France and Greece feel economic strain

12 August 2011 Last updated at 10:38 GMT

BBC News

French economic growth was zero in the second quarter, compared with the previous three months, adding pressure for the government to curb its deficit.

But French Finance Minister Francois Baroin insisted the economy was solid.

Meanwhile, the Greek economy shrank by 6.9% in the second quarter, compared with the same period a year earlier.

Italy and UK press case for deeper euro zone fiscal ties

(Reuters) - Britain's finance minister called for some form of fiscal union to resolve the euro zone's debt crisis on Saturday, while his Italian counterpart renewed a call for the introduction of common euro zone bonds.

After more than a year of piecemeal responses to the euro zone's still-expanding debt crisis, some economists and policymakers are making the case for broader changes to how the currency bloc works.

The spread of market concerns in the crisis to France in the past week have raised the stakes further ahead of a meeting of the bloc's French and German leaders next week -- both of whom have opposed more radical moves to date.

American idiocracy

Schumpeter

The civil war in Washington, DC, is damaging American business

Aug 13th 2011 | from the print edition he Economist

THE great Calvin Coolidge reputedly said that “the business of America is business.” These days the business of America is carpet-chewing rage. American politicians are intent, not on improving their country’s competitiveness, but on gouging each other’s eyes out.

Looking for the bottom

Aug 9th 2011, 9:39 by Buttonwood

The Economist

HOW does one tell when markets are cheap? Regular readers will know that this blogger has been gloomy for a while but the trick is to have some cash available so one can follow the old rule of being greedy when others are fearful. The Vix index of volatility has reached 48, the kind of levels that indicate panic. Hedge funds say there is unusually high volume for August and that there are signs of capitulation in the financial stocks, perhaps as value investors exit the sector.

French fears

Pummelled

Markets go into a panic about France

Aug 13th 2011 | PARIS | from the print edition

The Economist

NICOLAS SARKOZY, France’s president, rushed back from his holiday on August 10th to defend the country from financial attack. In a day of rumour, panic and denials, shares in Société Générale, the country’s third-biggest bank, fell by almost a fifth before recovering some ground to close down 15%.

Central bankers to the rescue?

The Economist

They can buy a little time, but the real remedy must come from Western politicians

Aug 13th 2011 | from the print edition

FLAT on its back, feeble and growing weaker, the rich world’s economy is in a sorry state. In the past week the signs of alarm at its condition have multiplied. In Europe yields on Italian and Spanish ten-yearbonds rose above 6%. America fretted at seeing its credit downgraded by one of the big ratings agencies. Around the world, stockmarkets tumbled, with some recording their biggest one-day falls since 2008. Bank shares were hit especially hard, a sign of stress in the financial system. Then the central banks stepped in.

Surging Yuan May Signal Boost For Global Recovery

By Bloomberg News - Aug 12, 2011 5:46 AM GMT+0300

The yuan’s strongest gain in more than three years may herald a new stimulus for a flagging global recovery as Chinese importers get more firepower to buy up goods from slowing economies in the U.S. andEurope.

The currency has climbed 0.7 percent this week, more than any weekly increase since December 2007, breaking through 6.4 per dollar for the first time in 17 years. The yuan traded at 6.3953 as of 10:27 a.m. in Shanghai today.

Britain Tallies Damage and Sets Out Anti-Riot Steps

The Wall Street Journal

By Alister McDonald

As the U.K. counts the cost of four nights of rioting, Prime Minister David Cameron set out a raft of new measures it will impose or consider on crowd control, gang membership and social media designed to prevent another violent episode.

Europe Must Produce Fudge of Much Higher Quality

The Wall Street Journal

By GEOFFREY T. SMITH

This being Europe, every step toward the ultimate resolution of the debt crisis seems ungainly, unbalanced, and generally insufficient. In other words, a fudge. The markets' response to the July 21 Greek rescue package—welcome, then skepticism, then outright rejection—is now a familiar pattern.

French economy stagnates in second quarter

(Reuters) - French economic growth ground to a halt in the second quarter, raising pressure on the government to cut spending and abolish tax breaks to convince turbulent financial markets it will deliver on debt reduction targets.

U.S. stock futures slide but Europe seen firmer for now

(Reuters) - U.S. stock futures slid 1 percent on Friday, pulling Asian shares off early highs, as sentiment remained cautious on concerns over the European debt crisis, which will probably keep supporting safe havens like gold and Swiss franc.

