Fiscal Policy

Zimbabwe offers a way to test blockchain’s worth

5 Mar 2019

Even after a 60 pct devaluation, Harare’s monetary credibility is irreparably broken. That should make it an ideal test case for distributed ledgers replacing ropey central banks. Yet citizens’ justifiable distrust of the state doesn’t mean ceding monetary control is an easy fix.

Beijing strikes the right balance on stimulus

5 Mar 2019

The government lowered its growth target at the annual opening of parliament, as expected, and rolled out a $300 bln tax cut, which was less so. Officials will keep a hawkish eye on debt. The policy package looks like an effective, if awkward, way to support the real economy.

Hadas: GDP forecasters need to lower their sights

6 Feb 2019

Global growth predictions for 2019 are sinking. There are one-offs, like trade tensions, but larger trends are also at play. Demographics, undercounted new technological gains and China’s middle-income blues all drag down the numbers. The GDP errors carry big risks for debtors.

Italy recession is oddly helpful for EU fiscal row

31 Jan 2019

The economy contracted for the second quarter in a row at the end of 2018. Rome is increasingly likely to miss a budget deficit goal of 2 pct of GDP but will get away with it. Imposing austerity during a broad-based euro zone slowdown makes no economic or political sense.

Italy’s budget truce may yet herald 2019 hangover

19 Dec 2018

Rome’s anti-austerity executive has ended a damaging EU row by backing down over its deficit, cheering domestic asset prices. But its restraint looks largely cosmetic. Investors may soon fret about the risk of a recession and how to refinance public debt without much ECB support.

Italy saves EU budget battle for another day

13 Dec 2018

Spooked by hostile markets, Rome’s anti-austerity government is offering to cut its 2019 budget deficit goal. The U-turn could help avoid EU fines. But if the new targets are achieved by simply delaying promised freebies, tensions with the EU and investors may return next year.

Italian budget climbdown would be just a start

26 Nov 2018

The anti-austerity government may trim its 2019 budget deficit target to defuse a clash with the European Commission. That would ease financial market tensions which risked undermining any benefits of extra spending. The stimulus is still being spent in the wrong places, though.

Brexit vote plan is more twerp than TARP

23 Nov 2018

Market panic helped the U.S. government push its 2008 bank bailout through Congress. Theresa May might hope for a similar outcome if the UK parliament rejects her deal to leave the EU. The flawed analogy misunderstands markets, and forgets that Britain’s crisis is self-inflicted.

Italian savers send Rome a warning on debt

21 Nov 2018

Private investors are shunning an issue of sovereign bonds reserved for them. Lacklustre interest in the “BTP Italia” undermines hopes that households will replace fleeing foreign buyers. It’s also a first sign of domestic discontent over Italy’s budget clash with the EU.

Hadas: Fear of fiscal deficits is overdone

14 Nov 2018

Mainstream economists agree that governments can safely spend more than they take in, but worry about big funding gaps. Some dissidents make a good case for going deeper in the red. They could be bolder. Most domestic borrowing can be replaced with straight money-printing.

Hadas: Central bankers stuck between two myths

8 Nov 2018

Monetary authorities dream of a neutral technocracy though their jobs are inherently political. Politicians from the U.S. to India fantasise about exerting more monetary control, but wild policies quickly turn toxic. The uncomfortable status quo may be the least bad arrangement.

UK exploits fiscal good luck while Brexit allows

29 Oct 2018

Finance minister Philip Hammond plans to control the deficit while spending more on health, defence and schools without big tax hikes. Economic serendipity allows him to. A messy EU exit would end a run of good fortune, since he has used up much of the windfall that came his way.

Italy tries risky EU gamble on budget

19 Oct 2018

The radical government wants to boost spending despite Brussels’ opposition. Lengthy procedures mean the spat will drag on until European Parliament elections in May. With radical parties gaining ground, the new Commission could be more lenient. But markets won’t wait that long.

South Africa offers markets a too-friendly face

9 Oct 2018

New finance chief Tito Mboweni is one of the country’s most respected black economists, and his decade at the helm of the reserve bank adds credibility to Cyril Ramaphosa’s government. Ties to Goldman Sachs, though, could make him a target for political criticism at home.

Hadas: Nobel rewards pointless economic modelling

8 Oct 2018

Paul Romer won half the 2018 prize for recognising that education and governments help growth. William Nordhaus won the other half for condemning man-made climate change. Obvious? Maybe, but their work has complex equations. Unfortunately, these obscure more than they clarify.

Italy botches useful fiscal boost

5 Oct 2018

The radical government wants to ramp up spending in defiance of Europe’s fiscal rules. The country could use a stimulus but the case is being undermined by rosy growth forecasts and inflammatory rhetoric from Rome. That spells more tensions with Brussels and bond markets.

Italy budget gives with one hand, takes with other

1 Oct 2018

The new government has chosen to fight stuttering growth with tax cuts and a “citizens’ income”. Ditching austerity may boost sentiment and lift consumer spending in the short term. But the plan lacks a credible strategy to fight youth unemployment which is over 30 pct.

Mega-vendetta can’t square Italy’s budget circle

24 Sep 2018

A government spokesman has threatened a purge at the Treasury unless it finds the cash to pay for costly welfare handouts. Blaming the deep state won’t help. Global investors will stomach a bigger deficit only if Italy’s debt remains stable. Voters are in for a disappointment.

South Africa slump comes at worst possible time

4 Sep 2018

The first recession in nearly a decade is a blow for President Cyril Ramaphosa. Barring a sharp recovery, it will be harder to control debt and push through reform. Jittery emerging market investors and an election in eight months put his credibility as economic saviour at risk.

Sterling’s Brexit jitters bigger than they look

7 Aug 2018

The pound’s gyrations in the coming year will be fairly restrained, options prices imply. But the currency is expected to be jumpier than a basket of major exchange rates, rather than less volatile as in pre-EU vote days. That gap is a sort of Brexit risk premium, and will grow.