Tuesday 21st April 2015
NEWS TICKER MONDAY APRIL 20TH 2015: European President Donald Tusk has called an extraordinary European Council on migratory pressures in the Mediterranean for Thursday this week to discuss how to tackle the growing tragedy of hundreds of would-be immigrants dying at sea on the way to trying to build a better life. “The situation in the Mediterranean is dramatic,” says Tusk. “It cannot continue like this. We cannot accept that hundreds of people die when trying to cross the sea to Europe. The objective of the summit is to discuss, at the highest level, what we, the Member States and the EU institutions together, can and must do to alleviate the situation now. I do not expect any quick-fix solutions to the root causes of migration - because there are none. Had they existed, we would have used them long ago. But I do expect that the Commission and the European External Action Service will present options for immediate action. And I do expect Member States will contribute immediately.” – The Nasdaq Stock Market says trading was halted today in ForceField Energy Inc (Nasdaq:FNRG) at 10:21:37 Eastern Time for "additional information requested" from the company at a last price of $3.11. Trading will remain halted until ForceField Energy Inc. has fully satisfied Nasdaq's request for additional information. For news and additional information about the company, please contact the company directly or check under the company's symbol using InfoQuotes on the Nasdaq web site - PEGAS, the pan-European gas trading platform operated by Powernext, successfully launched physically settled Spot and Futures contracts, quoted in pence per therms, for the Belgian Zeebrugge Beach (ZEE) gas hub on April 17th 2015. On the same day, a Daily Average Price index for the Zeebrugge Trading Point (ZTP) in Euros per Megawatt-Hour was introduced. The first transaction was completed on the first trading day at 08:49 AM CET on ZEE May 2015 contract at 45.025 pence per therm with a volume of 25,000 therms. This represented the first cleared futures trade ever made on the Zeebrugge hub. 14 trading members are set up for trading of the new products, with more members currently in the process of being admitted. “With the addition of the new ZEE contracts and with the ZTP and ZTPL (ZTP L-gas) products launched in July 2014, PEGAS is offering new trading opportunities through the widest range of products in two of the most important European hubs”, comments Dr Egbert Laege, chief executive officer of Powernext. Moreover, PEGAS is now providing a new ZTP Daily Average Price (DAP) index which is the weighted average of all transactions during a trading day - The value of real estate trades in Kuwait fell by 27% to KWD956m and the number of transactions fell by 28% to 692 in the first quarter this year according to statistics from the real estate registration department at the Ministry of Justice - The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) have pledged to enhance cooperation to respond more effectively to the needs of their common membership in a Memorandum of Understanding (MOU). The AMF and the IMF share common objectives of maintaining macroeconomic and financial stability, and accelerating broad-based and inclusive economic growth and job creation in the Arab region, in addition to strengthening capacity building. Under the MOU, the AMF and the IMF will continue to provide training opportunities to Arab officials, support the development of domestic capital markets in the Arab countries, and strengthen their collaboration on the Arabstat initiative, which aims at the development of efficient statistical systems in the region. The two parties also intend to carry out joint analytical work to inform Arab finance ministers and central bank governors, and to organise high level events on topics of mutual interests and priority for the region – The Kuwait Turk Bank will open in Frankfurt in July offering Shari’a compliant retail banking services having just received a licence from German market authorities. The bank already has a branch in Mannheim, but this new licence will allow it to operate as a fully functional bank in the country - The Joint Committee of the European Supervisory Authorities (ESAs) is organising the third Joint ESAs Consumer Protection Day on 3 June 2015 in Frankfurt am Main. The event will bring together, from all over Europe, thought leaders of consumer/investor organisations, national regulators, EU institutions, academics and key market participants. The keynote speech will be delivered by Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets Union. The focus will be on conduct risk; the next decade in the banking, insurance, pensions and securities sectors and the growing digitalisation of financial services. The Joint Committee of the European Supervisory Authorities consists of the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA), and the European Insurance and Occupational Pensions Authority (EIOPA). The Straits Times Index (STI) ended 21.94 points or 0.62% lower to 3503.25, taking the year-to-date performance to +4.10%. The top active stocks today were SingTel, which declined 1.12%, DBS, which declined 0.80%, Keppel Corp, which closed unchanged, CapitaLand, which declined 1.09% and UOB, with a 0.29% fall. The FTSE ST Mid Cap Index fell 0.32%, while the FTSE ST Small Cap Index fell 0.57%. The outperforming sectors today were represented by the FTSE ST Health Care Index, which rose 1.77%. The two biggest stocks of the Index - Raffles Medical Group and Biosensors International Group – ended 1.02% higher and 5.03% higher respectively. The underperforming sector was the FTSE ST Utilities Index, which slipped 1.65%. United Envirotech shares rose 3.15% and Hyflux declined 1.07% - The performance of the UK buy-to-let (BTL) residential mortgage-backed securities (RMBS) market remained steady in the three months ended February 2015, according to the latest indices published by Moody's Investors Service. The 90+ day delinquency rate and outstanding repossessions stood at 0.7% and 0.1% respectively in February 2015, unchanged from November 2014. Moody's annualised total redemption rate decreased to 9.3% in February 2015 from 11.2% in November 2014, representing a 17.5% drop - Proserv and hazardous environment specialist JCE Group (UK) Limited have announced a strategic working partnership in the Middle East and Africa (MEA) region. The agreement will see Proserv supporting JCE Group by offering its products and services whilst also delivering in-country engineering and technical support. Together, the companies aim to further build on their industry-leading standards of quality, service and reliability, and help cultivate a world-class QHSE culture - Deutsche Asset & Wealth Management (Deutsche AWM) has launched a physical replication exchange-traded fund (ETF) tracking the JPX-Nikkei 400 Index of Japanese stocks. At the same time, three new currency-hedged share classes of existing db X-trackers ETFs have also been listed. db x-trackers JPX-Nikkei 400 UCITS ETF (DR)1 tracks an index of 400 Japanese stocks selected on the basis of quantitative and qualitative screening. As the underlying index is not a standard capitalisation-weighted benchmark the ETF falls into the strategic beta – also known as ‘smart beta’ – category of investments.

