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February 12, 2010
Asia Watch: [
William Pesek
B]Asia Isn’t Immune To Far-off Meltdowns[/B]
If anyone could use a few days in the Sydney summer sun, it’s Jean-Claude Trichet.
But it was not to be. Pressing business this week yanked the European Central Bank governor back to the Brussels winter. Few in Sydney begrudge Trichet for bolting from a Reserve Bank of Australia symposium. Not with Greece on the brink and the creditworthiness of Portugal and Spain in question.
Trichet’s early departure highlighted the contrast between the plight of Western economies and the enviable state of Asian ones. It’s also a reminder that Asia can’t be complacent as a new phase of the global financial crisis looms.
Remember how a minuscule economy like Iceland’s sent shock waves through the region in 2008. Or how Dubai, but a piece of a national economy comparable in size to the Philippines, upset Asia’s 2009. Greece is, well, a real economy that is part of one of the world’s three main currencies. Turmoil there won’t be a non-issue for Asia.
Consider, too, that Greece is merely the most fragile of the “PIGS” economies: Portugal, Ireland, Greece and Spain. And that Europe’s problems may deepen as the year unfolds, regardless of how policy makers act today. Even if Asia is the least ugly economic region these days, financial chaos in the euro area will hurt.
Trichet’s return to Europe eased nerves. It suggested the region’s leaders understand the magnitude of its debt crisis and will act accordingly. It doesn’t change one thing: The post-Lehman Brothers world remains a dangerous one and Asia’s economies are largely in the developing-nation camp.
Say what you want about Asia de-coupling from the West, but this region is in a rough place when $27.8 trillion worth of world GDP is underperforming. Make that $32.7 trillion if you add in deflationary Japan. While Asia performed impressively in 2009, this year will be more difficult if at least modest world growth doesn’t return soon.
The PIGS crisis complicates things for Asia-Pacific policy makers. In China, for example, the central bank must drain yuan from the financial system to contain asset bubbles. While doing that, it also must consider how such steps will affect growth and how Europe’s debt troubles could worsen.
If sovereign debt is the new sub-prime, the next 12 months will be rocky. Credit risks abound. Earlier this month, Moody’s Investors Service said America’s AAA debt rating will come under pressure unless something is done about expanding deficits.
Asia Watch: [
William Pesek
B]Asia Isn’t Immune To Far-off Meltdowns[/B]
If anyone could use a few days in the Sydney summer sun, it’s Jean-Claude Trichet.
But it was not to be. Pressing business this week yanked the European Central Bank governor back to the Brussels winter. Few in Sydney begrudge Trichet for bolting from a Reserve Bank of Australia symposium. Not with Greece on the brink and the creditworthiness of Portugal and Spain in question.
Trichet’s early departure highlighted the contrast between the plight of Western economies and the enviable state of Asian ones. It’s also a reminder that Asia can’t be complacent as a new phase of the global financial crisis looms.
Remember how a minuscule economy like Iceland’s sent shock waves through the region in 2008. Or how Dubai, but a piece of a national economy comparable in size to the Philippines, upset Asia’s 2009. Greece is, well, a real economy that is part of one of the world’s three main currencies. Turmoil there won’t be a non-issue for Asia.
Consider, too, that Greece is merely the most fragile of the “PIGS” economies: Portugal, Ireland, Greece and Spain. And that Europe’s problems may deepen as the year unfolds, regardless of how policy makers act today. Even if Asia is the least ugly economic region these days, financial chaos in the euro area will hurt.
Trichet’s return to Europe eased nerves. It suggested the region’s leaders understand the magnitude of its debt crisis and will act accordingly. It doesn’t change one thing: The post-Lehman Brothers world remains a dangerous one and Asia’s economies are largely in the developing-nation camp.
Say what you want about Asia de-coupling from the West, but this region is in a rough place when $27.8 trillion worth of world GDP is underperforming. Make that $32.7 trillion if you add in deflationary Japan. While Asia performed impressively in 2009, this year will be more difficult if at least modest world growth doesn’t return soon.
The PIGS crisis complicates things for Asia-Pacific policy makers. In China, for example, the central bank must drain yuan from the financial system to contain asset bubbles. While doing that, it also must consider how such steps will affect growth and how Europe’s debt troubles could worsen.
If sovereign debt is the new sub-prime, the next 12 months will be rocky. Credit risks abound. Earlier this month, Moody’s Investors Service said America’s AAA debt rating will come under pressure unless something is done about expanding deficits.
