister Michel Sapin is expressing a wish that many of the euro’s creators hoped would already…
At least there’s still football. At least there’s still football. EPA

Argentina’s vulture defeat shows courts have too much power

A missed debt repayment this week means Argentina further extends its exclusion from the world’s capital markets. The country must find the money to repay all its creditors, or agree to a restructuring…
Europe’s economies are still stuck in the mud. Europe’s economies are still stuck in the mud. EPA

Address the eurozone’s original sin, or watch the EU stagnate

What do the latest growth figures teach us about Europe? First, the overall growth performance of the European Union is worse and more fragmented than expected. GDP in vulnerable countries such as Greece…
While the Coalition has criticised Australia’s public debt levels, it is the country’s private debt that is the big issue. While the Coalition has criticised Australia’s public debt levels, it is the country’s private debt that is the big issue. Image sourced from www.shutterstock.com

The truth behind our ‘dangerous’ public debt levels

Liberal MP Andrew Robb has criticised the rise in public debt under the current Gillard government in a recent ABC radio interview. During the interview, Robb claimed growth in public debt was excessive…
With the implementation of the Single Supervisory Mechanism, European Central Bank chief Mario Draghi has taken a major step towards greater financial integration in the Eurozone. With the implementation of the Single Supervisory Mechanism, European Central Bank chief Mario Draghi has taken a major step towards greater financial integration in the Eurozone. AAP

EU banking union is a decisive step towards saving the euro

Last week was one of mixed fortunes for the Eurozone. The week began badly with news that Italy’s Prime Minister Mario Monti was resigning due to Silvio Berlusconi’s withdrawal of parliamentary support…
Spain’s Prime Minister, Mariano Rajoy, is under pressure to formally request a bailout from the European Central Bank. Spain’s Prime Minister, Mariano Rajoy, is under pressure to formally request a bailout from the European Central Bank. AAP

Spain at the crossroads: should it opt for a bailout?

Up until fairly recently, Spain was a story of economic success. It was an example of how the periphery of Europe was quickly catching up with the core. Between 1995 and 2007, Spanish real GDP grew at…
Protesters outside the Federal Constitutional Court of Germany express their anger over Germany’s support of the ECB’s debt buy-back scheme. Protesters outside the Federal Constitutional Court of Germany express their anger over Germany’s support of the ECB’s debt buy-back scheme. AAP

Balancing stability and sovereignty will prove challenging for the Eurozone

The past few days have seen economic crisis management — if not the political landscape in the Eurozone — change fundamentally. On September 6, the ECB announced it would buy-back unlimited government…
European Central Bank President Mario Draghi announced that the ECB will buy back bonds on the secondary market in a bid to curb the debt crisis. European Central Bank President Mario Draghi announced that the ECB will buy back bonds on the secondary market in a bid to curb the debt crisis. AAP

Bonds to the rescue: ECB reveals its Eurozone rescue plan, but will it be enough?

Yesterday, the European Central Bank’s president, Mario Draghi, unveiled the European Central Bank’s rescue plan for the Eurozone. Mr Draghi said that the ECB is now prepared to buy sovereign bonds of…
Germany’s triple A rating has been given a negative outlook by ratings agency Moody’s, amid ongoing woes in Greece, Spain and Italy. Germany’s triple A rating has been given a negative outlook by ratings agency Moody’s, amid ongoing woes in Greece, Spain and Italy. AAP

From the periphery to the core: the unstoppable journey of the Euro debt crisis

On 23 July, the rating agency Moody’s put the triple A debt of Germany, the Netherlands, and Luxembourg on a negative outlook. The day after, the outlook on the European Financial Stability Fund was also…
Will super Mario Draghi, President of the European Central Bank, come to the Eurozone’s rescue? Will super Mario Draghi, President of the European Central Bank, come to the Eurozone’s rescue? AAP

