Merkel Economy Shows Neglect as Sick Man Concern Returns
By Jeff Black and Stefan Riecher – Jan 9, 2013
As the continent’s growth engine and self-appointed fiscal paragon orders budget cuts for its peers, investors, economists and policy makers are starting to warn Germany is turning a blind eye to its own weaknesses. Joerg Asmussen, a European Central Bank board member nominated by Merkel, has gone as far as to predict a return to the status of “Sick Man of Europe” should they go unfixed.
Without Merkel and a largely supportive German electorate ready to back over 300 billion euros ($393 billion) in bailouts and guarantees, Europe’s debt crisis could have already broken up the single currency. At the same time, the drive to rescue Europe has distracted her from signs of economic drift at home as labor costs rise at the fastest pace in a decade, erasing most of the progress made under predecessor Gerhard Schroeder.
“Merkel has had to work with the cards that history has dealt to her and Europe has been a priority,” said Irwin Collier, professor of economics at the Freie Universitaet in Berlin. “But you have to do a lot of things at the same time, and it’s clear now things have to change at home too.”
The chancellor, in office since 2005, thus far has had to do very little to the economy.
The unemployment rate sank to the lowest since east and west were reunited in 1990 as companies from Bayerische Motoren Werke AG (BMW) to Siemens AG (SIE) helped Germany maintain its place as the world’s largest exporter after China.
The benchmark DAX Index rose 29 percent in 2012, its best year in nine. The yield on 10-year benchmark bunds was 1.48 percent today, down 37 basis points from a year ago.
That boom is partly down to the so-called Agenda 2010 package under Schroeder, who cut taxes, unemployment benefits and health-care services from 2003 in what was seen as the biggest change to the German welfare system since World War II. It ultimately cost him his job.
Merkel, 58, now faces her third general election in September or October, with the economy projected by the Bundesbank to expand by as little as 0.4 percent over the course of the year. Industrial production increased less than economists predicted in November, rising 0.2 percent from the previous month, the Economy Ministry in Berlin said today.
In her New Year’s television address, she warned that the debt crisis is “far from over,” and the economic environment could be yet more difficult in 2013.
“Until now Merkel has been able to profit from the inheritance of her predecessor,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “But now something really has to happen, otherwise in a few years things are going to look quite different.”
Eurostat data show that the cost of Germany’s workforce is on an upward path while the competitiveness of euro area peers like Spain is improving.
Unit labor costs have risen more than 3 percent since 2009, compared with an almost 7 percent decline in Spain over the same period, figures from the European Union’s statistics arm show. The cost of German workers has risen an estimated 8.3 percent since Merkel came to power.
Germany has been in a similar situation before, with the political and economic burden of saving the euro akin to the effort of integrating the former East Germany after the fall of the Berlin Wall in 1989, according to Gerd Langguth, Professor of Political Science at the University of Bonn and Merkel’s biographer.
At that time, Helmut Kohl, chancellor from 1982 to 1998 and Merkel’s mentor, arguably let the economy stagnate while he was engaged elsewhere. Unemployment swelled to 11.1 percent in the reunited country in 1998 or 9.2 percent in Western Germany, from 6.4 percent in the West in 1990.
“When it came to Europe, Kohl at that time solved a lot of things by throwing money at the problem,” Langguth said. Now, even as Merkel has backed euro-area rescues with cash and guarantees, “Germany itself has to cut back, so she can’t really do this much longer.”
Germany’s looming difficulties are largely demographic. While there are currently four people of working age for every pensioner, within 20 years there could be as few as two, according to Eurostat. Though many European countries face a similarly ageing society, Germany’s problem is the most acute.
A decline in the maximum number of people employable in the economy also depresses potential growth.
At about 1 percent per year, the long-term forecast for gross domestic product growth is the lowest for any member of the Organization for Economic Cooperation and Development. Japan, which already suffers the effects of a population living longer, has the next lowest.
“Aging will clearly cost growth and there is no clear strategy on how to tackle this problem yet,” says Carsten Brzeski, an economist at ING Group in Brussels.
The problem of a shrinking workforce might be eased by encouraging people who can work, though don’t to take up jobs, lowering the cost of hiring and firing, and making it easier for companies and workers to agree on wage levels, according to the World Economic Forum. The WEF ranks Germany 112th out of 142 countries in terms of the flexibility of its labor rules.
While the percentage of women who work in Germany is high compared with the average of industrialized countries, more than 60 percent of those between 25 and 54 with children work part time, according to OECD figures. Only a quarter of French women in the same position choose to go part-time.
Merkel’s government pledged to increase the number of childcare places available for working parents. At the same time, the coalition in November approved new benefit payments for families looking after their children at home.
Christian Schulz, an economist at Berenberg Bank in London, describes that move as an “electoral gift.” “It is an example of policies that are backtracking on the reforms made earlier,” he said. “It does not promote employment.”
Then there’s the skills issue, according to ECB board member Asmussen. The workers of tomorrow aren’t getting the education they need to compete globally, he said.
A former state secretary in the finance ministry, Asmussen took the performance of German universities to task in a speech on Dec. 6 in Frankfurt. There isn’t a single German university in the world’s top 50, according to the 2012 U.S. News World’s Best Universities Ranking.
“Germany is seriously lagging behind in science and mathematics education,” said Asmussen, 46, with a master’s degree in business administration and a diploma degree in economics. “That is of course a problem for a country that prides itself on manufacturing high-quality products.”
Without reforms, “within five years Germany will again have the title ‘Sick Man of Europe,’” he said.
The success of the German economy has been down to more vocational training, the technical apprenticeship system, said Andreas Scheuerle, an economist at Deka Bank in Frankfurt.
“But when it comes to creating the products for the future, then we really need the universities,” he said.
Still, with unemployment near a 20-year-low and locally made high-technology machinery and automobiles achieving record sales across the globe, Germany doesn’t look like a country on the verge of economic malaise.
That’s bolstered Merkel’s popularity. Four out of five Germans think she is performing well as chancellor, according to the ZDF Politbarometer. If Germany’s election took place now, 40 percent would vote for Merkel’s Christian Democrats, leading the Social Democrats by 10 percentage points.
Merkel’s buoyancy in the polls might also be down to her government’s claim that wages rose an average 2.6 percent last year as unions brokered deals boosting pay by as much as 6.5 percent. Productivity isn’t keeping pace with wage deals either, with Eurostat estimating a decline of 0.2 percent in 2012 and growth of 0.5 percent in 2013.
That’s worsening Germany’s competitive position. Since 2010, the country has lost its top-five spot in the World Economic Forum’s competitiveness index to Japan.
“The worry that German competitiveness will be endangered over the long term if reform efforts aren’t begun is completely justified,” said Christoph Kind, head of asset allocation at Frankfurt Trust, which manages about $20 billion. “Since Merkel has been in power, there hasn’t been any reform at all.”
India Joins Indonesia Facing Heightened Policy Dilemma: Economy
By Shamim Adam – Dec 26, 2012
Central banks in Indonesia and India, with the worst-performing currencies among Asian emerging markets this year, will face more challenges in 2013 as they balance inflation risks with the need to boost growth.
The Reserve Bank of India must deal with “conflicting cues” from elevated prices and an economic slowdown, complicating policy decisions even after it recently signaled there is room to lower interest rates, Mizuho Corporate Bank Ltd. economist Vishnu Varathan said.
Indonesia’s inflation may be at the upper end of the central bank’s targeted range, forcing it to raise borrowing costs “aggressively,” according to HSBC Holdings Plc.
Demand for higher wages, reduced government subsidies and greater capital inflows may drive up price pressures in the world’s fastest-growing region. Bank Indonesia refrained from raising rates this year even as the currency slumped and costs accelerated, while delayed reforms and infrastructure bottlenecks in India have spurred the most rapid inflation among the largest emerging nations.
“Central banks will have to strike a delicate balance between tightening policy, allowing stronger exchange rates and looking past inflation humps,” Varathan said in a Bloomberg survey of 15 economists on challenges facing policy makers. “Inflationary pressures may be emerging in a few quarters, whereas growth may not be recovering quickly and broadly enough to justify shifting to decisive policy tightening.”
Indian inflation has remained above the central bank’s comfort level of 5 percent every month for the past three years, while growth is forecast to be the slowest in a decade in the current fiscal year. The paradox is pitting Governor Duvvuri Subbarao against Finance Minister Palaniappan Chidambaram, as the central bank chief resisted calls for lower borrowing costs to aid a government policy overhaul.
“Policy makers there will continue to grapple with uncomfortably-high inflation and a substantial slowdown in investment and gross domestic product growth,” said Sukhy Ubhi, who covers Asian economies at Capital Economics Ltd. in London. “The former suggests that monetary policy should be tightened, while the latter suggests it should be loosened. We expect inflation to fall only gradually.”
The rupee has declined more than 3 percent this year, after plunging 16 percent in 2011. Wholesale prices rose 7.2 percent last month, and gains may moderate to as little as 6.8 percent by the end of March, the government predicts. The economy will expand about 5.7 percent to 5.9 percent in the year through March, less than an earlier estimate of as much as 7.85 percent, the Finance Ministry said Dec. 17.
“The RBI’s dilemma is especially acute, given that sticky inflation is entrenched as it is due to structural or supply- side factors that are not reflective of underlying demand conditions,” Varathan said. “The risks of policy error remain pronounced, and the RBI will remain acutely aware of this.”
Bank Indonesia will start raising rates as early as next quarter, according to a Bloomberg survey of economists last month. The central bank has kept borrowing costs unchanged for 10 straight meetings, seeking to bolster a currency that has dropped more than 7 percent against the dollar this year as rising imports and declining exports led to a widening current- account deficit and a $1.5 billion trade gap in October.
While Bank Indonesia expects inflation of about 3.5 percent to 5.5 percent next year, price gains may exceed that target amid a planned increase in electricity tariffs and a possible reduction in fuel subsidies, said Chua Hak Bin, an economist at Bank of America Corp. in Singapore.
Indonesia’s Energy Minister Jero Wacik said today he has signed a decree to raise electricity tariffs by 15 percent from Jan. 1. The increase will save the government 14 trillion rupiah ($1.4 billion) in subsidies, he said.
“Bank Indonesia needs to be more pro-active in containing latent inflationary risks now,” said Lim Su Sian, a Singapore- based economist at HSBC. “Otherwise the central bank may have to tighten policy faster and more aggressively than expected, particularly in the second half, when we expect inflation to climb towards the upper end of its target.”
The Philippine central bank will also struggle to manage inflation without sacrificing competitiveness or economic stability, said Aninda Mitra, an economist at Australia & New Zealand Banking Group Ltd. (ANZ) in Singapore. Its growth is attracting funds that pushed the peso to a four-year high in November, even as Bangko Sentral ng Pilipinas lowered rates four times this year and introduced measures to curb inflows.
