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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
Even on the assumption that European leaders have finally produced a coherent policy response to the European debt crisis, a clear downside risk remains associated with the longer-term political and economic outlook for Europe. The long-term demographic decline in the region will continue to accelerate, and at some point “austerity and reform fatigue” among electorates [...]
The House-Senate reconciliation process is still underway and some details will still change. But the broad contours of “financial reform” are already completely clear; there are no last minute miracles at this level of politics. The new consumer protection agency for financial products is a good idea and worth supporting—assuming someone sensible is appointed by [...]
There will be an eerie familiarity to this weekend’s G-20 meetings. Disagreements between the United States and Europe on two important issues—macroeconomic policy, and specifically the timing of withdrawal of policy support, and financial regulation—will characterize these meetings. Resolution of these issues seems unlikely. The verdict will be that the G-20 has failed, reinforcing the [...]
India has just implemented a policy coup. In arguably its most important policy reform over its two stints in office, the Congress-led Indian government announced a major package of deregulation of its petroleum pricing regime, which would reduce substantially consumer subsidies in this area. The reform covers four products: petrol, diesel, liquefied petroleum gas (LPG), [...]
Last weekend’s announcement by China to introduce greater exchange rate flexibility is unambiguously good news. Greater currency flexibility will help China with its domestic overheating problem. But China deserves a lot of credit for its act of responsible international citizenship, for making its contribution to global rebalancing. Two implications follow. First, the G-20 deserves a [...]
When China decided last weekend to “relax” its dollar exchange rate policy, at least rhetorically, much drama-seeking media attention instead shifted to the next likeliest flashpoint at the coming G-20 Summit, namely the alleged transatlantic crisis over fiscal policies. On this side, as expressed in his letter to the G-20 leaders, President Obama is “concerned [...]
Winston Churchill once quipped about Americans: They always do the right thing—after they have tried everything else. One can now say the same of Europeans and their handling of banks. After steadfastly refusing to do so ever since the beginning of the global financial crisis in 2008, last week the European Council suddenly decided to [...]
The recent turn toward fiscal austerity in Europe in the wake of the Greek crisis has raised serious concerns that it will threaten economic growth and revive global trade imbalances. While fiscal consolidation is unavoidable for the high-deficit, high-debt countries, the cuts made by Germany, whose government deficit is comparatively moderate, have attracted particular criticism. [...]
Adapted from a June 15 posting on the Council on Foreign Relations website. A couple weeks ago, Michael Levi wrote about the Chamber of Commerce’s new Energy Security Risk Index and raised the question of “how various energy and climate bills being debated in Congress score” on the index. We have now done that analysis [...]
Paul Krugman recently argued on his blog that since Ireland faces higher government bond yields (5.27 versus 4.68 percent) and credit default swap (CDS) rates (226 versus 206) than those of Spain,1 financial markets are not recognizing or rewarding Ireland’s early and decisive fiscal austerity measures. The inference he draws is that in their belt-tightening, [...]