Hollande’s plan to tackle soaring French unemployment by swelling the size of the public service is anathema to the thrifty chancellor, who is keen to see eurozone governments cut their spending. […] But even more worrying for Merkel is Hollande’s pledge to renegotiate her precious, prized treaty that will force all eurozone countries to follow a rigid budgetary discipline.
Karen Maley, Business Spectator
It’s an election year for France, and that’s proving to be bad news for Germany’s chancellor Angela Merkel. Her current counterpart in the Élysée Palace, Nicolas Sarkozy, is largely in lock-step with the Germans. But Sarkozy is facing an uphill battle for re-election. He will likely be succeeded later this year by the socialist candidate, François Hollande. And Hollande is far less receptive than Sarkozy to the German push to reform Europe.
Of particular concern, as Karen Maley notes, is that Hollande will seek to renegotiate a new Eurozone fiscal pact — agreed only last month — that would, among other things, bind governments in the single currency union to budget deficit caps. Hollande wants to water down the treaty, which would essentially render it useless in promoting the kind of fiscal restraint that Berlin is seeking.
Unsurprisingly then, Merkel is hoping for a Sarkozy win. Indeed, she is effectively campaigning for her man in Paris. But with Hollande in such a commanding position in the polls, the risk is that Merkel will simply end up poisoning the future Franco-German relationship.
Have I got a Proposition for you
This week, California’s gays and lesbians had reason to celebrate. An appeals court upheld an earlier ruling that a controversial measure to ban same-sex marriage in the state was unconstitutional. The measure, ‘Proposition 8’, was a citizens-initiated referenda that passed in 2008. Religious and conservative groups had championed the measure as a means to overturn a ruling from the state’s Supreme Court that had opened the door to gay marriage in California less than a year earlier.
As legal scholar Noah Feldman writes, not all is good news for advocates of same-sex marriage. The appeals court’s ruling is narrowly defined: it doesn’t establish a right to gay marriage. Rather, it ruled Proposition 8 unconstitutional strictly on the basis that it took away from gays and lesbians what had previously (though only briefly) been an equal right to marriage. Hence, if the matter is appealed again to the federal Supreme Court, the justices there will not be asked to judge whether gay marriage is itself a constitutional right, but solely whether Proposition 8 introduced discrimination on the basis of sexual-orientation to something where an equal right had already been created.
Then again, there are no guarantees this matter will end up in the US Supreme Court. The Californian government was not a party to the appeal — the groups that brought the action may not be recognised by the Court. But in an election year, some conservative justices may be chomping at the bit to hear the case anyway.
Rates on hold, future uncertain
Yesterday’s decision by the Reserve Bank of Australia to leave the cash rate unchanged apparently stunned many market watchers. In a survey undertaken by business news agency Bloomberg, 24 out of 27 macroeconomists reckoned the RBA would cut rates by 25 basis points. Why were so many ‘informed’ analysts left with egg on their face?
As Alan Kohler writes, a pure analysis based on the core economic indicators would suggest the RBA’s call was inevitable. Inflation is moderate (the key target for the central bank), unemployment is low, and Australia’s economy is growing. But Kohler also notes that there are serious concerns about the economic health of the retail and manufacturing sectors, which loom large on the east coast. And storm clouds from overseas — both Europe and the United States — still linger on the horizon.
In the mean time, the RBA’s decision will likely mean overseas investors continue to park their capital in Australia. Indeed, in the immediate wake of the RBA’s non-decision, the Australian dollar shot up against major currencies — it’s now worth 1.08 US dollars. Perhaps to the chagrin of exporters and domestic import-competing industries, the Aussie’s strength continues to provide a moderating influence on inflation — making future rate cuts even less likely. But that’s no guarantee: most analysts still expect the cash rate to go down in the near term. Then again, they thought the same about yesterday.
The challenges of airline mergers
Corporate mergers can be complex affairs even when the businesses involved are small in scale. Different firms have different internal practices, and harmonising these can be uncomfortable for workers and consumers alike. Different pay and conditions for the two workforces will take time to streamline. Technical systems can be incompatible, requiring wholesale changes in how data and information are generated, stored and accessed. And beyond these tangible aspects, the cultural aspects of bringing together two different groups of people who may have different values and priorities are seldom easy to overcome. The stakes become greater still when the entities involved are subject to heavy regulation.
Aviation mergers take these challenges to a whole new scale, as this profile piece by Bloomberg Businessweek demonstrates. United and Continental Airlines announced their merger back in 2010. And the process of bringing together the two behemoths of America’s skies is still far from complete. The airlines still essentially operate as two separate divisions. Much progress has been made: there is now one flight control system for both the legacy United and Continental fleets. And by March, it is expected that customers will finally be processed through a single passenger management system. Those flying with the airline will surely be hoping that the March switch-over goes as smoothly as last year’s flight control merger.
It hasn’t always been this easy. The first evidence of the merger for passengers came when the merged entity (also called United) picked one brand of coffee for its two airlines. After an exhaustive, bureaucratic decision-making process over several months — involving various layers of management — the near-universally agreed choice ended up proving a disaster, when passengers served coffee on legacy United’s fleet found their caffeinated brew was watery. Why? Because the equipment on the old United planes differed from those on the old Continental planes. Oops.
Is the Labor leadership issue a bizarre beat-up entirely confected by the news media? Certainly not. Is it an unstable and shifting situation, which may lead to a challenge, and which is notoriously difficult to report? Absolutely.
Lenore Taylor, Sydney Morning Herald
In response to claims that the media is whipping up a frenzy over the Labor party’s leadership, some journalists have raised their heads above the parapet to defend their profession. Lenore Taylor of the Sydney Morning Herald is one, insisting that the seemingly basis speculation in fact reflects an inherently complex, fast-moving political situation. While Kevin Rudd doesn’t have the numbers for a challenge, Julia Gillard also can’t count on having a solid base of support either. There is a large bloc of potentially swinging MPs who are willing to consider alternatives — whether it is Rudd or somebody else.
Still, there’s something wrong with this picture. Taylor asserts that the rapid change in momentum in 2010, from Rudd to Gillard, made a coup inevitable. But momentum doesn’t exist in a vacuum. It is fuelled by media coverage. That is precisely the intent of the Rudd camp — to use the media to create the appearance that Gillard is toast, and that Rudd in turn is the only viable option to succeed her. For journalists, there should be a difference between objectively reporting facts and allowing yourself to be a central tool that drives the story. Much of the recent coverage seems to be far closer to the latter than the former.
The unnamed sources briefing journalists may be senior, well-informed and largely reliable. It doesn’t mean they’re not playing the media for fools though.