“In the absence of measures to sterilize liquidity more effectively, or much faster capital formation which will heighten the economy’s absorption capacity, BSP’s monetary dilemmas will get worse in 2013,” Mitra said. “With growth above potential, market rates and credit costs at historic lows, we could see rapid asset price growth or more inflation.”
The majority of economists surveyed by Bloomberg this month said Malaysia’s central bank will face the fewest challenges next year. The nation boasts the slowest inflation in Asia and growth that exceeded 5 percent for the past five quarters, giving Governor Zeti Akhtar Aziz room to extend a 1 1/2-year rate-pause.
The country must hold general elections in early 2013, and Prime Minister Najib Razak may resume a plan shelved in December 2010 to cut fuel subsidies, said Enrico Tanuwidjaja, a Singapore-based economist at Royal Bank of Scotland Group Plc. Najib has raised sugar prices as he tries to narrow the budget deficit to 4 percent of GDP in 2013 from 4.5 percent this year.
Malaysia can reduce subsidies in a gradual manner, allowing businesses to adjust without having to pass on rising costs to consumers, Zeti said Dec. 6. Consumer prices have gained 1.3 percent in each of the past three months.
While the central bank will probably keep its benchmark rate unchanged at 3 percent at its six meetings next year, it has “ample flexibility” to lower borrowing costs if the global economy deteriorates sharply, Chua said.
“Bank Negara has kept its ‘policy ammunition’ dry,” Mitra of ANZ said. “The central bank also has a toolkit which is well suited to managing capital flows and inflation, and is relatively free from political interference.”
Interest rates alone increasingly won’t be enough to manage the various threats facing Asian central bankers, Varathan said.
“Central banks will have to flexibly employ the entire tool box — main policy rate, reserve requirements, macro prudential measures, currency market signals — to manage sometimes conflicting risks,” he said.
In Japan, incoming Prime Minister Shinzo Abe has called for unlimited cash provisions from the central bank to spur inflation and growth in Asia’s No. 2 economy. The Japanese yen weakened and Asian stocks climbed today amid expectations he will push for further stimulus.
Abe agreed with his coalition ally Natsuo Yamaguchi of the New Komeito Party yesterday on a policy package that includes “bold monetary easing” to reach an inflation target of 2 percent. One Bank of Japan (8301) policy maker had embraced the idea of open-ended monetary stimulus as early as last month, according to a record of the Nov. 19-20 board meeting released today in Tokyo.
Elsewhere in Asia, South Korean consumer confidence failed to improve this month as a budget stand-off in the U.S. and austerity measures in Europe highlighted risks for the nation’s exports. Singapore’s industrial output rose for the first time in four months in November, while Thailand’s export growth quickened to a 15-month high in the same period.
Russia will release weekly consumer-price data today, while Mexico will give international reserve numbers. Home values in 20 U.S. cities probably increased 4 percent in the year through October, a Bloomberg surveyed showed before S&P/Case-Shiller’s report due today.
Asian Shares Up on US Hopes, Greek Upgrade Lifts Euro
December 19, 2012
Asian markets were boosted on Wednesday as US politicians look to be closing in on a deal to avert the fiscal cliff, while the euro added to gains in New York after Greece’s debt rating was upgraded.
The Jakarta Composite Index bucked the regional trend, dropping 25.58 points, or 0.59 percent, to close at 4,275.86.
Traders in Jakarta exchanged 4.12 billion shares valued at Rp 4.23 trillion ($438 million) on Wednesday. The benchmark index’s decliners outnumbered advancing stocks by nearly two-to-one, 177 to 90.
Tokyo shares surged 2.39 percent, a third straight rally, to break 10,000 for the first time in eight months ahead of an expected Bank of Japan announcement on monetary policy.
The Nikkei in Japan ended up 237.39 points, to 10,160.40 on the Tokyo Stock Exchange, while Sydney climbed 0.49 percent, or 22.6 points, to a 17-month high of 4,617.8.
Hong Kong climbed 0.57 percent, or 128.64 points, to 22,623.37, while Shanghai closed flat, dipping 0.22 points to 2,162.24.
Seoul was closed for presidential elections.
The main focus continues to be on the United States, where lawmakers are holding talks to avert the huge tax hikes and deep spending cuts slated to come into effect in two weeks.
Most economists expect the package to tip the US economy into recession if a new deal — with less swingeing measures — is not agreed in time.
However, there is growing confidence that progress is being made in the negotiations, with top Republican lawmaker John Boehner saying he is willing to see taxes rise for people on more than $1 million — rather than his previous position of no rises at all.
President Barack Obama has also said he is willing to see rises for people on more than $400,000, rather than the $250,000 he previously wanted.
Adding to the upbeat sentiment was news out of Europe that
Standard & Poor’s raised Greece’s sovereign debt rating by six notches, citing support for Athens from its euro zone partners.
The upgrade from selective default to B-/B “reflects our view of the strong determination of European Economic and Monetary Union [euro zone] member states to preserve Greek membership in the euro zone,” the agency said.
Greek Finance Minister Yannis Stournaras said the decision “was a very important one that created a climate of optimism.”
The move came after Greece completed a debt buyback programme and euro zone finance ministers approved the latest batch of bailout cash.
Tuesday’s decision provided a fillip for the euro, which added to recent gains against the dollar and yen.
In afternoon forex trade, the yen was under pressure in Asia as markets bet on more easing measures after a Bank of Japan (BoJ) policy meeting, while the single currency won support from a batch of positive euro zone news.
The euro firmed to 111.62 yen from 111.47 yen in New York late on Tuesday, while it was at $1.3233, from $1.3225. On Tuesday in Asia the euro was at 110.49 yen and $1.3165.
And the dollar was quoted at 84.31 yen, compared with 84.28 yen in New York.
The Japanese currency remains under pressure as traders await the end of a two-day BoJ meeting on Thursday, with most expecting fresh monetary easing to kick-start the economy.
Incoming Prime Minister Shinzo Abe on Tuesday asked central bank chief Masaaki Shirakawa to adopt a 2 percent inflation target, just days after his landslide election win on a promise of pressing for more aggressive monetary easing.
The weak yen again fueled a rally on the Nikkei, which hit its highest level since early April.
There appeared to be little reaction to data showing Japan’s November trade deficit expanded 37.9 percent on-year to $11.3 billion, a record for the month, with exports to China slumping owing to a bitter territorial spat with Beijing.
Oil prices rose, with New York’s main contract, light sweet crude for delivery in January rising 38 cents to $88.31 a barrel and Brent North Sea crude for February delivery advancing six cents to $108.90.
Gold was at $1,672.40 at 0805 GMT compared with $1,698.90 late Tuesday.
In other markets:
— Taipei rose 33.73 points, or 0.44 percent at 7,677.47.
— Manila soared 2.05 percent, or 115.80 points, to 5,752.39.
— Wellington added 1.10 percent, or 43.75 points, to 4,023.00.
AFP & JG
World Bank Raises East Asia Outlook, Sees China Growing 8.4% in 2013
December 19, 2012
Singapore. The World Bank raised its 2013 economic growth forecasts for China and developing East Asia on Wednesday, and said the region remained resilient despite the lackluster performance of the global economy.
“For 2013, we expect the region to benefit from continued strong domestic demand and a mild global recovery that would nudge the contribution of net exports to growth back into positive territory, a trend projected to continue into 2014,” the World Bank said in its latest East Asia and Pacific Economic Update.
“Most countries in the region have retained their strong macroeconomic fundamentals and should be able to withstand external shocks,” it added, although it warned of risks such as a sharp drop in investment growth in China that could shake global confidence and a US failure to reach an agreement on tax increases and spending cuts before the end of the year.
The World Bank said China was expected to expand by 8.4 percent next year, fueled by fiscal stimulus and the faster implementation of large investment projects. The latest forecast is higher than the 8.1 percent figure cited in an October report.
“The slowdown in the Chinese economy appears to now have bottomed out. While third quarter growth, at 7.4 percent year-on-year, is still low compared to last year, quarter-on-quarter growth has picked up notably, reaching 9.1 percent in the third quarter at a seasonally-adjusted, annualized rate,” the World Bank said.
Growth in the world’s most populous nation is, however, expected to slow to around 8 percent in 2014, with the potential pace of economic expansion gradually declining as productivity and labor force growth tail off.
For developing East Asia as a whole, next year’s growth is expected to come in at 7.9 percent, up from an earlier forecast of 7.6 percent, with the Philippines and Malaysia growing by 6.2 percent and 5.0 percent, respectively.
The international lender’s previous forecast was for the Philippines to grow by 5.0 percent and Malaysia to expand by 4.6 percent in 2013.
The World Bank said domestic demand, in the form of both consumption and investment, has been critical to sustaining growth in East Asia, in particular Indonesia, Malaysia, Thailand and the Philippines.
“The robust growth in services this year in part reflects strong domestic demand, but is also associated with longer term trends caused by rising incomes,” the World Bank said of the four countries and Vietnam.
For Myanmar, the World Bank now expects the country to grow by 6.5 percent next year, up from an earlier forecast of 6.2 percent.
Monetary Policy, QE3
While Asian governments in general had room to boost spending in the event of an economic shock, the World Bank warned that further easing of monetary policy could be detrimental to inflation.
“In Indonesia, the Philippines and Thailand, the current policy rates are lower than those implied by the Taylor Rule, suggesting that monetary policy is already relatively relaxed. Consequently, further easing may be constrained in these countries unless conditions change dramatically.”
“This is particularly true for Thailand, which has a negative policy interest rate in real terms,” it said.
The Taylor Rule calls for raising rates if the inflation rate is above the target, or if the economy is overheating.
The World Bank was, however, sanguine about the problem of hot money arising from further monetary easing by developed countries, saying quantitative easing did not necessarily lead to more capital inflows into emerging Asia.
“QE1 did but QE2 did not. Moreover, the bulk of capital flows into East Asia and the Pacific consists of FDI [foreign direct investments], which create jobs and growth in production capacity,” the World Bank said.
November 29, 2012
Third-Quarter G.D.P. Growth Is Revised Up to 2.7%
By NELSON D. SCHWARTZ
The economy grew at a substantially faster pace in the third quarter than first thought, powered by increases in business inventories and federal spending.
After initially saying output increased at an annual rate of 2 percent, the Commerce Department on Thursday revised its estimate to show growth at a 2.7 percent rate in the three months that ended Sept. 30.
While businesses have remained cautious amid fiscal uncertainty in Washington and weak growth overseas, consumer spending in the United States has moved along in recent months at a healthier pace.
