By Peter Apps, Political Risk Correspondent WASHINGTON | Wed May 23, 2012 8:31am EDT WASHINGTON (Reuters) - For decades, Western navies have built ever larger, more expensive warships. Those vessels now look increasingly vulnerable to thousands of small, fast Iranian attack boats that could dominate the Gulf in the event conflict there. In response, the U.S. Navy has sent almost its entire fleet of small patrol boats and minesweepers to the region, hastily refitting some to dramatically increase their firepowerConcerns over the Gulf, a key oil conduit, play into a much wider debate about whether developed navies waste their money in pursuing a small number of sophisticated ships. Perhaps, some argue, they should follow the example of poorer states like Iran, who invest in large ... Continue reading →

In theory these would still fit Left outside the European Central Bank in the dead of night, the horse has now been moved into the ECB’s central lobby where it is proudly on display. A gift tag attached to the horse, which is surprisingly light for its size and has small holes along the length of its body, suggested that it should be placed in the bank’s vaults overnight to avoid it being targeted by thieves. Mario Draghi, President of the ECB, said: “How nice of the Greeks to acknowledge the trouble we’ve been put to on their behalf with this wonderful horse, handmade and so large it could hold a dozen double-decker buses. “The card with it, which had a teddy bear dressed as ... Continue reading →

What should be the long-term vision for the euro zone? The standard answer is fully-fledged fiscal, banking and political union. Many euro zone politicians advocate it. So do those on the outside such as David Cameron, Britain’s prime minister, who last week called on the zone to “make up or break up”. The crisis has demonstrated that the current system doesn’t work. But a headlong dive into a United States of Europe would be bad politics and bad economics. An alternative, more attractive vision is to maintain the maximum degree of national sovereignty consistent with a single currency. This is possible provided there are liquidity backstops for solvent governments and banks; debt restructuring for insolvent ones; and flexibility for all. Enthusiasts say greater union won’t ... Continue reading →

By Glenn Somerville WASHINGTON | Wed May 23, 2012 2:10am EDT WASHINGTON (Reuters) - Wanted for the Treasury Department: a new boss who can fix trillion-dollar-plus budget deficits, overhaul the tax system and spur a reluctant Europe into fixing its debt crisis. It's a tall order, especially when the new Treasury chief also must deal with a fractious Congress - and all for a salary lower than that paid to many junior Wall Street bankers.Economists, investors and veterans of past administrations are appraising potential successors to Treasury Secretary Timothy Geithner, either in a new Obama administration, if President Barack Obama is re-elected, or under Mitt Romney.Geithner has made it clear that he is leaving the post he has held since January 2009 even if Obama, ... Continue reading →

By Ioan Grillo VALLECILLO, Mexico | Wed May 23, 2012 7:06am EDT VALLECILLO, Mexico (Reuters) - Mexican government forces had bottled up a band of enemy fighters in this tiny village late last year, but feared they would escape into the dusty, rock-strewn hills. So more than 600 soldiers and federal police closed in from all directions with armored Humvees and helicopters. The outlaws responded with a barrage of rocket-propelled grenades and AK-47 assault-rifle fire, tearing apart one federal police vehicle. For three days the fighting raged.In the end, according to military accounts of the battle, 22 members of the Zetas drug cartel, two police officers and a soldier were dead, and 20 Zetas were in custody. Dozens more escaped to fight another day.The battle ... Continue reading →

BRUSSELS | Wed May 23, 2012 8:31am EDT BRUSSELS (Reuters) - Euro zone officials have agreed that each euro zone country must prepare an individual contingency plan in the eventuality that Greece decides to leave the single currency area, two eurozone officials said on Wednesday. The agreement was reached during a teleconference of the Eurogroup Working Group (EWG), which started at 9:00 a.m. EDT (1300 GMT) on Monday and lasted for about one hour.As well as confirmation from two officials, Reuters has seen a memo drawn up by one member state detailing some of the elements that euro zone countries should consider.The EWG consists of officials who prepare meetings of finance ministers and also form the board of the temporary bailout fund, the European Financial ... Continue reading →

By Peter Apps WASHINGTON | Sun May 20, 2012 4:59am EDT WASHINGTON (Reuters) - If or when policymakers finally decide Greece should leave the euro, the exit could happen so quickly that "new drachma" currency notes might not be printed in time. In principle, some of the long-term consequences of Athens leaving the currency bloc are not unappealing. The euro zone would no longer have to worry about what has always been its weakest link. While a new Greek currency would almost certainly immediately crash in value as soon as it was issued, in doing so it would make the Greek economy much more competitive.But the short-term effects would be brutal, both domestically and on the global economy. A post-euro Greece could find itself struggling ... Continue reading →

Are equal rights good for the economy? Campaigns against discrimination, like the battles for women’s rights and civil rights in the 1960s and the fight for gay marriage equality today, are usually framed as struggles for justice. We think of these issues as entirely separate from economic concerns and sometimes as even running counter to them. Equal pay legislation and rules against discrimination have often been opposed by business on the grounds they would raise costs. But there is actually a powerful economic argument for equal rights. If you believe that talent isn’t determined by gender, race or sexual orientation, but is instead a roll of the genetic dice, then the most productive society will be the perfectly fair one. A society that is blind ... Continue reading →

By Jeff Mason and Laura MacInnis CAMP DAVID, Maryland | Sat May 19, 2012 8:28pm EDT CAMP DAVID, Maryland (Reuters) - World leaders backed keeping Greece in the euro zone on Saturday and vowed to take all steps necessary to combat financial turmoil while revitalizing a global economy increasingly threatened by Europe's debt crisis. A summit of the G8 leading industrialized nations came down solidly in favor of a push to balance European austerity - an approach long driven by German Chancellor Angela Merkel - with a new dose of U.S.-style stimulus seen as vital to healing ailing euro-zone economies. But it was clear that divisions remained."We commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognizing that ... Continue reading →