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The WSJ's Alessandra Galloni speaks with Mario Monti, the Italian premier, for in-depth interviews. Here Galloni and Walker provide an account of what happened during and after the June 28, 2012 summit of European leaders. Monti described the comments of ECB president Draghi in early August- about ECB buying of bonds of Italy and Spain being within the mandate of the ECB if monetary transmission channels were not working properly to reduce yields- as a bold effort following the agreement made at the June 28 summit to support Italy and Spain. Monti expressed the idea that Draghi should feel morally and politically justified if and when he makes the bold moves to rescue the euro. The only problem he says is whether one has to wait till the night before the euro is about to disintegrate for this to happen. This is the first time Monti has publicly expressed the possibility of this happening.

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After 13 years of Labor government, the new Liberal-Conservative coalition is seen as good for both the parties and good for Britain A good deal of optimism about the prospects for this government. The optimism rests on the pragmatic sensible nature of Cameron and Clegg, on the fact that the 2 parties combined have 59% of the vote in the elections for making some tough decisions- on spending cuts, a sensible fiscal program to generate $9 billion in savings through spending cuts in 2010, and generally agreement between the two parties on the significant issues of state finances. The Tories holding to their position on immigration but giving in on the idea of proportional representation. The election changes would have Parliament members in office for 5 years and the manner of election changed to remove a growing distortion of the popular vote. Labor and Conservatives share of the vote has dropped from 81% in 1979 to 65% in 2010, and still Tory and Labor MP's have 565 of the 650 seats in Parliament or 87%....

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Speaking at the annual meeting of Italy's banking association on July 11, 2012, prime minister Mario Monti calls the struggle he is leading to change the economic performance of Italy, and especially against structural vices in the economy, "a very tough war." He added that the plan to reduce Italy's borrowing rates with the agreement to use the ESM or EFSF, the EU's rescue fund, "must be consolidated both in its substance and the way it is communicated." Bank of Italy governor, Ignazio Visco, said the spread between Italian and German bonds and the borrowing rates approaching 7% for Italy compared to about zero for Germany and France, were "far above what would be justified by the fundamentals of our economy." Deputy finance minister, Vittorio Grilli, is taking over the role of finance minister which Monti had assumed earlier. Monti will lead a new economic and financial policy committee which includes Mr. Grilli and development minister Corrado Passera.

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Britain's National Institute for Health and Clinical Excellence (NICE) says Glaxo's drug Benlysta for lupus is not "good value for money." The drug is priced at 10,000 pounds a year in the U.K. ($15,600) and much higher at $35,000 a year in the U.S. Benlysta is covered by insurers in the U.S. and some European state run health systems according to Glaxo. NICE also rejected a new multiple sclerosis drug Gilenya, which costs 19,000 pounds a year in the U.K. ($29,700), and $48,000 a year in the U.S.

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White, Thomson and Blumenstein interview Russian President Medvedev. Medvedev says he is very conscious of what is happening to the EU and its fiscal affairs, and to the euro, in this intervew. He sees Russia's future as a European country closely related to the future of the EU and its member countries, especially how the EU countries do as they adopt austerity measures and cut spending.

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Italy's debt sustainability analysis shows how critical it is to improve prospects for growth and competitiveness and avoiding any lowering of growth from current forecasts. Equally critical is lowering of borrowing rates. And vital to setting the right tone for this is the future of the Monti government and nature and committment of the new government after spring 2013 elections.

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Public sentiment shifts sharply against free trade in the March 2016 Michigan primary for the U.S. presidential election, with candidates saying trade agreements do not take into account the interests of American manufacturing workers making large gains. Between 1999 and 2010 public sentiment shifted against trade agreements for all age, education and income groups. A study by Autor, Hanson and Dorn showed loss of 5.6 million jobs in the last decade and large trade deficits, and demonstrated the effect by counties in the U.S. most hurt by trade policies.

