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from Breakingviews:

Argentine opportunity cost is reason to cut deal

By Martin Hutchinson

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Argentina’s debt negotiators need to think about opportunity cost. A failure to reach agreement with holdout creditors by Wednesday might not make things immediately worse. But it would set back recent efforts to curry favor with international financiers – efforts that could pay off richly for the Argentine economy.

If a deal can’t be done with hedge funds led by an affiliate of Elliott Management – which want about $1.5 billion in payments on debt that predates Argentina’s last restructuring – then, according to New York court rulings, the Latin American nation won’t be allowed to pay other creditors either. Those bondholders took a haircut for new bonds after Argentina defaulted last decade.

Argentina has two financial problems. One is that the hedge funds are the tip of the iceberg, with a larger group of relatively passive holdout investors potentially due as much as $15 billion. That figure tops half the nation’s foreign exchange reserves and is much more than it could easily borrow. Second, the country told holders of exchanged bonds that it wouldn’t voluntarily offer anyone else better terms, at least until after the end of this year – a so-called “rights upon future offers” or RUFO clause.

from Hugo Dixon:

UK prepares for possible EU failure

David Cameron looks to be preparing for the possibility that his plan to renegotiate Britain’s relationship with the European Union will fail. The UK prime minister would then campaign for the country to quit the EU in a referendum he plans to hold by 2017. That seems the best way to interpret his appointment of a eurosceptic foreign minister and the nomination of a little-known former lobbyist as Britain’s European commissioner.

This is not to say that Cameron wants to take Britain out of the EU – which would be a historical mistake. It is rather that he apparently thinks quitting could be an acceptable Plan B that would keep him in his job and his Conservative party reasonably united.

from Hugo Dixon:

The European politician worth watching

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

Matteo Renzi is on a roll. The Italian prime minister is a brilliant politician. His youthful dynamism has bought him time with his people, the markets and the European Union to carry out the immense job of reforming Italy. But he has yet to show he can execute. He now needs to, because even his time will run out.

from Hugo Dixon:

EU would also be harmed by Brexit

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

It is not just Britain which would be damaged if it quit the European Union. So would other members. Jean-Claude Juncker’s nomination as Commission president at last Friday’s summit increases the chance of Brexit - Britain’s exit from the EU. Leaders from all countries now need to work to limit the risk it happens.

from Counterparties:

Export troubles

Almost immediately after his election as House Majority Leader, Rep. Kevin McCarthy (R-Calif.) suggested that he would try to effectively kill the U.S. Export-Import Bank when its charter expires in September. The bank provides low-interest loans to foreign companies, who then use that loaned money to buy U.S. goods. Big U.S. manufacturers—companies like Caterpillar and Ford—love the bank because it makes it easier for them to export their goods. Many conservatives, especially those who lean libertarian, see the bank as a vehicle for the government to give arbitrary special favors to companies.

It doesn’t matter, Jared Bernstein says. Even with the Ex-Im Bank’s flaws, it’s worth keeping. Bernstein points out that the stock price of Boeing, one of the companies that benefits most from the Ex-Im Bank’s cheap loans, plummeted just after Eric Cantor lost his primary (Cantor was one of the Ex-Im Bank’s staunchest supporters). The stock price fell to $132 from $138 that week, erasing all gains from the year so far, reports the NYT. Boeing closed at $128.54 today. It’s all well and good to inveigh against the bank’s “crony capitalism” in theory, Bernstein says, but people’s livelihoods are still at stake: “Imagine the upheaval to communities where Boeing is such a strong presence if the hard right shuts down the bank.”

from Breakingviews:

Biggest risk of geopolitics is as a distraction

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Investors consider geopolitics the most important risk to financial markets over the next year. That judgment, reported in a Barclays survey this week, shows people taking greater cues from headlines than numbers.

from Breakingviews:

Investors beware: France will get more erratic

By Pierre Briançon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The French government didn’t have to buy a 20 percent stake in Alstom. It could have smugly observed that its intervention in the acquisition of the French engineer’s energy assets by General Electric had yielded some success. Pressure from Paris forced GE to rework its offer, giving France a decisive say in the future of Alstom’s nuclear business. With that concession secured, there was no good reason to buy out Alstom’s main shareholder, construction-to-telecom conglomerate Bouygues.

from Hugo Dixon:

Is Greece losing its reform drive?

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own. 

Is Greece losing its reform drive? Prime Minister Antonis Samaras has stuck to a harsh fitness programme for two years. But just as it is bearing fruit, he has sidelined some reformers in a reshuffle. There is only one viable path to redemption for Athens: stick to the straight and narrow.

from Nicholas Wapshott:

Democracy is on the ropes. So what are we going to do about it?

child holds her father's hand at a polling station in Kabul

Democracy is taking a bashing. On almost every continent, attempts to extend the right of people to choose their own government is running into deep trouble. In Iraq, Egypt, Ukraine, Russia, Afghanistan, Pakistan and many other countries, democracy is being overwhelmed by despotism and despair.

A commonly heard response is that Western democracy is not for everyone, that what works in our society does not automatically work elsewhere. Another is to suggest that we should not try to spread democracy to the rest of the world; it is none of our business.

from Expert Zone:

Nehru’s last stand?

(This piece comes from Project Syndicate. The opinions expressed are the author's own)

The victory of the Bharatiya Janata Party and its leader, Narendra Modi, in India’s general election last month has raised a crucial question about the country’s future. With the BJP sweeping to power on a platform of aggressive nationalism and business-friendly corporatism, has the socioeconomic consensus dating to India’s first prime minister, the democratic socialist Jawaharlal Nehru, come to an end?

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