It will take courage to end the Eurozone crisis

Today Eurozone leaders will meet in Brussels. On the agenda is nothing less than the survival of the euro. Officially, it is about Spain: Spain’s economic and financial woes show the urgency. Moody’s drastically…
The EU summit is sure to be a testing time for President of the European Commission, Jose Manuel Barroso. The EU summit is sure to be a testing time for President of the European Commission, Jose Manuel Barroso. AAP

Europe at the crossroads: why the EU summit is too crucial to fail

European leaders will meet tomorrow and Friday for the EU summit in Brussels, which has been billed as a “make or break” event that will determine not only the fortunes of the eurozone, but of the global…
Alexis Tsipras, leader of the Coalition of the Radical Left (Syriza) party, has proposed the cancellation of Greece’s agreements with the European Union and the IMF. Alexis Tsipras, leader of the Coalition of the Radical Left (Syriza) party, has proposed the cancellation of Greece’s agreements with the European Union and the IMF. AAP

With Europe at debt’s door, the future hinges on Greece’s election result

All eyes are on Greece this weekend for the second legislative election in five weeks. This is no ordinary election: the global implications of the outcome might be significant. Griffith University lecturer…
The G8’s communique embracing employment following the weekend’s meeting alters a 30 year focus on inflation.. The G8’s communique embracing employment following the weekend’s meeting alters a 30 year focus on inflation.. AAP/White House

The G8’s cautious new direction away from an old enemy

The G8 leaders' cautious embrace of “growth and jobs” on the weekend has momentarily buoyed international markets, but significantly, altered a 30-year focus on inflation. For more than three decades…
Satyajit Das: “I think the democratic process and the politics of the world relies on a very fragile construct. One is trust. And trust relies on economic growth.” Satyajit Das: “I think the democratic process and the politics of the world relies on a very fragile construct. One is trust. And trust relies on economic growth.” Supplied

Satyajit Das: Europe will have far-reaching consequences for everybody

Welcome to the latest in our In Conversation series, between risk analyst and author Satyajit Das and Kevin Davis, Research Director of the Australian Centre for Financial Studies. Satyajit Das is an internationally-known…
Getting it off her chest: a protester reinforces her message at the World Economic Forum at Davos in January. Getting it off her chest: a protester reinforces her message at the World Economic Forum at Davos in January. AAP

The future is looking backward, at least according to Davos

When the great and the good dutifully traipsed to the Swiss Alps for the Annual Meeting of the World Economic Forum in Davos in late January, they were equally dutifully followed by hordes of media and…
Protests rocked Athens as Greek legislators voted to accept a tough austerity package. So what now for the Greek people? Protests rocked Athens as Greek legislators voted to accept a tough austerity package. So what now for the Greek people? AAP

Austerity in, Euro out – is this Greece’s future?

As Greek politicians approved a tough austerity package amid fierce protests, one question dominates: is an orderly exit from the Eurozone available for Greece? And just what might be the consequences…
Just how can Europe grapple with sluggish economic growth? Just how can Europe grapple with sluggish economic growth? AAP

Growth is essential to rescue the Euro - the question is, how?

When it comes to finding ways out of the European sovereign debt crisis, views appear to range widely. At last week’s World Economic Forum Martin Wolf, chief economic commentator for the Financial Times…
Economic policies – not credit ratings – will determine the future of the euro. Economic policies – not credit ratings – will determine the future of the euro. AAP

The Eurozone’s future rides on Italy’s actions, not S&P’s ratings

The decision by Standard and Poor’s to downgrade the debt of nine Eurozone countries last week, followed by the inevitable downgrade of the Eurozone rescue fund two days later, raises important questions…
Bankrupt former billionaire Sean Quinn accepted highly risky loans from Anglo Irish Bank before it collapsed. Bankrupt former billionaire Sean Quinn accepted highly risky loans from Anglo Irish Bank before it collapsed. AAP

