Reuters blog archive
Russia’s next move remains the great unanswered question for Ukraine but there are glimmers that things might be starting to move elsewhere.
IMF chief Christine Lagarde said last night she would send a technical support team to Ukraine soon if Kiev makes a request. It can’t do so until an interim government is formed, probably tomorrow. That would be step one, but only step one, down the road to an international aid package.
The European Union's foreign policy chief promised Ukraine's new leaders strong international support but offered up no specifics and there will be no meaningful bailout until after elections slated for late May although EU budget commissioner Janusz Lewandowski said bridging aid of 1 billion euros might be available.
The situation is clearly urgent though the assertion from Kiev that money must come within two weeks looks overblown.
There is jockeying for position in Kiev with allies of newly freed former premier Yulia Tymoshenko trying to take key positions and opposition leader and ex-world boxing champ Vitaly Klitschko declaring he would run for president. The formation of an interim administration will be the main internal focus for now.
Euro zone policymakers like to talk. They often contradict each other at separate speaking engagements on the same day. But they have struck a chorus in recent weeks, asserting that deflation is not a threat.
Members of the ECB Governing Council have been particularly vocal, insisting they will not have to alter policy to counter falling prices.
Day one in Davos showed the masters of the universe fretting about Sino-Japanese military tensions, the treacherous investment territory in some emerging markets and the risk of a lurch to the right in Europe at May’s parliamentary elections which could make reform of the bloc even harder.
Today, the focus will be on Iranian President Hassan Rouhani (and his main detractor, Israel’s Netanyahu). Presumably he’s there to woo the world of commerce now sanctions are to be relaxed in return for Tehran suspending enrichment of uranium beyond a certain level. Anything he says about Syria’s peace talks, which have so far been more hostile than conciliatory, will instantly be headline news.
The surveys are likely to show the currency bloc ended the year on a reasonably robust note with Germany leading the way as always, Italy and Spain showing signs of life and France looking worryingly weak.
Spain will sell up to four billion euros of six- and 12-month treasury bills, prior to a full bond auction on Thursday. Italy attracted only anaemic demand at auction last week and Madrid has already had to pay more to borrow since the Federal Reserve shook up the markets with its blueprint for an exit from QE.
However, yields are nothing like back to the danger levels of last year and both countries have frontloaded their funding this year. Economy Minister Luis de Guindos, who declared over the weekend that the Spanish economy will grow in the second half of the year, speaks later in the day.
from Nicholas Wapshott:
In the nearly five years since the worst financial crash since the Great Depression, the remedy for the world’s economic doldrums has swung from full-on Keynesianism to unforgiving austerity and back.
from Ian Bremmer:
After another year of panels, colloquia, summits, meetings, whispers and skiing, the Davos emissaries headed home with a few new connections and catchphrases (“Resilient Dynamism” forever!). After four years of gloomy predictions and summits dominated by post-financial crisis concerns, this year the mood was significantly more positive. While I would argue that the pendulum of sentiment has swung too far, there are reasons to be cautiously optimistic. Based on my observations at the 2013 World Economic Forum, here’s a power ranking of who’s up, who’s down and who’s off the radar—according to Davos attendees, at least.
United States: The politics of Washington were all but forgotten. With the so-called fiscal cliff standoff resolved and no current budget battle hurdles (at least for the next few weeks), there were no urgent crises to distract Davos from the strong American economic fundamentals. Instead, the chatter was about insourcing, the energy revolution and the positive growth outlook this year – all sources of a (perhaps inflated) exuberance.
from Chrystia Freeland:
Managing Director of the IMF Christine Lagarde sat down for an interview with Chrystia Freeland yesterday, January 17th, following the IMF's New Year Press Briefing.
Thank you for joining me, Madame Lagarde.
One of your themes as we enter 2013 is that financial reform must continue. And you have just said that you're concerned, you see a waning commitment to financial reform. What do you see going on?
Some key positions were staked out on Greece over the weekend – ECB power-behind-the throne Joerg Asmussen became the first euro policymaker to say on the record that euro zone finance ministers meeting on Tuesday would be intent only on finding a deal to tide Greece over the next two years. But IMF chief Christine Lagarde told us in an interview that she would push for a permanent solution to Greece's debts to avoid prolonged uncertainty and further damage to the Greek economy.
Sounds like those two positions could be mutually exclusive. However, it may be that something like a behind-the-scenes pledge from the German government that it will act decisively after next year’s election will keep the IMF on board.
Eurogroup chief Jean-Claude Juncker said at the weekend that intensive work was being done on a compromise with the IMF and progress was being made, after the euro zone sherpas put their heads together on Friday. And even hardline German Finance Minister Wolfgang Schaeuble said a deal had to be struck on Tuesday and would be. Juncker and Lagarde clashed last week over his suggestion that Greece should be given an extra two years, to 2022, to get its debt/GDP ratio down to 120 percent, the level the IMF has decreed is the maximum sustainable. Lagarde looked surprised and firmly rejected the idea.
So said Winston Churchill of Russia. The Greek debt saga isn't quite that unfathomable but the economic necessities continue to clash with the political realities.
Eurogroup Working Group – the expert finance officials from 17 euro zone nations who do the clever preparatory work before their finance ministers meet – will convene to today try and get the Greek debt process back on track after a ministerial meeting got nowhere on Monday and in fact ended up in an unusually public spat between its chair, Jean-Claude Juncker, and IMF Managing Director Christine Lagarde.