■ WHAT TO WATCH: Euro-area finance ministers may not make a decision on unlocking funds for Greece until late November. Industrial production in France may have fallen 1 percent in September (7.45 a.m.) while Italy’s industrial output probably slumped 1.6 percent (9 a.m.), surveys show. China’s industrial output rose 9.6 percent in October from

a year earlier. The Reserve Bank of Australia reduced its 2013 growth forecast. St. Louis Fed President James Bullard said academic research suggests the Fed may be providing too much stimulus.

■ ECONOMICS: OECD releases Looking to 2060 policy paper. (See page 4). Data: Bank of France Oct. business sentiment. 7.30 a.m. Sweden Sept. industrial produc-tion. 8.30 a.m. Norway Oct. CPI. 9 a.m. Italy Sept. industrial production. 9 a.m. U.K. Sept. trade balance. 9.30 a.m. ECB policymakers: Makuch speaks about banking union. 8 a.m. Costa, Angeloni speak in Lisbon. 9 a.m. Kranjec speaks at banking conference in Slovenia. 10 a.m. Coeure speaks in Lyon. 1.30 p.m.

■ GOVERNMENT: Barack Obama will make a statement today about his plan for spurring economic growth and reducing the deficit. Ecofin budget meeting. 9 a.m.

■ MARKETS: The British Bankers’ Association proposed cutting the number of cur-rencies and maturities included in Libor in the next five months. Indonesian rupiah-denominated sukuk yields fell to seven-month lows. Treasuries headed for a weekly gain. Wheat exports from Australia rose to a record. (All times are local for London.)

BRIEF

EUROPEAN dAybOOk:

Chris Kirkham

Greek Gridlock, French IP, Obama’s Plan, Libor

Harvard’s Martin Feld-stein discusses his policy prescriptions for the U.S. and Europe with Tom Keene

0

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4

6

8

10

12

14

16

Average Maturity of Sovereign Debt in Years

Source: Bloomberg

* After Restructuring

The weighted-average maturity of sovereign bonds among EU countries indicates the level of vulnerability to short-term increases in borrowing costs. The average maturity of U.k. gov-ernment debt is 14.4 years, according to data compiled by bloomberg. The nation’s longer debt profile makes it less vulnerable to interest-rate increases than Spain or Italy where the average maturity is 5.79 and 6.57 years, respectively. — Niraj Shah, Bloomberg Economist

U.K. Less Vulnerable to Short-Term Borrowing-Cost Increases

ECONOMIC CALENDAR(London TIME)

COUNTRY TIME EVENT SURVEY PRIOR

FR 07:30 BOF Bus. Sentiment Oct. 90 92

FR 07:45 Ind. Prod. (YoY) Sept. -0.10% -0.90%

FR 07:45 Ind. Prod. (MoM) Sept. -1.00% 1.50%

DE 08:00 Current Acc. (Kroner) Sept. 15.0B 14.3B

DE 08:00 Trade Bal. X Ship sa Sept. 8.5B 9.0B

HU 08:00 Ind. Prod. WDA (YoY) Sept. P -0.40% 1.40%

HU 08:00 Ind. Prod. SA (MoM) Sept. P -- 2.60%

SO 08:00 Ind. Prod. wda(YoY) Sept. 13.30% 17.00%

SO 08:00 Trade Balance Sept. -- 22.8M

CZ 08:00 CPI (YoY) Oct. 3.30% 3.40%

CZ 08:00 CPI (MoM) Oct. 0.20% -0.10%

SW 08:30 Ind. Prod. SA (MoM) Sept. P -1.50% 0.40%

SW 08:30 Ind. Prod. n.s.a. (YoY) Sept. -0.10% 3.20%

NO 09:00 CPI (MoM) Oct. 0.40% 0.90%

NO 09:00 CPI (YoY) Oct. 0.90% 0.50%

LN 09:00 CPI (MoM) Oct. -- 0.70%

LN 09:00 CPI (YoY) Oct. -- 3.40%

IT 09:00 Ind. Prod. SA (MoM) Sept. -1.60% 1.70%

IT 09:00 Ind. Prod. wda(YoY) Sept. -4.70% -5.20%

UK 09:30 Visible Trade GBP/Mln Sept. -£8,900 -£9,844

UK 09:30 Trade Non-EU GBP/Mln Sept. -£4,600 -£4,972

UK 09:30 Total Trade (GBP/Mln) Sept. -£3,200 -£4,169

LV 11:00 GDP YoY NSA 3QP 4.50% 5.00%

LV 11:00 GDP SA QoQ 3QP 1.50% 1.30%

EconomicsEurope NEWS ANALYSIS & COMMENTARY

11.09.12Friday

www.bloombergbriefs.com

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Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12

Headline Euro-Area Inflation (YoY, %)

Implicit Target

Source: Bloomberg ECCPEMUY Index <GO>

EC Forecasts Inflation to Fall Toward Implicit Target

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Euro-Area GDP (YoY, %)

Source: Bloomberg EUGNEMUY Index <GO>

EC Forecasts GDP to Contract in 2012

ECB Rate Reduction Back on Agenda as Draghi Abandons Talk of Recovery

ECB WATCH CoMMEnTARY BY dAvId PowELL, BLooMBERg EConoMIsT

reiterated that stance a few minutes later: “I would say that there was no discussion. So it was a unanimous decision about interest rates.”

