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29 марта, 19:32

Growing out of it: Portugal cuts its fiscal deficit while raising pensions and wages

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Print section UK Only Article:  standard article Fly Title:  Growing out of it Location:  LISBON Main image:  20170401_EUP002.jpg NO ONE would have called António Costa, Portugal’s Socialist prime minister, a fiscal hawk when he took office in November 2015. After finishing second to the centre-right Social Democrats in an inconclusive general election, he cobbled together a coalition with the far left, promising to “turn the page on austerity”. Conservatives dubbed his pact with radicals and communists the geringonça, a term for an improbable contraption. He pledged both to reverse the austerity measures attached to Portugal’s bail-out during the euro crisis and to meet stiff fiscal targets. Many called it voodoo economics. Yet Mr Costa has kept his word. In 2016, according to official figures released on March 24th, his minority government cut the budget deficit by more than half to just under 2.1% of GDP (see chart), the lowest since Portugal’s transition to democracy in 1974. His administration restored state pensions, public-sector wages and working ...

24 марта, 11:48

The Economist explains: The significance of the Treaty of Rome

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Main image:  ON MARCH 25th the European Union’s heads of government will gather in the glorious Sala Degli Orazi e Curiazi of Rome’s Palazzo dei Conservatori to issue a solemn declaration of unity. The moment will be freighted with significance: exactly 60 years earlier, as expectant crowds huddled under umbrellas on the Piazza del Campidoglio outside, plenipotentiaries from six Western European countries—France, West Germany, Italy, Belgium, the Netherlands and Luxembourg—assembled in the same room to sign the Treaty of Rome. The 1957 treaty established the institutions that made up the European Economic Community—the European Commission, the Council of Ministers, the European Parliament and the European Court of Justice (ECJ)—which was in time to become the EU. (A second treaty signed that day created the European Atomic Energy Community, later folded into the EU.) What was the significance of the Treaty of Rome?The treaty emerged from the European Coal and Steel Community (ECSC), signed by the six countries in Paris in 1951, with the ashes from the second world war still smouldering. By uniting industrial production under a centralised authority the ECSC was, in the words of Robert Schuman, France’s foreign minister, designed to make war “not only unthinkable but materially impossible”. It was also ...

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23 марта, 18:44

That sinking feeling: Members agree that the single currency needs more integration

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Print section Print Rubric:  Euro-zone members agree that the single currency needs more integration, but disagree over how Print Headline:  That sinking feeling Print Fly Title:  The euro UK Only Article:  standard article Issue:  The case for flexibility Fly Title:  That sinking feeling Main image:  20170325_SRP054_0.jpg MANY BRITISH TORY Eurosceptics trace their beliefs back to the 1992 Maastricht treaty which agreed to create a single currency. To them, Maastricht represented a Franco-German stitch-up. The French president, François Mitterrand, accepted German unification, and in exchange the German chancellor, Helmut Kohl, agreed to give up the D-mark for the euro. In fact money was crucial from the very start of the European project. In the 1950s Jacques Rueff, a leading French economist, declared that “Europe will be made through a currency, or it will not ...

23 марта, 18:44

Reverse Balkanisation: With EU accession distant, Balkan countries find a substitute

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Print section Print Rubric:  With EU enlargement in question, the western Balkans find a substitute Print Headline:  A common market of their own Print Fly Title:  Reverse Balkanisation UK Only Article:  standard article Issue:  Amazon’s empire Fly Title:  Reverse Balkanisation Location:  SARAJEVO Main image:  20170325_eup504.jpg TO JUDGE by the headlines, things are getting pretty hairy in the western Balkans. Newspapers have been running articles arguing that borders should be redrawn. Russia’s foreign ministry has accused Western officials of promoting a Greater Albania. Montenegro claims that Russia was behind an alleged coup attempt last November aimed at stalling its accession to NATO. Serbia has excoriated the president of Kosovo for suggesting that his demilitarised country might form an ...