Fallen billionaire Sean Quinn embodies Ireland’s boom to bust

The fall of the “Mighty” Sean Quinn from Ireland’s (and Forbes-listed) richest man to one of the world’s most indebted individuals is perhaps the biggest story of Ireland’s boom-to-bust recent economic…
French leftists protest after Standard & Poor’s downgraded the country’s debt on Friday. French leftists protest after Standard & Poor’s downgraded the country’s debt on Friday. AAP

After France’s downgrade, Europe’s debt cycle looks hard to break

Standard & Poor’s decision to downgrade the credit ratings of nine Eurozone countries, including Austria, France, Italy, Spain, and Portugal, is another symptom of the contagious and vicious debt cycle…
Spain, Italy, Portugal and Greece face serious problems without EU-wide financial reform. Spain, Italy, Portugal and Greece face serious problems without EU-wide financial reform. AAP

While Rome burns, it’s time for some monetary and fiscal fiddling

Every year, on the evening of December 31, the President of the Republic of Italy addresses the Italian people with a video message broadcast by all the major radio and television networks. This “end of…
British Prime Minister David Cameron had no choice but to reject the EU plan and was right to do so. British Prime Minister David Cameron had no choice but to reject the EU plan and was right to do so. AAP

Why Cameron can’t afford to get fiscal with the EU

Last week’s EU Brussels summit produced a tentative fiscal compact, a mild boost of the European Financial Stability Facility’s (EFSF) reserves to €500 billion, and an acrimonious split between Britain…
Merkel, Sarkozy and Monti must accept drastic fiscal reforms if they want to save the Eurozone. Merkel, Sarkozy and Monti must accept drastic fiscal reforms if they want to save the Eurozone.

Europe’s economies must pull together before they fall to pieces

The announcement by credit ratings agency Standard & Poor’s overnight that it could downgrade the triple-A rating of Europe’s debt rescue fund has battered market confidence, which had been buoyed…
Banks increasingly choose not to follow the lead of Reserve Bank of Australia Governor Glenn Stevens on interest rates. Banks increasingly choose not to follow the lead of Reserve Bank of Australia Governor Glenn Stevens on interest rates. AAP

Should banks be compelled to pass on interest rate cuts?

As Reserve Bank of Australia board members gather today to ponder Australia’s cash rate, financial markets are having a bet each way the RBA will cut rates amid the release of data reflecting a softening…
Despite happy appearances, the two leaders disagree the way out of the Eurozone crisis. Despite happy appearances, the two leaders disagree the way out of the Eurozone crisis. AAP

A make-or-break week: Can Sarkozy and Merkel save the euro?

What could be a decisive week for Europe and its common currency has begun, with the announcement of a package of fiscal austerity measures in Italy. Markets, European partners, and – perhaps above all…
Bank of England Governor Mervyn King has warned UK banks to prepare for the worst. Bank of England Governor Mervyn King has warned UK banks to prepare for the worst.

Britain prepares for worst, but liquidity will be key to stabilising Europe

Bank of England Governor Mervyn King has called on British banks to lift their capital reserves, hold off on paying dividends and cut bonuses amid growing fears about Europe’s economic stability. King’s…
Markets responded positively to the central banks' credit lifeline, but serious problems lie ahead. Markets responded positively to the central banks' credit lifeline, but serious problems lie ahead. AAP

Central banks' credit lifeline will keep global economy liquid, but not afloat

For European banks threatened by a looming credit squeeze, the US Federal Reserve’s move to cut the cost of obtaining US dollars rescue hasn’t come a moment too soon. The Fed’s decision to engage in quantitative…
Treasurer Wayne Swan is maintaining a slimmed down surplus for 2012-2013 - but storm clouds are rolling over the global economy. Treasurer Wayne Swan is maintaining a slimmed down surplus for 2012-2013 - but storm clouds are rolling over the global economy. AAP

