Europe/Middle East

Has a Russia-Saudi Arabia Breakthrough Occurred?

In recent days, signs of a possible breakthrough in the yearlong standoff between Russia and Saudi Arabia on crude production strategy have emerged. Saudi Arabia, OPEC's dominant member, has long insisted OPEC (read Saudi Arabia) would not reduce output to balance supply and demand absent corresponding cuts from non-OPEC members (read Russia), while Russia has consistently insisted harsh climactic conditions prevent Russian producers from reducing output and in any case Russia insists it could withstand low prices as well as any other country.

Irish PM Kenny Betting on the Economy in Election

Apparently, when Irish eyes are smiling, it is time to call an election. That is what Prime Minister Kenny has done.  The election will be held on February 26.  The polls suggest that the governing coalition (Fine Gael and Labour) it may struggle to secure a majority. 

In some ways, Kenny is making the same bet as Spain's Rajoy.  The economy's strength will provide a lift on Election Day.  It has not worked out so well for Rajoy though Kenny may have greater success.  However, this is most likely to be in a coalition. 

UK to EU: "We're In"

Prime Minister Cameron has enthusiastically embraced the EC draft proposals in response to the UK’s demands.  The wires quote Cameron as saying, "I would opt in to EU membership on these good terms." 

The proposals presented by European Council President Tusk are weak on details that are still to be decided, though Cameron quickly seized upon them to claim: I have delivered commitments in my election manifesto."  It has yet to be seen if it is sufficient to convince several of the Eurosceptic cabinet members and backbenchers. 

Greece's Tsipras One Year Later, Still in Charge, Still Drama

Greek Prime Minister Tsipras is celebrating the one-year anniversary of his election.  He offered Greek voters an opportunity to replace him last summer, but they stuck with him. 

Many economic issues remain unresolved. Pension reform promises to be a flashpoint between the Tsipras government and the official creditors.  Although the G10 has eleven members, official creditors are no longer represented by the Troika, as there are now four.  The ESM has joined the EC, ECB and IMF. 

Calculating the Cost to the UK without the EU

There have been a couple of notable signals about the upcoming EU referendum lately. A public opinion poll showed a clear majority lead for Brexit, then a Financial Times poll of more than 100 leading economists concluded that a vote to leave would damage UK growth.

However, while the arguments for and against are still shaping up, everyone appears to be ignoring how the credit-ratings agencies would respond to Brexit.

Market Participants Continue to Watch Spain

The US dollar is narrowly mixed. The euro and yen remain within yesterday's ranges, while sterling continues to trade heavily. The stabilization of oil prices has not lifted the Canadian dollar, while the other Antipodean currencies turn higher.

Emerging market currencies are mostly lower, though the South African rand is slightly firmer. The Russian ruble's decline has been extended into the fourth sessions and brings its loss this month to 8.5%, the worst performing emerging market currency after the Argentine peso that sank as it was floated.

Why is U.K. Productivity Lower Than Its Peers?

We all know by now that Britain has a productivity problem. The average British worker simply doesn’t make as much stuff as those from other major countries and for all the agreement that something must be done, there is little consensus.

Debates about solutions tend to focus on big ticket national infrastructure policy designed to grandly sweep away obstacles and enable improvement. But the risk is that we obscure practical steps needed at the very heart of the problem.

The Uniqueness of Spain's Political Dynamic

Spain goes to the polls on December 20.  The country's political and economic dynamics are different from other EMU countries that have held elections this year.  The economy is among the strongest performers in Eurozone, though unemployment remains stubbornly high.

Today is the last day that election polls can publish.  El Pais and El Mundo papers published the results of surveys today.  They confirm what many have come to expect.  The ruling center-right Popular Party will remain the biggest party, but it will lose its majority.  

Hooray for Holyrood

Scotland will receive major new fiscal powers from the Scotland Bill working its way through Westminster. Holyrood will get more control over income tax, some welfare powers, and will be assigned half of VAT receipts – all the result of the Smith Commission agreement by the five leading Scottish political parties that followed the independence referendum that saw Scots vote to remain in the UK.

Trying Not to Waste a Good Crisis

It is a common refrain of political strategists that, you should not let a good crisis go to waste. Seven years on from the beginnings of the global financial crisis, we can make an assessment whether one followed that maxim.