He also suggested yesterday the lower bound of the main policy rate has not necessarily been reached. “We have not discussed what we are going to do next year in terms of monetary policy,” he said.

A downward revision to the forecasts of the staff economists would present an opportunity for the Governing Council to broach the topic of a rate cut again. They are scheduled for release next month.

The growth estimates will likely be trimmed. The midpoints of the last round

of forecasts for GdP in 2012 and 2013 were minus 0.1 percent and 1 percent, respectively. The European Commission released its own forecasts on Wednesday. Their figures for growth were minus 0.4 percent and 0.1 percent, respectively.

The inflation estimates will probably con-tinue to support the Governing Council’s view for a drop below their implicit target next year. The midpoints of the last round of forecasts of the ECb for inflation in 2012 and 2013 were 2.4 percent and 1.6 percent, respectively. The figures from the European Commission on Wednesday were 2.5 per-cent and 1.8 percent, respectively.

ECb President Mario draghi abandoned talk of a recovery for the euro-area econ-omy and hinted a debate about a rate reduction has been reignited. That move may materialize as soon as January.

draghi switched from talking about “eco-nomic growth” to “economic activity” in the second paragraph of the introductory statement of the monthly press confer-ence. yesterday, he said: “Economic activ-ity in the euro area is expected to remain weak.” That compares with the wording from the previous meeting of “Economic growth in the euro area is expected to remain weak.”

The syntax of the in-depth discussion of the economic analysis in paragraph five was also more downbeat this month than in October, with the Governing Council having removed mention of a recov-ery. yesterday, the statement indicated: “Looking ahead to next year, the growth momentum is expected to remain weak.” Last month, draghi said: “We expect the euro-area economy to remain weak in the near term and to recover only very gradu-ally thereafter.”

The decline in inflation no longer leaves the Governing Council facing higher-than-expected price increases. The paragraph on price developments began this month with: “Euro-area annual HICP inflation was 2.5 percent in October 2012…com-pared with 2.6 percent in September and August.” That compares with: “Euro-area annual HICP inflation was 2.7 percent in September 2012…compared with 2.6 per-cent in the previous month. This is higher than expected…” in October.

draghi’s response to a question from a journalist suggests the Governing Council may have discussed the option of an inter-est-rate reduction this month in contrast to last month. He said: “On interest rates, we always discuss our instruments - all instruments — of monetary policy, but the Governing Council decided — as I just said — to keep interest rates unchanged.”

The president firmly stated the topic was omitted from the discussion last month. In October, a journalist asked: “Have there been any discussions today about a possible rate cut in the months to come?” He responded: “The answer is no.” He

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 2

Krona House Prices

SWEDEN MONITOR nIRAj shAh, BLooMBERg EConoMIsT

CPI/UnemploymentPolicy Rate

A split at Sweden’s Riksbank over what poses the biggest threat to the economy is deepening. deputy Governor Lars E.O. Svensson said the bank’s failure to deliver more rate cuts is destroying jobs, while deputy Governor barbro Wickman-Parak said on Wednesday more rate cuts would have limited effect. The rift follows comments by Governor Stefan Ingves last month signaling he’s more concerned about a housing bubble than job losses. The bank kept its main rate at 1.25 percent, leaving the door open for a december cut.

The bank is running out of time if it is to avoid a deflationary spiral, ac-cording to Lars E.O. Svensson. Inflation slowed to 0.4 percent in Sep-tember and has undershot the 2 percent target 73 percent of the time over a decade. Inflation will not return to the target until March 2014, the Riksbank forecasts. While inflation is 1.6 percentage points below target, the seasonally adjusted unemployment rate is 0.8 percent point above the structural rate of unemployment at 7.8 percent, according to the OECd.

Swedish property prices have almost tripled since the mid-1990s. The OECd warns that prices may be overvalued by about 30 percent in relation to income. The average cost of a single dwelling is more than 235,000 euros. Still, prices have increased at a slower pace since 2010, rising 2 percent in the third quarter. Limiting loan-to-value ratios and increasing minimum deposits may be a more effective way of containing prices than keeping interest rates higher than they need to be.

The krona has risen 7 percent against the euro since May as Sweden emerged as a haven from the debt crisis. That may hurt exports, which make up half the economy. About 35 percent of Swedish sales abroad go to the euro area. debt as a share of GdP will fall to 27.1 percent in 2016 from 38.4 percent last year, the government forecasts. That may allow policy makers to expand fiscal policy through subsidies to support jobs.

Incorporating the Riksbank projections for unemployment and inflation into a Taylor Rule model, using coefficients estimated by the Federal Reserve bank of San Francisco, suggests the rate needs to drop to 1 percent this year. The bank’s assessment that the repo rate will remain unchanged through 2013 before rising to 2 percent in 2014 is question-able. The bank has misjudged trends before. It was raising rates to com-bat inflation a month before the collapse of Lehman brothers in 2008.

