Italy starts countdown to risky life after Draghi 5 Jul 2022 The 5-Star party may bring down Mario Draghi’s coalition government. A crisis would hurt growth and raise the chances of a less EU-friendly executive. Worse, market jitters due to rising political uncertainty may complicate the European Central Bank’s efforts to tame bond yields.
Macron’s travails could turn into fiscal mess 5 Jul 2022 The French president’s electoral platform was bound to stress the state budget. Now a deadlocked parliament may only agree on increased spending and more tax cuts. With borrowing above 110% of GDP, and no credible plan to control public finances, Paris’s debt looks vulnerable.
Capital Calls: Chinese fishermen, UK’s Jupiter 28 Jun 2022 Concise views on global finance: Joe Biden goes after the People’s Republic’s commercial fishing fleet; the fund manager’s new chief executive has an even tougher task than his predecessor.
Capital Calls: Russian default, Inflation and debt 27 Jun 2022 Concise views on global finance: Moscow defaulted on its foreign debt for the first time in over 100 years, leaving bondholders in limbo; the Bank for International Settlements wants rates raised “quickly and decisively”, but is also worried about higher borrowing costs.
Cost of Asia’s recurring floods will trickle down 24 Jun 2022 Swathes of Bangladesh and India’s Assam state were swamped this week, affecting 9 mln people. Insurers shy away from offering cover for such disasters if they’re too frequent. For countries on the front lines as climate change worsens, the burden on the public purse will rise.
ECB’s crisis weapon pledge is vague and late 15 Jun 2022 The European Central Bank will “accelerate” work on a new tool to control soaring bond yields from weak sovereigns. The lack of detail reflects divisions within the bank on when and how to use such a programme. It’s an invitation to markets to test the ECB’s resolve yet again.
U.S. sanctions give Russia default it doesn’t need 25 May 2022 The Treasury won’t let Moscow pay U.S. bondholders, tipping it into default. The move further isolates Vladimir Putin but will have minimal impact. It’s a surreal twist given Russia can still pay its debts, while battlefield foe Ukraine urgently needs relief but isn’t getting it.
German fiscal obsession is ill-timed and untenable 19 May 2022 Finance Minister Christian Lindner is keen to reinstate a debt limit that was waived during the pandemic. The Ukraine war means the economy is facing new problems. And massive investments are needed in the green transition. This is no time for fiscal fetishes.
Russia plays the fool in its own default theatre 3 May 2022 Moscow looks set to meet foreign currency bond payments, after saying a month ago it could only pay in roubles. High oil and gas prices mean it has ample revenue to meet its obligations. But the debt grandstanding may not yet be over, notably if the EU imposes an energy embargo.
China takes new tack on emerging market debt 27 Apr 2022 Beijing has agreed to work with the Paris Club of official creditors to clear up Zambia’s $17.3 bln debt mess. That’s a major shift from the bilateral approach it usually adopts. An even bigger sign of progress would be accepting a haircut on the $5.8 bln that China is owed.
Draghi’s bond-buying triumph lacks obvious sequel 13 Apr 2022 The ECB’s plans to tighten monetary policy and the Ukraine war revive fears that weak euro zone members’ borrowing costs will soar. Though the former central bank boss tamed debt spreads in 2012, a repeat is tricky. Besides, governments that struggle can use tools Draghi devised.
Fed’s 5-year balance sheet plan may be interrupted 7 Apr 2022 The U.S. central bank aims to reduce its $9 trln of assets by $95 bln a month. At that pace, even already fat pre-pandemic levels might not be reached until early 2027. That's a long time in economics, and in politics. Like the last attempt to slim down, it risks being thwarted.
Russia takes big step towards default 7 Apr 2022 Russia will pay foreign bondholders roubles instead of dollars. A default looks likely after a 30-day grace period. Many investors, stuck with a currency they can’t use and facing an uncertain legal battle for any recovery, may prefer to take losses today and sell.
Ukraine should be rebuilt without Russian money 6 Apr 2022 Reconstruction may cost as much as $200 bln, more than Europe’s post-WW2 Marshall Plan in today’s money. Even if Kyiv wanted Russia’s roubles, Western finance will keep Ukraine in Europe’s orbit. Moscow’s main penance for the carnage will be in the form of long-term sanctions.
Macron’s smallest problem is winning second term 4 Apr 2022 The French president’s lead over contender Marine Le Pen is shrinking. But a decent economic record and a divided opposition mean he’s the favourite to win the upcoming election despite asking the French to work more. Tougher years lie ahead to implement his manifesto.
Where odd U.S. yields lead, Europe will follow 30 Mar 2022 Two-year U.S. Treasuries briefly yielded more than 10-year ones. There’s some way to go before such an inversion happens in the euro zone. But high inflation pushed German two-year bond yields into positive territory for the first time since 2014. A replay may be on the cards.
Joe Biden nods at fiscal discipline 28 Mar 2022 The U.S. president is pitching a 2023 budget that would make America's deficit about $1 trln smaller than it would otherwise become over a decade. One proposal is a billionaires’ tax. Though that's a tough political sell, the package is a modest tilt toward a healthier ledger.
ECB squeeze leaves room for fiscal war response 24 Mar 2022 The central bank is fighting inflation and cutting bond purchases, leaving European governments to shoulder the cost of the Ukraine war. That may add up to 4% of GDP to public debt loads inflated by the pandemic. But even with rising yields, national budgets can afford it.
Russia kicks default drama into future 17 Mar 2022 Moscow says it sent $117 mln due in bond interest payments. While sanctions made the decision painful, not paying its dues or offering roubles instead of dollars would have meant years of legal disputes and made the economy even more dependent on oil. That may still happen.
Emmanuel Macron changes stripes as election nears 15 Mar 2022 The French president’s chances of winning a second term have been boosted by his performance during the pandemic and since Russia’s attack on Ukraine. But the main plank of his platform is to “protect” the French. That’s a far cry from the bold reformer who ran five years ago.