Reuters blog archive
from The Great Debate:
Following the international financial crisis of the late 2000s, the world’s financial leaders have been working towards a standardized banking system that will strengthen banks at an individual level, and thus improve the banking sector’s ability to survive stress when it occurs.
In 2010 the Basel Committee produced a third accord outlining a set of regulations, with the goal of solving the banking system's ongoing problems. Since then the conversation has yet to cease over whether enough has been done, since the peak of the crisis in 2008, to ensure a stable financial environment that supports growth on an international scale.
The importance of Basel III lies not only on an inter-continental scale, but for individual countries to maintain the required standard regulations to a point of sustainability. In Europe, the debate over the role Britain will play in Basel III has yet to be resolved. During early Basel III discussions in May 2012, Michel Barnier, the French European commissioner for financial regulation, clashed with British Chancellor of the Exchequer George Osborne over the suggestion of higher leverage ratios in the UK, stating that a distortion of competition within the EU had the potential to cause a continental disadvantage.
In recent times the political context surrounding Basel III has not dwindled. In the Autumn Statement released on December 5 2013, Osborne revealed that "Britain is currently growing faster than any other major advanced economy." As it stands Britain’s rate of recovery, in comparison to that of other EU members and the U.S., puts the country at risk of greater pressure to conform to the standardized regulations proposed in the Basel III accord. For Britain there is a better hope of financial prosperity and continued development in strengthening relations with China. Prime Minister David Cameron cemented that this is indeed the case during his December meetings in China, a country whose own role within Basel III is similarly undetermined. The chancellor noted:
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.
from Anatole Kaletsky:
Students of British history will recall the story of Thomas a’Becket, the 12th century prelate who was handpicked by Henry II to become Archbishop of Canterbury because of his loyalty to the Crown. Within months of his appointment, a’Becket turned against the King in the numerous conflicts between church and state. As a result, a’Becket was murdered at the altar of Canterbury Cathedral in 1170, after four of Henry’s henchmen heard their royal master mutter in irritation: “Will no one rid me of this turbulent priest?” Archbishops do not have much political clout these days, but comparable spiritual importance now attaches to central bankers. And a central banker who suddenly seems reminiscent of Thomas a’Becket is Mark Carney, the recently appointed governor of the Bank of England.
When George Osborne, the British chancellor of the Exchequer (finance minister), delivered his Autumn Statement on Britain’s economic and fiscal prospects this week, he intended it as a “soft launch” for the Tory-Liberal government’s campaign for re-election in May 2015. The big set-piece speech offered Osborne an ideal opportunity to boast about the British economy’s sudden improvement this year and to announce some populist measures, such as a “voluntary” price-control regime for energy utilities, that were carefully designed to wrong-foot the Labour opposition. Osborne’s speech marked the start of a long political campaign designed to create a Pavlovian association in voters’ minds between government policies, rising house prices and the economic recovery. If this campaign is successful it will virtually guarantee election victory for the Tory-Liberal coalition -- and it could even make an outright majority for the Tories conceivable in 2015.
The European Central Bank holds its last rates meeting of the year with some of the alarm about looming deflation pricked by a pick-up in euro zone inflation last week – though at 0.9 percent it remains way below the ECB’s target of close to two percent.
The spotlight, as always, will be on Mario Draghi but also on the latest staff forecasts. If they inflation staying well under target in 2015 (which is quite likely), expectations of more policy easing will gather steam again.
from The Great Debate UK:
--Darren Williams is Senior European Economist at AllianceBernstein. The opinions expressed are his own.--
The Bank of England appears to have moved the goalposts. After 30 years of focusing almost exclusively on inflation, monetary policy is now being more explicitly directed toward generating faster growth and lower unemployment.
Ukraine continues to top the European worry list.
Monday demonstrated how quickly the financial side of the equation can spiral out of control. The hryvnia currency slumped and the cost of insuring against Ukrainian default soared, forcing the central bank to intervene and urge its citizens not to spark a bank run.
Having turned its back on the EU, Kiev must find more than $17 billion next year to meet gas bills and debt repayments. Presumably Russia will have to help out if it is not to have a basket case on its doorstep.
Ukraine’s shock decision to turn its back on an EU trade deal continues to reverberate with mass rallies on the streets of Kiev in protest at President Viktor Yanukovich’s decision.
To try to defuse tensions, Yanukovich issued a statement saying he would do everything in his power to speed up Ukrainian moves toward the EU. Is this another U-turn or mere semantics? The answer is important.
By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
George Osborne has something to boast about during his budget update on Dec. 5. UK growth is up and the deficit is down. But the Chancellor of the Exchequer has engineered an all-too-British recovery, in which house-price inflation will soon be too prominent. A radical policy shift is needed to build a genuinely sustainable revival.
Third quarter UK GDP data are likely to show robust growth – 0.8 percent or more, following 0.7 percent in Q2 – more kudos to a resurgent finance minister George Osborne who only a year ago was buried in brickbats.
We can argue about the austerity versus growth debate ‘til the cows come home – there is still a strong case that if the government hadn’t cut so sharply, growth would have returned earlier and debt would have fallen faster. But the fact that the economy is ticking along nicely 18 months before the next election means Osborne has won the argument politically.
UK finance minister George Osborne is speaking at a Reuters event today, Bank of England Deputy Governor Charlie Bean addresses a conference and we get September’s public finance figures. For Osborne, there are so many question to ask but Britain’s frothy housing market is certainly near the top of the list.
The government is extending its “help to buy” scheme at a time when house prices, in London at least, seem to be going through the roof (no pun intended). Property website Rightmove said on Monday that asking prices for homes in the capital jumped 10.2 percent in the last month alone.