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Swedish Repo Rate

Swedish Repo Rate Prescribedby Taylor Rule

%

Source: Bloomberg; San Francisco Federal Reserve Bank

Taylor Rule Rate = 1 + (1.5 x Core Inflation) - (1 x Unemployment Gap)

Fore

cast

Taylor Rule Suggests Further Rate Cut

0.08

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0.13

SEKEUR

Source: Bloomberg

Strengthening Swedish Krona

10-year Average

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3Inflation Tends to Undershoot Target

Deviation from 2% CPI Target (Percentage Points)

Source: Bloomberg

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Sweden

House Price Index

Source: Bloomberg

ECONOMIC WORKBENCH:Have Our Data Make Your Point

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 3

COMMENTARY BY guEsT CoLuMnIsT ÅsA johAnsson of ThE oECd

Looking Toward 2060: The OECD’s Global Vision of Long-Term Economic Growth

The balance of economic power will shift over the next half century. After recovery from the current crisis, global GdP could grow around 3 percent a year on average in the next 50 years. Growth in the 34-na-tion OECd area is projected at about 2 percent annually to 2060, with declining rates in many high-income countries.

Emerging countries will account for an ever-increasing share of output. While growth rates in emerging countries are expected to continue outpacing those in developed nations, the difference will nar-row over the coming decades. Emerging economies’ growth will drop from the aver-age 7 percent annual rates seen over the past decade to around 5 percent in the 2030s and about half that by the 2050s.

These growth patterns will lead to radical changes in the relative size of economies, with fast-growing emerging economies comprising an increasing share of global output. The U.S. is the largest economy today, accounting for around 23 percent of global output, but it will be exceeded by China, perhaps as soon as 2016. The combined GdP of China and India will soon surpass that of the G-7 economies, and will exceed that of the entire current OECd membership by 2060. Today’s economic heavyweights will be replaced by the likes of Indonesia and brazil.

Education and productivity improve-

ments will drive growth in both developed and emerging economies, with productiv-ity gains being the most powerful driver. Countries with relatively low productivity today — such as India, China, Indonesia, brazil and many nations in Eastern Eu-rope — will experience faster productivity growth than the more developed econo-mies as technology uptake and better business governance lead to convergence with advanced countries.

For some lower-income countries with comparatively low levels of average edu-cation — India, Turkey, China, Portugal and South Africa — the build up of skills will also add to growth. With most OECd economies — and also some emerging economies, such as China — expected to be hit by aging and declining working-age populations, labor is not expected to make major contributions to growth. Longer working lives will partially offset the de-cline in working-age populations.

The radical shift in global GdP will be matched by a trend of converging GdP per capita between developing and emerging economies. While GdP per capita in the poorest economies will more than quadruple over the 2011 to 2060 period, it will only double in the richest economies. Faster growth in low-income and emerging countries will reduce the wide gaps in living standards seen today

with advanced countries, though large cross-country differences will persist. China will experience more than a sev-enfold increase of its per capita income over the coming half century, though living standards will still only be 60 percent of those in the leading countries in 2060.

OECd research shows the outlook for global growth and living standards improves dramatically if countries imple-ment structural reforms. bolder reforms in labor and product markets could raise long-term living standards by an aver-age of 16 percent relative to the baseline scenario, which only assumes moderate policy improvements. Ambitious product market reforms that raise productivity growth could increase global GdP by an average of about 10 percent, while poli-cies that encourage labour force partici-pation could increase GdP by more than 6 percent on average.

Without ambitious reforms, global imbal-ances may continue widening through 2030, potentially undermining future growth. deeper structural reforms and faster fiscal consolidation, on the other hand, could reduce imbalances by as much as a quarter over the same period.

Inaction is no longer a choice OECd na-tions or emerging economies can afford.

Åsa Johansson is a senior economist in the OECD’s Structural Policy Analysis Division

United States 23%

Japan 7%

Euro area 17%

Other OECD 18%

Other non-OECD 11%

China 17%

India 7% 2011

United States 18%

Japan 4%

Euro area12%

Other OECD 15%

Other non -OECD 12%

China 28%

India 11%

2030 United States

16%

Japan 3%

Euro area 9%

Other OECD 14%

Other non -OECD 12%

China 28%

India 18%

2060

Composition of Global GDP1

Percentage of Global GDP, in 2005 PPPs

1. Global GDP is taken as the sum of GDP for 34 OECD and 8 non-OECD G20 countries.Source: OECD

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 4

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2008 2009 2010 2011 2012 2013 2014

Greece Portugal Estonia Slovakia

Greece to Become Poorest Euro Nation

GDP per Capita in Purchasing Power Parity, % of EU Average

Source: Bloomberg, European Commission's Ameco Database

FX TECHNICALS dAvId PowELL, BLooMBERg EConoMIsT

Short-Term Technicals Favor Selling EUR Against CHF, GBP & SEK

TICKER LAST PRICE RANK OVERALL

TECHNICAL SIGNAL

ADX BOLLINGER BAND DMI 14 MACD RSI 9 STOCHASTICS 50-DAY SMA 200-DAY

SMA50D VS 200D

SMAAUDUSD 1.0426 2 range buy buy 1.0350 1.0331 0.2%EURPLN 4.1669 2 range buy buy 4.1193 4.1745 -1.3%EURCZK 25.4490 1 buy buy sell 24.9165 25.0701 -0.6%USDJPY 79.57 0 strong trend buy sell 78.81 79.66 -1.1%EURNOK 7.2931 -1 sell sell buy 7.3937 7.4759 -1.1%USDCAD 0.9988 -1 range sell 0.9851 0.9994 -1.4%EURUSD 1.2777 -1 range sell sell buy 1.2910 1.2823 0.7%EURJPY 101.66 -1 sell sell buy 101.74 102.16 -0.4%EURGBP 0.7983 -2 sell sell 0.8028 0.8089 -0.8%EURCHF 1.2058 -2 range sell sell 1.2090 1.2043 0.4%GBPUSD 1.6005 -2 range sell sell 1.6081 1.5851 1.5%NZDUSD 0.8172 -2 range sell sell 0.8195 0.8080 1.4%EURSEK 8.5128 -2 range sell sell 8.5593 8.6998 -1.6%

Source: Bloomberg Updated: Nov. 9, 2012 6:09 AM BST *Short-term technicals favor selling EUR against CHF, GBP & SEK. *These indicators provide a sell signal for USD versus AUD. *They also provide a buy signal for USD versus GBP & NZD.

