The G20 will wrap up with entrenched positions on Syria and a little more entente over the emerging market turmoil prompted by the Federal Reserve’s impending move to slow the pace of its dollar creation programme.
Spain will sell up to four billion euros of six- and 12-month treasury bills, prior to a full bond auction on Thursday. Italy attracted only anaemic demand at auction last week and Madrid has already had to pay more to borrow since the Federal Reserve shook up the markets with its blueprint for an exit from QE.
Brazilian economic policy is fast becoming a shining example of the law of unintended consequences. As activity fades and inflation picks up, the government has tried several different measures to fix the economy – and almost every time, it ended up creating surprise side-effects that made matters worse. Controls on gasoline prices tamed inflation, but opened a hole in the trade balance. Efforts to reduce electricity fares ended up curbing, not boosting, investment plans.
With debate about the balance between growth and austerity well and truly breaking out into the open, flash euro zone PMIs – which have a strong correlation to future GDP — are likely to show why a bit of fiscal stimulus is sorely needed. Talk of a European Central Bank rate cut is growing, euro zone policymakers at the G20 last week began to ponder loosening up on debt-cutting in an attempt to foster some growth and European Commission President Jose Manuel Barroso added his voice to the debate yesterday, saying the austerity drive had reached its “natural limit”.
All the talk of currency wars is mostly just that – talk. This week’s meeting of the Group of 20 nations at the International Monetary Fund was living proof. Despite speculation that emerging nations would redouble their criticism of extraordinarily low rates in advanced economies, the G20 ended up largely supporting the Bank of Japan’s new and bold stimulus efforts aimed at combating years of deflation.
The big euro zone development over the weekend was the re-election of ageing Italian President Giorgio Napolitano for a second term. The presumption is that to put himself through this again he must have got pretty serious expressions of intent from the warring political parties that they will strive for some form of grand coalition. That may have been made easier by the resignation of centre-left leader Bersani who was in danger of splitting his own caucus.
from The Great Debate:
Four years ago world leaders, meeting in the G20 crisis session, agreed they would all work to move from recession to growth and prosperity. They agreed to a global growth compact to be delivered by combining national growth targets with coordinated global interventions. It didn’t happen. After the $1 trillion stimulus of 2009, fiscal consolidation became the established order of the day, and so year after year millions have continued to endure unemployment and lower living standards.