The European Union should have money to help stabilise economies in a crisis, especially after the bloc’s post-pandemic recovery fund ends in 2026, European Economic Commissioner Paolo Gentiloni told a seminar on Thursday. Speaking at a European Central Bank seminar on euro zone fiscal policy, Gentiloni said that apart from such a fiscal stabilisation tool, EU fiscal rules, now under review, also needed a way to encourage public investment and a credible way to reduce public debt without hurting growth. “Coordinated, countercyclical fiscal policy has proved highly effective in cushioning ...

1Still no fiscal reforms but silent power shift towards Brussels The long-awaited discussion on how to modernise the eurozone’s fiscal rules will gain momentum in the second half of the year after the French presidential elections. The new German government has kept the door open to some reforms, even if we warn against too much optimism. There have hardly been any coalition agreements in any eurozone country in the past, spelling out upfront a roadmap to eurozone reforms. On substance, we don’t expect changes to the numerical fiscal rules but ...

A rebound in only one sector After a fall in September, French industrial production rebounded by 0.9% in October. Industrial production is still 4.5% below its pre-crisis level (-5.3% for manufacturing). October’s rebound is largely attributable to a strong increase in production in other transport equipment (excluding automobiles), which rose by 13.9% in one month, driven by aerospace construction. However, this sector remains heavily impacted by the coronavirus, with production still 19.6% below its February 2020 level, as is also the case in automotive production (-29.9% below its pre-crisis level). ...

1Inflation to stay above 3% throughout 2022 Supply chain strains, labour market shortages and the arrival of corporate pricing power have pushed inflation to a 30-year high. The Federal Reserve expects these influences to fade through 2022, but we are not so sure. Firms have millions of job vacancies to fill so competition to find workers with the right skill set will remain intense. Demand-supply issues are a global phenomenon with semiconductor producers warning shortages could last through 2023. In an environment of strong demand, record order backlogs and ongoing ...

China will cut to no more than 10 days the time required for approval of travel by U.S. business executives, its ambassador to the United States said on Thursday, promising to turn “an attentive ear” to concerns raised by businesses. Qin Gang, who arrived in the United States in July, told a dinner hosted by the US-China Business Council that Beijing would also work to make COVID-19 testing more convenient and allow executives to work during quarantine. Qin said Beijing was adopting President Xi Jinping’s direction on upgrading “fast track” ...

Statistics show that Omicron, a new variant of the novel coronavirus, might infect more juveniles and infants, and some vaccine manufacturers have said that the effectiveness of the current vaccines against Omicron is weaker. No wonder some countries, including Japan and Israel, have shut their borders again. The appearance of Omicron has shaken the financial and energy markets, and is another blow for the already struggling world economy. With the tightening of the United States’ monetary policy and the slowing down of the growth of the Chinese economy, Omicron will ...

Formal negotiations for an India-UK free trade agreement (FTA) are set to begin early next year as officials on both sides continue their engagement following the conclusion of working groups in October, the UK government said on Wednesday. A government spokesperson also dismissed a British media report indicating ruptures within the UK Cabinet over food safety standards concerns associated with the proposed UK-India FTA as completely untrue and insisted that government departments remain in lockstep towards a deal with India to open up huge opportunities for UK businesses. We look ...

China and the EU can forge complementarity in infrastructure connectivity, China’s Foreign Ministry said on Thursday, arguing against pitting infrastructure initiatives against one another, after the EU’s newly unveiled Global Gateway strategy was hyped by some as another response to the China-proposed Belt and Road Initiative (BRI). China welcomes all initiatives that help developing countries build infrastructure and foster common development, Foreign Ministry spokesperson Wang Wenbin told reporters on Thursday. There’s a lot of common ground between China and the EU in connectivity, and the two sides can be complementary ...

Bank of England policymaker Michael Saunders, who voted for an interest rate hike last month, said on Friday he wanted more information about the impact of the new Omicron coronavirus variant before deciding how to vote this month. “At present, given the new Omicron COVID variant has only been detected quite recently, there could be particular advantages in waiting to see more evidence on its possible effects on public health outcomes and hence on the economy,” Saunders said in a speech. But there were also risks from delaying a rate ...

Finnish central bank chief Olli Rehn stuck with his description of the current inflation spike as “transitory,” even as U.S. policymakers made the case this week for abandoning the term. “I do recognize that the micro experience of our citizens at the fuel pump is quite different from the macro reading of economists and central bankers,” Rehn told a conference. “Still, in our view, euro area inflation is mostly transitory… even if some of its components will probably prevail longer over the next year than previously expected,” he said. Source: ...

The US Congress has passed a stopgap bill to fund federal agencies until 18 February, avoiding a costly government shutdown over the festive season. In a 69-28 vote, the Senate backed the measure approved earlier by the House of Representatives. President Joe Biden is now expected to sign it into law. “I am glad that, in the end, cooler heads prevailed,” Senate Majority Leader Chuck Schumer said. The bill was passed hours before the funding would have stopped on Friday. This would have left unpaid millions of workers in the ...

If inflation continues to exceed expectations next year, the European Central Bank (ECB) could decide to raise interest rates in 2023, ECB policymaker Klaas Knot said in an interview published on Friday. “I cannot rule out an interest rate hike in 2023, if inflation continues to be higher than our base case scenario in 2022”, the head of the Dutch central bank told newspaper het Financieele Dagblad. “But we still consider the elevated inflation to be largely a temporary phenomenon.” Inflation in the 19-country currency bloc soared to a record-high ...

The strongest inflation pressures in at least 23 years crimped the recovery of British services companies from the COVID-19 pandemic in November and dented optimism for the coming year, a survey showed on Friday. The IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) fell to 58.5 in November from 59.1 in October, revised down slightly from a preliminary “flash” reading of 58.6. The survey’s gauges of costs paid by services companies and prices they charged to customers hit their highest levels since records started in 1998, which some Bank of ...

China’s industry ministry on Friday (Dec 3) unveiled a five-year plan aimed at the green development of its industrial sectors, vowing to lower carbon emissions and pollutants and to promote emerging industries so as to meet a carbon peak commitment by 2030. The world’s top greenhouse gas emitter is aiming to bring its carbon emissions to a peak by 2030 and become “carbon-neutral” by 2060. The Ministry of Industry and Information Technology (MIIT) reiterated the targets of cutting carbon dioxide emissions by 18 per cent, and energy intensity by 13.5 ...

Capital flows to emerging markets not including China suffered a “sudden stop” this quarter according to the Institute of International Finance, setting up some EMs poorly for an expected monetary tightening cycle in developed economies. “Our high-frequency tracking shows flows into non-China EM grinding to a halt this quarter,” said IIF economists, with “important emerging markets” all but acting as closed economies over the past few years. “Emerging market flows have gone into a de facto sudden stop.” Higher rate hike expectations have tracked the rise in inflation measures in ...