In addition, a strengthening housing market in many regions, along with better employment figures, has reassured some analysts who feared the economy was close to stalling.
However, worries remain about growth in the current quarter, with many economists estimating output to increase at a more tepid annual rate of roughly 1 percent.
And with more than $600 billion in tax increases and spending cuts looming if Congress and the White House can’t agree on a deal to cut the deficit by Jan. 1, economists warn the economy remains vulnerable.
The newly estimated pace of growth represents a substantial increase in the level of expansion from the second quarter, when the economy grew at a rate of just 1.3 percent. It also marks the fastest rate of expansion since the fourth quarter of 2011, when the economy grew at a 4.1 percent annual pace.
This was the second of the government’s three estimates of quarterly growth. The final figure is scheduled for Dec. 20.
“The economy certainly hasn’t taken off, but it’s nowhere close to a stall,” said David Kelly, chief global strategist for JPMorgan Funds. “The economy is still underperforming its full potential, but once we get past the ‘fiscal cliff’ uncertainty, we could see stronger growth next year.”
He cautioned that the inventory buildup in the third quarter might cool growth in the fourth quarter. “If you’re building inventory in the third quarter, then you don’t need to build it in the next quarter,” Mr. Kelly said.
In a separate report, the Labor Department said the number of people filing first-time claims for unemployment dropped by 23,000 to a seasonally adjusted level of 393,000 last week. Economists had been expecting the number to total 390,000.
November 27, 2012
O.E.C.D., Slashing Growth Outlook, Warns of Global Recession
By STEPHEN CASTLE
LONDON — The Organization for Economic Cooperation and Development sharply cut its forecast for the world economy on Tuesday, warning that failure to resolve the euro crisis and to avert a fiscal impasse in the United States could trigger a global recession.
The Paris-based O.E.C.D. predicted that gross domestic product in its 34 member nations, all developed economies, would expand by 1.4 percent in 2013, a significant downward revision from its forecast of 2.2 percent made just six months ago.
That assumes that the United States agrees on a budget deal in January, averting billions of dollars in tax increases and automatic spending cuts.
If that so-called fiscal cliff is not avoided, “a large negative shock could bring the U.S. and the global economy into recession,” according to the forecast, written by Pier Carlo Padoan, the organization’s deputy secretary-general and chief economist.
Even leaving that possibility aside, the O.E.C.D. report makes grim reading, particularly with regard to the 17-nation euro area — which, still mired in recession, is where the “greatest threats to the world economy remain.”
“Challenging fiscal sustainability conditions in some countries risk sparking a chain of events that could considerably harm activity in the monetary union and push the global economy into recession,” the report said.
Highlighting the continuing lack of economic confidence, the report urged European policymakers to accelerate efforts to bolster their single currency through the creation of a banking union.
“Temporary fiscal stimulus should be provided by countries with robust fiscal positions (including Germany and China),” it added.
“Over the recent past, signs of emergence from the crisis have more than once given way to a renewed slowdown or even a double-dip recession in some countries,” the document said, adding that “the risk of a new major contraction cannot be ruled out.”
According to the O.E.C.D., provided the “fiscal cliff” is avoided, the U.S. economy should grow by 2 percent in 2013 and 2.8 percent in 2014. In Japan, G.D.P. is expected to expand by 0.7 percent in 2013 and 0.8 percent in 2014.
The euro area probably will remain in recession until early 2013, leading to a mild contraction in G.D.P. of 0.1 percent next year before growth accelerates to 1.3 percent in 2014.
Labor markets, meanwhile, remain weak, with around 50 million jobless people in the O.E.C.D. area. Unemployment is expected to remain high, or even rise further, in many countries unless structural measures are used to lift employment growth, the report said.
“The world economy is far from being out of the woods,” the O.E.C.D’s secretary-general, Angel Gurría, said in a statement. “Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs, in the United States, in Europe, and elsewhere.”
Tom Rogers, a senior economic adviser at Ernst & Young, said the report was “consistent with our view that the euro zone faces another year of stagnating economic output and rising unemployment, and that the medium-term recovery is likely to be weaker than from previous recessions.”
Although much has been achieved in stabilizing the euro area, “more needs to be done to deepen the fiscal and banking unions, to improve medium term growth prospects through reform, and to broaden the single market to include trade in services,” Mr. Rogers wrote in a note.
BURSA ASIA: Kesepakatan Yunani tercapai, MSCI terangkat 0,2%
November 27, 2012 08:16
SYDNEY: Saham Asia Selasa (27/11) pagi naik untuk hari kelima setelah Presiden Bank Sentral Eropa Mario Draghi mengatakan menteri keuangan telah memeroleh kesepakatan mengenai Yunani, tanpa memberikan detil dari kesepakatan tersebut.
Saham CSL Ltd, produsen alat terapi darah kedua terbesar dunia, melonjak 7,3% di Sydney menyentuh rekor setelah mengatakan mereka mengharapkan pertumbuhan laba sekitar 20%. Saham Rio Tinto Group dan BHP Billiton Ltd memimpin kenaikan di antara perusahaan komoditas.
Indeks MSCI Asia Pacific naik 0,2% menjadi 123,59 pada 9:05 di Tokyo, sebelum pasar Cina dan Hong Kong dibuka, memperpanjang kenaikan beruntun terpanjang indeks sejak minggu kedua September.
MSCI naik 13% dari level terendah tahun ini pada 4 Juni sejak kemarin dipicu penambahan stimulus oleh bank sentral guna memacu pertumbuhan ekonomi dan data menunjukkan perlambatan di Cina mungkin akan berakhir.
“Tidak pernah mudah. Pasar masih mencari tahu konsuensi apa dari yang telah disepakati di Brussel tersebut,” kata Tim Schroeders dari Pengana Capital Ltd di Melbourne. (Bloomberg/15/Bsi)
Berikut pembukaan bursa Asia:
* Nikkei 225 Jepang +0,36% ke 9.423,08
* KOSPI Korea Selatan +0,78% ke 1.923,35
* ASX 200 Asutralia +0,77% ke 4.458,30
* NZX 50 Selandia Baru -0,02% ke 4.011,33
BI Ingatkan Risiko Baru Ekonomi Global
Oleh: Restu A Putra
ekonomi – Sabtu, 24 November 2012 | 12:26 WIB
INILAH.COM, Jakarta – Gubernur Bank Indonesia, Darmin Nasution menyatakan ekonomi global akan memasuki era baru dengan risiko baru yang harus diwaspadai karena berpotensi memberikan ketidakpastian baru.
“Dalam era ini kita perlu mewaspadai utang apabila tidak mampu dimitigasi dapat menambah kompleksitas dalamn pengelolaan kebijakan makro kita,” ujarnya dalam acara bankers dinner di Gedung BI, Jumat (23/11/2012).
Pertama, kata Darmin, hal yang perlu diwaspadai yaitu risiko berlanjutnya ketidakpastian penanganan krisis Eropa. Kedua, risiko tidak terhindarkannya peningkatan pajak dan pemangkasan anggaran belanja secara otomatis di AS (fiscal cliff) di awal 2013.
Dalam publikasi edisi Oktober 2013, IMF mengingatkan bahwa kegagalan mengatasi kombinasi dua risiko global tersebut akan menyeret kembali negara maju dalam arus resesi. “Maka ekonomi global hanya akan tumbuh 2,0%, dibandingkan skenario baseline 3,6%,” tuturnya.
Maka, ujar Darmin, Indonesia dituntut segera membangun konektivitas domestik yang lebih efisien dan handal, perbaikan kemudahan berbisnis, harmonisasi regulasi dan reformasi birokrasi. [hid]
TIGA MACAN ASIA Hadapi Transisi Politik-Ekonomi
Kamis, 15 November 2012 | 21:06 WIB
BEIJING: Tiga negara Macan Timur Asia, China, Jepang, dan Korea Selatan (Korsel), akan menghadapi transisi pemerintahan tahun depan dan menentukan masa depan perekonomian Asia Pasifik dan dunia.
Kantor Berita Xinhua melansir Xi Jinping menggantikan Hu Jiantao sebagai sekretaris jendral Partai Komunis China. Xi juga mengambil alih posisi ketua Komisi Militer Pusat dari Hu.
Setelah penunjukkan jajaran kepengurusannya, partai penguasa Republik Rakyat China (RRC) sejak 1949 itu akan bersiap menentukan jajaran pemerintahan generasi kelimanya yang akan mengendalikan China dalam satu dasawarsa kedepan.
Dengan didudukinya dua posisi paling berpengaruh di China, menurut dosen ilmu politik University of Western Ontario Alfred Chan, Xi merupakan calon terkuat dalam partai yang beranggotakan 82 juta orang itu untuk juga menggantikan Hu sebagai Presiden RRC.
“Xi Jinping mendapatkan tugas komisi militer pusat, sehingga sangat mendukung konsolidasi kekuasaannnya. Dia dapat bergerak cepat menempatkan pendukungnya di posisi-posisi penting dalam militer dan membangun hubungan yang kuat dengan militer,” jelasnya Chan.
Sementara itu, Perdana Menteri RRC Wen Jiabao diperkirakan akan digantikan oleh wakilnya, Li Keqiang. Penunjukkan presiden dan perdana menteri yang baru akan dilaksanakan dalam pertemuan pada Maret 2013.
Selain mengambil alih kendali atas negara dengan populasi terbesar di dunia itu, pemerintah China yang baru juga mewarisi perekonomian yang terus melambat, hingga diperkirakan akan mencapai level pertumbuhan terendah sejak 1999.
Perlambatan ini terjadi seiring dengan melambatnya pertumbuhan ekonomi Amerika Serikat (AS) dan Uni Eropa, dua pasar ekspor terbesar bagi China. Pekan lalu, Hu berwasiat agar pemerintah yang baru mampu menggenjot pertumbuhan ekonomi.
Dengan berkurangnya permintaan dari AS dan Eropa, China didesak untuk mengalihkan perekonomian yang selama ini berorientasi kepada ekspor itu menjadi lebih fokus kepada peningkatan permintaan konsumen domestik dan penanaman modal asing.
Selain itu, Hu memperingatkan partainya akan ancaman lengser dari kekuasaan jika terjadi kerusuhan sosial di negara berpenduduk 1,3 miliar jiwa itu yang memprotes perampasan tanah rakyat dan tindakan korupsi oleh pemerintah.
Xi dan Li bergabung dengan Komite Tetap Politburo, dewan pimpinan Partai Komunis. Dalam sambutannya di Balai Besar Rakyat Beijing, Xi menjanjikan reformasi dan pembukaan ekonomi.