23 марта, 18:44

Buttonwood: The unusual gap between American and European bond yields

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Print section Print Rubric:  Europeans are borrowing more cheaply than the American government Print Headline:  Generation gap UK Only Article:  standard article Issue:  Amazon’s empire Fly Title:  Buttonwood AMERICA may be the world’s largest economy, but these days its government pays more than many others to borrow money. Its ten-year bond yields are higher than those in Britain, France, Singapore and even Italy. The gap between American and German ten-year yields has been above two percentage points. For much of the past 25 years, it was very rare for the difference to exceed a single percentage point. On occasions, American yields fell below German levels (see chart). Go back a generation and you might have expected the country with the higher bond yields to be the one with the weaker currency; investors would demand a higher yield to compensate for the risk of future depreciation. But that is not the case today. The dollar has been strong, relative to the euro, and many people expect it to ...

23 марта, 18:44

Bello: There has never been a better time for Latin American integration

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Print section Print Rubric:  There has never been a better time for Latin American integration Print Headline:  Come together, right now Print Fly Title:  Bello UK Only Article:  standard article Issue:  Amazon’s empire Fly Title:  Bello Main image:  20170325_AMD001_0.jpg IT IS Saturday lunchtime, and about 30 trucks are parked at each of the customs posts on either side of the bridge across the broad Uruguay river that marks the border between Argentina and Uruguay. Both countries are members of Mercosur, a would-be customs union that also embraces Brazil and Paraguay. In theory, internal borders should not exist in Mercosur. In practice, customs, sanitary inspections and other paperwork mean that the trucks are delayed for up to 24 hours, says Oscar Terzaghi, the mayor of Fray Bentos, on the Uruguayan side. This represents an improvement. For three years before ...

23 марта, 18:44

Lean, not green: America’s proposed budget cuts will be bad for the environment

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Print section Print Rubric:  What American budget cuts might mean for the environment Print Headline:  Lean, not green Print Fly Title:  Climate finance UK Only Article:  standard article Issue:  Amazon’s empire Fly Title:  Lean, not green Main image:  20170325_IRP002_0.jpg AT HOME and abroad, one clear result of Donald Trump’s proposed budget would be to push green programmes into the red. Between 2010 and 2015 America increased its climate-related spending in developing countries fourfold. It lavished $15.6bn on projects for clean energy, better land use and infrastructure suited to a warming world. Cutting such schemes is bad enough. But for America to step down as an environmental champion is worse. International deal-making will slow without its clout and diligence, other countries’ emission-cutting efforts will shrink, and laggards such as Saudi Arabia and ...

22 марта, 15:08

Financial regime change: Donald Trump, trade and the new world order

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Main image:  TWO months into the Trump administration and we have had more sound and fury than concrete proposals about its economic agenda. The most alarming sign so far is that America forced the G20 to drop a pledge about resisting “all forms of protectionism” from a joint statement but this may be purely symbolic.Nevertheless, Mr Trump’s determination to shake up the status quo may yet have global consequences. In a research note, Chris Watling of Longview Economics suggests thatTrump’s policies might inadvertently bring about a new international monetary order as the administration struggles to fulfil campaign promises in the light of the original misdiagnosis of the ‘trade deficit’ problem.The current monetary system emerged from the downfall of Bretton Woods in the 1970s. Under the Bretton Woods system, devised in part by John Maynard Keynes (pictured, left), currencies were fixed to the dollar (with scope for occasional devaluations or revaluations) and the dollar was fixed against gold. But this required America to act as the anchor of the system; other central banks were entitled to sell their dollars for gold. In order to maintain confidence in the system, America would have to tighten policy if its gold reserves fell; that is, subordinate domestic economic policy to international demands. ...

