Franco-German Proposal Disappoints

Sarkozy and Merkel Propose Euro-Zone Council for Better Governance

By NATHALIE BOSCHAT, BERND RADOWITZ and GABRIELE PARUSSINI

PARIS—The plan by France and Germany to create a head of the euro zone to shore up economic governance of the monetary union stopped short of more fundamental steps toward refashioning the area into a federal entity that would issue its own debt, disappointing investors hungry for a more radical solution to the euro-zone crisis

Poor German data hits stocks and euro

(Reuters) - Stagnant growth in Europe's powerhouseGermany knocked stocks lower on Tuesday and hit the euro, adding to investor fears that the world economy is slowing more than expected.

Focus was also on a meeting in Paris between French President Nicolas Sarkozy and German Chancellor Angela Merkel, with investors looking for any signs of new measures to contain the spreading euro zone debt crisis.

U.K. Leader Blames Riots on 'Moral Collapse'

U.K. Prime Minister's Promise to Use Policy to Remedy Social Ills Comes Amid Debate Over His Cuts to Police

The Wall Street Journal

By ALISTAIR MACDONALD

LONDON—Prime Minister David Cameron sought to bolster his law-and-order credentials Monday with a speech promising a root and branch review of all government policy to tackle the "slow-motion moral collapse" he believes led to the U.K.'s worst rioting in decades.

Mr. Cameron faces many obstacles in turning round what he described as "broken Britain"—including his government's cuts to police forces, and divisions between the police and government that have erupted since the unrest.

Selloff raises stakes in Sarkozy-Merkel talks

(Reuters) - The leaders of France and Germany face a stark choice in talks on Tuesday over whether to begin steering the embattled euro zone toward closer fiscal union or risk watching the bloc unravel.

French President Nicolas Sarkozy and German Chancellor Angela Merkel meet in Paris to discuss what further measures they can take to contain Europe's debt crisis, which is now spreading to the continent's core.

Italy has been forced to ramp up its austerity measures and financial market jitters hit France last week with French banks' shares subject to panic selling following rumors that the country could be next to lose its prized AAA debt rating.

Markets heading to new danger zone: Zoellick

(Reuters) - The loss of market confidence in economic leadership in key countries like the United States and Europe coupled with a fragile economic recovery have pushed markets into a new danger zone, something that policymakers have to take seriously, the head of the World Bank said on Sunday.

U.S. Shows off Carrier Amid Tensions

The Wall Street Journal

ABOARD THE USS GEORGE WASHINGTON—Less than a week after China launched its first aircraft carrier, the U.S. showed off its own big-boy supercarrier to former enemy Vietnam—one of several smaller Asian nations with jittery nerves amid Beijing's burgeoning maritime ambitions. A delegation of Vietnamese military and government officials was treated to a tour aboard the sprawling USS George Washington nuclear carrier this weekend off the country's southern coast, once home to the U.S.-backed capital of South Vietnam during the Vietnam War.

It's the second such visit to the U.S. Navy's hulking carrier in as many years and a symbol of the former foes' warming military ties. But Saturday's visit also came amid heated tensions between China and its Asian neighbors. Hanoi's relations with Beijing hit a low point this summer following weeks of squabbling over disputed territory in the South China Sea—where the U.S. carrier cruised under blue skies about 140 miles (225 kilometers) off the coast.

Greece’s economy

Keep calm and carry on

Does the government have the will to see through its ambitious bail-out plan?

Aug 13th 2011 | ATHENS | The Economist

PATROCLES, a taxi driver, had to borrow his wife’s car to ferry customers to and from Athens airport to avoid being spotted by his colleagues on strike.

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.