1 The New York Times on the euro crisis leading to a tightening of credit across the globe. Europe’s worsening sovereign debt crisis has spread beyond its banks and the spillover now threatens businesses on the continent and around the world. From global airlines and shipping giants to small manufacturers, all kinds of companies are feeling the strain as European banks pull back on lending in an effort to hoard capital and shore up their balance sheets. The result is a credit squeeze for companies from Berlin to Beijing, edging the world economy toward another slump. The deteriorating situation in the euro zone prompted the Organization for Economic Cooperation and Development on Monday to project that the United States economy would grow at 2% next year, down from a forecast of 3.1% growth in May. It also lowered its economic outlook for Europe and the rest of the world, and a credit contraction could exacerbate the slowdown.
Investors have begun to treat Europe’s big banks as the weak link in the global financial chain because of their huge holdings of bonds issued by debt-laden governments like Italy and Spain. Analysts say Europe’s banks could shed up to 3 trillion euros of loans over the next few years, equal to about 10% of their total assets. Air France, for example, typically relied on French banks like BNP Paribas and Société Générale to help it finance about 15% of what it spends to purchase airplanes. Now those banks are retreating from making airline loans to save capital. Executives of Emirates Airlines, based in Dubai, are turning to the Islamic financing system, as well as to lenders in emerging markets, to help pay for its new fleet as some of the European banks shut off lending.
2 The Guardian on OECD warning that the UK is on the brink of a double-dip recession. The west’s leading economic thinktank has warned that Britain faces sliding into a double-dip recession this winter. The Organisation for Economic Co-operation and Development said output would fall in the final three months of 2011 and the first quarter of 2012. OECD said it expected the UK to grow by 0.5% in 2012 as a whole but the two consecutive quarters of contraction fulfil the technical definition of a recession. The OECD said in May that it expected the UK to grow by 1.8% next year, but said on Monday that it was sharply downgrading its forecast because public spending cuts, the squeeze on household incomes and a more difficult climate for exporters had weakened the economy. It warned that unemployment would rise to 9.1% by 2013, exacerbating social problems and leading to a rise in homelessness.
3 The BBC on Fitch lowering US credit outlook. Fitch ratings agency has revised its outlook on the US from “stable” to “negative” after a Congressional committee failed to agree deficit cuts. Fitch affirmed the US’s coveted AAA rating, but warned that this may be cut unless the country comes up with a “credible plan” to tackle the deficit. The US national debt has just risen above $15 trillion (£9.67 trillion). Last week, a so-called “Super Committee” of six Democrats and six Republicans said they could not agree by their deadline on deficit reduction.
4 The BBC on Japanese youth seeking a slower, rural life. The bright lights of the big city have been a draw for decades, pulling people into Tokyo from the countryside. But for some young Japanese, the city with its skyscrapers and neon lights is losing its appeal. Like millions of others from her generation Megumi Sakaguchi cannot find a permanent job, just contracts. The certainty of the job-for-life tradition enjoyed by earlier generations has passed her by. “I never know if I’m going to lose my job,” she says. “Financially my anxiety levels are very high. So she has decided it is time for a change. One weekend in October Megumi Sakaguchi joined a bus tour through the Japanese countryside. Like her fellow passengers, who were also from the cities, she was getting a taste of what life would be like as a farmer – trying out working the land for a day. After years of young people heading for the cities the average farmer in Japan is now 65.8 years old and that figure is rising steadily. But now some are considering making the journey back.
5 Manu Joseph writing in Khaleej Times about a divide in the EU of the East. There is a European quality to India. Like the European Union today, the Indian republic is a confederation of regions and attitudes with little affection between them and vastly different levels of governance, productivity and historical good fortune. And all of them, of course, are stuck with a uniform currency. Mumbai is the Germany of India. The city accounts for more than a third of India’s income tax revenue, nearly half its corporate tax revenue and a quarter of its industrial output. Mumbai has a third-rate infrastructure. It has one-tenth the roads of Delhi. Its obsolete local trains, which are not air-conditioned, are stuffed with more than twice their capacity at peak hours.
Even as Mumbai decays, hundreds of migrants from the poorest regions of the country flock to it each day. The migrants are despised by locals, humiliated often and even assaulted. The resentment of the migrants has spawned a successful political movement in Mumbai, the chief beneficiary being a relatively new party called the Maharashtra Navnirman Sena. When elections approach, the muscular members of this organisation beat up migrant taxi drivers. In the past, the goons have also waited in train stations to assault impoverished youths arriving from other states, especially Uttar Pradesh and Bihar.
Those two states are governed comically even by Indian standards, and they are among the most corrupt, lawless and poor regions in the world. But, with a combined population exceeding 290 million, they exert extraordinary influence on national politics.
The people they view as the Greeks of India are the farmers, especially the wealthy farmers, who are the beneficiaries of extraordinary political patronage, billions of rupees in subsidies, cheap or free electricity, tax exemptions, and the unnatural prices at which the government procures farm and dairy goods. Imagine a European Union where the Greeks got to decide economic policy. For the Germans, that is merely a terrifying thought. It is the reality of India.
But, despite all the tensions, the idea of nationhood is stronger than ever, especially among the middle class. A united India is a cherished ideal of almost every Indian. The moral of the Indian story for the European Union is that what holds a nation together is not the virtues of its people, but very simply time and habit. As most Indians would testify from the lives of their parents, an arranged marriage grows stronger in time, especially when divorce is unthinkable.
6 The Wall Street Journal on India’s growth rate slipping below 7% for the first time in more than two years. India’s growth is forecast to have slowed in the three months ended in September, slipping below 7% for the first time in more than two years and adding pressure on the central bank to end its 18-month-long campaign to fight inflation. “The downside risks to growth are rising very fast,” says DK Joshi, chief economist at the ratings firm CRISIL in Mumbai. India’s gross-domestic-product figures, due to be released Wednesday, are expected to show growth of 6.9% from the year-earlier quarter, according to the average forecast of economists polled by Dow Jones Newswires. That’s down sharply from 7.7% growth in the previous quarter and 8.9% growth in the year-earlier quarter. The Reserve Bank of India has hiked interest rates 13 times since March 2010 to curb excess demand and stem inflation, which remains above 9%.