21 марта, 17:43

Daily chart: Measuring the cost of living worldwide

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Main image:  SINGAPORE retains its title as the world’s most expensive city for a fourth consecutive year, according to the latest cost-of-living survey from the Economist Intelligence Unit, our sister company. The survey, which compares the prices of 160 goods and services in 133 cities around the world and is primarily used by human resources managers to calculate compensation packages for overseas postings, found that Singapore was 20% more expensive than New York and 5% pricier than Hong Kong, which lies in second place.A sustained recovery in the strength of the Japanese yen has led to rising costs in Osaka and Tokyo. Asia now hosts five out of the six most expensive cities in the world. This contrasts with a gradual drop down the rankings for European cities, which made up eight of the ten most expensive places a decade ago and now account for just four. In Britain the depreciation of sterling after the Brexit referendum has helped push London and Manchester sharply down the rankings; London is at its lowest position in 20 years.American cities have fallen down the rankings, too, although they still remain comparatively expensive compared with five years ago, when New York was ranked in 46th position. San Francisco and Lexington, Kentucky were the only American cities out of the 16 surveyed to ...

17 марта, 18:02

Love thy neighbour: An array of churches opposes Donald Trump’s proposed cuts to foreign aid

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Main image:  THERE IS no consensus among America’s faith leaders over how the country should help poorer parts of the world. The question pits religious conservatives against religious liberals, just as it divides the non-religious. There was dismay in the conservative camp when the Obama administration said it would no longer channel help through organisations with traditional ideas on gender and sexuality. And Donald Trump dismayed progressives when he ruled that no more funds would be given to organisations that offer advice on abortion, a draconian reinstatement of an old policy known as the “gag rule”.This week, however, church leaders across a broad ideological and theological spectrum came together to oppose the Trump administration’s proposal to slash the foreign aid budget. More than 100 dignitaries wrote to Congressional leaders, including two of the clerics whom the president invited to participate in his inauguration ceremony: Cardinal Timothy Dolan of New York, and Samuel Rodriguez, a leader of the burgeoning Hispanic Pentecostal movement. They made the simple point that a prosperous country should share some of its riches with others:  America is blessed with fertile land, abundant natural resources, a strong economy, and faithful citizens who value religious freedom. But ...

16 марта, 18:55

Promises, promises: Just what is the status of the Conservative manifesto?

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Print section Print Rubric:  A U-turn on tax highlights the odd status of a sacred, yet disposable, document Print Headline:  Promises, promises Print Fly Title:  The Conservative Party manifesto UK Only Article:  standard article Issue:  The global economy enjoys a synchronised upswing Fly Title:  Promises, promises Main image:  Cameron? Never heard of him Cameron? Never heard of him PHILIP HAMMOND’S budget of March 8th was short and rather sensible. But it blew up spectacularly over a promise to raise taxes on the self-employed. The chancellor’s tax plan was extremely modest, representing less than 0.1% of public spending. Yet the response from Conservative backbenchers and the right-wing press—who, with Labour under inept leadership, form the main opposition to the government these days—was apoplectic. The Sun even offered its readers bumper stickers bearing ...

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16 марта, 17:44

Can't tax, won't tax: The hole in Western finances

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Main image:  HAVE western governments, faced with angry voters, lost the ability to raise taxes? The question is raised by a farcical U-turn by the British government over a budget measure announced a week previously. The government retreated in the face of backbench opposition and the right-wing press. It seems eerily reminiscent of America, where Republicans have an absolute abhorrence of tax-raising measures.The planned British increase (aligning the tax rates of the employed and self-employed) was perfectly sensible. Unless closed, this gap will erode the tax base over the long run. Most economists agree that differential tax treatments tend to distort behaviour for no long-term gains. But the government had promised at the 2015 election not to raise income tax, national insurance or VAT—three taxes that raise around two-thirds of revenues—and this (foolish) promise was used against it. As the graph shows, British tax revenues have struggled to get above 35% of GDP since the late 1980s. That is a problem when spending has consistently been above 35% and often above 40%. The UK is not alone. From 2000 to 2016, the average OECD government spent 40.9% of GDP a year; tax revenues have been 37% of GDP (see the data here). In only two years (2000 and 2015) did tax revenues get to 38% of GDP; since ...