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John Cochrane provides a no-nonsense assessment of what is happening in the euro-zone financial crisis. He says Americans should stop swallowing all that talk about "contagion" from Ireland. He puts it in plain language- there is no bailout of Ireland, this bailout is about bailing out of German and British banks that made risky loan to Irish banks and the Irish government. And he says that European governments if they choose to bailout German or British banks should do so frankly and openly and not by covering it up as a country bailout. If they did this he fears the governments and the German and British banks would face some serious questioning about their risky bets on Irish debt and the Irish property bubble. The German insistence that debt-holders would have to take a haircut, or losses on the face value of their bonds, has been diluted by the French inserting a provision that this would be after 2013 and on a case by case basis. Cochrane sees the vagueness of a case by case threat as the worst combination possible. He says this relies too much on the assessments of IMF and EU officials. The result would be for big financial institutions to bet on a bailout and to lobby these same officials hard. Cochrane's says the big culprit in the problem facing the euro-zone is short term debt. If Europeans won't let governments default, then they must insist on long-term financing of government debt. It is the short term debt of these countries that creates a crisis atmosphere. If investors become pessimistic about long-term debt, bond prices can go down temporarily without causing damage. The way a crisis happens is bad news develops, and governments having financed with short term debt need new money to pay off old debts. The way to handle this refinancing crisis is to have a large forced exchange of maturing short-term debt for long-term debt, and this is what occurs in "restructuring." And this kind of restructuring ocurred with the Brady plan that helped Latin American economies recover from a debt crisis in the late 1980's and early 1990's. This is the only viable solution, as it will be virtually impossible to bail out all euro-zone countries- Portugal, Spain, Italy and so on. For the US this is an eye opener to get its own financial house in order. US government debt is also tilted to short-term debt maturities, with the majority rolled over every year. and the Fed's quantitative easing will tilt this further to shorter term debt. And in the US, many states and local governments are in serious financial trouble....

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Medvedev appears to have little role in setting policy in Russia, even though he has presented a different view of liberal groups and showed interest in pluralistic democracy and free expression of opinion. Putin has expressed a very different view about liberal groups, as representing foreign interests in Russia. The media remains tightly controlled in Russia, and elections are determined in the Putin way. A mayor picked by Putin won the Sochi elections even without campaigning, as many opposition candidates were disqualified or discredited before the campaign. He won with 77% of the vote. In this way elections take place in Russia but are conducted in a way which makes it very difficult for the opposition parties, and keeps media television coverage heavily pro-government.

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Galston says Hillary Clinton is right to say as she did at Roosevelt Island in her opening campaign speech, that "growth and fairness go together, for lasting prosperity, you can't have one without the other." Economic growth was at 4% for 5 of 8 years of the Clinton presidency, but in the 15 years since the economy has managed 3% only twice in the George Bush presidency, and fallen below 2.5% in the last 5 years. The high growth rate following World War II was a result of the increase in the workforce and productivity. The workforce increased by 2% annually between 1950 and 2000. Since then as female participation peaked and the baby boomers reached retirement age the workforce has increased by 0.7%, and is slowing to 0.5% annual growth for the next decade. Growth in productivity of 1.9% between 1991 and 2007, slowed to 0.4% after 2010. Galston tells the next president to go all out to increase the labor force- adopt family friendly policies similiar to Europe so more women can work, get more immigrants into the labor force, more elderly should be encouraged to work given the better health, reduce the college dropout rate to reduce incarceration and bring more young people into the labor force, get more people who qualify for disability but could work part time into the labor force, and emphasize the importance of increasing the labor force participation rate a policy being followed by the Federal Reserve's Janet Yellen....

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The WSJ's Christopher Emsden and Alessandra Galloni's interview with Italy's Labor Minister, Elsa Fornero, after major changes to Italy's labor laws including Article 18. This is a major change for Italy. She describes the problems she faced and how she has tackled them to get the new labor law passed. Fornero will set up a monitoring system to ensure that the law's imprementation takes place smoothly. To make the change Fornero took apart Article 18 to its constituent elements, preserving the anti discrimination aspect and the right to appeal, but allowing employees to be terminated for economic reasons. This puts Italy on an even footing with its europartners Germany and France, and addresses one of the main reasons Italian businesses are loath to hiring new employees. It also addresses the main reason why foreign investment in the Italian economy is so scarce. In achieving this Fornero faced the lack of support from Confindustria, the business association (which does not cease to amaze her), CGIL, the labor unions, and the political class in Italy, with each side wanting to tweak the system to make gains or get special exemptions. Fornero is a pensions expert and economics professor at the University of Turin. Her ministry covers pensions, labor, welfare and equal opportunity policies....

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The jawboning by ECB head Mario Draghi in July 2012, when he said the ECB would do whatever it takes to support Spain and Italy, has produced exraordinary results in calming financial markets.

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Martin Feldstein points out why the recent agreement for a "fiscal compact" is no more than an empty statement about fixing the eurozone's finances. In this respect it is no different than the Stability and Growth Pact it replaces, with serious weaknesses. Feldstein cites the weaknesses in the language of the agreement. Each eurozone country is required to limit its"cyclically adjusted" budget deficit to 0.5% of GDP and bring its debt down to 60% of GDP. Compliance will be performed by the European Court of Justice and fines imposed. In practice the questions loom large- for a country like Spain with a 23% unemployment rate, isn't all of the 6% budget deficit cyclical? Again the agreement says deficits are calculated "net of one-off and temporary measures." Under this provision a lot of the stimulus programs would be considered in the category of "one-off." Other language lets eurozone countries frame budgets based on "exceptional circumstances" and "periods of severe economic downturn." Italy has declining economic growth, does it make sense to have a large budget surplus in that situation to lower debt to GDP, and how does that goal relate to "exceptional circumstances."...