“Partai kita menghadapi banyak tantangan berat dan ada beberapa masalah yang medesak untuk diselesaikan dalam tubuh partai, terutama korupsi, dan hal-hal lain yang membuat kita terpisah oleh rakyat, oleh sejumah oknum partai melalui birokrasi formal,” kata Xi.
Jepang & Korsel
Sementara itu, Perdana Menteri Jepang Yoshihiko Noda akan membubarkan parlemen besok (16/11) dan memulai pemilihan umum (pemilu) parlemen. Berbagai jajak pendapat meramalkan partai Noda, Partai Demokrasi Jepang (DPJ) akan kalah.
Jika ramalan ini benar, maka pemilu kali ini akan mengakhiri kekuasaan DPJ atas Jepang selama 3 tahun setelah mengalahkan Partai Demokrasi Liberal, yang saat itu telah berkuasa di Negeri Sakura selama setengah abad.
Sekjen DPJ Jun Azumi mengatakan (14/11) partainya memutuskan pemilu parlemen akan diselenggarakan pada 16 Desember 2012. Berbagai jajak pendapat menunjukkan dukungan untuk DPJ telah anjlok 20% setelah tiga perdana menterinya gagal memulihkan ekonomi.
Pertumbuhan perekonomian terbesar ketiga di dunia itu terus melambat sehingga deflasi terus meningkat. “Ekonomi jelas masalah utama yang dihadapi Jepang,” kata Jeff Kingston, dosen politik Jepang di Temple Universities di Tokyo.
Adapun pemilu presiden Korsel, salah satu negara dengan perekonomian terbesar di Asia, akan diadakan pada 19 Desember 2012 dan pemenangnya akan memulai pemerintahan pada Februari 2012. (Ahmad Puja Rahman Altiar/sut)
EKONOMI CHINA: Modal asing surut lagi
Selasa, 20 November 2012 | 13:13 WIB
BEIJING: Penanaman modal asing (PMA) di China turun untuk kesebelas kalinya dalam 12 bulan terakhir karena naiknya upah buruh, perlambatan pertumbuhan ekonomi, dan sengketa wilayah dengan Jepang telah membebani perdagangan.
Kementerian Perdagangan China di Beijing pada hari ini (20/11) mengungkapkan investasi asing tersebut turun 0,2% pada Oktober 2012 dari periode yang sama tahun lalu menjadi US$8,31 miliar.
Arus investasi langsung dalam 10 bulan pertama tahun ini turun 3,5% menjadi US$91,7 miliar, sedangkan dalam 9 bulan pertama turun 3,8%. Penurunan PMA adalah salah satu tantangan utama yang akan dihadapi oleh pemerintah China yang baru.
Xi Jinping, pimpinan Partai Komunis yang baru diangkat, diproyeksikan akan menggantikan Hu Jintao sebagai presiden China. Hu telah berwasiat kepada calon jajaran pemerintahan yang baru agar memulihkan pertumbuhan ekonomi.
Pertumbuhan perekonomian terbesar kedua di dunia itu telah melambat dalam 7 kuartal terakhir. Para ekonom yang disurvei Bloomberg sebelumnya memperkirakan perekonomian China hanya tumbuh 7,7% sepanjang tahun ini, terendah sejak 1999.
“Model pertumbuhan ekonomi telah berubah dan sejumlah investor mungkin harus merelokasi [investasi] ke negara-negara lain jika mereka ingin beban [usaha] yang rendah,” kata Li Huiyong, kepala ekonom SWS Research Co.
Sengketa wilayah antara Jepang dan China di Laut China Selatant telah menyulut gelombang unjuk rasa di China yang juga mengklaim wilayah itu. Ketegangan ini juga berdampak ke sektor pariwisata. Nippon Airways Co., menyatakan (16/11) akan terus mengurangi kapasitas angkutan antara China dan Jepang hingga bulan depan.
Organisasi Pariwisata Nasional Jepang melaporkan turis China menuju Jepang turun 33% pada Oktober 2012, sedangkan JTB Corp., agen perjalanan terbesar di Jepang, memperkirakan jumlah orang Jepang yang berangkat ke China akan turun hingga 70% sampai akhir Maret 2013.
Toyota Motor Corp., Honda Motor Co., dan Panasonic Corp. melaporkan kerusakan pada fasilitas operasional mereka di China pada September 2012 saat ribuan pengunjuk rasa menyerang pabrik-pabrik dan toko-toko perusahaan-perusahaan asal Jepang itu.
Investasi Jepang ke China juga dilaporkan melambat pada Oktober 2012 dengan pertumbuhan sebesar 10,9% pada 10 bulan pertama tahun ini menjadi US$6,08 miliar, lebih rendah dari pertumbuhan sepanjang 9 bulan pertama yakni 17% menjadi US$5,62.
Namun, data lain justru menunjukkan adanya pemulihan pertumbuhan ekonomi, seperti kinerja ekspor yang mencatatkan pertumbuhan terpesat dalam 5 bulan terakhir serta pertumbuhan produksi industri dan penjualan ritel yang melampaui estimasi.
Para ekonom memperkirakan pemerintah tidak akan memberikan pelonggaran kebijakan moneter lagi paling tidak hingga akhir tahun ini karena perekonomian diperkirakan akan kembali menguat.
Para analis yang disurvei Bloomberg sebelumnya memperkirakan China akan mempertahankan rasio kecukupan modal perbankan sebesar 20% hingga akhir tahun ini. (Bloomberg/03/Bsi)
More and more and not enough
Europe’s peripheral economies have already undergone a lot of restructuring. But without action by the rest of the euro zone, it risks being in vain
Nov 17th 2012 | BARCELONA | from the print edition
THE port of Barcelona, Spain’s third-busiest, used to handle more imports than exports. This has now turned around, says Santiago Garcia-Milà, the port’s deputy general manager; among many other things, ships are now for the first time taking cars off to China. The European Commission believes that this year exports of goods and services from Spain will be 22% greater, in real terms, than they were in 2009, as will exports from Portugal. Irish exports are expected to have grown by 15% over the same period, and if the rate is a little slower the growth matters even more; Irish exports are worth about 100% of GDP, whereas in Spain the share is about 30%.
Growth in exports, and with them strongly reduced current-account deficits, are one sign of change on Europe’s periphery. Budget deficits have also been dropping. So have labour costs, increasing competitiveness. One measure of the scope of the efforts under way is the wave of industrial protest against them on November 14th, which included a general strike in both Spain and Portugal and smaller protests in Greece and Italy.
There remains much for these countries to do by way of “structural reform”—shake-ups of product and labour markets that will cause more pain and unrest. And little of the limited good news spreads as far as Greece, where exports are barely rising and which remains, in effect, insolvent. But the amount of both fiscal and economic progress in Spain, Ireland and Portugal, and to some extent Italy, is both underappreciated and heartening. The south is more than half way through the adjustment that is needed, says Julian Callow of Barclays, a bank, and still going in the right direction.
Even if such efforts are continued and strengthened, though, they cannot in themselves be enough. If the euro crisis is ever to be resolved, the divide that opened up in the first decade of the single currency between creditor countries in the northern core of the 17-strong euro zone and debtor nations in the south must be closed. That will require concerted action from the core countries of the north, as well.
There has been some helpful action at the level of the euro zone as a whole. Tensions in financial markets have eased since Mario Draghi, head of the European Central Bank (ECB), said in July he would do “whatever it takes” to save the euro. The ensuing commitment by the ECB to buy short-term sovereign bonds of beleaguered countries without limit (under strict conditions) is a treatment for the symptoms of the crisis rather than its causes. But the relief it has brought by reducing bond yields is still welcome. The effect was most obvious in Spain, which was on the brink of requiring a bail-out for its public finances on top of the one earlier provided to its banks. But yields dropped elsewhere, too—in Portugal ten-year-bond yields fell from 11.1% to 8.8%, in Italy from 6.5% to 4.9%. In part as a result, Ireland has been tapping financial markets for the first time in two years.
This improvement may owe much to Mr Draghi, but it also reflects real change in the south, where yawning budget deficits have been cut back. A crucial measure is the primary budget balance (ie, before interest), which needs to swing into surplus in order to prevent debt from spiralling out of control. The size of the necessary surplus depends on growth rates, interest rates and the stock of debt. Since 2009 primary deficits have narrowed a lot in southern countries (see chart 1), and Italy’s has returned to surplus.
Current-account deficits are also improving. The room for improvement, admittedly, was vast. The deficits in Greece and Portugal peaked in 2008 at 18% of GDP and 12.6% of GDP, respectively. Spain’s peaked at 10% the year before. Deficits throughout the periphery have shrunk notably since then (see chart 2). Ireland, where the deficit peaked at 5.7% of GDP in 2008, has been running a current-account surplus since 2010. Portugal and even Greece have been running surpluses in recent months, though this may not last. The European Commission’s projections show both countries running a deficit in 2013, with Greece’s still worryingly high at 6.3%. Italy’s deficit, meanwhile, shrank from 3.5% in 2010 to 1.2% this year.
Indicators of underlying competitiveness like unit labour costs have also turned in the right direction in most of the countries in trouble, though Italy’s are still rising. Ireland has done the best, with a 14% improvement since 2008. And there has been progress on the structural reforms needed to allow southern economies to cope with the rigours of the single currency in the longer term. How much progress is hard to say, because the reforms cover such a wide range of regulations affecting businesses and workers. Mr Draghi said on November 8th that the peripheral economies had moved far faster in this area in the past year than they had before. But as Mr Callow notes, progress on structural reforms lags behind the improvement on external adjustment.
The missing ingredient
All the progress, though, needs to be judged in the harsh light of the periphery’s lack of growth. Although the improvement in the south’s balance of payments is welcome in as much as its exports are finding markets, much of it is due to the fact that demand for imports has fallen in its recession-stricken economies. As far as GDP and unemployment are concerned, the economic divide between the periphery and the core is continuing to widen (see chart 3). Next year the European Commission expects the euro area to grow by just 0.1% (following a decline of 0.4% this year). But whereas GDP in Germany will rise by 0.8%, the same as this year, it will fall in Spain by 1.4%, and in Portugal by 1% (after a 3% fall in 2012). Italy’s GDP will decline by 0.5%, after a 2.3% decline in 2012. The Greek collapse will continue for a sixth year, with output shrinking by 4.2%. The divergence will be just as marked for unemployment, predicted to be 5.6% in Germany compared with 26.6% in Spain.
This lack of growth is the heart of the problem: the south is being subjected to self-defeating austerity, which drives economies down, makes it harder to close deficits and raises debt. The bigger the debt burden—which exceeds 100% of GDP in Greece, Italy, Ireland and Portugal—the more important the gap between interest rates and growth becomes, and that gap widens when economies are shrinking. In such circumstances the growth in the stock of debt can accelerate even if deficits are shrinking. The main reason why the Greek debt burden is expected to get worse despite serious deficit reduction is that its economy has continued to nosedive.
