Economics

China’s woes make Plaza Accord 2.0 less outlandish

16 Oct 2024

If Donald Trump becomes US President, he wants a weak dollar and taxes on Chinese imports. He may use the threat of tariffs to get Beijing to boost the yuan, an echo of the 1985 Plaza Accord. A strong currency hurts growth, but a trade war could be worse for President Xi Jinping.

US economy is partying, but voters are hungover

16 Oct 2024

Full employment and subdued inflation have the economy in its best shape in years. Despite a rocky Biden tenure, Kamala Harris enters the election with a chance to blunt Trump’s advantages. But bruised consumer feelings – and the overall wealth picture – are getting in the way.

Measured UK tax hike can avoid dealmakers’ Brexit

16 Oct 2024

Chancellor Rachel Reeves has to raise money in her Oct. 30 Budget and may up capital gains tax from 28% to 35%. That would require 2,000 buyout barons to pay $120,000 extra on their funds’ profits. Such a small hit would probably stave off a threatened private equity exodus.

Putin’s economic resilience rests on war addiction

15 Oct 2024

Sanctions and the fall in oil prices have hit the Russian economy. But growth has outpaced expectations since the 2022 Ukraine invasion thanks to high military spending, now at more than 6% of GDP. The reliance on ongoing conflict hides President Vladimir Putin’s vulnerability.

Nobel prize brings global inequality back in focus

14 Oct 2024

Economist Daron Acemoglu and two colleagues shared the Swedish award for showing why some countries are rich and others poor. Their findings – democracy and rule of law matter – are a reminder that huge disparities in income among, and within, nations remain a festering issue.

Old theories offer new insight into global rivalry

14 Oct 2024

The geographer Halfold Mackinder in 1904 proposed that future strife would revolve around control of Eurasia. Though the modern world is very different, it’s one way to understand conflicts in Ukraine and the Middle East and the showdown between the United States and China.

Italy has more to gain from France’s pain

14 Oct 2024

Rome borrowing costs are converging with Paris. Prime Minister Giorgia Meloni’s stable government is pledging to contain its deficit and pushing through reforms, at a time when its peer is in turmoil. To press home the advantage, though, Meloni will need to take bolder action.

France heads toward aimless short-term austerity

11 Oct 2024

PM Michel Barnier’s deficit-reduction plan mostly relies on 30 billion euros of tax hikes next year. That will hit growth just as corporate investment and consumer demand are flat. Long-term spending cuts would be a better solution. But this weak government cannot provide them.

UK government can still trip over lower fiscal bar

11 Oct 2024

Chancellor Rachel Reeves needs an extra 31 bln pounds in public investment by 2029 to boost the country’s anaemic growth. Easing the spending rules is a start. But without a clear plan and return targets, the Labour administration will fall into a debt trap of its own making.

Labor is on the Fed’s side against inflation

10 Oct 2024

A three-year low for US price rises amid robust job gains reverses the usual tension between employment and inflation. New workers and high productivity are key to the balance. But as Fed boss Jay Powell eyes rate cuts, a new president or fading Covid-era boons could topple it.

Hurricane Milton blows utilities into eye of storm

10 Oct 2024

The industry’s stocks have led the market thanks to prospects for AI-related electricity usage and lower interest rates. Such exuberance misses the inconvenient truth about mounting climate-related costs. Florida’s $170 bln NextEra epitomizes the tricky investment theses.

China’s stock market bazooka is yet to fire

10 Oct 2024

The People’s Republic recently unveiled a raft of measures to solve a housing bust and support the market, producing a pop of post-vacation enthusiasm. That’s now waning as investors await a bigger move. In this Viewsroom podcast, Breakingviews columnists discuss what comes next.

China’s consumers regain some lost lustre

7 Oct 2024

Daily cross-border travel is forecast to rise 19% for this year's Golden Week holiday, above pre-Covid volumes. Gamblers have also returned to Macau. Consumption bright spots are scarce, but more middle-class spending will stir hopes that Beijing's stimulus might gain traction.

Union flaws run amok on both sides of picket line

4 Oct 2024

Port workers on the US East Coast have negotiated a 62% pay rise over six years. The resolution seems fair. But the process has highlighted gross inefficiencies – from overpaid union leaders to a nebulous counterparty. A revamp of unions, in the absence of politics, is necessary.

French PM has a plan but lacks time to fix budget

4 Oct 2024

Michel Barnier is proposing 30 billion euros of spending cuts and tax hikes to shrink the country’s deficit. Even if a divided parliament approves, he will have to repeat the feat in future years to fill the fiscal hole. This government’s weak hold on power makes that unlikely.

China and India reveal emerging market mistakes

3 Oct 2024

Investors often assume stocks in developing countries track economic growth, while valuations are a guide to future returns. The diverging path of Chinese and Indian equities over the past decade shows the flaws in this approach. Better to pay attention to capital efficiency.

Middle East turmoil edges closer to global economy

3 Oct 2024

Military escalation between Iran and Israel may at some point affect the price of oil. In this Viewsroom podcast, Breakingviews columnists debate how the conflict may prompt a fresh inflationary headache for central banks – and how Saudi Arabia might offset that risk.

Deforestation U-turn takes EU down a risky road

3 Oct 2024

Brussels has proposed a 12-month delay to a law banning imports linked to tree-felling. It had looked like the so-called EUDR would come in on time, with measures to soothe irked trading partners. The risk now is that it gets defanged – and other EU climate goals follow suit.

Greece is unlikely victor in bank selldown race

3 Oct 2024

Athens sold 10% of National Bank, effectively ending the privatisation of the major lenders it rescued. Germany, the Netherlands, the UK and Ireland still own bank stakes. Greeks can thank continued government support and a strong economy, fuelled by rising investment.

Gulf turmoil will leave ratesetters on edge

2 Oct 2024

Israel’s riposte to Iran’s missile strike may see oil prices spike. The Fed, the ECB and peers struggled to contain inflation in 2022. A new energy crisis, along with a US docker strike, would force central banks to rethink rate cuts just as markets price them in.