It doesn't add up...

Neither Labour or Libdems want big deficit cuts now and indeed tend to favour tax rises on the wealthy, something the markets won't like. The anti-austerity parties will have around 344 seats while the Tories, the only party which might try to slash the deficit immediately, will have just 306. The UK election outcome is not stable, will probably lead to another election and is unlikely to deliver the kind of fiscal package the markets want, says Buttonwood in "Just do the maths" (The Economist). While deficit reduction might be welcome news for the market, I guess the common fear may be as to how the reduction is going to be achieved? Is it by way of higher taxes or reduced expenditure or both? I guess reaction of people would at the end depend upon how they are going to be impacted by government's decision.

The risk-free rate and corporate finance

In corporate finance theory, the risk-free rate (that paid by governments) is the basis for pricing other assets, which must pay a risk premium on top of that. But what happens when the government, like Greece, has little hope of repaying its debts at market rates, asks Buttonwood in this interesting blog post.