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The European Review

By Patrick Artus, chief economist at Natixis

Without lax monetary and FX policies, fiscal consolidation in the euro zone is impossible

Friday, 01 June 2012 Written by 
Without lax monetary and FX policies, fiscal consolidation in the euro zone is impossible In the past, successful fiscal consolidations occurred through a combination of restrictive fiscal policy, expansionary monetary policy and sharp depreciation of the currency. In many euro-zone countries, as the policy mix is restrictive, fiscal consolidation is failing due to falling real economic activity. All possible ways to make monetary policy in the euro zone more expansionary must therefore be explored. Although there remains little leeway to lower short-term interest rates, it is possible to reduce long-term interest rates in the euro-zone countries where they are abnormally high, both by restoring fiscal credibility and through bond purchases by the ECB. Above all, the euro must be weakened, requiring interventions in the FX market. And if the current trend of restrictive fiscal policies without drastic monetary measures persists, euro-zone countries will end up in recession and with higher, not lower fiscal deficits. http://www.ftseglobalmarkets.com/

In the past, successful fiscal consolidations occurred through a combination of restrictive fiscal policy, expansionary monetary policy and sharp depreciation of the currency. In many euro-zone countries, as the policy mix is restrictive, fiscal consolidation is failing due to falling real economic activity. All possible ways to make monetary policy in the euro zone more expansionary must therefore be explored.

Although there remains little leeway to lower short-term interest rates, it is possible to reduce long-term interest rates in the euro-zone countries where they are abnormally high, both by restoring fiscal credibility and through bond purchases by the ECB. Above all, the euro must be weakened, requiring interventions in the FX market. And if the current trend of restrictive fiscal policies without drastic monetary measures persists, euro-zone countries will end up in recession and with higher, not lower fiscal deficits.

Monetary measures during fiscal consolidations in the past

In the nineties, Sweden, Canada, Finland and Italy all successfully consolidated their fiscal position through rapid reductions in fiscal deficits, without negative effects on economic growth and unemployment. This was because fiscal consolidation was systematically combined with a very expansionary monetary policy that included lower interest rates and, above all, a sharp depreciation in the exchange rate to kick things off.