Why This Crisis Differs From the 2008 Version

The Wall Street Journal

It is a parallel that is seducing Wall Street bankers and investors: 2011 as a repeat of 2008, the history of financial turmoil playing in one endless loop.

As a big fund manager muttered darkly this past weekend while heading into the office to prepare for a tumultuous Monday, "The sense of déjà vu is almost sickening."

Central Bankers Race to Protect Growth in 72 Hours of Crisis

Bloomberg

Central bankers are racing to shield their economies from fiscal tightening and lopsided currency swings that threaten a new global recession.

In the 72 hours after a Group of Seven conference call on Aug. 7, the Federal Reserve pledged to keep interest rates near zero through at least mid-2013, the European Central Bank intervened in bond markets and the Bank of England indicated it’s ready to add more stimulus if needed. Japan signaled renewed concern about the yen and Switzerland yesterday stepped up its fight to curb an “overvalued” franc.

France Considers Further Austerity

The Wall Street Journal

By DAVID GAUTHIER-VILLARS

PARIS—The French government pledged Wednesday to consider fresh tax rises, spending cuts and other budget measures to ensure the country doesn't deviate from a challenging deficit-reduction trajectory as market concerns that France's top-notch creditworthiness is at risk accelerated.

Soul searching lies ahead as riots cool in Britain

(Reuters) - British Prime Minister David Cameron will face pressure Thursday to soften his austerity plans, toughen up policing and do more to help inner-city communities after days of riots and looting laid bare deep social tensions in a depressed economy.

Greece Feels Push Toward Euro Exit

The New York Times

By JACK EWING AND LIZ ALDERMAN

Published: August 10, 2011

FRANKFURT — If the European debt crisis were an old ocean survival movie, there would be a scene in which the passengers in the lifeboat realize that they don’t have enough food and water for everyone and that someone needs to go over the side. We’re looking at you, Greece. In fact, that is the sentiment a growing number of reputable economists and other commentators, particularly from fully liquid Germany, have been expressing lately.

U.K. Ethnic Tensions Stoked by Riots

The Wall Street Journal

By GUY CHAZAN

BIRMINGHAM—Three Birmingham men died early Wednesday as they sought to protect local businesses from rioters, showing how the violence that began four days ago in London and spread to the U.K.'s other big cities is stoking long-simmering ethnic tensions in some of the country's most racially diverse communities.

The three men who died, all Asians, were hit by a carload of suspected looters. West Midlands police arrested a man near the scene and launched a murder inquiry. Witnesses said the man, the driver of the vehicle, was black.

Greek Bond Swap May Be Extended

The Wall Street Journal

By COSTAS PARIS And ALKMAN GRANITSAS

LONDON—Greece's ambitious reform program suffered a double setback Wednesday after it emerged that talks with the country's creditors on a bond swap plan have stumbled and fresh data showed a sharp increase in the budget deficit.

European Stocks Swing Wildly in Volatile Trade

By ISHAQ SIDDIQI

 The Wall Street Journal

LONDON—European stock markets plunged after earlier swinging to positive territory, as worries of another recession in the U.S. and debt contagion across the euro zone hit investor confidence.

The DAX in Frankfurt was recently 4.4% lower and London's FTSE 100 had also dropped 2.5%. The CAC index in Paris had fallen 2.4%.

India’s economy

Reflections of reality

Does India have a bad-debt problem?

Aug 6th 2011 | MUMBAI | from the print edition

The Economist

A RITUAL familiar to students of the subprime and euro crises has started taking place on Indian banks’ conference calls with analysts and investors. The number-crunchers probe the lenders about their exposures to potential bad debts. Bank bosses insist that, although there are niggles, all is under control.

Some scepticism is due. With India’s economy slowing—growth could dip below 8% this year, from a peak of 9-10%—and interest rates rising (see chart), borrowers will be under more strain. India’s banks have been growing fast for years, often a sign that discipline has slipped. Total loans have almost tripled since 2005.

The Reserve Bank of India (RBI), which regulates banks and sets interest rates, has a record of running a tight ship. Gross non-performing loans have fallen from about a fifth of the total in 1995 to under 3% today. But the RBI is neither infallible nor squeaky-clean. Between 2005 and 2008 some foreign banks and several local ones got caught by a mini-boom in unsecured loans to consumers that quickly soured. And since the start of the global financial crisis the RBI has quietly given Indian lenders some get-out-of-jail cards; these may pale into insignificance compared with perks doled out by Western regulators but they suggest that the central bank prefers to fudge the recognition of losses in the system if it thinks stability is at risk.