What to do with Poland

January 13, 2016

Since sweeping to power in October elections, Poland’s Eurosceptic and authoritarian new government has packed the constitutional court with its appointees, skewed the court’s voting system and passed a law tightening its control on top media posts — all in the country supposed to be one of the bulwarks of democracy in east Europe. Today the European Commission will debate what to do with Poland: it is likely for now to hold back from triggering possible sanctions against Warsaw but will discuss ways of subtly increasing the pressure.

The move may have been obscured at the time by simultaneous revelations of his croissant-fueled trysts with an actress, but macro policy-watchers will remember January 2014 as the moment that France’s Socialist President Francois Hollande signalled a shift towards supply-side, pro-business economics. Two years later, and with re-election beckoning in 2017, that reformist fervour appears to be ebbing. Hollande is expected in coming days to lay out a final economic plan before the elections and, as our story will explain, pressure from within his own party for more traditionally leftist moves to boost job creation and demand is growing.

Spanish parliament reconvenes for the first time since last month’s inconclusive elections, a fact which has forced rival parties to at least agree on who will be the new parliamentary speaker. That said, nobody expects the agreement over this largely symbolic position to serve as a template for an actual coalition. Fraught negotiations between parties, with the future status of Catalonia region now one of the big issues on the table, are likely to continue for weeks.


Better-than-expected Chinese trade data, with both imports and exports falling less than expected last month, cheered investors and broadly lifted Asian stocks (though not in China). Europe to follow suit, adding to Tuesday’s gains. Oil is picking itself up off the floor after an unexpected fall in U.S. crude stocks. U.S. WTI crude fell below $30 a barrel for the first time in 12 years. The dollar and risk-sensitive currencies such as the China-focused Australian dollar are up while the safe-haven yen and the euro are down. German bond yields are up.

MSCI’s main Asia-Pacific index is up 1.2 percent and Tokyo’s Nikkei closed up 2.9 percent, its biggest gain since early September. European stock futures suggest gains of around 0.7 percent at the open. Gains on Wall St also seen helping after energy and biotech shares rose. Apple boosted by a BAML upgrade but Alcoa down 9 percent.

In European stocks, Sainsbury’s, Britain’s second-biggest supermarket, reported a better-than-expected performance in its Christmas quarter and upgraded its sales forecast for the second half. France’s Arcep telecoms regulator called on operators to make specific plans for ending their network-sharing agreements which allowed them to delay investments in building their own networks. Talks due with the U.S. Environmental Protection Agency after California rejected Volkswagen’s plan to fix 2.0 litre diesel cars; French food services and facilities management group Sodexo kept its full-year goals; Italy’s Saipem and France’s Technip are among the companies vying for a $4 billion contract to expand the Nord Stream gas pipeline; Continental AG expects free cash flow of at least 1.8 billion euros before acquisitions in 2016; Airbus signalled a change in priorities over tweaks to its biggest jets; and sugar refiner Suedzucker said it expects a sharp rise in full-year earnings.

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