Pension Pulse

Daniel Flynn of Reuters reports, Sarkozy, Merkel agree to stop sniping on ECB crisis : France and Germany agreed on Thursday to stop arguing in public over whether the European Central Bank should do more to rescue the euro zone from a deepening sovereign debt crisis. President Nicolas Sarkozy and Chancellor Angela Merkel said after talks with Italian Prime Minister Mario Monti that they trusted the independent central bank and would not touch its inflation-fighting mandate when they propose changes of the European Union's treaty to achieve closer fiscal union. They also demonstrated their confidence in Monti, an unelected technocrat, to surmount Italy's daunting economic challenges, in contrast to the barely concealed disdain they showed for his predecessor, media billionaire Silvio Berlusconi. "We all stated our confidence in the ECB and its leaders and stated that in respect of the independence of this essential institution we must refrain from making pos...

Paul Dobson reports in Bloomberg BusineesWeek, German Auction ‘Disaster’ Stirs Crisis Concern; Bonds, Euro Drop (h/t Tom): Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, sending its borrowing costs higher and the euro lower on concern that Europe’s debt crisis is driving investors away from the region. “This auction is nothing short of a disaster for Germany,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said by e-mail. “If the strongest nation in Europe has this kind of difficulty raising capital one shudders concerning the upcoming auctions in other European nations.” The debt crisis that began more than two years ago in Greece and snared Ireland, Portugal, Italy and Spain has closed in on France and now risks engulfing Germany, the region’s biggest economy. Political leaders are struggling to find a fix for the crisis, with German Chancellor Angela Merkel rejecting proposals f...

Professor Jeffrey Sachs, Director of the Earth Institute at Columbia University, wrote an excellent article for the Huffington Post, The Super Committee's Big Lie (h/t Fred): The big political lie of the Super Committee is that the deficit must be closed mainly by cutting government spending rather than by raising taxes on corporations and the super-rich. Both parties are complicit. The Republicans want to close the deficit entirely by cutting spending; Obama has brandished the formula of $3 of cuts for every $1 of tax revenues. On either approach, the poor and middle class would suffer grievously while the rich and powerful would win yet again (at least until the social pressures boil over). The key to understanding the U.S. economy is to understand that we have two economies, not one. The economy of rich Americans is booming. Salaries are high. Profits are soaring. Luxury brands and upscale restaurants are packed. There is no recession. The economy of th...

Bethany McLean, contributing editor at Vanity Fair, wrote an op-ed comment in Reuters, The euro zone’s self-inflicted killer : There were a lot of things that were supposed to save Europe from potential financial Armageddon. Chief among them is the EFSF, or European Financial Stability Facility. In the spring of 2010, European finance ministers announced the facility’s formation with great fanfare. In its inaugural report, Standard & Poor’s described the EFSF as the “cornerstone of the EU’s strategy to restore financial stability to the euro zone sovereign debt market.” The facility itself said in an October 2011 date presentation that its mission is to “safeguard financial stability in Europe.” That of course hasn’t happened. And the evidence suggests that the EFSF may have only exacerbated the problems. In theory, the facility is supposed to provide a way for a country that the market perceives as weak to still borrow money on good terms. The initial idea was that i...

Tim Boreham of The Australian reports, McFarlane issues storm warning for banks : Former ANZ Bank chief executive John McFarlane, eyeing the financial storm engulfing Europe, has urged Australian banks to resist risky activities as they chase growth in a "constrained" domestic market. Labelling the crisis as "very serious", the respected executive predicted that most European banks would not survive the continent's debt tailspin, or would emerge as only a "shadow of their former self". "This is going to take a long time to work out," Mr McFarlane said of the European problem. "These events have crystallised the importance of a healthy banking sector," he added, noting that "Australia has held up incredibly well. The Australian economy remains incredibly robust." Mr McFarlane said the overseas sovereign debt problems would have an impact on Australian and Asian banks, but it was unclear how. In ...