Further structural reform could help provide the needed growth. One way to see the scope for improvement is in the World Bank’s “ease of doing business” measurement, derived from factors such as the time it takes to start a business, register a property and enforce contracts. Figures released this October show that Greece, Portugal and Spain have all significantly narrowed the gap that divides them from the best European countries in which to do business by reforming things like construction permits and procedures for insolvency. But though the gap has been narrowed, it is still present. And in the case of Italy it has narrowed very little.
But the rest of the euro zone also has a role to play in delivering the growth that the south needs. The country with the most to offer is Germany. Although its surplus with the euro area has fallen a lot, it still amounted to 2.3% of GDP in 2011. Germany resists structural reforms in its underdeveloped services sector that would generate more domestic demand in the longer term. And its citizens remain hostile to the idea of inflating away some part of their competitiveness in order to make things easier on their cousins in the south.
A narrowing fiscal and economic divide between north and south is a necessary condition for ending the euro crisis, but it is not a sufficient one. The crisis has led to a deep gulf between financial conditions in the north and south. In the north, businesses and households can borrow at cheap rates. In the south, they have to pay much more, and often banks just don’t want to lend at all. Despite emergency measures by the ECB—including the provision of €1 trillion ($1.3 trillion) three-year central-bank funding to European banks last winter, most of which went to the periphery—this divide persists.
This reflects the third dimension of the euro crisis: that it involves not just collapsing public finances and huge trade imbalances but fragile financial systems, which are susceptible to investor panics. Weak government finances left banks with lots of dodgy government debt; in Ireland and Spain, which experienced epic housing boom-and-busts, self-inflicted wounds by the banks weakened the governments. The pernicious link between banks and governments stymies progress.
Putting this right requires a return of confidence on the part of private investors outside the south, which would ease financing pressures. But although yields have fallen, private investors are still leery of investing in the south. Its banks remain heavily reliant on ECB funding. The “Target2” imbalances between central banks—liabilities chalked up in the south by, for example, the Bank of Spain and claims accumulated in the north, especially by the German Bundesbank—have recently fallen a little but remain extraordinarily high, which indicates the extent to which central banks have been financing capital flight from the south.
Say not the struggle naught availeth
Breaking the vicious circle between weak banks and weak sovereigns requires a big leap forward in economic integration: a euro-area banking union (see article). Although European leaders recognised the necessity of this reform over the summer, they have since been backtracking on making it a swift and meaningful reality. In particular, hopes of introducing euro-wide deposit insurance are dwindling.
That is characteristic of the way the euro crisis has been mishandled. Whenever the ECB has countered market fears, its reaction has taken the pressure off European politicians and they have dragged their feet. Spain is a prime example. Mariano Rajoy continues to hesitate over seeking a bail-out which could trigger the ECB’s bond-buying policy, even though that may mean that he eventually has to ask for one from a position of weakness rather than strength. Despite all the adjustments, the euro area remains vulnerable to economic setbacks and political upsets, especially in the south (and above all in Greece). And the progress has been bought at a price. How much more will electorates be prepared to suffer without seeing more convincing and rewarding results?
Foreign Buying of U.S. Assets Plunges on Europe Optimism
By Kasia Klimasinska and Meera Louis – Nov 16, 2012
International purchases of U.S. financial assets plunged 96 percent in September as confidence grew that Europe was beginning to solve its debt crisis and investors sold Treasuries following the Federal Reserve’s quantitative easing announcement.
Net buying of long-term equities, notes and bonds totaled $3.3 billion during the month, down from net purchases of $90.3 billion in August, the Treasury Department said today in Washington. Economists surveyed by Bloomberg projected net buying of $50 billion of long-term assets, according to the median estimate.
The Federal Open Market Committee said Sept. 13 that it would undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets improve substantially.
“QE3 certainly played its role in basically encouraging people to take risk and to some extent to short the dollar,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York, said. “The risk appetite was pretty strong overall, there were better places to park your money than the dollar,” and “there was a big rise in optimism regarding the euro zone.”
European Central Bank policy makers on Sept. 6 agreed to an unlimited sovereign bond buying program to wrest control of interest rates in the euro area and to stem the crisis in the region. ECB President Mario Draghi has called the euro “irreversible” and said the new government bond purchasing program will have effective conditionality attached.
Including short-term securities such as stock swaps, foreigners bought a net $4.7 billion in September, down from net purchases of $63.5 billion the previous month, the Treasury said.
China remained the biggest foreign owner of U.S. Treasuries in September after its holdings rose $300 million to $1.16 trillion, according to the Treasury.
Japan, the second-largest holder of U.S. Treasuries increased its holdings in September by $7.9 billion to $1.13 trillion, the highest on record, according to the Treasury.
Hong Kong, which is counted separately from China, decreased its holding by $6 billion to $135.7 billion.
Foreigners sold a net $17.3 billion of Treasuries in September, according to today’s report.
Estimates of foreign purchases of long-term U.S. assets in September ranged from net buying of $40 billion to $50 billion, according to five economists surveyed by Bloomberg before the report.
The Treasury Department’s data capture international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies.
Nov. 14, 2012, 5:17 p.m. EST
Obama open to tax ideas before talks begin
Won’t slam door in lawmakers’ faces, he says at news conference
By Robert Schroeder, MarketWatch
WASHINGTON (MarketWatch) — President Barack Obama on Wednesday said he is open to ideas about raising revenue as he prepares to meet with congressional leaders, but was firm that taxes on the wealthiest Americans must go up.
“I am open to new ideas,” Obama said in his first news conference since being re-elected last week. “I’m not just going to slam the door in their face,” Obama said about members of Congress. “I want to hear ideas from everyone.” Read MarketWatch’s live blog of Obama’s news conference.
Without action by Congress and the White House, Bush-era tax cuts will expire on Jan. 1, and $1.2 trillion in automatic spending cuts over 10 years will begin.
Obama is set to meet with congressional leaders on Friday to begin talks about averting the fiscal cliff. House Speaker John Boehner says he is open to a deal that raises revenue but not tax rates. Obama has insisted that any deal include higher taxes on the wealthy and did so again on Wednesday.
“We should not hold the middle class hostage while we debate tax cuts for the wealthy,” he said at the White House.
U.S. stocks dropped as Obama spoke. U.S. stock indexes fell to multi-month lows Wednesday on worries about the fiscal cliff and after an Israeli strike in the Gaza Strip. Read more on stocks in Market Snapshot
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U.S. President Barack Obama addresses his first news conference since his reelection, at the White House in Washington November 14, 2012.
Going over the fiscal cliff involves much more than increased taxes on income, and changes to several parts of the tax code could be part of a final deal. Taxes on capital gains and dividends will rise, the temporary 2% payroll tax holiday will expire and a higher estate tax will kick in.
The fiscal cliff also involves across-the-board spending cuts of $109 billion a year, split between military and domestic programs.
Without agreement, the tax on long-term capital gains would rise to a maximum of 20% from 15%, and the tax on dividends would rise to ordinary wage tax rates from 15%.
Obama also addressed the scandal surrounding ex-CIA director David Petraeus, immigration reform, the attack on the U.S. consulate in Benghazi, Libya, and other issues at his news conference.
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Obama presses on tax cuts
President Obama urges Congress to pass legislation extending tax breaks for the middle class first and then continue debating about how to handle taxes for the wealthy, in his first post-election press conference.
Obama said he had “no evidence” that the U.S.’s national security was compromised by the scandal that forced Petraeus to resign last week.
Obama met with business leaders at the White House after his news conference on Wednesday afternoon to discuss deficit reduction, the fiscal cliff and its consequences for the economy.
Following the meeting, Xerox Corp. (NYSE:XRX) Chief Executive Officer Ursula Burns told reporters that there would be some “sticking issues” related to the fiscal cliff to resolve but that there would “absolutely” be a deal.
“Going over the cliff is not something that any of us in the room could live with,” she said.
Nov. 15, 2012, 8:11 a.m. EST
Euro zone double dips back into recession
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — Europe’s long-running debt crisis dragged the 17-nation euro zone back into recession in the third quarter, data showed Thursday, offering a negative counterpoint to growing optimism among U.S. and global investors over prospects for the global economy.
Third-quarter euro-zone gross domestic product shrank 0.1% compared to the second quarter, the European Union statistics agency Eurostat said. That’s equal to an annualized contraction of around 0.4%.
That follows a 0.2% quarterly contraction in the previous three months. A recession is widely defined as two consecutive quarters of shrinking GDP.
The figures “didn’t tell us anything we didn’t already know. However, they did confirm that things are as bad as we thought. And when sentiment in the markets is already at such lows, it doesn’t take much of a push to send stocks lower,” said Craig Erlam, market analyst at Alpari U.K. in London.
The Europe Stoxx 600 Index XX:SXXP -0.93% remained 0.7% lower, while U.S. stock index futures were mixed. See: Stock futures cede gains; Wal-Mart off on results .
The euro EURUSD +0.42% traded at $1.2755 versus the dollar in recent action, up from around $1.2739 in North American trade late Wednesday.
The overall contraction was modest, but confirmed fears the region had been sliding back toward contraction over the course of the year, economists said. The bigger concern is that the downturn will only intensify from here.
The data will put added pressure on euro-zone politicians to ease up on calls for added austerity measures across the region’s so-called periphery, while likely spurring the European Central Bank to provide another dose of monetary stimulus, economists said.
“Today’s GDP figures clearly demonstrate that the euro-zone economy as a whole is in desperate need of macroeconomic stimulus,” said Martin van Vliet, economist at ING Bank in Amsterdam.
“With policy makers seemingly reluctant to engineer a coordinated pullback from fiscal austerity, more monetary stimulus and a weaker currency is likely to be needed to put [the] euro zone back on a path of sustained growth,” he said.
Howard Archer, chief European economist at IHS Global Insight in London, said the GDP data and subdued inflation figures will likely lead the European Central Bank to cut its key lending rate from 0.75% to 0.5% “sooner rather than later,” with a move next month seen as “very possible.”
Still, economists noted that the picture painted by the GDP release could have been worse.
On a national basis, German growth slowed less than expected to 0.2% from an 0.3% second-quarter pace. France surprised economists, rebounding with 0.2% growth after a 0.1% contraction in the previous quarter.
Italy remained mired in recession, but the pace of the contraction slowed to 0.2% after shrinking 0.7% in the second quarter. Likewise, Spain contracted 0.3% after shrinking 0.4% the previous quarter.