Click here for TECHNICAL NOTES, including the triggers for “buy” and “sell” signals.To re-create or customize this table, enter XLTP Historical Technical Analysis Screener <GO> on your Terminal. Click “Open” to download into Excel.

TRENDS RAdosLAv ToMEk, BLooMBERg nEws

Greece Set to Become Euro-Area’s Poorest Nation as Estonia, Slovakia Overtake

percent in 2013, Estonia’s projected 3.1 percent growth would make it the fastest-growing euro-sharing nation, followed by Slovakia, with a 2 percent rate.

Portugal, the third euro country to re-

quest a bailout, is also set to lose wealth relative to eastern members. Slovak price-adjusted GdP per capita is set to match Portugal as early as this year and exceed it in 2013.

Greece will become the euro area’s poorest nation in two years as economic growth in Estonia and Slovakia outpaces the rest of the bloc, the European Com-mission estimates.

Greek output per person adjusted for relative price levels is set to fall to 71.3 percent of the EU average in 2014 from 79.8 percent last year, according to the commission’s Ameco database. Slovakia, the second-poorest euro nation, will sur-pass Greece as early as this year, while Estonia, the most-impoverished state, will top Greece at the end of 2014.

The need for more Greek austerity measures is pushing the economy deeper into recession and more than one-fifth of output will have been erased by 2014.

Slovakia, a euro-area member since 2009, and Estonia, which adopted the currency last year, are benefiting from lower labor costs that help exports. While Greece’s economy should shrink 4.2

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 5

EUROPEAN BANK WATCH jonAThAn TYCE, BLooMBERg IndusTRIEs

Cyprus’s Private Debt Burden May Present Stumbling Block in Bailout Talks

to 2009. Over the same period, Irish mort-gages outstanding doubled and corporate lending more than tripled. both countries have made inroads into lowering house-hold leverage in a falling GdP environ-

ment, as bank and/or country bailouts were sought and granted.

The bailout talks for Cyprus will be tough but the nation’s path is clear.

Cyprus holds the unwelcome accolade of most consumer-indebted country in the world, with a level of domestic credit–to-GdP that has more than doubled since 1998 and is close to 300 percent vs an average 130 percent globally.

between 2005 and 2010, aggregate loans outstanding more than doubled, add-ing 23 billion euros of credit to the econ-omy — more than the nation’s annual GdP.

As Cyprus continues discussions with the ECb, IMF and European Commission over a bailout, a key issue is likely to be how it will unwind this glut of credit. Total assets of the Cypriot banking sector are eight times the country’s now shrunken economy. Almost one-third of Cyprus’s outstanding sovereign debt is set to ma-ture in 2013.

by contrast, Spanish mortgages out-standing, construction and real estate loans collectively grew 250 percent to more than 1 trillion euros in the five years

4 Dec 2012 | SINGAPORE

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 6

Singapore Malaysia

ASIA WEEK AHEAD TAMARA hEndERson, BLooMBERg EConoMIsT

IndiaJapan

Foreign institutional investors became net buyers of equities in India, Indonesia, the Philippines, South korea, Taiwan, Thailand and Vietnam with purchases of $658 million in the week through Wednesday, compared with sales of $567 million the previous week. Posi-tive economic surprises in Asia and the re-election of U.S. President barack Obama lifted sentiment. Next week, investors will focus on GdP releases in Japan and Malaysia, as well as Singapore’s exports and India’s industrial production.

Nov. 12, India Industrial Output: An annual output gain of 2.7 percent in August was the fastest pace since February. The RbI’s growth bias, plus further improvement in the global PMI, would translate into stronger output were it not for persistent power shortages. October’s manufactur-ing PMI rose to 52.9 from 52.8 in the prior two months, suggesting stable demand. A jump in the backlogs-of-work sub-index and a drop in the inventories sub-index indicate how electricity shortages constrain output.

Nov. 16, Malaysia 3Q GDP: Weak global demand has curbed Malaysia’s export values via lower commodity prices and volumes. Still, the drop in exports hasn’t translated into a slowdown because of strong investment and consumer spending. GdP at 5.4 percent in the prior quarter was above the five-year average of 4.4 percent. With the Asia brief’s domes-tic demand barometer indicating momentum, real private consumption growth, accounting for 50 percent of GdP, may have further strengthened.

Nov. 16, Singapore Non-Oil Domestic Exports: September export growth of a seasonally adjusted 1 percent was below the five-year aver-age of 2.3 percent, weighed by a drop in electronics. The outlook has im-proved on signs of stronger momentum in the U.S. and China, though it is unclear whether the pickup can be sustained into 2013. Chinese imports — often a harbinger for Singapore’s exports — rose an annual 2.4 percent in September, compared with a decline of 2.6 percent in August.

