Can we finally stop worrying about Europe?

THE squiggles on traders’ screens showing changes in the prices of government bonds are the closest thing that financial markets have to ECG machines for economies. By this diagnostic measure the invalids in Europe’s medical ward are making a remarkable recovery.

On January 10th the interest rate on Spanish ten-year government bonds fell below 5% for the first time in almost a year. Even though rates then ticked up a tad, the cost of new government borrowing is now about 2.5 percentage points lower than it was when worries over a break-up of the euro area peaked in July 2012 (see left-hand chart). The Italian patient is doing well too. The rate on ten-year Italian debt is approaching 4%, which is also close to 2.5 percentage points off the highs last year.

Other measures show improvement as well. Big banks in Italy and Spain are managing to sell long-term bonds. European banks also seem likely to reduce their dependence on the lifeline extended by the European Central Bank (ECB) through its long-term refinancing operations. Huw van Steenis, an analyst at Morgan Stanley, reckons that banks (mainly those in the core of Europe) may repay €100 billion-200 billion ($133 billion-266 billion) of the €1 trillion in cash they borrowed from the central bank in 2011 and 2012. Mario Draghi, the president of the ECB, says that a “positive contagion” is sweeping through Europe. The idea has some merit, but is the region really on the mend?

Read More at The Economist

A bail-out by any other name

CALL it a silent bail-out. After several failed attempts, the euro zone's finance ministers finally agreed late on November 26th partly to reschedule Greece's debt, and offer several other measures to alleviate the country’s financial burden. Taken together, this action should cut Greece's debt by up to 20 percentage points of GDP by 2020—with the promise of more to come if Greece keeps to its adjustment programme.

The promise of relief—and the disbursement of a long-delayed tranche of aid worth €34.4 billion next month, subject to approval in national parliaments—does not come a moment too soon for Greece, whose economy has been in free-fall for five years. The country’s crisis has seen many false dawns, and there are several open questions even about the latest plan. But the hope is that it will help restore a degree of confidence in Greece's future and make the euro zone look less fragile. Yannis Stournaras, the Greek finance minister, said the agreement’s assumptions were so pessimistic that Greece could surprise on the upside. He even spoke of his hope of tapping the markets within the next couple of years.

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France's rating downgrade a warning for banks

French banks were reminded of risks to their own growth and credit ratings when Moody's stripped France of its triple-A badge because of an uncertain fiscal and economic outlook.

"It is likely that Moody's will cut its outlook on SocGen and Credit Agricole in coming weeks," said Yannick Naud, fund manager at Glendevon King Asset Management.

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The time-bomb at the heart of Europe

THE threat of the euro’s collapse has abated for the moment, but putting the single currency right will involve years of pain. The pressure for reform and budget cuts is fiercest in Greece, Portugal, Spain and Italy, which all saw mass strikes and clashes with police this week. But ahead looms a bigger problem that could dwarf any of these: France.

The country has always been at the heart of the euro, as of the European Union. President François Mitterrand argued for the single currency because he hoped to bolster French influence in an EU that would otherwise fall under the sway of a unified Germany. France has gained from the euro: it is borrowing at record low rates and has avoided the troubles of the Mediterranean. Yet even before May, when François Hollande became the country’s first Socialist president since Mitterrand, France had ceded leadership in the euro crisis to Germany. And now its economy looks increasingly vulnerable as well.

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European workers stage austerity protests

Workers across the European Union are staging a series of protests and strikes against rising unemployment and austerity measures.

General strikes in Spain and Portugal have halted transport, businesses and schools. Police and protesters have clashed in Madrid.

Smaller strikes were reported in Greece, Italy and Belgium, and rallies were planned in other countries.

Hundreds of flights to and from striking nations have been cancelled.

Airlines are recommending that passengers check schedules before setting out to airports.

British Airways and Easyjet were among the UK carriers forced to cancel some of their services.

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Is China Getting Desperate to Prop Up Their Economy?

China looks like it wants to get ahead of any possible economic slowdown, catapulting off of strong export numbers and granting a record foreign investment quota of $2.75 billion in October.

China’s Qualified Foreign Institutional Investor system curates all foreign investment in the country. Prior to 2002, the country’s control on capital prevented investors to trade on China’s exchanges. The introduction of the QFII system allowed qualified investors to trade on Chinese exchanges within a certain quota. The quotas granted for the last few years have been modest, usually coming in at under a billion dollars in any given quarter

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G20 economic growth slows in 2012

The G20 group of leading world economies has reported slower growth in the three months ending in June.

National output as measured by GDP grew at an annual rate of 3% in the second quarter compared with 3.2% in the first quarter, official data showed.

But, economic health varied with China's output growing 7.6% and Italy's shrinking 2.6% due to recession.

Taking global population growth into account, G20 output is effectively stagnating.

Read More at BBC