Fiscal Policy

Trump’s fanciful budget relies on voodoo economics

22 May 2017

Paid parental leave and caps on repaying student loans sound appealing. But the rest of the president’s budget plan to cut $3.6 trln relies on pie-in-the-sky assumptions about employment rates and reforming Obamacare and welfare. It’s a non-starter even for a Republican Congress.

Time for UK to lose timidity on taxing property

22 May 2017

Theresa May has backed down on a so-called “dementia tax” following a backlash against older Britons using their homes to fund social care. How much the state should subsidise these costs is up for debate. But unearned housing equity should be taxed more.

Spain is beginning to look more like Italy

22 May 2017

Pedro Sanchez’s unexpected victory in Socialist primaries could weaken the already fragile minority government. The risk of a crisis is low, but a more fragmented parliament, similar to Italy, makes economic reforms harder, and undermines Spain’s call for European integration.

Review: Democrats’ chief firebrand fumbles message

19 May 2017

Elizabeth Warren's "This Fight is Our Fight" reads like a marker for a 2020 White House run. The senator from Massachusetts targets Donald Trump, lobbyists and Wall Street. Tales of struggling Americans are engagingly woven into the outrage. But her rote views limit her appeal.

Theresa May’s manifesto leaves Brexit wiggle room

18 May 2017

Britain’s Tory party will slash migration and quit the EU without a deal if need be should it win a June 8 election. But its leader has left herself room to make Brexit very hard or relatively soft. That’s artful, but ensures adherents of one or the other will be disappointed.

Britain’s joyless job boom is nothing to celebrate

17 May 2017

A record three of every four working-age Britons is employed. But prices are rising faster than wages, and a post-Brexit crackdown on immigration threatens to limit further expansions in the workforce. That makes declining productivity an even bigger cause for alarm.

Lloyds bailout bill still isn’t paid in full

17 May 2017

The UK has recouped its 20.3 bln pounds on the once-failing lender. It wouldn’t matter if it hadn’t, since rescuing Lloyds helped save the banking system. Still, just as the real returns outweigh the financial ones, so do the costs: austerity and mistrust of the industry.

Labour’s risky UK manifesto requires Brexit context

16 May 2017

Britain’s opposition party has outlined tax rises for companies and the rich to pay for higher spending. Potential payers could get around them. Yet what Labour is proposing isn’t that much more risky than the “hard Brexit” the ruling Conservative party may deliver.

Macron faces stronger Merkel after state election

15 May 2017

France’s new president needs German support for his euro zone reform ideas. Angela Merkel’s challenger Martin Schulz is more supportive of tighter fiscal integration and more investment. The triumph for Merkel’s party in a regional poll suggests any changes will need her consent.

German bonds are caught between Mario and Macron

12 May 2017

Euro zone yields have risen in anticipation of tighter policy from ECB President Mario Draghi. But the euro zone’s fragility puts a cap on long-term rates. Changing that would require the kind of common fiscal policy imagined by new French President Emmanuel Macron.

Australia hands U.S. timely infrastructure example

11 May 2017

An investor group is paying A$7.6 bln for 50.4 pct of Endeavour Energy, a New South Wales electricity distributor. It's an "asset recycling" model that raises private capital against established operations to fund new government investment. Trump's team should take note.

Levy takes some sheen off Australian banks

10 May 2017

The government is slapping a 6 bps levy on big banks’ liabilities. The move will rake A$6.2 bln into federal coffers and shows bank-bashing is good politics, even in countries that weathered the financial crisis well. At least the sector is strong enough to absorb the hit.

What’s Britain’s real Brexit bill?

9 May 2017

Negotiators may demand the UK pay 100 bln euros as part of an orderly EU exit. Avoiding this would mean leaving without a trade deal, which would hit future growth. This Breakingviews calculator estimates how much output and tax revenue Britain stands to lose in a chaotic Brexit.

Britain’s Brexit bill is worth the money

8 May 2017

An orderly departure from the EU may cost the UK as much as 100 billion euros. A chaotic exit that permanently lowered the growth rate of its 1.9 trillion pound economy would be much more expensive. Better to hand over a hefty sum if it means avoiding that outcome.

Theresa May has a way out of UK pension pickle

28 Apr 2017

The prime minister is dithering over whether to keep guaranteeing above-inflation hikes to pensioners. The triple-lock is nonsensical, inequitable and unfit for an era of Brexit and stagnant wages. May has the political capital to adopt a fairer single-lock, tied to earnings.

Hadas: Nationalists are united by economic muddle

26 Apr 2017

Brexit fans want freer trade, Marine Le Pen is a protectionist and Donald Trump can’t make up his mind. Populists also disagree on fiscal deficits and industrial policy. What they share is an aversion to the truth that national prosperity starts with compromises on sovereignty.

Saudi austerity U-turn highlights reform hurdles

24 Apr 2017

The kingdom has restored perks for public sector workers in an attempt to preserve its broader economic agenda. Though the unpopular measures helped cut the deficit the social costs outweighed the benefits. Riyadh is learning that austerity and reform rarely work in tandem.

India loan waiver opens financial doors for Modi

19 Apr 2017

The country's biggest state will write off farm loans worth $5.6 bln. Pressure is building for a nationwide move that might cost 2 pct of GDP. That would be bad for credit and fiscal discipline but help win votes, ease rural economic stress, and give cover to any bigger bank bailout.

Dixon: Start preparing for fourth Greek bailout

3 Apr 2017

Despite a last-minute wrangle over pensions, Greece is likely to get the next chunk of the money due under its current bailout plan. But this will only buy Athens time until the middle of 2018. After that, a new programme, and more fraught negotiations, will probably be needed.

Gordhan exit is dual blow for South African debt

31 Mar 2017

President Jacob Zuma has fired his respected Finance Minister Pravin Gordhan. Instead of action to rein in South Africa’s debt, it will probably now rise. The damage to the state’s credibility means the cost of servicing the debt pile will head in the same unsettling direction.