World economies on autopilot

It is ironic that at a time when we need leadership from our policymakers, they are unable to give us any. They are paid the big bucks for the big decisions but are taking the money and hiding. We are in a period of policymaker paralysis.

August was a good month for European policymakers as they rewarded themselves with long holidays and there has been little news. We are no longer surprised when conference after conference between the 17 euro nations ends without a decision on the debt crisis. Their indecisiveness is unsurprising when the negotiations consist of a host of profligate governments wanting to plug their spending deficits with German money.

Policy paralysis means that if you wait long enough, the problems might go away. But while no one believes in the conference communiqués, the financial markets still wait for them with bated breath.

No decisions mean that you can declare victory and continue to pay yourself the big bucks, eat well on expenses and use the ministerial chauffeur - while blaming the bankers. It helps to softly rotate the top European jobs between policymakers so complaints are muted.

Yet with Greece likely to exit the euro before the end of the year, almost certainly followed by Portugal and Cyprus, policy paralysis is not an option. Sooner or later, a line will have to be defended and that is likely to be over Spain, where the bankruptcy of local governments is becoming contagious. For if Spain leaves the euro, so will Italy, and the experiment with the euro will survive only in Northern Europe.

Moving across the Atlantic, markets were disappointed by US Federal Reserve Board chairman Ben Bernanke's failure to announce a big new stimulus to the economy.