In these countries, the fall in government expenditure was offset by an increase in exports linked to the devaluation of the currency as well as an increase in domestic demand linked to the fall in interest rates.

In the absence of sufficient monetary measures, the fiscal consolidations in several euro-zone countries are failing

The ECB’s policy rate is actually low, but long-term interest rates in the troubled countries have risen markedly, which results in long-term interest rates for the euro zone as a whole that are far too high.

Moreover, although it has depreciated since 2008, the euro is still overvalued against the dollar. And, since euro-zone countries want to reduce their fiscal deficits as quickly as possible, the euro zone’s policy mix is on the whole too restrictive. So it is unsurprising that activity is declining in countries with restrictive fiscal policies: Greece, Portugal, Italy, Spain, Ireland and even the Netherlands.

Indeed, the decline in growth is so substantial that fiscal deficits stopped narrowing in early 2012 in several countries (Spain, Greece, France, Italy and Portugal), requiring additional fiscal austerity measures to be adopted. But these measures will further weaken growth, especially because they are being adopted simultaneously by most of Europe (the euro zone and the United Kingdom). This could lead to an absurd situation later in the year whereby unemployment soars while the fiscal deficits fail to fall. European countries are moving increasingly to the right of the Laffer curve, where a more restrictive fiscal policy subsequently leads to a higher fiscal deficit due to a fall in economic activity.

The only solution: Expansionary monetary and exchange-rate policy

Euro-zone countries are at an impasse if the current policy mix is too restrictive, and the resulting fall in economic activity prevents them from reducing their fiscal deficits. The only solution is then to emulate the successful fiscal consolidations in the nineties by changing over to an expansionary monetary and exchange-rate policy. So – while there is no longer much to be gained from short-term interest rates in the euro zone – it is possible to reduce long-term interest rates in the countries where they are abnormally high.

In order to achieve this, these countries need to regain medium-term fiscal credibility, i.e. financial markets need to be convinced of their determination to stabilise their public debt ratios. This would enable the ECB to resume its government bond purchase programme (SMP) – aimed at accelerating the decline in interest rates – without fear of encouraging these countries to not reduce their deficits.

Furthermore, the euro must be weakened. Indeed, exchange-rate depreciation played an important role in the fiscal consolidation programmes of the nineties. And like Switzerland, China, or once again Japan, the ECB could accumulate foreign exchange reserves (in dollars in the ECB’s case) to push down the euro’s exchange rate against the dollar.

A depreciation of the euro would directly benefit the countries with large-scale industry (Germany, Italy, Ireland, Finland, Austria and Belgium) as well as countries with large-scale exports outside the euro zone (Belgium, Ireland, the Netherlands and Germany), while Spain, France, Portugal and Greece would indirectly benefit from the positive effects of the euro depreciation on these other euro-zone countries.

Averting disaster

Although resuming its government bond purchase programme and accumulating foreign exchange reserves runs counter to the ECB’s culture, if it does not do this, several euro-zone countries will soon reach the absurd situation of the simultaneous increase in both unemployment and fiscal deficits at the same time that fiscal deficit reduction policies are being carried out. Indeed, the examples from the past clearly show that successful fiscal consolidations have always been combined with expansionary monetary and exchange-rate policy.

Patrick Artus

A graduate of Ecole Polytechnique, of Ecole Nationale de la Statistique et de l'Adminstration Economique and of Institut d'Etudes Politiques de Paris, Patrick Artus is today the Chief Economist at Natixis. He began his career in 1975 where his work included economic forecasting and modelisation. He then worked at the Economics Department of the OECD (1980), before becoming Head of Research at the ENSAE. Thereafter, Patrick taught seminars on research at Paris Dauphine (1982) and was Professor at a number of Universities (including Dauphine, ENSAE, Centre des Hautes Etudes de l'Armement, Ecole Nationale des Ponts et Chaussées and HEC Lausanne).

Patrick is now Professor of Economics at University Paris I Panthéon-Sorbonne. He combines these responsibilities with his research work at Natixis. Patrick was awarded "Best Economist of the year 1996" by the "Nouvel Economiste", and today is a member of the council of economic advisors to the French Prime Minister. He is also a board member at Total and Ipsos.

Website: cib.natixis.com/research/economic.aspx

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