Nov. 12, Japan GDP: Economists are divided on the size of the third-quarter contraction, with forecasts ranging from an annualized minus 2.8 percent to minus 5.1 percent, a bloomberg survey shows. Industrial out-put fell 6.6 percent in quarter, bringing the decline for the first nine months to 8.9 percent. The trade deficit also widened to 1.8 trillion yen in 3Q from 1.4 trillion yen in the second quarter. A strong yen and increased tensions with China, its largest export market, remain key hurdles.

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Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12

Japan GDP Annualized QoQ SAJapan Industrial Production YoYJapan Exports YoY

Source: Bloomberg

Weak Foreign Demand, Strong Yen Signal Contraction

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Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12

Non-Oil Domestic Exports to U.S. YoYNon-Oil Domestic Exports to European Union YoYNon-Oil Domestic Exports to Japan YoYNon-Oil Domestic Exports to China YoY

Momentum in U.S., China Bodes Well for Exports

Source: Bloomberg

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Power Shortages Constrain Production

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25

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Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12

Real GDP YoY% Private Consumption YoY%Government Expenditure YoY% Private Investment YoY%Net Exports YoY%

Investment Outweighs Export Contraction

Source: Bloomberg

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 7

China’s Inflation ModeratesChina’s inflation decelerated to a

33-month low on food costs, signaling that the government is succeeding in supporting growth without driving a rebound in prices. CPI rose 1.7 per-cent in October from a year earlier af-ter gaining 1.9 percent in September, the National bureau of Statistics said today. Industrial production climbed 9.6 percent after a 9.2 percent in-crease. Today’s report may offer some comfort to Chinese leaders who are meeting this week for a once-a-de-cade power transition and pledged yesterday to double per-capita income in the 10 years through 2020.

Bank of Korea Holds RatesThe bank of korea held borrowing

costs as policy makers pause to as-sess the effects of two cuts earlier this year amid signs that growth in Asia’s fourth-largest economy may rebound. It kept the seven-day repurchase rate at 2.75 percent, after a 25 basis point cut last month and in July. South ko-rea’s first increase in four months in exports in October signaled the econ-omy may be recovering just as the na-tion readies for a presidential election on dec. 19, while strength in the won could act as a drag.

RBA Reduces 2013 OutlookThe Reserve bank of Australia re-

duced its 2013 growth forecast as lower investment in iron-ore, coal and natural-gas projects and the govern-ment’s pledge to deliver an election-year budget surplus restrain the econ-omy. It predicted year-average GdP growth of 2.25 percent to 3.25 percent in 2013, lower than its August estimate of 2.75 percent to 3.25 percent. Con-sumer prices will rise 2 percent to 3 percent in the year to december 2013 and underlying inflation the same rate, little changed from three months ago, the central bank said.

Greek Aid Payment Call Won’t Be Made Next WeekEuro-area finance ministers may not make a decision on unlocking funds for Greece

until late November as they await a full report on the country’s compliance with the terms of its bailout, an EU official said.

Finance chiefs won’t make the call to release 31.5 billion euros of aid for Greece that has been frozen since June when they meet in brussels on Nov. 12, the official said.

Ministers will await a final report from the so-called troika that oversees euro-area bail-outs on Greece’s efforts to meet the conditions of its second bailout since 2010 before taking action, the official said. While a preliminary version may be available for the Nov. 12 meeting, it won’t be enough for ministers to base their decision on, the official said.

The official said Nov. 26 is a possible date for finance ministers to sign off on the next disbursement of aid.

— By Craig Stirling

Banks Risk Crimping Growth in Lending SqueezeEurope’s corporate bond market is shrinking as redemptions outstrip issuance, banks

borrow and lend less and companies stockpile cash rather than invest in their business.banks have sold about 335 billion euros of bonds in the common currency and pounds

this year, down from 443 billion euros last year, 503 billion euros the year before and a record 671 billion euros in 2009. banks cut their lending to euro-area companies by 45 billion euros in the third quarter from a year earlier, according to the ECb.

“It’s not clear whether the lack of bank lending is a reflection of broken banks or more a problem of dire economic outlooks for corporates,” said david Watts, a strategist at CreditSights. “Companies that are able to do so are tapping the bond markets. The rest either can’t or don’t want to borrow.”

— By John Glover

Russia to Forgo Rate Increase After Inflation SurpriseRussia, the largest emerging economy to raise interest rates this year, will probably

refrain from increasing borrowing costs today after inflation unexpectedly slowed in Oc-tober for the first time in six months.

bank Rossii will leave the refinancing rate at 8.25 percent, half a percentage point above the record low, according to 21 of 23 economists in a bloomberg survey. Two pre-dict a quarter-point increase. Policy makers will hold their main short-term lending and deposit rates at 5.5 percent and 4.25 percent, two separate surveys showed.

Russia raised its refinancing rate for the first time in 16 months in September as a surge in price growth pushed inflation beyond the 6 percent upper limit of the target range. Chairman Sergei Ignatiev needs to check price gains next year as the economy slows and his counterparts from Poland to the Philippines reduce borrowing costs.

— By Scott Rose and Olga Tanas

U.K. House Prices Rise for First Time in Five MonthsU.k. house prices rose for the first time in five months in October as the market re-

bounded from a post-Olympic slump, Acadametrics said.The average price of a home in England and Wales climbed 0.1 percent from Sep-

tember to 225,954 pounds, Acadametrics and LSL Property Services said. From a year earlier, values rose 2.3 percent.

