Debt crisis: The EU plans to have a plan
European leaders continue to unnerve investors with their lack of decisive action on the continent’s growing debt crisis, said Liz Alderman and Judy Dempsey in The New York Times. A meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy last weekend produced only a vague promise to better coordinate future eurozone policies and help vulnerable European banks. Missing were details on how exactly the banks might be recapitalized and how much money would be provided. But Merkel and Sarkozy promised they and other eurozone leaders would finalize an agreement before a meeting of G20 leaders in early November.
The stakes could not be higher, given that Greece’s debt crisis just “took its biggest victim yet,” said Michael Birnbaum in The Washington Post. Belgium, France, and Luxembourg agreed to nationalize Dexia, Belgium’s largest bank, to prevent it from collapsing under the weight of billions of dollars of Greek and other sovereign debt. It is the second bailout for the bank in three years. Under the latest rescue plan, the Belgian government will take over the bank’s Belgian consumer division, and France and Luxembourg will back other units. Dexia will receive $121 billion in guarantees from the three governments over the next 10 years to prevent future failures.
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Companies: Netflix kills Qwikster, keeps price hike
Netflix is “bowing to customers’ anger and confusion” and abandoning plans to spin off its DVDs-by-mail service into a separate business called Qwikster, said Bill Chappell in NPR.org. “We are going to keep Netflix as one place to go for streaming and DVDs,” said CEO Reed Hastings this week in a blog post explaining the reversal of the split, announced just last month. “This means no change: one website, one account, one password…in other words, no Qwikster.” However, the 60-percent price hike for the combined services will remain in effect.
Banking: China buys shares in four major banks
In a move to shore up investor confidence in the country’s slowing economy, China’s sovereign wealth fund this week bought shares in the country’s four largest banks, said Simon Rabinovitch in the Financial Times. Bank share prices in China have dropped roughly 30 percent in recent months over worries about bad debts, and the Chinese stock market is at a 30-month low. “They are trying to signal to the market that they feel confident,” said Sanjay Jain, a Credit Suisse analyst.
Economics: Two Americans win Nobel Prize
Thomas Sargent of New York University and Christopher Sims of Princeton were awarded the Nobel Prize for economics this week for their work on how government policy affects the economy, said Karl Ritter and Malin Rising in the Associated Press. The prize committee praised the economists’ independent work in creating “essential tools” to determine how economic growth and inflation are influenced by policies like tax cuts and temporary interest-rate hikes. “Sargent’s and Sims’s methods are used daily...in all central banks that I know of in the developed world,” said Nobel committee member Torsten Persson.
Jobs: Unemployment holds steady at 9.1 percent
The latest U.S. unemployment report suggests “an economy stumbling forward,” said Ben Casselman in The Wall Street Journal. In a welcome sign, employers added 103,000 new jobs in September, but that tally was less than the 125,000 new jobs needed to keep up with population growth and far below the 200,000 needed each month to make a dent in the 9.1 percent unemployment rate, which remained unchanged. Despite some positive employment signs, “once the dust settles you’re still left with an utterly anemic growth backdrop,” said Tom Porcelli, chief U.S. economist for RBC Capital Markets.
