France grieves and questions

January 8, 2015

Makeshift memorial is seen outside the Consulate General of France during a vigil for the victims of an attack on satirical magazine Charlie Hebdo in Paris, in San Francisc

The youngest of three French nationals hunted over the killing of 12 people at a satirical magazine turned himself in overnight. The police have named the trio, the two still at large are brothers Said and Cherif Kouachi.

The latter had previously been tried on terrorism charges and served 18 months in prison, according to our sources. That may pose questions for the authorities about whether this could have been prevented.

One of the top concerns of security services in Europe is that disaffected citizens come back from Syria or Iraq having been taught how to fight and kill. There is no evidence yet that is what happened here but the video footage suggests a highly organized operation.

Politically, this is huge for European governments as they try to balance freedom of movement and speech with security against a growing backdrop of disenchantment with immigration.

Tens of thousands joined impromptu rallies across France last night in memory of the victims and to support freedom of expression. The far-right National Front has won support on discontent over immigration to France and it will be interesting to see how it responds. Some fear Wednesday’s attack could be used to feed anti-Islamic agitation.

The magazine, Charlie Hebdo, has published numerous cartoons ridiculing the Prophet Mohammad. Jihadists online repeatedly warned that the magazine would pay for its ridicule.

Ukraine will have to get money from the IMF and European Union soon or face bankruptcy.

An IMF team arrives in Kiev today and Ukrainian premier Yatseniuk will visit Angela Merkel in Berlin to press Ukraine’s case for financial help from the West, stressing that Ukraine is undertaking robust reforms to make it fit for a place in the European mainstream.

A $4 billion IMF tranche is due now the government has passed a budget and Kiev is hoping for rather more.

The Bank of England has a policy meeting but is no nearer raising interest rates as wage growth – only now just beginning to peep above a low inflation rate – counterbalances robust economic growth.

Just out, Marks & Spencer posted a worse than expected 5.8 percent drop in underlying sales of clothing, gifts and homeware in its Christmas quarter while Tesco reported like-for-like sales at Christmas down 0.5 percent, compared with a 4.4 percent fall in the previous three months.

German industrial orders plunged 2.4 percent on the month in November, far steeper than forecast and almost reversing a 2.9 percent increase in  October.

Spain will issue up to five billion euros of bonds due 2020, 2028 and 2037 later. France plans to raise 8.5 billion to 9.5 billion of bonds maturing in 2024, 2030 and 2045.

Greek 10-year borrowing costs have leaped above 10 percent on the prospect of Jan. 25 elections delivering a government led by left-wing Syriza which, although it wants to stay in the euro zone, is intent on renegotiating Greece’s debt obligations and reneging on bailout commitments.

But the contention of euro zone policymakers that the days of contagion are over is so far being borne out by the fact that Italy and Spain can still borrow for a decade at 1.9 and 1.7 percent respectively. France can do so at just 0.8 percent.

With a banking union in place, most Greek debt held by other euro zone governments and EU institutions and the ECB poised to buy lots of euro government bonds there are good reasons to think that Greece can no longer threaten the currency bloc as a whole, no matter what happens in Athens. But it remains a risk most would prefer not to take whatever the public declarations from Berlin and Paris.

Given all the main Greek parties want to stay in the euro zone, it seems highly unlikely that a way won’t be found, not least since thought was already being given about how to ease Greece’s debt burden.

The latest opinion polls show a slight fall in Syriza’s lead over the ruling Conservatives though it remains around three percent ahead.

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