— By Scott Hamilton and Fergal O’Brien

TOP STORIES BLooMBERg nEws {TOPE <GO>}

ASIA OVERNIGHT

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 8

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ICAT

ORS

1D YoY 30D FORWARD LAST 1D CHG YoY 30D 5Y%Chg %Chg Chart PE 12M YIELD BPS BPS Chart CDS

MXAT Index Austria 101.6 -1.4% 9.0% 9.4 GAGB10YR Index Austria 1.85% -1.8 -114.3 45.5MXBE Index Belgium 59.5 0.2% 34.1% 13.1 GBGB10YR Index Belgium 2.33% -1.6 -195.4 81.3MXEST Index Estonia 688.9 -0.1% 8.8% Estonia 79.1MXFI Index Finland 68.2 -0.1% -4.9% 14.6 GFIN10YR Index Finland 1.66% -2.6 -62.4 29.0MXFR index France 95.5 -0.1% 11.7% 10.3 GFRN10 Index France 2.16% -2.0 -93.5 80.9MXDE Index Germany 101.2 -0.4% 19.7% 10.3 GDBR10 Index Germany 1.36% -1.6 -43.7 32.3MXGR Index Greece 12.1 -0.6% -21.2% 11.9 GGGB10YR Index Greece 18.07% 72.1 -968.6MXIE Index Ireland 25.1 -2.0% 16.6% 17.6 GIGB9YR Index *Ireland (9Y) 4.79% -0.3 -335.4 201.2MXIT Index Italy 45.8 -0.7% 1.2% 8.7 GBTPGR10 Index Italy 5.02% 11.1 -175.0 296.5MXNL Index Netherlands 79.0 0.0% 18.2% 10.6 GNTH10YR Index Netherlands 1.63% -3.0 -58.9 45.3MXPT Index Portugal 47.6 0.3% -12.0% 11.6 GSPT10YR Index Portugal 8.61% 11.5 -299.5 580.0SKSM Index Slovakia 191.6 0.4% -11.8% GRSK10Y Index Slovakia 2.41% -0.3 -160.8 111.8MXES Index Spain 82.9 -0.4% -8.6% 10.1 GSPG10YR Index Spain 5.85% 15.8 21.8 329.4

MXBU Index Bulgaria 109.1 0.4% -36.3% BulgariaMXCZ Index Czech Republic 307.6 -1.0% 1.3% 10.5 CZGB10YR Index Czech Republic 1.89% 0.6 -144.9 76.3MXDK Index Denmark 4237.7 -0.7% 28.8% 15.4 GDGB10YR Index Denmark 1.13% -1.9 -89.3 30.8MXHU Index Hungary 1055.9 0.8% 19.9% 8.4 GHGB10YR Index Hungary 6.95% 15.0 -115.0 284.3RIGSE Index Latvia 377.2 0.3% -1.7% Latvia 133.5VILSE Index Lithuania 341.9 -0.8% -1.3% Lithuania 122.2MXPL Index Poland 1616.2 0.6% 0.9% 10.4 POGB10YR Index Poland 4.30% -0.9 -142.8 86.3MXRO Index Romania 504.1 -1.4% 6.8% GRRO5YR Index *Romania (5Y) 4.72% 1.6 -58.4 230.0MXSE Index Sweden 8050.6 -0.1% 11.6% 12.3 GSGB10YR Index Sweden 1.39% -1.1 -33.7 22.3MXGB Index U.K. 1709.5 -0.3% 5.6% 11.1 GUKG10 Index U.K. 1.77% 1.4 -49.4 29.3

ICEXI Index Iceland 621.3 -0.9% 7.8%MXNO Index Norway 2280.2 -0.6% 6.4% GNOR9YR Index *Norway (9Y) 1.84% 2.0 -145.6 18.9MXRU Index Russia 748.2 0.0% -7.1% MICXRU10 Index Russia 7.69% -7.6 -106.4 151.6MXCH Index Switzerland 869.4 0.2% 18.9% 12.6 GSWISS10 Index Switzerland 0.47% 0.1 -40.4MXTR Index Turkey 1008141.0 -1.7% 30.4% 10.7 TGBY10T0 Index Turkey 7.43% -16.0 -195.0 151.0MXUK Index Ukraine 143.0 -3.9% -52.9% Ukraine 637.2

MXUS Index U.S. 1314.7 -1.2% 12.0% 12.7 USGG10YR Index U.S. 1.63% 1.2 -33.5 35.5MXBR Index Brazil 2624.9 -1.7% -12.4% 9.4 GEBR5Y Index *Brazil (5Y) 8.72% 5.6 103.0MXMX Index Mexico 6586.5 -0.9% 14.4% 16.8 GMXN10YR Index Mexico 5.40% -9.2 -71.4 99.8

MXAE Index United Arab Emirates 220.1 0.1% 15.9%MXZA Index South Africa 973.0 0.1% 16.0% 11.6 GSAB9YR Index *South Africa (9Y) 6.65% 0.1 -122.8 152.1