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In remarks published in English on the Bundesbank website, Jens Weidmann, Bundesbank president and member of the ECB governing council said: "The ECB should be aware of its independence. This also requires it to respect, and not to overstep its own mandate." This is seen as a pushback by the Bundesbank to ECB president Draghi's comments on July 23, 2012, about doing all that is necessary to keep the eurozone together. Weidmann referring to the situation in France recollecting his days as a student in France in 1987, said there were "two different worldviews colliding." And that this situation prevailed in all political debates right up to the present day. He says about deflationary tendencies -"If these countries go through adjustment processes which result in decreases in wages and prices, then this constitutes one-off shifts in the wage and price structure and not deflation."

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Full face veils for women are now a topic in the immigration debate in Germany. Interior Minister Thomas de Maiziere now favors a ban on full face veils, agreeing with state level party members of the Christian Democratic Union. CDU interior ministers are now in agreement to come up with legislation to require that people show their faces where necessary "for living together in our society." Maziere says the Social Democrats SPD party agrees with much of this agreement, called the Berlin declaration. Chancellor Merkel told news group RND that she understands and accepts that "a fully covered woman has little chance of integrating in Germany." Some CDU officials such as state premier of Hesse, Volker Bouffier, say its all about liberating women, because he thinks it simply isn't true that this is what a woman wants. Other CDU leaders interior ministers in Berlin and Mecklenburg, Henkel and Caffier, say dual citizenship needs to be abolished. The Berlin Declaration put off this issue by requiring a report on this by 2019, on whether it helps integration. The Berlin Declaration calls for 15,000 additional police officers, though the association BDK of police officers says this is not enough. ...

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Actually some of this is a healthy development as more nations and people have a stake in the world economy. Take the Brazil situation for example . Clearly the Brazilian people are more favorable to globalization and its benefits than they were a decade ago at the height of the Asian crisis and the contagion effect on Brazil. Actually the advantages of free trade and a global trading system that benefits Brazil as well as China and India and other countries that buy its commodities such as iron ore is more now than ever because these nationas are benefitting from this trade. Because of the high prices of commodities and the agricultural products of Brazil, it has a currrent account surplus and its currency is strengthening. Instead of having to go to the IMF for assistance Brazil has large foreign exchange reserves that support its currency and which help it push up its investments as a share of GDP from 19% to closer to 25%, which should enable it to sustain about 5% growth year after year., according to Sergio Vale of MB Associados. A strong real, lower interest rates, and consumer credit have boosted the purchasing power of the middle class and the antipoverty programs of the Lula government have helped the poorer classes have a stake in the development. According to a recent Observador/Ipsos survey 23 million Brazilians have left social classes D and E and joined class C whose distinctive markings are a rented apartment, a car and some new gadgets. Actually quite to the contrary of the impression created by this article Brazil according to a former central bank governor is now showing a new enthusiasm for this kind of development which encompasses free trade and markets, a feeling that the stockmarket is not a casino and being part of the world economy is a good thing. The big discoveries of oil at Tupi and Carioca-Sugar Loaf in Atlantic offshore waters by Petrobras even though they are in miles deep waters and require special expertise must only have reinforced this mood. The danger to Brazil's enthusiasm comes not from nationalism of different countries trying to find better ways of meeting the aspirations of their people but from the risks in a global slowdown that started with the US subprime and mortgage crisis, the resulting credit tightening, and fall in consumption thats expected after years of overspending by the American consumer. Its now upto these individual countries, like Brazil, China, India and Russia, Japan as well as Germany France and other countries that are not directly part of the housing bubble and subprime and mortgage securitization mess affecting the USA, and the UK and Ireland and Spain to a lesser extent, to find ways of maintaining more modest but still substantial growth to meet the growing aspirations of people in these countries. In this sense the policy errors and regulatory errors made during this last decade in the US will actually have hurt the world economy and markets in a serious manner, and it is this that has now to be managed in a better way by these countries with the close cooperation between them and the USA. The situation in Brazil is repeated in the experience of India, China and Russia where for the first time there is enthusiasm for being part of the world economy. In the light of this development there is more reason for hope and more need for careful navigation mechanisms for these and other countries to weather the difficulties from a global slowdown and still sustain development that itself could help the USA work its way out of the current crisis through its exports....