At the time of writing, the world hasn’t ended, so Harold Camping, whose second attempt at calling the date of the apocalypse put a cross on Friday 21 October, is probably going to have to buy a new calendar.
Prophets of doom in Europe would do well to take note.
The self-imposed deadline for solving the eurozone debt crisis is moving. With the German and French governments at loggerheads over the size of the bailout mechanisms and over the details of its reform, hopes are fading that an agreement will be reached on Sunday.
The two governments said on Thursday night that a comprehensive plan would be announced by the middle of next week at the earliest.
Just like Camping’s forecasts, every hard deadline in Europe seems to soften as it is breached. Sunday was the absolute latest, but now it could be November.
The Greek government is expected to run out of money by mid-November, and would need at the very least the next €8 billion tranche of aid from its last bailout in order to avoid default.
However, the government was also due to run out of cash earlier this month, and off-the-record, some economists and analysts have been murmuring that the Troika of the EU, European Central Bank (ECB) and International Monetary Fund (IMF) are playing a dangerous game of economic chicken with Greece, trying to force them to push through the most difficult reforms that will see them cut civil service jobs.
The country’s parliament voted through further austerity measures on Thursday, despite violent protests on the streets of Athens. Cuts are hurting in Greece, and, while policymakers in Brussels, Frankfurt and Washington continue to debate the next round of structural reforms for the economy, they may need to be reminded that the Greek people still have some agency in determining whether those cuts actually get made.
Even the relatively straightforward bits of the comprehensive plan are now hitting snags.
Bank recapitalisation – pumping money into the banks to guard them against the near-inevitable default of one or more peripheral eurozone countries – should have been one of the first points that policymakers agreed on. However, some of the banks themselves have seemed hesitant, allegedly preferring to sell-down their assets to improve their capital adequacy. A sell-off would be bad news for markets, and policymakers are going to fight hard to prevent it.
The next week is likely to be volatile, but if Merkel and Sarkozy can pull off a miraculous consensus and give investors a rare moment of clarity, it could signal a brighter wind-down into December.
In the UK, the bounce in inflation to upwards of five per cent was alarming so close to the crucial Christmas shopping period, although that concern was slightly blunted by figures from the Office of National Statistics (ONS) that show a slight uptick in retail sales volumes over last year. The consensus view is that inflation will fall significantly next year.
With growth still weak, the signs from within the Bank of England suggest that more quantitative easing (QE) might be on the way in the New Year. The bank’s Monetary Policy Committee (MPC) voted unanimously for £75 billion in additional asset purchases, and to keep interest rates at 0.5 per cent.
On Friday, public sector finances showed some improvement, with George Osborne on track to meet his fiscal targets.
The public sector net borrowing requirement for the first six months of the fiscal year came in at £63.5 billion, down from £71.0 billion in the same period in 2010. The numbers seem to show that austerity is at least meeting its basic goal of shoring up the government’s budget in the short term. How that changes as the economy slips further towards stagnation remains to be seen.