Fiscal Policy

Britain sells mortgages, buys small Brexit hedge

31 Mar 2017

Selling 11.8 billion pounds of former Bradford & Bingley mortgages to Blackstone and Prudential will cut the UK’s national debt without leaving a loss. The buyers are showing confidence in the UK economy. The seller is shoring itself up in case such confidence proves misplaced.

Review: A flawed compass for post-Brexit Britain

31 Mar 2017

The vote to leave the European Union exposed a new political fault line, David Goodhart argues in “The Road to Somewhere”. The solution is for cosmopolitan elites to share more power with those left behind. The tension is real, but the distinction too broad to be a useful guide.

Saudi finds cheap way to be generous to Aramco

28 Mar 2017

The kingdom has slashed its oil major’s tax rate to juice up a potential IPO. That could theoretically triple the company’s market value to well over $1 trillion. Yet because Saudi will keep a 95 pct stake, the state can recoup almost all of what it appears be giving away.

Trump’s budget plan exhibits poor risk management

16 Mar 2017

The U.S. president wants to slash money for healthcare research, job training and clean water in favor of beefing up an already well-funded defense. His $1.1 trln blueprint discounts too many dangerous economic threats. America can't afford to forgo long-term investments.

Britain’s budget U-turn merits Brexit deal alarm

15 Mar 2017

Chancellor Philip Hammond has reversed last week's tax hike for self-employed workers. As EU exit negotiations begin, the UK critically needs a united government that can be firm in the face of political pressure. Ditching a defensible reform implies the opposite.

Britain’s tax raid on gig economy misses the mark

9 Mar 2017

The UK budget means the self-employed will hand over more of their income. That eases one problem – the fact that gig workers pay lower national insurance rates. But it leaves intact a bigger issue, the difficulty of taxing contractors that drive the gig economy.

Do-nothing UK budget belies big risks ahead

8 Mar 2017

Finance Minister Philip Hammond revealed minimal changes to tax and spending. His prudent message makes sense, but contrasts with the large and unpredictable economic consequences of leaving the European Union. It won’t take much for these to knock deficit reduction off course.

Markets’ latest distortion: riskless company debt

7 Mar 2017

Some 200 billion euros of corporate bonds are trading below interbank swap rates – usually seen as a floor for credit risk. That renders one measure of companies’ creditworthiness redundant. This distortion comes courtesy of central bank meddling and German parsimony.

China has leeway to tackle local debt mountain

7 Mar 2017

Authorities say cutting the $2.2 trln local government debt pile is a 2017 priority. Past attempts failed. An improving economy gives Beijing room to address the issue, in part by boosting local tax power. Possible higher interest rates and lower land prices argue for haste.

Northern Ireland vote sends Brexit warning shot

4 Mar 2017

Nationalist party Sinn Fein made surprise gains in snap elections, buoyed by discontent with the ruling unionist DUP. That puts the duo, who must govern together, on a more equal but confrontational footing. The result may be a bumpier path for Britain’s EU exit negotiations.

China regulator reshuffle leaves turf intact

24 Feb 2017

The People's Republic is shaking up top financial and economic positions, with veteran watchdog Guo Shuqing poised to take charge of supervising banks. Yet there is still no sign of the much-discussed super-regulator, and central bank chief Zhou Xiaochuan remains in place.

Hong Kong budget is missed chance to spread wealth

22 Feb 2017

The city's new finance chief rolled out new spending and said occasional deficits might be permitted. The shift away from stinginess comes weeks before Hong Kong chooses a new leader. But it's unlikely to placate the protest movement; the massive $120 bln reserve stays untouched.

Italian election delay swaps uncertainty for limbo

14 Feb 2017

Matteo Renzi’s centre-left party is holding a leadership contest, making it hard for the former prime minister to call an early election. Though a messy vote is avoided, a prolonged period of temporary government will only add to Italy’s slow growth and anti-establishment mood.

Switzerland shoots itself in foot on tax reform

13 Feb 2017

Voters rejected a government plan to balance low corporate rates with global reforms. That might make sense if international cooperation on tax fails. But the Swiss are mainly hoping to avoid higher personal taxes. If multinationals flee, these will happen anyway.

Chinese FX reserve crosses risky line in sand

8 Feb 2017

The country's foreign currency stash fell below $3 tln in January, the lowest in nearly 6 years. That matters less than the line that might get crossed next: the yuan weakening past 7 per dollar. That would mean eating into the reserves still further, or risking U.S. wrath.

Ireland could join Britain in EU departure lounge

6 Feb 2017

Dublin’s unequivocally pro-Brussels stance may be tested if politics unmoors it from key trading partners like the UK and U.S. A tough Brexit deal, along with an inflated EU budget bill caused by tax inversions, could raise tricky questions about Ireland’s true interests.

Greece is in a mess but not at the brink

3 Feb 2017

The government, its European creditors and the IMF are all being unreasonable in their own way over a bailout needed by July. The most sensible option would be for the IMF to withdraw. More likely is that if a compromise can't be found, the ruling Syriza party calls an election.

India state firm fusion is marriage of convenience

3 Feb 2017

A push to create national champions starting with the oil sector pairs industrial logic with Prime Minister Narendra Modi’s propensity for grand gestures, and desire to compete globally. Selling off small stakes in bigger players will also be easier than full privatisations.

India favours poor with damage-control budget

1 Feb 2017

Finance Minister Arun Jaitley is relaxing a bit on deficit reduction, while taxing the rich more to fund big outlays for the rural poor. There are few benefits for corporate India. But the budget will help to limit the political fallout from India's big currency experiment.

Merkel ignores dark side of job boom at her peril

26 Jan 2017

Rises in employment and real incomes mask the problem of growing income inequality in Germany. Chancellor Angela Merkel’s ability to fend off an election challenge from the rebooted centre-left Social Democrats may hinge on how she proposes to stop the poor becoming poorer.