Italy can be bolder with its budget laxity 28 Sep 2016 Rome will delay its deficit goal next year, citing emergency factors like refugees. Brussels may quibble, but Italy needs growth, and a fiscal crunch could hurt Prime Minister Matteo Renzi's chances in a critical referendum. The leeway is too modest and fleeting to ensure either.
Trump would follow in Obama’s debt footsteps 22 Sep 2016 The Republican presidential nominee's economic plan would add $5 trln in U.S. borrowing, a new study estimates. Barack Obama tallied about $8 trln during his two terms. Adding debt for infrastructure makes more sense than for cutting taxes on the rich. Both kick the can, though.
Freak euro bonds show ECB’s power – and its limits 8 Sep 2016 The central bank’s negative rates and bond-buying have forced down borrowing costs: German bearing maker Schaeffler is paying around 3 pct on risky notes that roll up interest payments. Yet smooth credit markets have not boosted investment. Europe’s governments need to step up.
Saudi faces choice of austerity over indulgence 7 Sep 2016 Falling oil prices may lead Riyadh to cut up to $20 bln of infrastructure projects. The risk is it might trigger a construction slump. Of course, Saudi could just increase borrowing and continue building in the desert. Restraint is perilous but would make more financial sense.
State spending revival would be good for growth 2 Sep 2016 As central banks struggle to boost economies, world leaders meeting at the G20 are once again looking to government-led investment. Ultra-low sovereign yields make borrowing to spend look a no-brainer. But even a small stimulus can face formidable political hurdles back at home.
Apple’s tax spat could blight European banks 31 Aug 2016 The tech giant’s $14.5 bln EU tax bill has shades of a $9 bln U.S. fine handed to BNP Paribas in 2014. Despite big differences, both have the whiff of a transatlantic raid on those deemed able to pay. EU banks awaiting U.S. fines, like Deutsche Bank and RBS, have cause to fret.
Europe’s bite at Apple could leave bad aftertaste 30 Aug 2016 The European Commission wants companies to pay their fair share of tax. Zeroing in on Apple’s alleged sweetheart deal with Ireland fits that agenda. But it could misfire. Reeling from Brexit, Dublin might feel pressure to make itself even more friendly to corporate taxpayers.
UK fat-busting plan is incoherent 18 Aug 2016 A tax on sugary drinks is good for the public health and purse but may hit poorer families in the short term. Yet the government shirked another trade-off: restricting advertising of unhealthy foods, which could have changed consumer behavior at the expense of company profits.
Portugal’s three bad B’s: banks, budget, Brexit 22 Jul 2016 Lisbon’s banks are saddled with bad loans, and need capital. The government is caught between Brussels’ fiscal rules and a weak coalition. And the UK vote to leave the EU may hurt already grim growth. The three B’s may imperil Portugal’s BBB rating, and blow up its bond yields.
China can afford to quit infrastructure binge 13 Jun 2016 State backed enterprises stepped up fixed-asset investment by a fifth in the year to May. Much of this spending will be wasteful and will add to the country’s huge debts. Given a fairly robust labour market, China could safely take a much harder line on inefficient SOEs.
Money-for-nothing idea will survive Swiss rebuff 6 Jun 2016 Welfare systems once seemed as outlandish as the proposed guaranteed basic income for all that has been rejected by Swiss voters. Advocates must provide more details on funding and the potential social impact. Other countries, such as Finland, will be the lab for the experiment.
“Because it’s France” no basis for EU budget rules 1 Jun 2016 Jean-Claude Juncker used that to explain why France wins more fiscal leeway. This might be worrying coming from the head of the European Commission, which enforces budget discipline, if it weren't already plain. Blindly applying rules is foolish, as is regular failure to do so.
Japan is right to choose growth over higher taxes 1 Jun 2016 Prime Minister Shinzo Abe’s decision to delay a planned consumption tax increase is a sensible gamble. While the budget deficit may now fall more slowly, a hike could have jeopardised growth. This would have posed an even bigger risk to the long-term health of public finances.
Trump tries morphing political fantasy into reality 12 May 2016 The White House hopeful had a kumbaya moment with GOP leaders. He has also dialed back some of his ideas on taxes, entitlements and U.S. debt. Broadening his appeal is key to wooing party elders, donors and voters. The biggest obstacle to the balancing act is Trump himself.
Euro zone needs better glue than Canadian kindness 29 Apr 2016 Portugal’s eligibility for ECB bond-buying hangs on the rating of Toronto-based agency DBRS. Effectively, the ECB has outsourced the decision of whether to cut off a country. It works to a point: it’s hard to imagine the ECB abandoning Italy or France whatever their ratings.
Will retirees get just 4 pct long-term returns? 28 Apr 2016 That’s a scenario laid out in a new McKinsey Global Institute report. The idea is that returns in recent decades – and expectations that are still above 7 pct – have been inflated by effects that are now disappearing. If so, Gen Xers will retire even poorer than they expect.
Reserve managers take risks at everyone’s peril 25 Apr 2016 Sub-zero rates are forcing those who manage central bank war chests to invest in riskier, less liquid assets, a new survey shows. Venturing out of their comfort zone could make these closely-watched investors twitchier. Bad news given their outsize influence on market sentiment.
Schaeuble plays risky political games with ECB 13 Apr 2016 Low European rates fuel support for the far right, Germany’s finance minister says. Such sniping jars with Germany’s usual passion for central bank independence. Wolfgang Schaeuble may be aiming to attract disgruntled voters rather than slam the ECB. His strategy could backfire.
Portugal can gain if it loses Novo Banco battle 5 Apr 2016 Bondholders are suing Lisbon’s central bank, arguing losses imposed on the stricken lender were arbitrary. Losing the case would complicate Novo Banco’s turnaround. But enforcing the principle that governments should use bail-ins fairly would help all banks, even in Portugal.
Hollande is in worse position than French economy 4 Apr 2016 Unemployment keeps hitting new highs but at least consumption and growth are holding up pretty well. President Francois Hollande’s plight is far more parlous. High-profile missteps are taking a toll on both his own political prospects and those of his ruling Socialists.