Global economy

A former colleague on the FT (no names, but he now runs the UK’s Office for Budget Responsibility) used to muse that a useful all-purpose headline for any story about an emerging market economy was “[Insert Name Of Country Here]: Structural Reform?”

Putting “Greece” into that formula after Syriza’s resounding victory in Sunday’s election, where do we stand? Every pundit in Europe is retailing some version of the insightful observation that it is all about whether Syriza — and its leader, Alexis Tsipras, Greece’s new prime minister (above) — can be induced to do enough structural reform to buy the fiscal leeway and debt relief it wants.

The problem with this view is that “structural reform” is a crude and unhelpful term. Read more

(c) WEF

Holding the World Economic Forum in a ski resort in the Alps sounds like an eccentric decision. In fact, the choice of Davos as a location for the WEF is very clever. It is such a pain to get here that once the delegates are in Davos, they feel compelled to stay. If the WEF took place in a big city, there would be a lot more flitting in-and-out. Read more

It is a momentous day for the European Central Bank as it launches full-scale government bond buying. Mr Draghi started speaking at 13.30 GMT and the press conference usually lasts for an hour.

By Ralph Atkins and Lindsay Whipp

 

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  • Magnus Carlsen retained his crown as world chess champion without the aid of supercomputers or a huge team of assistants – reinforcing the view that he is the best player the game has ever seen
  • Foreign travellers are returning to the pyramids in Giza and Cairo’s ancient markets as Egypt’s tourist industry picks up, a sign that the country’s broader economic picture may be improving
  • “Lung washing tours” are the new thing in Chinese tourism, as smog drives mainland tourists into novel migration patterns to escape the worst days of autumn
  • As China increasingly uses its state-owned television network as an arm of the law, not only are its journalists embarrassed to wear its logo in public – they don’t even believe the things they report (Foreign Policy)
  • Mumbai gangsters have returned to targeting Bollywood celebrities in an effort to find a “new business model”, police in India’s commercial capital say (Guardian)

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November’s press conference by European Central Bank President Mario Draghi comes a week after the US Federal Reserve ended its monetary stimulus programme, and the Bank of Japan put a rocket booster under its already large volumes of bond buying.

In contrast, investors and analysts are expecting the ECB’s monetary policy committee to sit tight this month. It has announced that rates remain at a record low and predictions are for no change in its private-sector asset buying programme. But with eurozone deflationary fears showing no signs of receding in the stagnating economy, investors will be wanting Draghi to instil confidence in markets that he has his own bazooka ready to fire. By Lindsay Whipp and Emily Cadman

 

  • Hungary’s introduction of the world’s first internet tax is just the latest in a batch of unorthodox uneconomic policies, dubbed ‘Orbanomics‘, that some say are leading to increased government control over the economy
  • Through their alliances with jihadis and actions that flout the democratic will, Libya’s Islamists are courting disaster for themselves and their country
  • The disappearance of 43 students has brought attention back to Mexico’s security woes and away from its economic reforms, threatening to tarnish President Enrique Peña Nieto’s record of success
  • Quantitative easing in the US has kicked back into gear Wall Street’s securitisation machine – providing a supply of risky assets that bundle together car loans, corporate debt and mortgages
  • The forgotten Yazidi refugees who once captured the world’s attention now sit outside the spotlight, wondering how they will survive the winter, reports Foreign Policy

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The biggest development story of the last two decades has been the vast reduction in the number of the world’s extreme poor thanks to the rapid growth of China and other developing economies. But how does the US, the world’s richest economy, fit in when you apply the $2/day poverty line the World Bank and others normally use to grade much poorer countries?

In a fascinating new paper, researchers at the Brookings Institution look at exactly that question and come up with some potentially shocking findings, albeit ones that come with plenty of caveats attached. Read more

Treasury Select Committee...Bank of England governor Mark Carney answers questions in front of the Treasury Select Committee in the House of Commons, central London, on the subject of the Bank of England's quarterly inflation report and Scottish independence. PRESS ASSOCIATION Photo. Picture date: Tuesday March 11, 2014. Later today he will answer questions on the 'Economics of currency unions' and the Bank's Foreign Exchange Market Review. See PA story ECONOMY Bank. Photo credit should read: PA Wire

The Bank of England will weigh the weakness of Britain’s wage growth against the strength of its economic recovery when it delivers fresh forecasts in its quarterly inflation report on Wednesday morning, containing signals about when a rise in interest rates is likely.

