A dissenting voice

July 23, 2014

A train carrying the remains of the victims of Malaysia Airlines MH17 arrives in Kharkiv

Interesting intervention from former Russian finance minister Alexei Kudrin late yesterday who warned that Russia risked isolation and having its efforts to modernize derailed.

That sort of internal criticism is rare but Kudrin has done so before without censure which suggests Vladimir Putin is – or has been – willing to hear it. Kudrin added that Moscow should not intervene militarily in eastern Ukraine.

EU foreign ministers came up with more promises of tougher action against Russia without quite showing the colour of their money. Meeting in Brussels they discussed restricting Russian access to European capital markets, defence and energy technology, asking the executive European Commission to draft proposals this week.

They also agreed to widen the list of people and companies to be targeted by asset freezes and travel bans and some called for an arms embargo but at the same time President Francois Hollande said delivery of a first French helicopter carrier built for Russia would go ahead.

The train carrying remains of the victims on the Malaysian airliner has arrived in the Ukrainian government-held city of Kharkiv. The bodies will be flown to the Netherlands today. Others remain at the crash site. U.S. officials said pro-Russian separatists probably shot down the Malaysia Airlines jet “by mistake,” not realizing it was a civilian passenger flight.

Airlines in the United States and Europe have halted flights to Tel Aviv as turmoil in the region intensifies, prompting Israeli Prime Minister Benjamin Netanyahu to ask U.S. Secretary of State John Kerry to help restore U.S. commercial flights that have been cancelled over the Gaza fighting.

Israel continued to pound targets in the Gaza Strip and the government said a ceasefire was not near. More than 600 people have died since Israel launched an offensive on July 8 to halt missile attacks by Hamas.

More economists are starting to expect a first UK rate rise to come later this year rather than next and either way the Bank of England is odds on to be the first of the big central banks to tighten. That expectation has helped propel sterling to its highest level in nearly six years.

Minutes of the Bank’s last policy meeting will be released today and will fuel that speculation if any of the nine members of the Monetary Policy Committee talked up the need to tighten policy. Governor Mark Carney is slated to make a big speech in Glasgow later today.

The Bank publishes its next quarterly Inflation Report on Aug. 13 when Carney and other officials will give a detailed update on their outlook for the economy.

Scottish First Minister Alex Salmond will speak at the same event as Carney, to raise the curtain on the Commonwealth Games. The financial markets have hitherto priced in little risk of Scotland seceding from the UK after a September referendum. But there are glimmers. Some investors have started to buy options that allow them to hedge against the possibility of a Scottish vote for independence.

Uncertainties to weight up on the back of a “yes” vote include which currency an independent Scotland would use, membership of the European Union, sharing of North Sea oil revenues and whether the Scottish fund industry would move south.

Bulgaria’s government is on the cusp of resigning. Prime Minister Plamen Oresharski’s minority administration agreed to resign after its biggest party, the Socialists, gained less than 20 percent of the vote in May’s EU elections.
Plamen said last week he would step down between July 23 and 25, in a line with an inter-party deal to hold a snap election on Oct. 5.

In the meantime and adding to the uncertainty, the central bank governor offered to quit if the existing parliament appoints a successor, saying he would not let the bank be used as a political toy after it was attacked for its handling of a banking crisis.

Polish central bank governor Belka speaks in parliament. He is likely to be grilled by MPs over leaked tapes of a conversation where he discussed the removal of a minister and ways to circumvent the rate-setting panel.

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