“It is encouraging that some peripheral countries like Spain only experienced a mild contraction. We have been surprised by the strength of Spanish and Portuguese exports. It seems that the efforts to boost competitiveness are bearing fruit which is very positive,” said Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast.
The data, however, showed ill winds still spread from the periphery toward the core. Austrian GDP shrank 0.1% after expanding by the same amount in the second quarter. The Netherlands, in particular, felt the pain, shrinking 1.1% after eking out growth of 0.1% in the previous two quarters.
And early survey data for the fourth quarter and hard data from the tail end of the third quarter have only fueled expectations that the downturn will deepen in the current quarter, Diron noted.
Core Germany and France are expected to increasingly feel the pain as well.
Global gold demand reflects a challenging global economic climate, with demand from India up and China down.
“Certainly the early indications on Q4 activity suggest that the recession is likely to continue through to at least year-end, and whereas the likes of Germany and France provided a partial offset to peripheral weakness in Q3, they too look set to suffer a fall in output in the final quarter of the year,” said James Ashley, economist at RBC Capital Markets in London.
Still, it isn’t clear Europe’s increasing economic woes will cause substantial heartburn for U.S. investors, who appear more sanguine on domestic economic prospects provided politicians can avert the so-called fiscal cliff — a combination of tax hikes and spending cuts that economists say could push the U.S. economy back into recession in 2013.
Meanwhile, retail-sales, production and exports data indicate China’s slowdown has come to an end, noted Heino Ruland, strategist at Ruland Research in Eppstein, Germany.
The U.S. and China “have historically been the world’s source of growth and a turnaround will be good news for those countries … which do represent the bulk of the NAFTA and BRIC countries,” he said.
William L. Watts is MarketWatch’s European bureau chief, based in Frankfurt.
Economy Has Green Shoots From China to U.S. as Data Surprise
By Simon Kennedy – Nov 15, 2012
The U.S. and China, the world’s traditional twin sources of growth, are planting seeds to lift the world economy from its midyear slowdown.
Among the green shoots indicating faster expansion: stronger housing demand and hiring in the U.S. and accelerating factory output and retail sales in China. Responsible for a third of the world economy, the two countries are now providing ballast internationally as Europe and Japan stagnate.
“China and the U.S. are both improving, which is extremely good news,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in a telephone interview. “If we could pretend Europe and Japan didn’t exist, the world would be fine.”
The rebound’s endurance may depend on whether authorities can clear a fog of doubt surrounding policy. U.S. lawmakers are debating how to curb $607 billion in automatic tax increases and spending cuts by year-end, while a once-in-a-decade leadership shift in China may raise questions about its direction. Elsewhere, Europe’s crisis-fighting remains erratic and Japan faces its own fiscal and political dilemmas.
“Policy uncertainty is affecting business confidence, delaying capital expenditure especially in the U.S.,” said Tim Drayson, global economist at Legal & General Investment Management in London and a former U.K. Treasury official. “The potential if we get a resolution of some of these issues is a release of pent-up demand.”
Confidence in the economic outlook was highlighted by a survey of fund managers released Nov. 13 by Bank of America Merrill Lynch. Global growth expectations were the most optimistic since February 2011 and the outlook for China’s economy surged to a three-year high.
For the first time in seven months a majority said profits will improve rather than deteriorate. More investors said companies should use idle cash to grow and increase capital spending rather than repair balance sheets or buy back shares. A net 37 percent of asset allocators said they were overweight in global emerging-market equities, up from 32 percent last month.
Strategists at Aviva Investors Global Services Ltd. said yesterday that more expansive monetary policies mean they attach a 65 percent probability to the world economy enjoying “better days” over the next six months with only a 20 percent chance growth stalls.
“The risk has abated somewhat, but we’re still awfully close,” Bank of Israel Governor Stanley Fischer said in an interview in Jerusalem yesterday. He said last month the world was “awfully close to a recession.”
Even so, Rockwell Automation Inc. (ROK), a Milwaukee-based maker of software for factories, is among companies forecasting an economic turnaround.
“We’re counting on market conditions improving early enough to have a positive impact on the second half of our fiscal 2013,” Chief Executive Officer Keith Nosbusch said during a Nov. 5 conference call with analysts.
Third-quarter profits at Kentucky-based Yum! Brands Inc. (YUM), owner of the Taco Bell and KFC fast-food chains, topped analysts’ estimates on sales gains in the U.S. and China. Kimberly-Clark Corp. (KMB), the Dallas-headquartered maker of Huggies diapers and Kleenex tissues, reported earnings in the same period that exceeded estimates and raised its forecast for profit this year amid sales gains in Latin America.
In a sign the world economy is emerging from its rough patch faster than economists anticipated, Citigroup Inc. gauges of whether incoming data exceeds or undershoots forecasts show U.S. and China indicators are increasingly proving stronger than anticipated. The so-called surprise index for the U.S. is at 57, up from a 2012 low of minus 65.30 in July, while China’s has risen to 27.30 from minus 87.80 in May.
Behind the upward turn is continued stimulus from monetary policy makers and a potential recovery in industrial growth after manufacturing production fell 2.6 percent in the three months through September, said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York. Order books and inventories suggest the slide may now begin reversing.
“We’re quite confident about the signs of stabilization,” Hensley said in a telephone interview. “We expect some modest acceleration and we’re seeing signs of it if not full confirmation.”
In the U.S., consumer spending, the biggest part of the economy, and an improving housing market are leading the expansion amid rising confidence, better employment prospects and healthier household finances. The pickup comes as the Federal Reserve undertakes its third round of quantitative easing.
In the housing industry, which helped trigger the last recession, residential real-estate prices increased in the year ended August by the most in two years. Housing starts surged 15 percent in September to the highest level in four years.
D.R. Horton Inc. (DHI), the largest U.S. homebuilder by volume, reported fiscal fourth-quarter earnings this week that beat analysts’ estimates on higher orders.
“If housing continues to recover, that’s going to underpin the economy,” Bill Miller, chairman of Legg Mason Capital Management, told Bloomberg Television on Nov. 2. “The economy is probably in a troughing process. That would lead to growth next year.”
Overseas demand for U.S. products may also be proving resilient. Exports gained 3.1 percent in September, the biggest increase since July 2011, to a record $187 billion amid shipments to South and Central America.
“We see upside in the U.S. market coming from exports,” Michael Sutherlin, CEO at Joy Global Inc. (JOY), a Milwaukee-based maker of mining equipment, said in a Nov. 6 conference presentation. “The fundamentals in the U.S. market are moving in the right direction.”
Still, in a sign the economy isn’t surging back, retail sales fell in October for the first time in four months, a report showed yesterday.
In China, the economy is growing at a rate closer to 8 percent after a seven quarter-slowdown, even though monetary easing has been on hold since July.
Factory output and retail sales exceeded forecasts in October and exports rose the most since May. The median estimate of analysts surveyed by Bloomberg News is for an acceleration of gross domestic product growth to 7.7 percent this quarter and 7.9 percent in the subsequent three months.
“We’re mildly bullish and cautiously optimistic with respect to China,” John McCormick, Asia-Pacific Chairman for Royal Bank of Scotland Group Plc (RBS), told Bloomberg Television’s “On the Move Asia” with Rishaad Salamat on Nov. 12, predicting growth “certainly” more than 7.5 percent and perhaps more than 8 percent.
Sands China Ltd. (1928), the Macau casino operator controlled by billionaire Sheldon Adelson, posted a 17 percent increase in third-quarter profit as spending by middle-class Chinese gamblers boosted earnings. China Shipping Container Lines Co. (2866), the No. 2 cargo-box carrier, returned to profit in the third quarter, in part by raising Asia-Europe and transpacific rates.
Alicia Garcia-Herrero, chief economist for emerging markets at Banco Bilbao Vizcaya Argentaria SA in Hong Kong, credits previous Chinese stimulus and acceleration in infrastructure construction for the rebound. A bonus is that the economy also may be pivoting away from its previous reliance on foreign demand toward domestic spending, she said.
Still, signs of malaise endure in the euro area and Japan. A report today showed the 17-nation single currency bloc fell back into recession in the third quarter as the three-year sovereign debt crisis threatens to engulf Spain and finance chiefs mull how to fill a fresh hole in Greece’s balance sheet.
Economic confidence in the bloc fell to its lowest since 2009 last month and unemployment climbed in September to a record 11.6 percent. Industrial production tumbled the most in more than three years in September. Uncertainty also abounds as Spain resists a bailout request, which would trigger bond-buying from the European Central Bank.
Perhaps worse still are signs the region’s core economies have been infected. Germany, Europe’s largest economy, had larger-than-expected declines in exports, factory orders and industrial production in September, while business confidence unexpectedly dropped to its lowest in more than 2 1/2 years.
Portuguese GDP fell for an eighth quarter in the three months through September and unemployment reached a euro-era record of 15.8 percent, while Greece’s economy contracted for a 17th straight quarter, figures yesterday showed.
“There’s renewed concern about Greece, new concern about Germany,” Fischer said. “When Germany slows down that is big in Europe.”
It’s even worse in Japan, where GDP fell an annualized 3.5 percent last quarter amid slumping exports and consumer spending. Analysts polled by Bloomberg predict the contraction will extend into the final three months of the year. That’s hurting companies: Sharp Corp. (6753) and Panasonic Corp. (6752) are among those expecting losses this fiscal year.
The nation also faces an election: Prime Minister Yoshihiko Noda said yesterday he would dissolve the lower house of parliament on Nov. 16 amid disapproval ratings as high as 64 percent. The national vote is scheduled for Dec. 16.
Underscoring the threats of uncertainty and fiscal consolidation, Moody’s Investors Service revised down its forecasts for the Group of 20 economies this week to show growth of about 3 percent next year, barely above the 2.7 percent of 2012.
A true global rebound may not be possible until political uncertainty dissipates, said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., who predicts world expansion will remain “rather sluggish” worldwide.
While President Barack Obama has secured re-election and Greece nears another handout, more is possible. Deutsche Bank AG economists calculate a successful resolution of the U.S.’s so- called fiscal cliff could boost expansion by as much as two percentage points.
The Chinese Communist Party’s handover of power from party head Hu Jintao to Xi Jinping will create a leadership with “new energy,” said Chen Zhiwu, a finance professor at Yale University. That means “good news for the remainder of the year and first half of 2013” in China.
“The global economy could tip into a much better equilibrium if proper political cooperation in Europe and the U.S. were to unleash into proactive uses all the spare cash that is idling on the sideline,” said El-Erian in Newport Beach, California.
The recent pickup may still be rubbing off on other Asian economies, typically bellwethers for the health of international trade. Shipments from South Korea and Malaysia unexpectedly rose in October and Indonesia’s dropped less than predicted.
