Fidest – Agenzia giornalistica/press agency

Quotidiano di informazione – Anno 32 n° 312

Posts Tagged ‘world economy’

Covid-19 infects the world economy

Posted by fidest press agency su lunedì, 9 marzo 2020

If the final week of February saw financial markets jolted awake to the dangers of a covid-19 pandemic, the first week of March has seen policymakers leaping into action. The realisation that global gdp will probably shrink for part of this year, and the looming risk of a financial panic and credit-crunch, has led central banks to slash interest rates at a pace last seen in the financial crisis of 2007-09.
On March 3rd the Federal Reserve lowered its policy rate by 0.5 percentage points, two weeks before its scheduled monetary-policy meeting. Central banks in Australia, Canada and Indonesia have also cut rates. The European Central Bank and the Bank of England are expected to follow. If the money-markets are right, more Fed cuts are in store. A composite measure of the global monetary-policy rate, compiled by Morgan Stanley, a bank, is expected to fall to 0.73% by June, from 1% at the start of the year and 2% at the start of 2019. (font: The Economist)

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Why Germany’s current-account surplus is bad for the world economy

Posted by fidest press agency su domenica, 9 luglio 2017

germanyTHE battle-lines are drawn. When the world’s big trading nations convene this week at a G20 summit in Hamburg, the stage is set for a clash between a protectionist America and a free-trading Germany. President Donald Trump has already pulled out of one trade pact, the Trans-Pacific Partnership, and demanded the renegotiation of another, the North American Free-Trade Agreement. He is weighing whether to impose tariffs on steel imports into America, a move that would almost certainly provoke retaliation. The threat of a trade war has hung over the Trump presidency since January. In contrast, Angela Merkel, Germany’s chancellor and the summit’s host, will bang the drum for free trade. In a thinly veiled attack on Mr Trump, she delivered a speech on June 29th condemning the forces of protectionism and isolationism. An imminent free-trade deal between Japan and the European Union will add substance to her rhetoric
There is no question who has the better of this argument. Mr Trump’s doctrine that trade must be balanced to be fair is economically illiterate. His belief that tariffs will level the playing field is naive and dangerous: they would shrink prosperity for all. But in one respect, at least, Mr Trump has grasped an inconvenient truth. He has admonished Germany for its trade surplus, which stood at almost $300bn last year, the world’s largest (China’s hoard was a mere $200bn). His threatened solution—to put a stop to sales of German cars—may be self-defeating, but the fact is that Germany saves too much and spends too little. And the size and persistence of Germany’s savings hoard makes it an awkward defender of free trade. At bottom, a trade surplus is an excess of national saving over domestic investment. In Germany’s case, this is not the result of a mercantilist government policy, as some foreigners complain. Nor, as German officials often insist, does it reflect the urgent need for an ageing society to save more. The rate of household saving has been stable, if high, for years; the increase in national saving has come from firms and the government. Underlying Germany’s surplus is a decades-old accord between business and unions in favour of wage restraint to keep export industries competitive (see article). Such moderation served Germany’s export-led economy well through its postwar recovery and beyond. It is an instinct that helps explain Germany’s transformation since the late 1990s from Europe’s sick man to today’s muscle-bound champion.There is much to envy in Germany’s model. Harmony between firms and workers has been one of the main reasons for the economy’s outperformance. Firms could invest free from the worry that unions would hold them to ransom. The state played its part by sponsoring a system of vocational training that is rightly admired. In America the prospects for men without college degrees have worsened along with a decline in manufacturing jobs—a cause of the economic nationalism espoused by Mr Trump. Germany has not entirely escaped this, but it has held on to more of the sorts of blue-collar jobs that America grieves for. This is one reason why the populist AfD party remains on the fringes of German politics.
But the adverse side-effects of the model are increasingly evident. It has left the German economy and global trade perilously unbalanced. Pay restraint means less domestic spending and fewer imports. Consumer spending has dropped to just 54% of GDP, compared with 69% in America and 65% in Britain. Exporters do not invest their windfall profits at home. And Germany is not alone; Sweden, Switzerland, Denmark and the Netherlands have been piling up big surpluses, too.For a large economy at full employment to run a current-account surplus in excess of 8% of GDP puts unreasonable strain on the global trading system. To offset such surpluses and sustain enough aggregate demand to keep people in work, the rest of the world must borrow and spend with equal abandon. In some countries, notably Italy, Greece and Spain, persistent deficits eventually led to crises. Their subsequent shift towards surplus came at a heavy cost. The enduring savings glut in northern Europe has made the adjustment needlessly painful. In the high-inflation 1970s and 1980s Germany’s penchant for high saving was a stabilising force. Now it is a drag on global growth and a target for protectionists such as Mr Trump.Can the problem be fixed? Perhaps Germany’s bumper trade surplus will be eroded as China’s was, by a surge in wages. Unemployment is below 4% and the working-age population will shrink, despite strong immigration. After decades of decline, the cost of housing is rising, meaning that pay does not stretch as far as it used to. The institutions behind wage restraint are losing influence. The euro may surge. Yet the German instinct for caution is deeply rooted. Pay rose by just 2.3% last year, more slowly than in the previous two years. Left to adjust, the surplus might take many years to fall to a sensible level.The government should help by spending more. Germany’s structural budget balance has gone from a deficit of over 3% of GDP in 2010 to a small surplus. Officials call this prudence but, given high private-sector savings, it is hard to defend. Germany has plenty of worthwhile projects to spend money on. Its school buildings and roads are crumbling, because of the squeeze on public investment required to meet its own misguided fiscal rules. The economy lags behind in its readiness for digitalisation, ranking 25th in the world in average download speeds. Greater provision of after-school care by the state would let more mothers work full-time, in an economy where women’s participation is low. Some say such expansion is impossible, because of full employment. Yet in a market economy, there is a tried and trusted way to bid for scarce resources: pay more.Above all, it is long past time for Germany to recognise that its excessive saving is a weakness. Mrs Merkel is absolutely right to proclaim the message of free trade. But she and her compatriots need to understand that Germany’s surpluses are themselves a threat to free trade’s legitimacy. (by The Economist) (photo: germany)

