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Germany, France Seek 'True European Economic Government'

Eleven countries first began to use the euro in nineteen ninety-nine. Today seventeen of the

twenty-seven members of the European Union are in the euro area.

The euro's foreign exchange value has remained strong against the dollar and other

currencies. But economic growth in the euro area was only two

-tenths of one percent from

April to June. Europe's biggest economy, Germany, grew at half that rate.

Ireland, Portugal and Greece have all required rescues. Greece received emergency loans

twice.

Debt and other problems in southern Europe remain a big concern. Last week, the European

Central Bank bought more than thirty billion dollars in Italian and Spanish debt securities.

Italy and Spain have yet to recover from the worldwide recession. The purchases of their

government debt helped reduce their borrowing costs, but the bank

will probably have to act

again.

On Tuesday German Chancellor Angela Merkel and French President Nicolas Sarkozy met in

Paris. They discussed

economic governance for the euro

area

and cooperation

on budget and

tax policies. Chancellor Merkel said,

of fiscal integration.

ove close

r on

budget issues.

Their proposal calls for a

economic government.

would include the leaders

of the seventeen euro countries and would be led by the European Union president. The

current president is Herman Van Rompuy of Belgium.

The group would meet at least twice

a year.

One goal would be to control budget deficits for euro area countries.

Rules limit the deficits

of EU members to three percent of the

size of their economies. But many members, including

France, have bigger deficits than that.

The two leaders also proposed

a tax on financial dealings in Europe. But they did not support

the idea of

euro bonds. These

would

be loans guaranteed

by all euro countries instead

of only

the governments seeking them.

The European Commission says it supports the French and German proposals. The

commission proposes and enforces legislation for the EU. On Wednesday, EU spokesman

Olivier Bailly said the calls for an economic government were a step in the right direction.

OLIVIER BAILLY:

economic and monetary union.

What is happening now

since the beginning of the crisis and

what has been announced yesterday as a proposal by France and Germany go

exactly in this

direction.

But many experts question

whether European countries

will be

willing to surrender individual

powers and deal with their debt problems together.

Debt, Recession Worries Bring Volatility to World Markets

A

markets. If you want to use a more technical term, the markets are showing volatility.

Thursday was another example of a day of strong gains on the New York Stock Exchange

after a day of heavy losses.

Major measures

of United States markets have closed with their biggest

one

-day losses since

the financial crisis of two thousand eight. Asia and Europe have also had sharp declines.

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Volatile markets can react suddenly in wild and unpredictable ways. Usually some kind of

shock, or more than one, is involved.

For example, last Friday,

one of the three major credit rating agencies

downgraded long

-term

United States governm

ent debt. Standard & Poor's lowered its opinion of Treasury securities

one step from the highest rating, triple-A, to AA-plus.

But shocks like a hopeful jobs report or good earnings results can stop a fall and send prices

higher. (Also, when prices fall, investors may find good deals and start buying.)

The United States held S&P's top rating for seventy years and never had a downgrade. But

many investors were expecting that to happen even after the budget deal in Washington.

Congress last

week

agreed to increase the

government's borrowing limit in return for

steps to

cut spending and reduce the deficit.

S&P says it thinks America's debt

will only increase in the future. President

Obama

disagreed.

BARACK OBAMA:

agency to tell us that we need a balanced, long-term approach to deficit reduction. That was

true last week, that was true last year, that was true the day I took office.

He said this week that markets still consider United States credit

safest.

Still, there are growing worries of another recession -- a double dip. On Tuesday, policy

makers at the central bank said economic growth so far this year has been

slower

interest rates near zero for at least two more years.

Borrowing costs for the United States remain very low. But debt worries in two of Europe's

biggest economies have increased costs for their governments in recent weeks.

On Monday the European Central Bank began buying debt securities from Spain and Italy.

These efforts have helped push down interest rates for those countries. Nick Parsons, an

economist with the National Australia Bank, says the bank made the right move.

NICK PARSONS:

But he

also thinks the bank

will have to buy more. And Europe must still deal with the rescues

of Greece, Ireland and Portugal.

A Debt Deal in US, but Stocks Still Slide

This week President Obam

a signed a bill raising the nation's borrowing limit. That debt deal,

however, failed to keep

stock markets from dropping.

Prices fell sharply on

growing

economic

concerns about the United States and the world.

The legislation followed months of arguing that only added to those concerns. Congress sent

the bill to the president to sign into law on Tuesday. That was the last day the government

said it had enough money to make all of its payments.

The Budget Control Act of 2011 lets the government seek financing to pay its bills until

twenty-thirteen. Congress agreed to lift the debt ceiling by over two

trillion dollars, but also

to make spending cuts.

President Obama said it was a starting point.

BARACK OBAMA:

reduction. It's an important first step to ensuring that as a nation, we live within our means.

Yet it also allows us to keep making key investments in things like education and research

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that lead to new jobs. And assures that we're not cutting too abruptly while the economy is

still fragile.

Richard Gordon worked with the International Monetary Fund for nearly ten years. He says

there is a risk in cutting the federal budget too much when unemployment is high.

RICHARD GORDON:

ent does not put money into the economy, the

economy will stall. And that will result in another recession, and that cannot help anybody.

The national debt is more than fourteen trillion dollars. At the end of last year, private

investors in the United States held the largest share -- thirty-six percent of that government

debt. China was the single largest foreign holder of Treasury securities, followed by Japan

and Britain.

On Wednesday, China's Dagong credit rating agency downgraded American debt. It said the

budget deal did nothing to improve the United States' ability to pay its debts. Still, the

government has had no trouble finding investors, and its borrowing costs have even fallen.

The Budget Control Act calls for almost one trillion dollars in spending cuts over ten years. A

committee of six Democrats and six Republicans will have to identify another trillion and a

half dollars in deficit reductions.

What happens if the committee cannot agree? Then an enforcement measure known as a

trigger would go into effect. It would cut money from dom

estic and defense programs, but

not in popular social programs for retirees and the poor.

The budget deal contained no tax increases, but that issue has not gone away. Richard

Gordon -- now

a law professor

at Case

Western University in Cleveland, Ohio -- says the deal

leaves a big question.

Indonesia's 'Technopreneurs' Help Fuel Economic Growth

Indonesia has one of the world's fastest growing economies, expanding at a rate of six

percent this year. Technology is helping fuel that growth, and producing

a new generation of

young entrepreneurs.

One of these

School in Boston, Massachusetts. He returned home and launched Go

-Jek. This service

connects motorcycle taxis, called ojeks, with people who need a ride or a delivery.

Go-Jek uses online maps, mobile phones and a call center. The aim is to improve Jakarta's

disorganized motorcycle taxi system. Nadiem Makarim says everything depends on a

business plan.

NADIEM MAKARIM:

you want sustainable impact, then you need a market incentive to do that. I firmly believe

that business and just straight up rational business growth, profitable business growth and

social impact are not mutually exclusive.

Go-Jek recently won ten thousand dollars in a competition through the American State

Department's Global Entrepreneurship Program. Indonesia is one of five countries in this

program which links startup businesses with investors.

Many startups are Internet-based services. Indonesia already has more than seven hundred

startups online, and new ones are launched every week. Half of Indonesians still live on less

than two dollars a day. But Indonesia has a young population interested in trying new

technology.

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