Europe Tops U.s. As Global Growth Locomotive: Cutting Research

German elections and Europe’s economy: Five things you need to know

STORY HIGHLIGHTS Rouhani: Iran wants nuclear agreement “within a very short period of time” New Iranian president says U.S., European tone is different He says his election helped pave the way for better relations and a nuclear agreement (CNN) — Western leaders have said Iran seems to sound different under the leadership of newly elected President Hassan Rouhani . On Friday, it was Rouhani’s turn to return the compliment, saying European Union officials and U.S. President Barack Obama sound “different compared to the past.” “I view that as a positive step in the settlement of differences between Iran and the West,” he told reporters Friday. Western leaders have expressed cautious optimism about Iran’s more moderate tone under Rouhani. Among other things, recent comments by Rouhani have given some hope that a deal could be struck over the Middle Eastern nation’s nuclear program. How far have Iranian relations come? U.S., Iran nuke talks advance to Geneva On Friday, he said his election helped pave the way for better relations between the Iran and the West, which has imposed heavy sanctions on the country. He also said Iran wants quick resolution to the nuclear issue. Western leaders believe the country’s nuclear program is designed to produce weapons. Iranian leaders have said it is purely peaceful. Opinion: U.S., Iran relations: No overnight miracles “I assure you that on the Iranian side, this will is there fully, 100%, that within a very short period of time, there will be a settlement on the nuclear issue,” he told reporters. Rouhani said he was heartened by Thursday’s meeting between U.S. Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif as part of a meeting between Iran and the six countries trying to tackle international concerns about Iran’s nuclear program. It was the first face-to-face meeting between such high-level officials of the two countries in more than 30 years.

Is there an alternative for Germany? Will there be more bailouts under a Merkel coalition? Germany and Greece have both acknowledged the latter will require further financial assistance. The IMF-led bailout for Greece is due to expire next year, leaving the nation with a financial shortfall of around 14 billion euros. Greece, which has already received two bailouts, may find itself facing more conditions as it seeks a third round of aid from its European peers. Portugal, which has been bailed out once, is expected to face problems if it attempts to return to the bond markets. As a result, bailouts and haircuts are likely to remain on the agenda for Merkel’s third term even as the eurozone enters a recovery phase. IN PHOTOS: Rising to the top The nascent pan-eurozone banking union and other pillars of Europe’s rescue package — like the legal use of the ECB’s pledge to support ailing nations through “outright monetary transactions” — are other issues that will need to be settled. Merkel’s strengthened mandate could also mean a stronger position on fiscal restraint and austerity across Europe. Merkel is convinced, in the longer term, healthier balance sheets will leave the region better off — but in the short term it may mean more cuts. What about the euroskeptics vote? Germany’s euroskeptic party Alternative for Germany — which is opposed to the single currency and wants the country to exit the eurozone — did not get past the 5% threshold required to usher it into the Bundestag, or lower house of Germany’s parliament.

Iranian President Hassan Rouhani smiles while answering questions in New York.

It showed about half the correlation of bond spreads between Italy and Greece can be attributed to linkages in their debt markets. * * * Central banks can pay a price in the form of higher unemployment if they undershoot their inflation target, according to Lars E.O. Svensson, a former deputy governor of Swedens Riksbank. In a paper published this week by the National Bureau for Economic Research, Svensson detailed how unemployment will mount if investors inflation expectations shadow a central banks inflation target yet inflation deviates from it. In Sweden, for example, he found that from 1997 to 2011 expectations were anchored at the Riksbanks goal of 2 percent, but average inflation fell 0.6 percentage point below it. Svensson calculates that means average unemployment has been 0.8 percentage point higher than if the Riksbank had allowed average inflation to run on target. Svensson often sought laxer monetary policy in Sweden, stepping down in May after failing to persuade colleagues to cut interest rates to support the labor market. In March, he derided as poor the banks efforts to reach its 2 percent inflation goal. I believe the main policy conclusion to be that if one wants to avoid the average unemployment cost, it is important to keep average inflation over a longer period in line with the target, Svensson said in the paper. He is now at The Institute for Financial Research at the Stockholm School of Economics. * * * Higher wages may be a curse as well as a blessing for emerging markets, according to a PricewaterhouseCoopers LLP report. The salaries that boost consumption may also discourage production. Average wages in India may quadruple over the next two decades while those in the U.S.