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All posts by Ana Fuentes


Scotland’s starting debt

In Europe

LONDON | By UBS Global Research | While there has been considerable attention paid to the impact of an independent Scotland on British government debt ratios, the debate about independence has paid very little attention to Scotland’s starting debt. If an independent Scotland were to take a per capita share of gross debt, it would have a debt burden of around 88% of GDP (after the migration of part of Scotland’s financial sector). Scotland’s initial deficit and the set-up costs for the new state would need to be added to this number.

In Europe

France: two more years to get to the 3% deficit objective

LONDON | By JP Morgan analysts | The French Finance Minister, Michel Sapin, announced this week that the deficit objective of 3.8% of GDP for 2014 would not be reached. This news was not surprising as the Ministry of Finance hinted this summer that the general government deficit would likely to be above 4% this year. But in his last speech, Sapin suggested that the magnitude of the revision would be large, as the government now expects a deficit of 4.4% for 2014. This represents a 0.1% worsening of the deficit with respect to 2013.

World economy

Deflation can be “good” or “bad”, it depends

SAO PAULO | By Marcus Nunes | I do not want to question the likely bad effects that come about owing to a large unexpected deflation (or inflation).  What I want to question is whether a period of prolonged moderate (and presumably expected) deflation is necessarily associated with periods of depressed economic activity. Most people certainly seem to think so. But why?

In Europe

Housing prices rising in Spain only the peak of a huge non-sold stock iceberg

MADRID | Ana Fuentes | The first rise in Spain’s property prices since 2008 made big headlines on Monday. The government was proud to feed the press with some positive figures in order to illustrate its new recovery rethoric: 2Q housing prices increased by 0.8% on the year, compared with a 1.6% drop in annual terms in 1Q. But prices are going up… only for the few real estate actually being sold. What about the 600,000 properties in stock that banks are desperate to get rid of?

In Europe

ECB: We need a QE shot (not 17 of them, JPMorgan)

MADRID | The Corner | It’s speculation day before the European Central Bank’s tomorrow meeting. Will a QE plan finally be announced? Experts at Santander bank think that, if announced too early, it could damage TLTROs. JP Morgan economists believe there is a 30% chance we’ll get a QE shot in 2014, 50% next year. And they’ve come with a proposal we find erratic: 17 different bond buying plans, one for each state member. That is exactly the opposite direction the EU needs to be heading to.

In Europe

Spain may press criminal charges against Pujol tax fraud

MADRID | By Ana Fuentes | According to the US-based organisation One, corruption takes around $1tn a year out of poor countries and kills millions. Yet this evil is not strange to developed nations. In Spain, 127 politicians are facing corruption charges although they have not lost their jobs. The last big scandal affects former Catalan leader Jordi Pujol, who in July admitted hiding an inheritance abroad for more than 30 years. A storm embarrassing the current ruling regional government who has called a referendum in November on whether the region should break from the rest of Spain. Madrid may seek criminal charges, Spanish Budget Minister Cristobal Montoro (see picture above) said on Tuesday. For some analysts, this could be a strategy to dent nationalism support.


Do Aussie central bankers have a “good enough” solution?

Benjamin Cole via Historinhas The Reserve Bank of Australia (RBA) shoots for an “inflation band” of between 2 percent and 3 percent, and the Aussie economy (as recently illustrated here by Marcus Nunes) has been among the best-performing following the 2008 Great Recession. Could it be that simple? Should central banks merely shoot for a somewhat flexible and slightly higher inflation target? Worth noting is the People’s Bank of China has overseen much prosperity with a 4 percent inflation target.