<To be delivered in tandem with the latest UK employment data, the BoE’s estimates of the amount of slack in the economy will be one of the most closely watched metrics. At the last quarterly inflation report in May, the BoE estimated the amount of spare capacity was between 1 – 1.5 per cent, judging there was room for this to narrow further before rates tightened.

By Sarah O’Connor and Claer Barrett

 

(Getty)

By Christian Oliver and Richard Milne

Europe’s leaders are preparing for a trade war with Russia by mapping out the battlefields on which they see the highest risk of casualties.

In data released on Friday, the European Commission identified the agricultural exporters most vulnerable to Moscow’s trade embargo on EU produce. Spanish peaches, Dutch cheeses and Polish apples find themselves squarely on the front line.

Polish fruit exports to Russia were valued at €340m last year and win the dubious honour of being the most exposed crops. The Poles have launched an impassioned public campaign to try to switch to more domestic consumption with their “Eat an apple to spite Putin” slogan.

The Netherlands (with dairy exports to Russia of €257m in 2013) and Finland (€253m) are at most risk on the milk and cheese front. Spain and Greece are vulnerable in relation to citrus, with stoned fruit such as peaches and nectarines also being described by farmers as being at crisis point in terms of storage overload and no market to go to. Read more

Once Indonesia has finally got through counting the votes and has separated the two presidential candidates, it will have a new leader. That puts the nation of 250m people in good company. In Asia, in the last 18 months, countries with approaching a total of 3bn inhabitants – including China, India, Japan and South Korea – have changed their leadership. Even the Thais have a new man in charge, though he had to organise a coup to get there.

One country that has not altered its leadership is the Philippines. Benigno “Noynoy” Aquino, has been president for four years. By the standards of his perennially disappointing country of nearly 100m people, his time in office has been a roaring success. Growth has stabilized above 6 per cent, inflation is low and debt and budget deficits have been brought under firm control. The economy is even creating jobs – something it has sorely lacked for years – in the booming outsourcing sector. Call centres in the Philippines employ more people than ones in India. Ratings agencies have responded to improving macroeconomic conditions, upgrading sovereign debt to investment grade. Philippine conglomerates have started investing significant sums at home. Read more

For those expats bemoaning the cost of a burger in Geneva or rent in Tokyo, it could be worse. They could be living in Luanda.

The tight supply of international standard housing in Luanda has put the Angolan capital top of the list of the most expensive cities in the world, according to a survey by consultants Mercer of the costs of living abroad. It held the same position last year as the oil boom continues to suck in expats. Read more

It was a fateful moment in Colombia’s long and troubled history of drug-fueled violence. On July 2 1994 Andrés Escobar, captain of the national football team, was shot six times in the chest in the parking lot of a bar in Medellín.

The killing was supposedly retribution for Escobar scoring an own goal days earlier, which hastened the team’s departure from the World Cup in the US. As a historian friend says, there was always a lame excuse to kill someone in Colombia in those days. Read more

  • Borzou Daragahi reports on how the violence in Syria, Iraq and Lebanon is merging into a single sectarian war whose Shia and Sunni protagonists are receiving support from regional powers “amid a dizzying and ever-changing cast of militia leaders, jihadi adventurers, sectarian politicians and rogue gangs dressed up as political groups”.
  • As for the conflict in Ukraine, Courtney Weaver discovers that dozens of Chechen fighters have joined pro-Russian separatists in the east of the country, claiming to have been ordered there by Chechen leader Ramzan Kadyrov. “They’ve killed one of our guys and we will not forget this,” said Magomed, a 30 year-old Chechen fighter with a wolf tattooed across his chest. “We will take one hundred of their lives for the life our brother.”
  • On the European front, “the outcome of the European elections (at home and elsewhere) paves the way for Italy to play an active role in Europe,” says the Bruegel think-tank as it chews over the success of Matteo Renzi and the Democratic party. But now that Renzi has a mandate, “Italy should play a role and put itself forward as a decided leader in the project of more European integration.”
  • One for a quiet moment and a cup of coffee: The Guardian has gone deep into “enemy territory” and produced an outsider’s guide to the City of London. “I am trying to understand the culture of the City; to find out whether those who work there have learned the lessons of the crash of 2007-08, and if the City can ever be made ‘disaster proof’,” writes Stephen Moss.
  • On that note, Martin Wolf ponders the crisis-prone nature of capitalism and asks what governments must do to minimise the damage without having to resort to the comprehensive measures needed after the last crash.

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