Euro Summit: Chinese Help and Italian Trouble

The Economist just published this post on the element of this week's eurozone summit that would involve Chinese cash as a part of the currency zone's recapitalization plan. Ever instructive, the article lays out the China factor in some of the magazine's trademark economics-in-layman's-terms. I didn't know, for example, that the EU is China's biggest trading partner. Given all the hub-bub stateside, wouldn't most Americans assume that position was enjoyed (or maligned) by the United States? 

Yet the piece's author makes an effort to signal that the appeal for Chinese cash is neither revolutionary nor a particularly important change in the status quo. He takes a longer-term view on the EU-Chinese relationship, which of course bears direct influence on the American role between the two. 

"Grand political bargains between China and Europe—money in return for more representation at the IMF, or market-economy status—seem wildly improbable. These prizes will eventually come anyway; and weak though parts of Europe are, the EU cannot be seen to trade them too nakedly. Bargaining of this sort would also require both parties to change their positions markedly. China is keen not to be seen as a source of “dumb money”, but requiring big political concessions in return for cash is a pretty clear signal that this is not a commercially attractive investment. As for the euro zone, it can hardly claim that senior Spanish and Italian debt is now safe for institutional investors if it has to horse-trade too hard to get China on board."

And further along the pessimism spectrum is the Wall Street Journal, which, true to form, has expressed typical euro-skepticism on the summit's results and bemoaned the plan's lack of detail and the risks that remain for U.S. companies and stakeholders. Though the European Financial Stability Facility will "backstop" troubled eurozone countries against default, the paper says, this week's decisions fall short of the muscular moves called for by experts and do relatively little to stem fears of a backslide toward recession in Europe and worldwide. 

Both articles signal the lingering dangers of the tenuous Italian situation, where fractious politics in Silvio Berlusconi's government has dimmed hopes for any kind of meaningful action against the euro's woes. Italy is heavily in debt and, as the third-largest economy on the euro, its future determines that of a host of other dependent nations both in and outside the monetary bloc.

Courtesy of the Wall Street Journal and ICAP

Though the chart refers to Italy only, its title -- "Brief Relief" -- sounds just as appropriate for the whole of the eurozone for the many observers that continue to be concerned about the currency's immediate and middle-term prospects.

To Young French, London Means a "Gateway to Globalization"

This week's Economist describes the cross-section of French who pull up stakes and move to London, seeking work, adventure and the chance to master English. 

The archetype of this exodus, explains the piece, is the French "banker with children at the Lycée Francais in [the upscale neighborhood] South Kensington... who misses the food and weather of home." Indeed, The City's status as a global financial and business hub, not to mention its lower tax rates on income and personal wealth, make it an enticing destination for ambitious French who have money or want to make it. Many London-based French complain of the strictures of their often upper-class social codes and expectations, which they are free to customize or discard completely through a new life in the British capital. 

The international smorgasbord of London offers an intoxicating feast to those seeking cultural and culinary adventure. "It's hard to go back once you have tasted the internationalism here," explains one Gallic expat. A senior official from the French consulate likewise dubbed the city a "gateway to globalization"  for mobile and willing French professionals. Some of these are fleeing the economic doldrums of Ireland, where they had gone to launch business and careers; reluctant to head home, they're giving themselves a second chance in the UK. And language is a key draw for French of all social strata, and many lower-middle- and middle-class strivers elect to work summers or longer stints as waiters, au pairs and odd-jobbers in exchange for increased fluency in the language of Shakespeare.

One detail of the article's Franco-centric globalization deserves underscoring: In the 2012 elections there will be for the first time a representative in France's Assemblée Nationale -- equivalent to the U.S. House of Representatives -- for all French citizens living in the UK and Northern Europe. The capital for the French diaspora in this part of the world is London by overwhelming numbers: the same French consulate approximates the Hexagon's population in London as some 400,000, perhaps the capital's largest minority nationality.

Watch this space for more on the French député for London and European points north, as well as Franco-British developments on either side of the Channel.

The Economist on the US Mid-Term Elections

Count on The Economist to deliver detached, informed, and dispassionate assessments of the US political scene. This UK news source is far removed from the red-and-blue squabble here in Washington, as well as the political phase cancellation that renders both parties' politicking all but inaudible. 



  
The piece is titled "Angry America," recognizing the palpable angst caused by historically high joblessness rates and the giant question mark looming over the day-to-day of many Americans' lives and plans. Yet it urges the US populace  to "cheer up" over their immediate future, a rare cadence within the polarized American commentariat.

"(...) America is now an uncharacteristically uncertain place. Abroad it seems unsure of who its friends and enemies are. At home there are too many imponderables: over how the health bill will play out in practice; over what might happen to energy prices if carbon-pricing is resurrected via executive action; most of all, over what Mr Obama can do about those yawning deficits. People do not like uncertainty; so if Americans are angry, it is hardly surprising.

Mr Obama seems curiously unable to perceive, let alone respond to, the grievances of middle America, and has a dangerous habit of dismissing tea-partiers and others who disagree with him as deluded, evil or just bitter. The silver tongue that charmed America during the campaign has been replaced by a tin ear. Some blame this on an emotional detachment his difficult upbringing forced on him, others on the fact that he has lived all his life among tribal Democrats. Whatever the reason, he does not seem to feel America’s pain, and looks unable either to capitalise on his administration’s achievements or to project an optimistic vision for the future.

Which ought not to be so hard. Despite its problems, America has far more going for it than its current mood suggests. It is still the most innovative economy on earth, the place where the world’s greatest universities meet the world’s deepest pockets. Its demography is favourable, with a high birth rate and limitless space into which to expand. It has a flexible and hard-working labour force. Its ultra-low bond yields are a sign that the world’s investors still think it a good long-term bet. The most enterprising individuals on earth still clamour to come to America. And it still has a talented president who can surely do better than he has thus far."