In South America, Brazil is also showing signs of recovery after slowing demand for exports led to a year of stagnation. GDP will increase 4 percent in 2013 from a projected 1.5 percent this year, according to a central bank survey of around 100 economists. The reason: a series of stimulus measures from tax breaks for industry to interest rate cuts. Outstanding loans grew 15.8 percent in the 12 months through September and car sales jumped 21.8 percent in October from a year earlier.
“Global growth has stabilized,” said Nariman Behravesh, chief economist for IHS Inc. in Lexington, Massachusetts. “I doubt we’ll see any further downgrades in the outlook.”
Yuan rekor terkuat sejak China buka pasar uangnya
Oleh Rika Theo – Senin, 12 November 2012 | 17:15 WIB | Sumber Reuters
SHANGHAI. Terbuai oleh data ekonomi yang positif, nilai tukar yuan menguat ke rekor terbaik hari ini. Perusahaan China menjual dollar sehingga mendorong harga spot yuan ke batas maksimal perdagangan yang diperbolehkan.
Yuan mencapai rekor setelah People Bank of China menentukan titik tengah baru batas perdagangan yuan yaitu pada 6,2920 per dollar. Ini merupakan titik tengah terkuat sejak Mei. Pada Jumat kemarin, titik tengah yuan baru di level 6,3012.
Nyatanya, pasar lebih bullish daripada bank sentral, setidaknya selama satu bulan terakhir. Harga spot yuan sudah menyentuh batas maksimal 1% penguatan dari nilai tengah, atau sekitar 6,2291 per dolar. Sampai pada penutupan hari ini level itu terjaga, sehingga mencetak kenaikan 0,25% dalam satu hari.
Di bawah sistem nilai tukar managed float, kurs dollar/yuan hanya dibolehkan bergerak 1% baik menguat maupun melemah dari nilai tengah.
Perdagangan hari ini juga merupakan hari perdagangan terkuat sejak China membuka pasar uang domestiknya pada tahun 1994.
Para trader berkata bahwa data China yang positif, termasuk pertumbuhan ekspor yang lebih tinggi dari harapan, dan angka purchasing manager index (PMI), telah menggenjot kepercayaan atas yuan.
“Perbaikan PMI dan data perdagangan membantu meyakinkan pasar bahwa yuan masih punya ruang untuk menguat,” kata seorang trader di sebuah bank internasional di Shanghai.
Hingga kini yuan sudah menguat 2,6% dari titik terlemahnya di Juli lalu. Sementara terhitung dari awal tahun, yuan menguat 1%.
Spekulasi alasan penguatan yuan
Beberapa analis pasar percaya bahwa bank sentral akan mengalah pada tekanan pasar dan melebarkan kisaran nilai perdagangan yuan. Analis lainnya berkata bahwa penjualan dolar akan menyusut segera dan bank sentral dapat menunggu sampai pimpinan baru China menyusun kebijakan baru.
Ada juga trader yang curiga bahwa bank sentral mengintervensi melalui bank-bank besar pemerintah untuk membeli dolar di akhir pekan lalu.
Pelaku pasar memang punya berbagai alasan berbeda mengenai penguatan yuan yang terjadi di tengah penguatan dolar terhadap mata uang lainnya. Aneh, sebab indeks dolar juga menguat sejak pertengahan Oktober.
Beberapa analis menduga perusahaan-perusahaan China melakukan rebalancing atas posisi mereka. Sebab, mereka sudah terlalu lama memegang dolar dalam jumlah besar di paruh pertama tahun ini.
Dugaan lainnya, penjualan dolar itu mencerminkan pemulihan pertumbuhan ekspor. Maklum, ekspor China akhirnya kembali menembus titik tertinggi selama lima bulandi Oktober lalu.
Obama Berkompromi soal “Jurang Fiskal”
Sabtu, 10 November 2012 | 03:19 WIB
WASHINGTON, KOMPAS.com — Presiden AS Barack Obama, Jumat (9/11/2012), mengundang para pemimpin Kongres ke Gedung Putih untuk memulai negosiasi kesepakatan guna mencegah kenaikan pajak dan pemotongan belanja tajam yang berlaku pada akhir tahun ini.
Dia mengatakan “terbuka untuk berkompromi”.
“Saya terbuka untuk ide-ide baru,” kata dia dalam penampilan pertamanya di Gedung Putih sejak mengalahkan Mitt Romney dari Partai Republik pada pemilihan umum presiden, Selasa.
“Saya berkomitmen untuk memecahkan tantangan fiskal kita, tetapi saya menolak untuk menerima pendekatan yang tidak seimbang.” Ia kembali mendorong pajak yang lebih tinggi untuk warga Amerika yang kaya.
Analis mengatakan, jika Kongres dan pemerintah tidak bertindak, pengetatan fiskal tiba-tiba akan mendorong ekonomi lemah ke dalam resesi.
Kantor Anggaran Kongres nonpartisan mengatakan, jumlah pengangguran pekan ini bisa naik di atas sembilan persen pada tahun ini jika tidak ada yang dilakukan untuk mencegah apa yang disebut “jurang fiskal”.
Fiscal Cliff: Congress Will Come to a ‘Reasonable Agreement’ By Year-End Says David Walker
By Stacy Curtin | Daily Ticker – 8 hours ago
Less than 24 hours after President Barack Obama won re-election, talk of the looming fiscal cliff — i.e. the $600 billion in automatic tax hikes and spending cuts set to take effect at the end of the year — dominated the news coverage.
On Wednesday, U.S. markets fell more than 2% and have continued their downward trend. That same day, Fitch Ratings warned of a debt downgrade in 2013 if Congress fails to stop the cliff. Standard & Poor’s already downgraded America’s triple-A status last year after politicians battled over whether or not to raise the country’s debt ceiling. On Friday, Obama invited congressional and business leaders to the White House to hold fiscal cliff talks next week.
“I’m not wedded to every detail of my plan. I’m open to compromise, I’m open to new ideas, I’m committed to solving our fiscal challenges, but I refuse to accept any approach that isn’t balanced,” Obama said in his first statement since he won the election on Tuesday.
Related: Markets Plummet After Obama Victory Puts ‘Fiscal Cliff’ in Focus
This week the Congressional Budget Office (CBO) warned again that the fiscal cliff could send the economy reeling back into recession. The nonpartisan federal agency projects the unemployment rate will jump back above 9% by the end of 2013 if no deal is reached. In October the jobless rate was 7.9%.
David Walker, CEO and co-founder of Comeback America Initiative, a group that tries to educate and lobby the public about the need for balanced fiscal reform, joined The Daily Ticker’s Henry Blodget in the accompanying video to discuss the looming fiscal crisis.
“I think it is very important that we get a deal before these provisions expire and before the sequester comes in,” Walker says.
Walker says he is optimistic a deal will get done before year-end.
Related: Corporate America Growing Wary About Fiscal Cliff
“I believe that we are going to come to some reasoned and reasonable agreement,” he says. Lawmakers need to “achieve a grand bargain to deal with a much bigger problem which are the large and growing deficits driven by demographics, healthcare costs and an outdated tax system.”
For example, he thinks politicians will let the payroll tax cut and extended unemployment benefits expire on Dec. 31. He also thinks Congress will cut defense spending, but not to a level anywhere near the $50 billion in cuts that would take effect next year under the sequester.
Walker says a Congressional grand bargain has to include a combination of tax reform and changes to social insurance and entitlement programs.
Related: Fiscal Cliff: “Major Market Meltdown” Expected If Congress Does Nothing, Says Steven Rattner
But as Henry points out in the accompanying video, achieving any type of compromise is incredibly difficult in a highly partisan Congress. Republicans don’t want to raise taxes and Democrats don’t want to drastically cut spending.
To that point, Walker remains resolute in his optimism for a deal.
“I think there is a better chance for it to happen because President Obama obviously does not have to stand for re-election….[and] the Republicans don’t want to be seen as obstructionist for the 2014 election cycle,” he says. “I think it is possible, but for it to happen the president has to demonstrate committed and inspired leadership on this issue.”
President Obama is set to address the fiscal cliff in his first post-election press conference at the White House today. He is not expected to put forth a specific plan but rather urge Congress to work together on a deal.
Obama Faces Pressure to Lead on ‘Fiscal Cliff’ After Win
By Kathleen Hunter and Roxana Tiron – Nov 7, 2012 9:21 PM GMT+0700
Obama now must decide how to contend with opposition from congressional Republicans who demand a tax-cut extension for all income levels.
Obama defeated Republican Mitt Romney to win a second term that will begin with the same balance of power in Congress: Democrats controlling the Senate and Republicans holding the majority in the House. Republicans were counting on a Romney victory or a Senate takeover to improve their negotiating posture.
Emboldened by the election results, Obama “will offer a brand-new plan of his own,” Steve Bell, senior director of the Economic Policy Project at the Bipartisan Policy Center, said in an interview.
Bell said one option the Obama administration is considering is pushing anew for a “balanced” plan to cut as much as $100 billion in spending as a deficit-reduction down payment while letting the George W. Bush-era tax cuts expire for top earners.
“In the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together: reducing our deficit; reforming our tax code; fixing our immigration system; freeing ourselves from foreign oil,” Obama said in his victory speech early today.
Congressional aides have previously said that lawmakers in both parties are discussing fallback plans for $60 billion to $100 billion in deficit reduction.
Senate Finance Chairman Max Baucus, a Montana Democrat, said this week that he expected Obama to call on Congress soon after the election to pass a deficit-reduction plan that includes revenue increases and spending cuts.
“There’s a mandate for a balanced approach, and that means it’s got to be a combination of revenue and cuts,” former Representative Tom Perriello, a Virginia Democrat, said in an interview. He said he would like to see Obama “put a very bold plan out there.”
Unless Congress acts, automatic spending cuts, known as sequestration, will begin in January and the Bush tax cuts will expire Dec. 31. Obama and congressional Democrats want to let the tax cuts expire for top earners, while Republicans advocate extending them for all income levels. The spending reductions and tax increases, amounting to $607 billion in 2013, are known as the “fiscal cliff.”
To help bring Republicans to the table, Obama also may propose “minor changes” to entitlement programs, such as a temporary change in the formula used to calculate annual benefit adjustments, Bell said.
“Obama will certainly be very proactive,” he said.
A big question is the degree to which Republicans will back off from their opposition to tax increases.
“For two years, our majority in the House has been the primary line of defense for the American people against a government that spends too much, taxes too much and borrows too much when left unchecked,” House Speaker John Boehner said yesterday at an election event in Washington. “With this vote, the American people have also made clear that there is no mandate for raising tax rates.”
