Editor's Note: Sebastian Mallaby is the Director of the Maurice R. Greenberg Center for Geoeconomic Studies and Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations.
By Sebastian Mallaby, CFR.org
Financial markets are behaving as though the euro crisis is on its way to resolution. Following Sunday's announcement of Italy's new budget and Monday's joint declaration from Germany's Chancellor Angela Merkel and France's President Nicolas Sarkozy, government bond markets have rallied in Italy, Spain, and Portugal.
Global stock markets initially jumped, following the previous week's strong performance. Expectations are running high that the EU summit, due to begin Thursday and run into Friday, will douse the fire that has been spreading across Europe since the first Greek bailout in May 2010. FULL POST
Editor's Note: Sebastian Mallaby is the Director of the Maurice R. Greenberg Center for Geoeconomic Studies and Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations. This is his CFR.org Expert Brief.
By Sebastian Mallaby
The United States is now only one month away from the date on which the Obama administration says it will exhaust its legal authority to issue government debt. To avoid bumping up against that ceiling, Republicans and Democrats must overcome their differences and pass legislation to raise it. But compromise appears elusive. Far from narrowing the gap, the two sides are indulging in the sort of posturing that will make a deal harder to reach.
From the start of the negotiations, Republicans have taken the position that they will only permit a higher debt ceiling if Democrats concede deep spending cuts. The Democrats, for their part, have agreed that spending cuts are reasonable; but they want these to include cuts for the Pentagon, and they want to balance spending cuts with tax increases. Republicans have resisted.
In recent days, however, they have done more than just resist. FULL POST
Editor's Note: Sebastian Mallaby is an economics expert at the Council on Foreign Relations (CFR) and the author of "More Money Than God: Hedge Funds and the Making of a New Elite."
By Sebastian Mallaby, CFR
The United States is running an unsustainable budget deficit. The International Monetary Fund calculates that it will come to 10.8 percent of GDP in 2011, worse than the 8 percent projected for the group of advanced G20 countries and far worse than the 2.5 percent projected for the emerging G20 countries.
The future doesn't look much better. The IMF calculates that the gap between the current budget path and a sustainable budget path is larger for the United States between now and 2016 than for any other country bar Japan. FULL POST