Fiscal Policy

French cracks show up Italy’s messy fiscal house

19 Jun 2024

Investors fear Paris’s financial laxity. Yet, after wasting $235 bln on tax credits for home improvements, Rome’s finances are also shaky. EU funds will help offset the phasing out of incentives. But with weak growth and nervy markets, cutting debt is both harder and more needed.

French investors face full year of financial funk

13 Jun 2024

If Marine Le Pen’s far-right RN party wins next month’s election and sticks to its pledges, France’s 5% budget deficit will balloon. President Emmanuel Macron could call a new election, but not for 12 months. Amid paralysis or worse, the state’s fiscal position may get messier.

India’s inequality deserves a bigger risk premium

12 Jun 2024

Prime Minister Narendra Modi suffered his biggest electoral blow in one of the nation’s poorest states. By one measure, the gap between haves and have-nots is wider than during British rule. Closing it is tricky. Without change, though, stability will hang by a thread.

Price cuts will lift US vibes only so much

11 Jun 2024

Since 2019, poorer Americans have received bigger pay hikes than their rich counterparts. Higher costs for basics like food and rent also mean inflation hit them harder. Fresh discounts from Target, McDonald’s and Amazon help, but offer limited relief for tight household budgets.

Russian bond rout raises risk of financial crunch

4 Jun 2024

Yields on the country’s debt are at 20-year highs on worries about the budget largesse lavished on the economy. With inflation rising and interest rates at 16%, President Vladimir Putin’s desire to keep funding the conflict in Ukraine could result in lasting fiscal turmoil.

EU’s wobbly budget rules can bolster shaky economy

3 Jun 2024

Eleven countries have breached Brussels’ fiscal levees, with deficits larger than 3% of GDP. But the limits come with loopholes and allow for delays. That’s good news for a bloc desperate for growth to rival the US. For Europe, weaker rules are better than misguided austerity.

India’s leader faces a reckoning with its poor

3 Jun 2024

Exit polls suggest Narendra Modi will secure a third term with a big majority. Raising rural incomes will be high on his to-do list. Consumption is growing at 4%, making the nearly 8% GDP pace look shaky. Fixing that will boost India's reliability as a global trade partner too.

Change is coming to UK’s macroeconomic policy

31 May 2024

The opposition Labour Party, the strong favourite to win the upcoming election, has promised continuity in its fiscal and monetary approach. An ugly economic inheritance at home and global challenges abroad make that ambition unrealistic. Investors should prepare for a shift.

Next UK leader will bang head against fiscal roof

30 May 2024

Britain’s election in July is likely to hand power to the opposition Labour Party. In this Viewsroom podcast, Breakingviews columnists discuss how constrained finances could mean higher taxes. For business leaders, the promise of more stability may be as good as it gets.

A confident India can afford to squeeze investors

21 May 2024

Finance Minister Nirmala Sitharaman dismissed reports the government, if re-elected, will majorly alter how asset sales are taxed. There is merit to the idea, however. It could help deepen the $550 bln corporate bond market. The buoyant rally in stocks provides an opportunity.

China’s new property fix is a work in progress

20 May 2024

Local governments can now borrow up to $138 bln to buy unsold homes. It's the strongest signal yet that Beijing is determined to revive the country's ailing housing market. The amount is not enough. But it lays the foundations for providing more support as needed.

China stimulus starts with a bond, not a bang

17 May 2024

Beijing will issue $138 bln-worth of special sovereign debt. It's not much by itself, but combined with planned offerings from local governments, fiscal support could top 3.2% of GDP this year. It can spur ailing credit demand and speed up investment in strategic sectors.

Inflation saps Inflation Reduction Act mini-me

16 May 2024

Australia is following the US with long-term support for greening the economy. But it's peanuts by comparison with just $15 bln for industry and nothing to boost sales of EVs and heat pumps. Fear of price rises and rate hikes ahead of an election has deflated ambition.

FOMO finally returns to Chinese equities

3 May 2024

After a $5 trln crash, a bull market in Hong Kong and surging inflows to mainland bourses are prompting some investors to up their allocations. Policy support from Beijing, buying by long-only funds and attractive valuations suggest the start of a long road to recovery.

Lower taxes would cripple Europe’s growth

26 Mar 2024

The bloc needs new public investment of about 3% of GDP for the green transition, defence, infrastructure, education and health. High debt loads limit borrowing and spending cuts hurt the economy. Instead of pledging lower levies, governments have to raise them.

Davos holds up funhouse mirror to shifting world

22 Jan 2024

Delegates from the Middle East and India made a splash at last week’s World Economic Forum, reflecting their wealth and investment appeal. Europeans and Chinese were subdued. Big Tech looks the winner from AI. This year’s Swiss conflab arguably exaggerated more than it distorted.

China consumers keep Beijing, and world, on edge

17 Jan 2024

The economy expanded 5.2% last quarter, thanks to manufacturing. But local demand remains weak, forcing factories to look abroad. That will stoke global trade tensions and add to fears that China will export deflation. All eyes are on how Beijing stimulates domestic consumption.

EU debt rules offer unity at price of relevance

21 Dec 2023

European Union finance chiefs reached a deal on a new fiscal pact, breaking a post-pandemic stalemate. Germany won austere deficit and debt targets, yet pain will be diluted by French-fought delays and concessions. The net result is an overly complex system that may not work.

White House needs to talk turkey about inflation

22 Nov 2023

The Biden Administration has encouraged Americans to “be thankful” for falling prices this year. But cherry-picking some items that have edged down from recent peaks won’t counter the fact that US citizens feel glum about the economy. A bit of empathy might go a long way.

American CEOs serve China’s Xi a too-rich dessert

16 Nov 2023

Tim Cook and Steve Schwarzman were among attendees at a dinner where the Chinese president got a standing ovation. For business leaders to curry favor with Xi’s regime is not new. Doing it so performatively, and on home turf, suggests there’s such a thing as too much harmony.