Reuters blog archive
Russian and Ukrainian energy ministers are due to meet European Energy Commissioner Guenther Oettinger in Brussels after presidents Petro Poroshenko and Vladimir Putin said they had agreed on the "basic parameters" of a deal to get gas flowing to Ukraine again this winter.
Russia cut off gas supply to Ukraine in mid-June following more than two years of dispute on the price and said Kiev had to pay off large debts for previously-supplied gas before it would resume supply.
Putin also threatened to cut gas supplies to Europe if Ukraine steals from the transit pipeline to cover its own needs this winter. Any interruption to flows to western Europe, via Ukraine from Russia, would deal another blow to already struggling EU economies.
The two sides still differ over how to calculate Kiev's huge gas debt and the schedule for payments and Poroshenko has already said Ukraine will need help to pay the bill.
The big question of the week is whether financial market gyrations continue, worsen or calm. European stocks are being called higher at the open.
Greece has been effectively shut out of the bond market. If it and others on the euro zone’s southern flank come under persistent market pressure, in a way that hasn’t happened for two years, the onus on the European Central Bank to act will grow and grow.
from Global Investing:
Many emerging economies have been banking on weaker currencies to revitalise economic growth. Oil's 25 percent fall in dollar terms this year should also help. The problem however is the dollar's strength which is leading to a general tightening of monetary conditions worldwide, more so in countries where central banks are intervening to prevent their currencies from falling too much.
Michael Howell, managing director of the CrossBorder Capital consultancy estimates the negative effect of the stronger dollar on global liquidity (in simple terms, the amount of capital available for investment and spending) outweighs the positives from falling oil prices by a ratio of 10 to 1. Not only does it raise funding costs for non-U.S. banks and companies, it also usually forces other central banks to keep monetary policy tight, especially in countries with high inflation or external debt levels. Howell says:
Russian President Vladimir Putin and Ukrainian President Poroshenko are due to meet on the sidelines of the EU/Asia summit in Milan today to try to find a way out of the Ukraine crisis.
Germany’s Angela Merkel and French President Hollande will also meet the pair as part of a four-way contact group. The Kremlin has just said Putin and Merkel have "serious differences".
A two-day summit of EU and Asian leaders, which was going to be most notable for a meeting between the heads of Russia and Ukraine, risks being overtaken by financial market tremors which have spread worldwide.
There’s a good case that markets, primed with a glut of new central bank money, had climbed to levels which the state of the economies that underpin them did not justify. With the Federal Reserve about to turn its money taps off, investors seem to have woken up to poor growth prospects in much of the world.
France will submit its 2015 budget to the European Commission today and, after a respectable period of consideration, it is likely to be thrown right back.
Paris has confirmed it will yet again miss the EU’s debt limits, failing to achieve a budget deficit of three percent of GDP until 2017 four years after it should have done.
from The Great Debate:
How dangerous is Vladimir Putin?
Reuters Editor-at-Large Sir Harold Evans moderated a panel of experts searching for answers to that question at a Newsmaker event hosted at the company's Times Square offices in New York on Oct. 14. The panel was comprised of New Yorker Editor David Remnick, author of the award winning Lenin's Tomb, former chess champion and Russian opposition leader Garry Kasparov, Russian-American journalist Masha Gessen and Roger Altman, who served in the Treasury Department under presidents Jimmy Carter and Bill Clinton, and is currently chairman of investment advisory firm Evercore.
The conversation ranged over topics including Putin's personal psychology, what threat Russia now poses to the world economy, and whether his regime might be toppled from within.
The European Court of Justice holds a first hearing on the legality of the European Central Bank's Outright Monetary Transactions programme. There won’t be anything definitive today but it serves to rekindle debate about the limits of the ECB’s powers.
In February, the German Constitutional Court asked the European Court to rule on the legality of OMT, the mechanism that drew a line under the euro zone crisis when it was unveiled in 2012. The court may give guidance about how best to make a final ruling which is expected in late spring next year.
The predictable battle lines were drawn at the G20/IMF meetings in Washington - most of the world urged Europe to do more to foster growth while Germany warned against letting up on austerity. The argument will doubtless be reprised today when euro zone finance ministers meet in Luxembourg.
Given a ghastly run of German data last week and sharp cuts to its growth forecasts by the IMF and Germany’s economic institutes, Berlin’s stance looks increasingly odd but Finance Minister Wolfgang Schaeuble continued to make it abundantly clear he will not countenance any more public spending in the one European country that could really afford it.
By Pierre Briançon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Russian central bank is doing what it can. The problem is that it cannot do much. It spent $1.4 billion on Oct. 3 and 6 to try stemming the rouble’s slide. But the currency keeps falling. Spending foreign exchange reserves can make sense – a little – when markets seem lost in a temporary moment of insanity. And the Russian central bank has $470 billion worth of it to spend. But there is nothing irrational about the rouble’s weakness. Its root causes are the deep flaws of the Russian economy, and the country’s new aggressive foreign policy.