MXAU Index Australia 912.2 -0.7% 3.3% 12.9 GACGB10 Index Australia 3.11% -4.6 -111.9 43.2MXCN Index China 59.1 -2.4% 2.6% 9.4 GCNY10YR Index China 3.57% -1.0 -14.0 71.8MXHK Index Hong Kong 10994.7 -1.8% 12.7% 14.8 HKGG10Y Index Hong Kong 0.58% -7.2 -78.4 89.1MXID Index Indonesia 5218.9 -0.3% 6.8% 13.8 GIDN10YR Index Indonesia 5.59% -2.0 -61.7 165.6MXIN Index India 736.2 -0.2% 8.1% 13.6 GIND10YR Index India 8.21% 1.4 -72.1MXJP Index Japan 451.9 -1.4% -2.0% 11.6 GJGB10 Index Japan 0.74% -1.2 -24.4 68.4MXKR Index Korea 547.9 -1.3% 1.1% 8.2 GVSK10YR Index Korea 2.96% -3.0 -83.0 71.2MXMY Index Malaysia 585.4 -0.4% 7.0% 14.1 MGIY10Y Index Malaysia 3.44% 0.5 -29.3 95.3MXPH Index Philippines 895.4 0.4% 24.1% 16.2 PDSF10YR Index Philippines 5.08% -7.7 -82.3 131.4MXSG Index Singapore 1594.9 -1.1% 5.1% n.a MASB10Y Index Singapore 1.32% -1.0 -31.0MXTH Index Thailand 477.3 -0.6% 22.6% 11.0 GVTL10YR Index Thailand 3.34% 0.1 -11.7 #N/A N/A

LAST 1D Chg YoY 30D 1Y TICKER LAST 1D YoY 30D 1YPRICE bps/% bps/% Chart Z-SCORE PRICE %CHG %CHG Chart Z-SCORE

EUR003M Index 3M Euribor 0.19% -0.2 -128.0 -1.4 GBP Curncy British Pound 1.60 0.1% 0.6% 1.4EONIA Index EONIA 0.09% -0.3 -113.2 -1.2 CZK Curncy Czech Koruna 19.92 -0.1% -5.5% -0.1EUSA10 Index EUR 10Y Swap Rate 1.71% 2.7 -65.8 -1.1 DKK Curncy Danish Krone 5.84 -0.2% -5.9% 0.0

EUR Curncy Euro 1.28 0.2% -5.6% 0.1SOBR3M Index Bulgaria SOFIBOR 3M 1.44% -2.6 -222.3 -1.5 HUF Curncy Hungarian Forint 222.88 -0.3% 3.1% -1.1PRIO3M Index Czech Interbank Rate 3M 0.19% 0.0 -56.0 -2.5 NOK Curncy Norwegian Krone 5.71 -0.3% 0.5% -1.1CIBO03M Index Denmark CIBOR 3M 0.32% -0.4 -96.3 -1.3 PLN Curncy Polish Zloty 3.26 -0.3% -0.5% -0.8BUBOR03M Index Hungary BUBOR 6.28% 0.0 4.0 -22.3 RON Curncy Romanian Leu 3.54 -0.3% -8.9% 0.4RIGI3M Index Latvia RIGIBOR 3M 0.19% 0.0 -35.0 -1.2 RUB Curncy Russian Ruble 31.49 -0.2% -2.9% 0.2VILIO3M Index Lithuania VILIBOR 3M 1.44% 0.0 2.1 -6.1 SEK Curncy Swedish Krona 6.66 -0.1% 0.4% -0.7WIBO3M Index Poland WIBO 3M 4.55% -5.0 -28.0 -53.3 CHF Curncy Swiss Franc 0.94 -0.2% -3.6% -0.2BUBR3M Index Romania ROBOR 3M 5.51% 0.0 -28.0 0.6 TRY Curncy Turkish Lira 1.78 -0.2% 1.1% -0.6STIB3M Index Sweden STIBOR 3M 1.48% -0.6 -111.0 -2.0 UAH Curncy Ukranian Hryvnia 8.19 0.0% -2.1% 2.1BP0003M Index U.K. LIBOR GBP 3M 0.53% -0.1 -47.2 -2.1 Americas

BRL Curncy Brazilian Real 2.04 0.3% -15.1% 1.0SEDA3MRE Index Iceland REIBOR 3M 6.10% 0.0 140.0 1.7 CAD Curncy Canadian Dollar 1.00 -0.1% 2.6% -0.5MOIB91 Index Russia Moscow Interbank 7.76% 0.0 92.0 -14.4 MXN Curncy Mexican Peso 13.14 -0.3% 4.1% -0.6SF0003M Index Switzerland LIBOR CHF 0.03% 0.0 -1.1 -1.5 Middle East & AfricaTRLIB3M Index Turkey TRLIBOR 3m 6.40% -5.2 -389.9 -1.8 ZAR Curncy South African Rand 8.69 -0.3% -7.3% 1.6

Asia/Pacific.TED3M Index 3M Ted Spread 21.8 -0.5 -22.6 -1.9 AUD Curncy Australian Dollar 1.04 0.2% 2.8% 0.4JPEIPLSP Index EMBI+ Spread 276.3 2.1 -69.1 -1.6 CNY Curncy Chinese Renminbi 6.24 -0.1% 1.6% -2.5

HKD Curncy Hong Kong Dollar 7.75 0.0% 0.3% -1.2LAST 1D YoY 30D INR Curncy Indian Rupee 54.35 -0.1% -7.7% 0.3PRICE %Chg %Chg Chart IDR Curncy Indonesian Rupiah 9632.00 0.0% -7.7% 1.5

JPY Curncy Japanese Yen 79.56 0.1% -2.2% 0.7SPGCAGTR Index S&P GS Agriculture Index 796.4 -0.1% 9.3% 13.7 NZD Curncy New Zealand Dollar 0.82 0.3% 4.6% 1.0

