In Between Days: Meet the New Boss, Same as the Old Boss

by CC December 19, 2011 10:40 pm • Commentary


The European Central Bank has warned that the eurozone debt crisis could spread to engulf further member states, creating risks to financial stability that could reverberate around the world

“Contagion of euro area sovereign debt strains remains the most pressing risk for financial stability in the euro area, the European Union and even across the globe,” said the ECB’s latest eurozone financial stability review, released on Monday.

The comments hinted at ECB concern over politicians’ failure to bring the crisis under control, and at the danger of countries’ fiscal austerity plans being derailed by domestic politics. Separately, Mario Draghi, ECB president, told the European parliament in Brussels that draft changes to European treaties strengthening fiscal rules were a “first step” but could be “made much better”. Many EU leaders believe that Mr Draghi’s approval of the treaty’s “fiscal compact” is a prerequisite to more ECB intervention in eurozone bond markets.

According to the ECB, eurozone bond market volatility had reached levels seen after the collapse of Lehman Brothers investment bank in 2008 – and were higher than in May 2010, when the eurozone crisis last reached a peak . Its report said the eurozone countries most vulnerable to contagion were those with weak public finances and financial systems – without naming examples.


The stand-off between Republicans and Democrats raised the specter of a $1,000 tax hike on the average American worker and millions of unemployed losing their benefits. One influential economist told Reuters that failure to extend the tax break heightened the possibility of a U.S. recession in 2012.

The rebellion by House Republicans against the Senate deal, which had the blessing of Senate Republican leader Mitch McConnell, raised fresh questions about Speaker John Boehner’s control over his restive caucus, which has repeatedly balked this year at compromising with Democrats.

At issue is a phone call between Boehner and rank-and-file members on Saturday. A veteran House Republican member, who asked not to be identified, told Reuters Boehner initially backed the Senate deal but back-pedaled after being caught off guard by the angry response of members.

Boehner has since denied flip-flopping on the issue.

Boehner has struggled to control his caucus, which includes scores of Tea Party-affiliated members elected to Congress in the November 2010 elections, propelled by voters furious about a bad economy and government spending.

A House Republican aide, who asked not to be identified, said McConnell kept Boehner informed of last week’s Senate negotiations. But the aide declined to elaborate when asked by Reuters whether the Speaker had pushed back against the two-month extension.

At least two Republican senators blasted House Republicans for refusing to approve the Senate deal.

“The House Republicans’ plan to scuttle the deal to help middle-class families is irresponsible and wrong,” said Republican Senator Scott Brown.

Senator Richard Lugar said House members must do what is “best for the country” and pass the Senate measure.

Without a deal, workers’ payroll taxes will rise on January 1 to 6.2 percent, from the current 4.2 percent. Some unemployment benefits, now at 99 weeks amid the weak economy, also would begin phasing out early next year, ending benefits for millions of people who have been jobless for an extended period.


As AT&T Inc. finally pulls the plug on its contentious bid to buy T-Mobile USA, its rationale behind the deal still remains: The telecom giant, along with the other carriers, needs more wireless spectrum to serve smartphone-bearing customers.

AT&T Chief Executive Randall Stephenson made this point in the company’s statement, in which the company finally called off the highly contested $39 billion deal to buy Deutsche Telekom AG’s T-Mobile.

“It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately,” Stephenson said. Read about AT&T hanging up on T-Mobile merger.

Citigroup analyst Michael Rollins noted in a recent report that “the wireless industry is poised for some form of consolidation over the next one to two years, given that the national wireless carriers are facing increasing spectrum constraints to satisfy the rising demand for mobile broadband services.”\


Kim Jong Il’s death and the risk of instability in North Korea may weigh on business and consumer confidence in South Korea just as the central bank warns of threats to growth and exports falter.

Finance Minister Bahk Jae Wan yesterday pledged preemptive action if needed to support financial markets and the economy as the won and stocks fell. The central bank will “closely monitor” developments and stabilize markets if needed, Governor Kim Choong Soo said.

Moves toward Kim Jong Un’s succession after his father’s 17 years of rule are a distraction for South Korean officials steering their nation through an export slowdown triggered by Europe’s debt crisis. The government is forecasting that shipments will grow in 2012 at less than half of this year’s pace and the central bank said Dec. 8 that “downside” risks for the economy are dominant.

North Korea’s transition “may hurt confidence in the short term,” said Kwon Young Sun, an economist at Nomura Holdings Inc. who worked at the central bank for 14 years through 2006. He added that the government will “do whatever it takes” to boost sentiment if necessary.


“This new generation will be beholden to Kim Jong-un for its power,” said Chang Yong-seok, senior researcher at the Institute for Peace and Unification Studies at Seoul National University.

But this could also leave Mr. Kim beholden to the military, which may cast doubt on one of the biggest long-term questions about the new North Korean leadership: whether it will be able to bring some sort of change to the decrepit regime and its failing state-run economy.

Still, Mr. Chang and other analysts said a change of generation might bring a re-evaluation of the North’s isolation. They say that growing numbers of North Korean officials are visiting neighboring China to see the success of its three-decade embrace of market economics under an authoritarian regime. Recent visitors to North Korea say there are already signs of a growing commercial links with China, including a new class of wealthy traders and a budding influx of Chinese-made consumer goods.

“The new leadership knows it will have to prove its mettle in the first few years,” said Mr. Delury, who visited Pyongyang in September. “Economic reform will be the single biggest challenge it faces.”

Tomorrow’s Tape- WSJ


  • 4:00 a.m. ET: Germany’s Ifo business climate index for December
  • 8:30 a.m.: Housing starts and building permits for November. Economists see starts rising to a 630,000 unit annualized pace from 628,000 in October. They see permits falling to a 633,000 unit pace from 644,000.
  • 1:00 p.m.: Treasury auctions 5-year notes.

Earnings:  We get results from:

  • Carnival — morning
  • General Mills — Before the opening bell
  • ConAgra Foods — 7:30 a.m.
  • Oracle — After the closing bell
  • Jabil Circuit — 4:00 p.m.
  • Paychex — After the closing bell
  • NIKE — 4:15 p.m.