Slimmed down surplus as Swan unveils mid-year budget: experts respond

The Federal Government is still aiming to deliver a slimmed down surplus next financial year, but has downgraded economic growth forecasts amid a slowing world economy and news that Europe may already…
The European Central Bank needs to start buying more bonds from Eurozone countries. The European Central Bank needs to start buying more bonds from Eurozone countries. Images_of_Money

With Italy stagnant, it’s time for drastic Euro intervention

The departure of Silvio Berlusconi does not seem to have eased the pressure on Italy, with reports suggesting the International Monetary Fund is reading a 600 billion euro emergency bailout for the Eurozone’s…
Westpac chief Gail Kelly has warned about “the contagion effect” from Europe. Westpac chief Gail Kelly has warned about “the contagion effect” from Europe.

The contagion effect: how much will Australian banks be buffeted by Europe?

Westpac chief executive Gail Kelly this week warned about Australian banks are vulnerable to “the contagion effect” of Europe’s ongoing financial woes, after the Commonwealth Bank of Australia delayed…
The eurozone crisis is moving beyond “spendthrift” countries in need of rescue, to the rescuers themselves. The eurozone crisis is moving beyond “spendthrift” countries in need of rescue, to the rescuers themselves. AAP

Heart of darkness – entering the Eurozone’s end game

Early this week, sovereign bonds spreads for France and other Euro-core countries peaked. Around noon on Tuesday the spreads on French and Austrian 10-year government bonds exceeded the German bund rate…
Angela Merkel and Nicolas Sarkozy must take drastic steps to maintain the legitimacy of EU institutions. Angela Merkel and Nicolas Sarkozy must take drastic steps to maintain the legitimacy of EU institutions. AAP

It’s time for Europe to show some courage

The European Union is in crisis – yet again. If you enter “Europe in crisis” into Google, more than 655 million entries pop up. Europe’s current problems are being described as a Euro crisis – it is a…
Former EU commissioner Mario Monti will form government in Italy as Silvio Berlusconi exits. Former EU commissioner Mario Monti will form government in Italy as Silvio Berlusconi exits. AAP

Here come the technocrats, to save the Eurozone

Is the Eurozone about to crash and burn, leaving Club Med in its wake? Not so fast. Reports have suggested that French President Nicolas Sarkozy and German Chancellor Angela Merkel have discussed a strategic…
The Irish have seen their booming economy implode. Is it a good lesson for Australia? The Irish have seen their booming economy implode. Is it a good lesson for Australia? AAP

The lessons Europe forgot are the ones Australia will do well to remember

When Treasurer Wayne Swan finger-wagged at the recent set of G20 events, scolding his European colleagues and telling them to get their act together, he had more of a point than perhaps the Australian…
Italy’s debt woes will not disappear after Berlusconi finally steps down. Italy’s debt woes will not disappear after Berlusconi finally steps down. AAP

As the Eurozone teeters, Italy has no time to waste

Global markets have tumbled in the past 24 hours on fears over Italy’s worsening debt crisis, with media reports that Germany and France have begun talks to break up the Eurozone if the monetary union’s…
Berlusconi’s resignation is one step towards solving Italy’s debt crisis – but many more are needed. Berlusconi’s resignation is one step towards solving Italy’s debt crisis – but many more are needed. AAP

Berlusconi’s going, but there’s no Silvio bullet for Italy’s debt

Italy’s sovereign debt crisis has been overshadowed by Prime Minister Silvio Berlusconi’s reluctant promise to resign after the country’s parliament made clear he no longer commanded a majority. Italy…
Italian Prime Minister Silvio Berlusconi has said he will resign after losing parliamentary support. Italian Prime Minister Silvio Berlusconi has said he will resign after losing parliamentary support. AAP

As Berlusconi exits, is democratic reform the next real step for Europe?

