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from MacroScope:

Renzi’s moment

Italy’s president will meet centre-left leader Matteo Renzi today and is likely to ask him to form a government following the ousting of Enrico Letta as prime minister.

Renzi will need to reach an agreement with the small New Centre Right party to continue the current coalition and there is common ground. The 39-year-old has already said he backs lower taxes affecting employment, but they differ on issues such as immigration and laws allowing gay and lesbian civil partnerships.

A lot is at stake. Italy needs a strong government that can push through much-needed economic reforms but needs to pass a new electoral law first to allow for more durable administrations in future.

Renzi has struck a deal with centre-right leader Silvio Berlusconi which could ensure passage of a new law intended to favour large coalitions and ensure stable government over a full term.

from MacroScope:

Cold War chill over Ukraine

Dramatic twist in the Ukraine saga last night with a conversation between a State Department official and the U.S. ambassador to Ukraine posted on YouTube which appeared to show the official, Assistant Secretary of State Victoria Nuland, deliberating on the make-up of the next government in Kiev.

That led to a furious tit-for-tat with Moscow accusing Washington of planning a coup and the United States in turn saying Russia had leaked the video, which carried subtitles in Russian. A Kremlin aide said Moscow might block U.S. "interference" in Kiev.

from Hugo Dixon:

Independent Scotland won’t keep the pound

An independent Scotland will not keep the pound. That’s despite this being the express wish of the Scottish government, which is campaigning for independence in September’s referendum. The reason is that it’s hard to see the rest of the UK agreeing to such a deal – except on terms that would affront Scotland’s amour propre.

One can understand why Edinburgh is keen not to change its monetary arrangements. If Scotland had its own free-floating currency, it would be less economically integrated with the rest of the UK. Given that 60 percent of its exports and 70 percent of its imports are with the rest of the UK, such a separation would hit hard.

from MacroScope:

New face at the ECB

The European Central Bank held a steady course at its first policy meeting of the year but flagged up the twin threats of rising short-term money market rates and the possibility of a “worsening” outlook for inflation – i.e. deflation.

The former presumably could warrant a further splurge of cheap liquidity for the bank, the latter a rate cut. But only if deflation really takes hold could QE even be considered.
Sabine Lautenschlaeger, the Bundesbank number two poised to take Joerg Asmussen’s seat on the executive board, breaks cover today, testifying to a European Parliament committee. A regulation specialist, little is known about her monetary policy stance though one presumes she tends to the hawkish.

from MacroScope:

Forward guidance not banking on Scottish independence

There are many unknowns surrounding a Scottish vote in favour of independence at next year's referendum, a potentially huge event for the British economy. But one that has attracted little attention is what it would mean for UK interest rates.

As part of its forward guidance policy, the Bank of England has promised that it will not consider raising rates from record-low levels until unemployment in the UK - 7.69 percent at the most recent reading - falls to 7 percent. It expects this to happen in late 2016, though some investors think the jobless rate could fall much quicker.

from MacroScope:

Scotland catches up with the UK economy – and maybe more?

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Updated to show Scotland's composite PMI has bettered the UK equivalent for seven straight months now, after Monday's data.

For the first time in a long while, Scotland's economic performance has caught up with the UK average– and there is at least some evidence to suggest it's doing slightly better than the British baseline.

from Photographers' Blog:

Modern day vikings

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Shetland Islands, Scotland

By David Moir

Vikings, they're not what they used to be.

No more do we see horn helmeted warriors pillaging and plundering everything in sight, striking fear into villagers with the stories of their wickedness. No, now they sing and dance when visiting community centers, hospitals and shopping centers. Basically cheering everyone up who sing along and join in the fun on a cold wet Tuesday in January.

I have just returned from covering the Up Helly Aa festival in Lerwick, in the Shetland Islands, Britain’s most northerly set of islands. More than 100 miles north of the Scottish mainland and closer to Bergen in Norway than London.

from Photographers' Blog:

The water of life, the spirit of Scotland

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Craigellachie, Scotland

By David Moir

Scotch whisky is big business. With sales well over 5 billion pounds per year it’s an industry that has gripped the growing middle classes around the world. Including in countries where sales previously struggled and with drinks industry companies eager to quench that thirst with huge modern computer run distilleries being built around the globe producing more and more of the liquid.
But one thing still remains true in its production, oak casks.

Whisky isn’t Scotch Whisky unless it has been distilled in Scotland and matured for a minimum of three years in an oak cask which comes in various capacities from a Pin to a Butt. ‘Cooper’s’ are the tradesmen who build and repair the oak casks and barrels, their skills passed down from generations show no signs of entering the hi-tech world. They use tools such as a dowelling stock, flagging iron, inside shave and a hollowing knife to name a few.

from Breakingviews:

Scots aim to break Europe’s working currency union

By Ian Campbell

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

The received wisdom is wrong. Europe doesn’t lack a functioning multi-country currency, fiscal and banking union. But it’s in the United Kingdom, not the euro zone - and Scotland ’s government is keen to break it up.

from John Lloyd:

No Union, please, we’re English

The opinions expressed are his own.

In France, it is les Anglais. In Germany, die Engländer. In Italy, gli Inglesi. In Russia, Anglichane.

The peoples of the United Kingdom, for most other peoples, are habitually “English.”

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