Bibi rides again

March 18, 2015

Israeli Prime Minister Benjamin Netanyahu waves to supporters at the party headquarters in Tel Aviv

Not for the first time, Benjamin Netanyahu has defied the odds and snatched electoral victory from the jaws of defeat.
Israeli opposition leader Isaac Herzog has just conceded although he has not given up hope of forming a coalition government if Netanyahu fails to.

Confounding opinion polls which predicted Herzog’s Zionist Union would come out top, the Israeli premier’s hardline stance – railing against an Iran nuclear deal and dropping a commitment to negotiate a Palestinian state – seems to have done the trick. With only a handful of votes uncounted, Likud has won 30 seats in the 120-member Knesset, comfortably defeating the opposition on 24 seats.

Forming a coalition will still be tricky. Netanyahu will look to the pro-settler Jewish Home party led by Naftali Bennett, as well as with religious groups. He may be forced to tack somewhat back to the centre to win over Kulanu, led by former Likud member Moshe Kahlon who won 10 seats, making him a kingmaker who could swing either way.

A UK budget is always a big set-piece occasion and when it comes seven weeks before a general election that is too close to call, that maxim applies in spades.

With growth solid and public finances starting to surprise on the upside, finance minister George Osborne has some scope for vote-winning giveaways. But that would run counter to his mantra of more debt-cutting and austerity to come to put Britain back on track. There is also the fact that his Liberal Democrat coalition partners probably wouldn’t agree to anything that smacked too much of electoral bribery.

Osborne has talked about a cost neutral budget but that still leaves some room to pluck some rabbits from his hat, probably including raising further the threshold at which Britons start paying income tax, a policy the LibDems claim ownership of.
The reheating of plans announced last year to give Britons more freedom to spend their pension pots suggests the cupboard is somewhat bare but that is not to downplay the political choice on offer in May.

There is a big gap in spending plans between the Conservatives and opposition Labour party which accuses Osborne of plotting the most extreme public spending cuts in post-war history to build on five years of austerity since 2010.
Osborne might try to soften that message and scale back the level of cuts he spelled out so starkly in his Autumn Statement. And he will of course trumpet growth figures that rest of Europe can only dream of.

Add to all that the surge in support for Scottish separatists and the prospect of a vote on Britain leaving the EU and this is a big election by any standards.

For the markets, all eyes will be on the Federal Reserve’s meeting later on Wednesday and whether it flags a looming U.S. interest rate rise.

The Bank of England publishes the minutes of its last meeting this morning which must surely unanimity on holding rates at a record low 0.5 percent.

The Danish central bank releases its ‘Monetary Review 1st Quarter 2015′. Last month, it cut rates to -0.75 percent, in line with Switzerland’s, the lowest in the world. Its governor says it has yet to hit a “lower bound” for interest rates in an ongoing battle to defend the country’s three-decade old currency peg as the euro sinks lower and lower.

Greek premier Alexis Tsipras has asked to meet key EU leaders and European Central Bank chief Mario Draghi on the margins of an EU summit starting tomorrow. That, together with his visit to see Angela Merkel in Berlin on Monday, looks like a “high noon” moment.

We exclusively reported last night that Greece frustrated its main creditors on Tuesday by refusing to give an update on its reform programme at a scheduled teleconference of euro zone finance officials. Instead, the Athens government insisted the discussions should be escalated to Thursday’s summit.

Euro officials suspect no progress has been made on economic reforms that were stipulated to unlock further loans. Athens attacked comments by Jeroen Dijsselbloem, head of the Eurogroup of euro zone finance ministers, who said pressure was growing and an emergency loan depended on real progress on reforms.

France premier Manuel Valls meets European Commission chief Jean-Claude Juncker and other commissioners ahead of the EU summit. He will defend French economic strategy and a public financing programme that has already received the Commission’s approval to meet the EU budget deficit limit only in 2017, four years after it was supposed to get there.

German Finance Minister Wolfgang Schaeuble and Economy Minister Sigmar Gabriel present mid-term public investment plans after sources said last week that, having balanced its budget for the first time in almost half a century, Berlin will boost spending over the next five years.

Provincial Dutch elections will give an interim gauge of support for far right, anti-Islam leader Geert Wilders, who went into 2015 leading opinion polls.

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