Boehner indicated before the election that the House may be willing to pass short-term legislation to make time for broader talks on reducing the deficit and averting automatic spending cuts over the next decade.
“The American people re-elected the president, and re- elected our majority in the House,” Boehner of Ohio said in a statement. “If there is a mandate, it is a mandate for both parties to find common ground and take steps together to help our economy grow and create jobs, which is critical to solving our debt.”
The speaker plans to make a statement on the fiscal cliff at 3:30 p.m. Washington time today, according to an e-mailed statement issued by his staff. He’ll make the statement after holding a conference call with House Republicans to discuss the fiscal cliff and the election results, according to a House Republican leadership aide, who spoke on condition of anonymity about the private meeting.
Eric Ueland, chief of staff to former Senator Bill Frist when the Tennessee Republican was majority leader, said Obama “has a responsibility to step forward quickly and express his specific interest in what he wants to see happen in December and then let Congress react to that.”
Ueland said Obama’s victory increases pressure on him to reach across the aisle.
“While he’ll have the ability to argue that he received an endorsement of his positions, he also has the responsibility of working with the Republicans in the House and Senate,” Ueland said.
Some congressional Republicans, especially in the Senate, have said they may be willing to consider eliminating some tax breaks to help pay for eliminating automatic cuts to defense programs.
To the extent that Obama “wants to move to the political center, which is where the work gets done in a divided government, we’ll be there to meet him halfway,” Senate Minority Leader Mitch McConnell, a Kentucky Republican, said in a statement. “That begins by proposing a way for both parties to work together in avoiding the ‘fiscal cliff’ without harming a weak and fragile economy.”
Obama wants to boost top income tax rates to the levels they reached when President Bill Clinton left office in 2001 — at 36 percent and 39.6 percent. He also wants higher taxes on capital gains and dividends than now and a smaller estate tax exemption and higher rate.
In July, the Senate, which Democrats now control 53-47, passed legislation to extend through 2013 the tax cuts for individual income up to $200,000 a year and income of married couples up to $250,000. Above those thresholds, taxpayers would face higher rates for ordinary income, capital gains and dividends.
‘Gridlock and Delay’
Senate Majority Leader Harry Reid, a Nevada Democrat, said yesterday in a statement that voters rejected “the strategy of obstruction, gridlock and delay” he has accused Republicans of employing.
“This is no time for excuses,” Reid said. “This is no time for putting things off until later. We can achieve big things when we work together, and the middle class is counting on us to achieve big things in the months ahead.”
The Republican-led House passed legislation in May to avert defense spending cuts and voted in July to extend all of the expiring tax cuts. Neither measure advanced in the Democratic- controlled Senate. Obama opposed them, too.
The automatic cuts over 10 years would be split equally between defense and non-defense programs. Democratic and Republican lawmakers have raised concerns about the cuts and say they want to avert them.
Representative Chris Van Hollen, a Maryland Democrat, said in an interview before lawmakers left Washington in September to campaign that he was optimistic lawmakers could at least find a short-term solution to allow time for talks on a larger deficit- cutting plan.
“The keys are in the Republican hands,” Van Hollen said. “The minute they decide to take a balanced approach to deficit reduction we can get there.”
GDP Amerika tumbuh 2%
Oleh Djumyati Partawidjaja – Sabtu, 27 Oktober 2012 | 00:23 WIB | Sumber Bloomberg
WASHINGTON. Perekonomian Amerika Serikat dalam kuartal ketiga tahun ini ternyata berhasil berkembang, dipicu oleh belanja konsumsi, rebound dari belanja pemerintah dan pertumbuhan konstruksi perumahan.
Hari ini Departemen Perdagangan Amerika mengumumkan GDP untuk semua produk dan service bertumbuh 2% (per annum), naik sedikit dari kuartal sebelumnya yang tumbuh 1,3%. Padahal perkiraan dari para ekonomis hanyalah 1,8%.
Rebound perumahan di Amerika telah berhasil membangkitkan percaya diri dan keuangan orang-orang Amerika. Itulah sebabnya, permintaan akan barang-barang yang mahal seperti mobil masih bisa bertahan. Data-data ini sepertinya akan bisa memainkan peran yang besar dalam Pemilu November mendatang. Minimal Presiden Obama bisa berkata perekonomian Amerika sedang menuju arah yang benar, walau mungkin Mitt Romney masih bisa menantangnya dengan mengatakan pertumbuhan sekarang ini masih terlalu lamban.
Ekonomi China Hanya Tumbuh 7,4%
Martin Bagya Kertiyasa – Okezone
Jum’at, 19 Oktober 2012 09:39 wib
BEIJING – China mencatat Pertumbuhan Domestik Bruto (PDB) pada kuartal III-2012 turun dari kuartal sebelumnya, dengan pertumbuhan tahunan sebesar 7,4 persen. Pertumbuhan ini menjadi pertumbuhan paling lambat dalam satu dekade.
Penurunan ini bukan hard landing seperti yang ditakuti, tetapi cukup membuat khawatir partai yang berkuasa menjelang transisi politik.
Perdana Menteri China Wen Jiabao mengatakan, ekonomi telah stabil dan masih di jalur untuk mencapai pertumbuhan tahunan 7,5 persen yang ditargetkan.
Data bulanan yang dirilis kemarin, mendukung pernyataannya bahwa masa terburuk telah berakhir. Pasalnya, produksi industri pada September pulih dari kejatuhan bulan sebelumnya dan penjualan ritel tumbuh 14,2 persen secara year-on-year.
Melansir Forbes, Jumat (19/10/2012), sebagian besar analis mengatakan mereka memperkirakan pertumbuhan China tetap pada tingkat saat ini. Adapun bila pertumbuhan naik, maka akan terbatas dan bukan dua digit seperti pada tahun-tahun sebelumnya.
Melemahnya PDB China, telah diramalkan pada kuartal II lalu, dan terjadi pada kuartal ketiga. Namun, pada kuartal IV, PDB China diperkirakan dapat mencapai target 7,5 persen.
China, saat ini masih berpotensi tumbuh tujuh sampai delapan persen dan masih memungkinkan untuk menciptakan lapangan kerja. Namun, pertanyaan besarnya adalah, apakah perlambatan akan membawa China ke era PDB enam persen. (gna) (rhs)
BRICS can build optimism
Updated: 2012-10-18 08:07
By Ding Yifan (China Daily)
Despite their slower growth, emerging economies will remain the engines driving the global recovery and future development
Since the outbreak of the financial crisis in 2008, the pattern of the world economy has undergone great changes. According to the International Monetary Fund, the average global economic growth rate in 2011 was 4.2 percent. For developed countries it was only 2.2 percent, while the emerging economies reached up to 6.4 percent.
However, since the second half of 2011, signs have pointed to a global growth slowdown in many emerging economies. This trend has continued into 2012, with many people beginning to question the future ability of the BRICS countries – Brazil, Russia, India, China and South Africa – to be engines of global growth.
India’s economy is currently slowing markedly. Its GDP growth has fallen to its lowest level in nearly three years, as a result of the reversal of international capital flows, diminishing demand in its export markets, and the volatility of the price of crude oil. India’s economic downturn is also reflected in a higher fiscal deficit and higher current account deficit.
After more than a decade of adjustment and reform, Brazil’s public finances have greatly improved, with the net national debt to gross domestic product ratio down from 60 percent in 2002 to 37 percent in 2011. The proportion of foreign currency debt in total public debt has also fallen from 40 percent to 4 percent. However, since the second half of 2011, due to the debt crisis in Europe, especially the woes of Spanish financial institutions, the growth rate of the Brazilian economy began to decline, and it has picked up only slightly this year.
Russia’s growth was better than expected in the first half of 2012, mainly because its oil and gas export revenues increased substantially, due to higher prices in the international energy market in the first quarter. Russia offset a 20 percent increase in government spending during the election period, thus allowing the federal budget to remain balanced. But Russia has just joined the World Trade Organization, meaning Russian foreign trade and investment could undergo new structural changes.
South Africa, the last member to join the BRICS grouping, has a bigger exposure to European financial risks because of its close ties with European goods and services and is likely to experience a lower growth rate this year than in 2011.
China’s growth has also been slower this year. Several factors have contributed to this slowdown: first, decreased exports, mainly to Europe because of the debt crisis in the eurozone; second, the withdrawal of government investment in public works and the slowdown in the housing market due to government intervention to reduce house prices to a more reasonable level; third, firms are de-stocking because of falling prices and shrinking demand; and fourth, consumption of housing and automobiles has declined.
In 2008, after the outbreak of the international financial crisis, emerging markets suffered from a massive flight of capital, credit crunches and a sharp contraction in world trade. As a result, the emerging economies such as China, India and Brazil implemented strong fiscal and monetary measures to fend off economic recession.
However, since the beginning of this year, economic growth in emerging economies has been affected by diminishing exports to Europe, where the outlook for the eurozone is worrying. In some emerging countries, the level of non-performing loans in banks is also on the rise. Inflationary pressures from rising oil and food prices are limiting the possibility of further relaxation of monetary policy. In addition, in Western countries, public opinion has been questioning the sustainability of the high investment rate in China and many other Asian countries.
Credit easing in 2008 caused a series of follow-up effects, including a high level of credit, real estate bubbles and an increase in non-performing loans. Therefore, many emerging countries have found the room for monetary and fiscal maneuvering narrowing. In addition, even if the governments of these emerging economies decide to expand credit again, the effects of the policies will be diminished, because unlike 2008 there are no more easy investment projects.
However, looking ahead, there are many factors that should make people feel optimistic about emerging economies:
First, the emerging economies still have room to maneuver using macroeconomic policy to stimulate the economy. The recent fall in commodity prices provides good conditions for emerging economies to further ease monetary policy. And the emerging economies still have leeway to adopt expansionary fiscal policy to stimulate the economy, as their public debt to GDP ratio is around 30 percent. In developed countries this ratio is about 100 percent.
Second, emerging economies such as India and China have a huge advantage given their market size. If the crisis forced the emerging economies into structural transition, they might be able to embark on a development path driven by mass consumption stimulated by accelerated industrialization. So China’s huge domestic market may become a new driving force for economic growth, provided that China adjusts its income distribution problem. In other words, there is a great consumer potential to be tapped in emerging economies.
Third, emerging economies are increasing their cross-border investments with each other. This trend might become a new impetus for future world economic growth. Since the financial crisis, the financial institutions of developed economies have withdrawn their investment in developing economies, but firms from emerging economies have taken over and become the driving force of foreign investment in developing countries. As national leaders of the emerging economies are committed to developing trade and investment among themselves, this trend will lead to greater development in the future.
The author is deputy director of the World Development Research Institute at the Development Research Center of the State Council.