The EU’s word is not its bond

Recent news on bond yields and credit ratings continues to tear at the very fabric of the euro project. Italy was forced to offer record interest rates in its latest treasury issue, making prime minister Mario Monti’s task of reforming the ailing economy just a little harder. Despite a $78 billion rescue package from other Eurozone member states and the IMF, Portugal had its credit rating cut to junk status by Fitch and will have to reverse the market view of its prospects before it seeks more commercial lending in two years’ time. Continue reading

Missing the obvious

Intelligent investment is always a case of looking at the obvious and then considering what else you may have missed. Yet in the panic of the current financial climate, the obvious and the overlooked may be the same thing. The received wisdom is that economic fragility in North America, Europe and Japan is currently being counterbalanced by reduced but still buoyant growth in India, China and some other Asian emerging markets. Yet the most obvious omission in this vision is Africa. Annual economic growth on the continent has averaged above 5% over the past decade. At the same time, its total population increased from 500 million in 1982 to 1 billion in 2009 and the United Nations forecasts that it will reach 2 billion soon after 2050, representing about half of global population growth over that period. Continue reading

The end of La Dolce Vita

The euro crisis has claimed its biggest scalp to date in the form of Italian prime minister Silvio Berlusconi. Speaking in the early hours of 9 November, the country’s largely symbolic president, Giorgio Napolitano, announced that Berlusconi would step down “within a few days”. Having survived countless legal actions against him, claims of corruption and tabloid tales of his relationships with young girls, the Italian leader has finally been felled by a combination of crumbling support from his multi-party coalition and the country’s dire economic circumstances.  Continue reading

Not just a Greek drama

The headline writers have been spoilt for choice this week: “Beware of Greeks taking gifts”; “What do the Greeks know about democracy?”; and, of course, “Another Greek tragedy”. Yet Athens’ economic woes are no laughing matter for the millions of Greeks who face a generation of hardship, debt repayment and sharply curtailed living standards. Hardly had the ink dried on the Eurozone’s latest bailout plan than Greek prime minister George Papandreou appeared to pull defeat out of the jaws of victory by calling for a referendum on the plan. Berlin and Paris promptly threatened to withhold the latest tranche of financial aid, forcing Papandreou to back down. Continue reading