SGD Curncy Singapore Dollar 1.22 -0.2% 5.4% -1.7SPGCINTR Index S&P GS Indus Metal Index 1491.3 0.5% -7.2% 14.8 KRW Curncy South Korean Won 1087.85 -0.2% 2.7% -2.4GC1 Comdty Gold 1726.0 0.7% 24.9% 13.0 THB Curncy Thai Baht 30.64 -0.1% 0.3% -1.0

TWD Curncy Taiwan Dollar 29.03 -0.3% 3.5% -1.6SPGCENTR Index S&P GS Energy Index 1026.6 0.4% -7.7% 26.4 Euro Crosses

EURSEK Curncy EUR/SEK 8.5 0.1% 6.4% -0.6CRY Index CRB Index 291.9 0.1% -8.4% 13.8 EURGBP Curncy EUR/GBP 0.8 0.1% 6.6% -0.7SPGSCITR Index S&P Commodity Index 4793.0 0.3% -3.9% 19.3 EURNOK Curncy EUR/NOK 7.3 0.0% 6.5% -1.3DBLCDBAT Index DBIQ Diversified Ag Index 234.9 -0.4% -5.2% 7.5 EURCHF Curncy EUR/CHF 1.2 0.0% 2.1% -0.2Source: Bloomberg. Updated at 6.30am London time

CURRENCY

Europe

Middle East & Africa

Asia/Pacific

Euro Area

CURRENCIES

Middle East & Africa

10 YEAR GOVERNMENT BOND YIELDS

TICKER COUNTRY LAST PRICE TICKER COUNTRY

MSCI EQUITY INDICES

EuropeEuro Area

Non-Euro EU

Non EU

Americas

Europe

Non-Euro EU

Non EU

Americas

Energy

Indices

Asia/Pacific

TICKER

OTHER INDICATORS

Non-Euro EU

COMMODITY VOLATILITY

Non EU

Other

TICKER

COMMODITIES

Agricultural

Metals

ECB

SPREAD/RATE/INDEX

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 9

Q: What an election. If you were to meet today across the table with the presi-dent and the speaker of the house, what would be your advice?A: That they have two big problems and they’ve got to deal with both of them. One of them is the fiscal problem, but the other one is how you get some growth and em-ployment increases in this economy.

Q: Looking at the deficit, you’re front and center on tax preferences. What is a tax preference?A: Tax preferences or tax expenditures or what bowles-Simpson called spend-ing through the tax code. If I buy a solar panel for my house, government gives me a tax break. If I increase the size of my mortgage, I get a bigger deduction. If my employer gives me more health insurance, I don’t have to pay anything on that. So those are all like the government writing checks, spending money.

Q: Let’s look at your writing on this. The key to raising revenue is to reduce tax expenditures like the mortgage deduction, use some of the resulting revenue to reduce tax rates and devote the rest to reducing future deficits. Every Republican says you’re nuts.A: They may say I’m nuts, but there was one Republican whose name was Rom-ney who said, ‘I want to put a cap on total deductions, and I want to cut tax rates.’ And that sounds like what we’re talking about.

Q: What is the common ground that both sides can reach this year?A: by the end of this year I think at best they can agree to put things off for six months. There isn’t enough time, but there is time to put something in place that’s better than the fiscal cliff.

Q: Describe how you would speak to a politician about why it needs to be done now, and yet the markets are fine.A: The markets are fine because the Fed is feeding the markets and China is feeding the market. China’s doing it by buying up a large amount of our deficits. More than half of the U.S. national debt is held abroad.

Q: If I’m a conservative Republican, I can wait. I can delay until this president becomes more of a lame duck.A: Well, in the last four, five years, we’ve seen the debt relative to GdP double, 37 percent to 74 percent, and it’s heading way over that to 90 percent during the next 10 years. Therefore, we’ve got to do something about it, because what we’re going to see during the next less than 10 years, say five years, is that neither the Chinese or the Japanese are going to be the kind of big buyers they once were. We’re going to have to pay a lot more in interest for long-term debt.

Q: What is the immediacy of solving the fiscal cliff now with a Treasury 10-year yield of 1.66 percent?A: If you don’t either solve it completely or postpone it to give time for serious reform, then we go over the cliff. When you go over the cliff, we see tax rates up. We see spending down. We see roughly 4 to 5 percent of GdP taken out of the economy.

Q: Are we going to go back into reces-sion in April, May, June of next year if we can’t get an agreement?A: There’s no doubt that we would be in recession next year if we go over the cliff and don’t come back very quickly.

Q: How do you envisage a bipartisan solution?A: A bipartisan solution is going to have to say we’re going to broaden the tax base and bring down some tax rates so that we’re not just raising tax rates in order to reduce the deficit. And I would hope that they would put some entitlement reform, Social Security reform on the table.

Q: How do you define austerity?A: Well, in Europe austerity meant fiscal tightening, raising taxes, cutting spending in order to bring down their very large fiscal

deficits. That has put them into recession.

Q: How weak does the euro need to be to assist Germany and peripheral Europe?A: I think at par with the dollar. It would be a big boost for Italy, for Spain, for France, all of whom have large trade and current account deficits. And there’s nothing else that’s going to turn them around. And it would not only help their competitiveness, but it would also stimulate their economies.

KEENE’SCORNER

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11.09.12 www.bloombergbriefs.com Bloomberg Brief | Economics European Edition 10