Italian Prime Minister Silvio Berlusconi appears set to become the largest political casualty so far of the Eurozone’s continuing inability to resolve its massive sovereign debt problems. Berlusconi, who…
Italy’s disturbing debt-to-GDP ratio has been decades in the making. Italy’s disturbing debt-to-GDP ratio has been decades in the making. AAP

Don’t blame the Eurozone for Italy’s homegrown debt crisis

During protests in Rome last month, as groups of hooded protesters clashed with the police, set cars on fire, and smashed bank windows around the Piazza San Giovanni, two large speakers installed on a…
Greek Prime Minister George Papandreou will use the referendum to try to win a mandate for austerity measures. Greek Prime Minister George Papandreou will use the referendum to try to win a mandate for austerity measures. AAP

Pain or more pain? The political gamble behind Greece’s debt referendum

Greek Prime Minister George Papandreou has taken the bold step of planning a referendum on the country’s EU-imposed austerity measures, in a bid to claim a mandate for his efforts to avoid a default on…
All Blacks captain Richie McCaw and coach Graham Henry celebrate their Rugby World Cup victory. All Blacks captain Richie McCaw and coach Graham Henry celebrate their Rugby World Cup victory. AAP

Let NZ savour its World Cup win – Australia is still the economic champion

Few would begrudge New Zealanders revelling in their rugby World Cup success. After two major disasters in the form of the Christchurch earthquake and the Greymouth coal mine explosion, some morale-raising…
Jean-Claude Trichet will step down at ECB president in November. Jean-Claude Trichet will step down at ECB president in November. AAP

As Euro Central Bank boss Trichet exits, will debt crises taint his legacy?

As the Eurozone trembles at the prospect of Greece defaulting on its debt, the winds of change are at work at the European Central Bank (ECB). ECB President Jean-Claude Trichet will step down in November…
European Commission President Jose Manuel Barroso says the FTT could raise 55 billion euros a year. European Commission President Jose Manuel Barroso says the FTT could raise 55 billion euros a year. AAP

The EU’s adopting a financial transactions tax, so why don’t the rest of us?

Momentum is building behind the global campaign to impose a tax on transactions in financial markets, with European Commission President Jose Manuel Barroso announcing plans to introduce the measure as…
Is a partial default one of the steps to recovery for Greece? Is a partial default one of the steps to recovery for Greece? AAP

Defend or default? It’s the three trillion euro question

Will Greece default and exit the Eurozone? The best-case scenario is a managed, orderly, partial default with the European Financial Stability Facility (EFSF), a fund created in 2010 to manage Eurozone…
World Bank chief Robert Zoellick and IMF head Christine Lagarde have doubts about global growth. World Bank chief Robert Zoellick and IMF head Christine Lagarde have doubts about global growth. AAP

Spooking the markets: should financial leaders keep quiet during crises?

Global markets have tumbled again this week, following the downgrading of Italy’s debt rating and a series of negative comments from leaders of the world’s financial institutions. International Monetary…
If Greece’s economy collapses, it could easily lead to a breakdown of civil order. If Greece’s economy collapses, it could easily lead to a breakdown of civil order. AAP

What will happen if Greece defaults?

Global markets look set for a rough week amid new concerns that Greece could default on its massive debt. The Australian share market has spent most of the day down 3% after reports that Germany could…
Nicolas Sarkozy and Angela Merkel believe an FTT can help solve Europe’s debt woes. Nicolas Sarkozy and Angela Merkel believe an FTT can help solve Europe’s debt woes. AAP

Let’s all dance to Europe’s tune and impose a financial transactions tax

French President Nicolas Sarkozy and German Chancellor Angela Merkel have announced a plan to impose a financial transactions tax (FTT) for the Eurozone, as part of an effort stem the bloc’s worsening…
The only way out of this crisis is to dishonour some of the debt that is weighing down the global economy. The only way out of this crisis is to dishonour some of the debt that is weighing down the global economy. AAP

Ireland, Greece … France? Accepting default is Europe’s only option

The dramatic falls in share prices of Greek debt-laden French banks overnight highlights just how closely tied the current market chaos is to the world’s worsening debt woes. Market crashes like that of…
Silvio Berlusconi has blamed international economic conditions for Italy’s worsening crisis. Silvio Berlusconi has blamed international economic conditions for Italy’s worsening crisis. AAP

As Italy’s debt crisis deepens, is Berlusconi turning a blind eye?