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Economic Forum: Final Statement by the Cercle des Économistes

Posted by fidest press agency su domenica, 14 luglio 2013

English: Various Euro bills.

English: Various Euro bills. (Photo credit: Wikipedia)

AIX-EN-PROVENCE, France, /PRNewswire/ –The Clash of Times: the World Economy between Emergencies and the Long Term
The world has never been confronted by such difficulty in managing the gaps between time-related horizons. The clash of times is the gap between the time of politics, that of populations, and that of institutions. It is also the conflict between the short time of the financial world and that of the corporate world.The difficulty in getting out of the financial crisis precipitates this conflict of times. Our challenge is to conceive the transition to balanced and sustainable growth by reconciling the need to go quickly with the need to protect the vulnerable groups.
In Europe, the Euro zone crisis is far from being resolved, but the matter of urgency is also to find new political solutions to revive growth. In France, the matter of urgency concerns structural reforms. The youth are the great sacrifice of the times we are going through. That’s why the Cercle des économistes has organised a competition called “Invent 2020! It’s the students’ turn to speak.”12 proposals to bring back confidence:In Europe, exit from the crisis will happen on two conditions: a realistic agenda for the reduction of public debt and transfer of savings from the North to the South:
1. Implement a single European mechanism to restructure the banks.
2. Risk management that favours long-term investment
3. Establish a counter-cyclical European unemployment insurance
For France, six measures to speed up the competitive impact:
4. Overturn the CICE (tax credit for competitiveness and employment), to lower than the social contributions in 2014.
5. Continue to reform the labour market through better social dialogue, by simplifying the branch system (reduce the current 600 branches to 40).
6. Implement a pension reform that will apply only to new entrants in order to start the transition towards structural balance.
7. Conduct a supply policy in real estate (free the land), transport and distribution.
8. Cause a technological breakthrough in the environment industry by redirecting the R&D tax credit to the clean energy and technology sectors.
9. For an efficient State, eliminate the structural doubles with a simplified architecture of local and regional authorities and agencies that do not rely on assigned taxes.
Youth is a wonderful asset for France. All youth-related policies go through a transfer of resources to the young, which could reach 1 to 2 points of the GDP.
10. Create a “youth contract”: a monetary allowance against contractual commitment to look for a job or go on a training scheme leading to a qualification for the 1.9 million young people who are neither students, nor employees, nor on a training scheme.
11. Increase the second chance schools tenfold
12. Promote the integration of young people on the labour market:
– Give each young person the right to an apprenticeship
– Make trial periods and work-study combinations tax exempt

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Before meeting president Hu Jintau of China

Posted by fidest press agency su giovedì, 2 aprile 2009

London Winfield House. President Obama:  I just want to welcome President Hu and thank him for extending himself to come to visit and allowing us to have our first face to face conversation. Obviously China is a great power.  It has a long and extraordinary history.  The relationship between the United States and China has become extremely constructive.  Our economic relationships are very strong.  And I’ve said publicly, and I continue to believe, that the relationship between China and the United States is not only important for the citizens of both our countries, but will help to set the stage for how the world deals with a whole host of challenges in the years to come. So I’m looking forward to a very productive and open conversation about not only the state of the world economy during this time of crisis, but also know we can work cooperatively together to improve peace and security for both nations and the world at large. I believe that as strong as our relationship already is, I am confident that we can make it even stronger in the years to come. President Hu:  (As translated.)  I’m very happy to have this opportunity to meet with President Obama.  It’s our first face to face meeting. Since President Obama took office we have secured a good beginning in the growth of this relationship.  President Obama and I stayed in close touch, and foreign ministers of our two countries have exchanged visits in a short span of time. In addition, the two sides both have reached agreement on the characterization of the China-U.S. relationship in this new era and on the mechanism of the strategic economic dialogues.  These results have not come easily, which deserve our both sides’ efforts to cherish. And as President Obama rightly said just now, sound China-U.S. relationship is not only in the fundamental interest of our two peoples and our two countries, but also contributes to peace, stability and prosperity in the Asian Pacific region and in the world at large. The Chinese side is willing to work together with the U.S. side to secure even greater progress in the development of the China-U.S. relationship, and I’m willing to establish a good working relationship and personal friendship with President Obama. I’m sure my meeting with President Obama today will be positive and productive. President Obama:  If I’m not mistaken we’re going to have our respective representatives on the strategic and economic dialogue appear with us, so that everybody knows who’s going to be talking. So these high-level ministers will be charged with working in a very detailed and constructive way on issues of mutual interest to our two countries.  And we are very grateful to President Hu for designating such distinguished ministers who are going to be working very constructively with Tim Geithner, my Secretary of Treasury, as well as Hillary Clinton, the Secretary of State.

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