Beppe Grillo, the comedian-turned-rebel leader of Italian politics, must have laughed heartily. No sooner had he announced to supporters that the euro was “a total disaster” than the currency union was driven to the brink of catastrophe once again.

Grillo launched a campaign in Rome last weekend for a 1 million-strong petition against the euro, saying: “We have to leave the euro as soon as possible and defend the sovereignty of the Italian people from the European Central Bank.”

Hours later markets slumped on news that the 18-member eurozone was probably heading for recession. And there was worse to come. Greece, the trigger for the 2010 euro crisis, saw its borrowing rates soar, putting it back on the “at-risk register”. Investors, already digesting reports of slowing global growth, were also spooked by reports that a row in Brussels over spending caps on France and Italy had turned nasty. With China’s growth rate continuing to slow, and US data showing the world’s largest economy was not as immune to the turmoil as many believed, it was time to head for the hills. Wall Street slumped and a month of falls saw the FTSE 100 lose 11% of its value.

In the wake of the 2008 global financial crisis, voters backed austerity and the euro in expectation of a debt-reducing recovery. But as many Keynesian economists warned, this has proved impossible. More than five years later, there are now plenty of voters willing to call time on the experiment, Grillo among them. And there seems to be no end to austerity-driven low growth in sight. The increasingly hard line taken by Berlin over the need for further reforms in debtor nations such as Greece and Italy – by which it means wage cuts – has worked to turn a recovery into a near recession.

Angela Merkel and her finance minister Wolfgang Schäuble are shaping up to fight all comers over maintaining the 3% budget deficit limit and already-agreed austerity measures.

Even if France and Italy find a fudge to bypass the deficit rule, they will be prevented from embarking on the Marshall Plan each believes is needed to turn their economies around. Hollande wants a EU-wide €300bn stimulus to boost investment and jobs – something that is unlikely to ever get off the ground.

So can we look forward to further turmoil on Wall Street and the stock exchanges of Europe and Asia? It seems as though there will be a rally, if only because the US has shown its economy is broadly growing. But can the US economy carry the world on its shoulders? No must be the answer. Several of Asia’s formerly tigerish economies are suffering with debt overhangs. China has found that pumping out steel and building endless apartments in unlikely places is not real economic activity and incurs huge debts. Investors worry about these debts.

Japan looked like it might come to the rescue after a multibillion-dollar pump-priming exercise by the central bank boosted growth. Yet even that has run out of steam. So a rally is likely to be short-lived. Volatility is here to stay. The only answer comes from central bankers, who propose pumping more funds into the financial system to bring down the cost of credit and encourage lending and, hopefully, sustainable growth.

James Bullard, an influential member of the US Federal Reserve, said as much last week. Andy Haldane, the chief economist at the Bank of England, said he was gloomier now than at any time this year. He expects interest rates to stay low until at least next summer.

It’s not a plan with much oomph. Most economists believe the impact of central bank money is waning. Yet without growth and the hope of well-paid jobs for young people, parents across the EU who previously feared for their savings following a euro exit appear ready to consider the potential benefits of a break-up. There is a Grillo in almost every eurozone nation. Now that would bring real volatility.

We can’t handle the banks’ pay dodges

John Lanchester’s book on the language of finance, How to Speak Money, laments how “closed and excluding” the lexicon of the City can be. This phenomenon is damaging for citizens – from the consequences of mis-selling to incomprehension of iniquitous economic policy – and for governments who find themselves on the hook when financial institutions hoodwink politicians and regulators with sophistry.

The British banking industry has been attempting to throw another bucket of obfuscation over the financial glossary with its claim that a new pay measure called a “role-based allowance” is not a bonus. UK banks claim that allowances — which have given an extra £1.7m a year to HSBC boss Stuart Gulliver and nearly £1m to his Lloyds and Barclays counterparts – constitute fixed pay and are not variable, or linked to performance. They are therefore not bonuses, they claim, and do not represent a breach of the European Union bonus cap that limits such payments to a maximum of two times salary.

Last week the European Banking Authority ruled that the allowances were indeed variable and therefore constituted a bonus. UK banks, backed by the government, will ignore the ruling. But if an overarching implication of the EBA’s finding holds firm – that banks can no longer get away with semantic chicanery – then it will be a step towards a safer and more honest financial system.

By veiling an act in disingenuous terms, banks are trying to drag their methods back into the darkness, where they can behave with the sort of impunity that triggered the credit crunch.

Lanchester’s book opens with a well-worn but apposite quote from the Aaron Sorkin film A Few Good Men. When it comes to economics, Lanchester says, governments are like the Jack Nicholson character in that film: “You want the truth? You can’t handle the truth!” Banks are the same, and in the wake of the EBA’s ruling a more honest approach by the industry must follow.

Big week for Tesco



A big week looms for new Tesco boss Dave Lewis, who gets his first public outing on Thursday, unveiling half-year profits expected to be a pitiful £800m. Last year it made £1.4bn, which was already down 23% on 2012. A year ago the shares stood at 358p; on Friday they were just 174p. We should also get the full, gruesome details of the retailer’s £250m accounting scandal.

Lewis must outline how he intends to restore Tesco’s fortunes and his plans for the vital Christmas trading period. He must also convince investors he is the man for the job. They will probably give him time, money and a free hand to rebuild the brand, but eventual success is not a slam dunk. The grocery world is changing faster than Tesco can. Marks & Spencer never regained its dominance after it lost its way, and it would be wrong to assume Tesco’s problems will pass.