Italian Prime Minister Silvio Berlusconi’s reassurance to his parliamentary colleagues during a speech on Wednesday did little allay about fears of a crisis in Eurozone’s third-biggest economy. The Italian…
President Barack Obama: will his resolve stand as the debt clock ticks down? President Barack Obama: will his resolve stand as the debt clock ticks down?

Does Obama have the courage to stand his ground?

As the political stand-off around the US debt crisis looks set to continue into the weekend, US President Barack Obama is being tested whether he has the courage to stand his ground. Last week the President…
Republican resolve to hurt President Obama - even at the risk of default - should not be underestimated. Republican resolve to hurt President Obama - even at the risk of default - should not be underestimated. AAP

US debt crisis: don’t be surprised if Republicans get a bit crazy

I rang some people at big banks who do liquidity and balance-sheet management to see how they are preparing for the August 2 deadline for US debt funding. They seemed remarkably sanguine. The feeling is…
Boom to bailout: Ireland’s economic implosion shows the consequences of unfettered policy. Boom to bailout: Ireland’s economic implosion shows the consequences of unfettered policy. AAP

Why it pays to believe economists

This year’s Economic Society of Australia conference saw a range of strong views expressed on what Australian policy makers have managed to get broadly right (carbon tax – hurrah!) and wrong (NBN – boo…
Nicolas Sarkozy, Christine Lagarde and Angela Merkel share a joke at Thursday’s Greece bailout talks. Nicolas Sarkozy, Christine Lagarde and Angela Merkel share a joke at Thursday’s Greece bailout talks. AAP

Greece is safe for now; but could Italy push Europe over the edge?

European leaders signed off on a second, 109 billion euro bailout for Greece overnight, while also establishing what has been described as an “infant monetary fund” to intervene if the bloc’s sovereign…
Thursday’s make-or-break EU finance ministers meeting looks set to be a highly charged affair. Thursday’s make-or-break EU finance ministers meeting looks set to be a highly charged affair. AAP

Greece can’t be quarantined, so Europe will keep on giving it medicine

As Margaret Thatcher’s trade minister in the 1980s, Norman Tebbit devoted much of his time to dealing with the European Community – the precursor to the European Union. Routinely, at meetings in Brussels…
“Indignado” protests prove a headache for Spain’s politicians but won’t threaten a greater Europe. “Indignado” protests prove a headache for Spain’s politicians but won’t threaten a greater Europe. AAP

Spain’s ‘indignant’ protests may hurt politically, but won’t threaten EU unity

As international markets react to the unrest in Greece amid fears of contagion, mass protests have also continued in fellow European Union member country, Spain. This protest movement, called the “indignant…
Despite attempts at regulatory reform, ratings agencies still act with little threat of litigation. Despite attempts at regulatory reform, ratings agencies still act with little threat of litigation. AAP

Should investors sue ratings agencies? It’s a matter of opinion

Standard & Poor’s downgraded Greece’s sovereign debt rating by three notches on Monday, reflecting its view that it would be next to impossible to imagine a scenario where the country could restructure…
Greece would be better off defaulting on its debt than languishing under tough austerity measures. Greece would be better off defaulting on its debt than languishing under tough austerity measures. AAP

A Greek debt default wouldn’t be a tragedy

A poll of international investors last month found that 85% expect Greece to default on its debt this year. As market expectations go, that is very high. Moody’s has since downgraded Greece’s already abysmal…

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