Iran and Japan in focus at Davos
Lots of action in Switzerland today with the annual get-together of the great and good at Davos getting underway and Syrian peace talks commencing in Montreux.
On the latter, few are predicting anything other than failure, a gloom that Monday’s chaotic choreography did nothing to dispel.
U.N. chief Ban Ki-moon Ban first offered Iran a seat at the table, prompting a threat to pull out by Syrian opposition groups which led to Washington demanding the invitation to Tehran be withdrawn. In the end, Ban did just that.
The release of thousands of photographs apparently showing prisoners tortured and killed by the government reinforced opposition demands that Bashar al-Assad must quit and face a war crimes trial. The president insists he can win re-election and wants to talk about fighting “terrorism.”
Davos often yields more heat (even in that cold) than light but there are some eye-catching guests to follow over the next four days with Iranian President Hassan Rouhani topping the list.
Presumably he’s there to woo the world of commerce now sanctions are to be relaxed in return for Tehran suspending enrichment of uranium to a fissile concentration of 20 percent, a short step below the level needed for nuclear weapons.
If a permanent accord is reached, the potential of a market of 76 million people in a country with some of the world’s biggest oil and gas reserves will be hard for foreign business to ignore. Rouhani is due to speak on more than one occasion in Davos. One of his main detractors, Israeli Prime Minister Benjamin Netanyahu, will also be there.
The world economy’s ability to recover will be a focus as always. A poll of business leaders at the forum showed they are feeling a bit better about their companies’ prospects and a lot more so about the broader economic outlook. Top worries were a slowdown in emerging markets to uncertainty over the tapering of Federal Reserve stimulus and r increased regulation.
With the U.S. recovering and the existential threat to the euro zone over, perhaps delegates will look most nervously to the east.
Japan has printed huge amounts of money which has had an impact but is still to follow through on promised structural reforms to counter the drag of an ageing and shrinking population and to reduce massive public debts. China’s ability to take excess credit out of the economy without causing a crash is perhaps of even greater importance.
Japanese premier Shinzo Abe will speak later today. Later in the week, we’ll get central bankers Mark Carney, Mario Draghi and Haruhiko Kuroda as well as U.S. Treasury Secretary Jacob Lew and IMF chief Christine Lagarde. China is sending a “senior leader” not yet on the published guest list.
The streets of Kiev have turned increasingly violent in the past few days as anti-government protestors rail against a new law aimed at curbing their activities. This morning, a new escalation with one demonstrator apparently shot dead.
Yesterday, Russian foreign minister Sergei Lavrov warned of that the country could spin out of control. For now, there is nothing to suggest that President Viktor Yanukovich could be toppled, given his grip on the security forces and no sign of Ukraine’s oligarchs peeling away, but things are heating up fast.
The French government is due to hold talks with business leaders over tax reform. The discussions are supposed to focus on simplifying the tax code and widening the base and could also cover company taxes after President Francois Hollande promised a 30 billion euros tax cut for companies if they commit to hire more workers and improve training.
Hollande’s announcement on that, and hefty future public spending cuts, already looks to be fraying at the edges. His trumpeting of a Franco-German energy company didn’t quite stack up, the spending cuts appear to be largely based on existing plans and are somewhat smaller than the headline figure he gave and French businesses are opposed to hard targets on hiring.
UK retail sales went through the roof in December, putting a further question mark over the Bank of England’s assertion that interest rates need not rise for some considerable time.
Unemployment data will be closely watched today given the Bank’s targeting of that as one of its policy triggers. The Bank has said it wouldn’t consider raising interest rates until unemployment dropped below 7 percent and predicted that would take a long time. In fact the rate has fallen pretty quickly and is forecast to hit 7.3 percent today.
All that has led to growing expectations that policy will have to be tightened before the end of the year. Minutes of the Bank’s last meeting will also be published.