October 9th – The BESA Times

Twenty-second Edition - Sunday, October 9th

Every week, a complete snapshot of what happened around the world in the past week

 

Notable Headlines

The Norwegian Nobel Committee awarded the 2016 Nobel Peace Price to Colombian President Juan Manuel Santos for his efforts to end his country’s five-decade-long civil war with FARC (Revolutionary Armed Force of Colombia). President Santos found a deal with FARC after four years of peace negotiations in Cuba which was rejected by Colombian voters after a referendum which took place on Saturday, October 2nd. Less than 38 per cent of Colombian voters answered the referendum, and the “No” victory was really slight. The main reason of this unpredicted result lays on the deep antipathy Colombians hold towards FARC, which led people to see the deal as a proof of weakness by the government. President Santos, during his speech to the nation, said that he is the first to recognise the result and that he will not resign. Although Mr. Santos had stated he wouldn’t renegotiate should the “No” win, he appeared to be more flexible on Saturday Night.


The International Monetary Fund (IMF), in its last Fiscal Monitor, reports that the world’s debt reached a new record of $152tn, which represents more than the double size of the global economy. It appears to be the most accurate measure of the world’s debt ever calculated and the amount is still rising, as said Vitor Gaspar, director of fiscal affairs at IMF. The focus is on the apparent paradox between the ultra-low interest rates imposed by the majority of the central banks in order to stimulate borrowing and the threats that follow the enormous debt level. The IMF also warned that in some countries the amount of borrowing by companies was too elevated because, as Mr Gaspar explained, excessive private debt is a risk to financial stability and “The Fiscal Monitor shows that rapid increases in private debt often end up in financial crisis”, which usually last longer and are deeper than ordinary recessions. In spite of that, IMF officials want governments to perform in order to boost growth and ask for “growth-friendly fiscal policies”.


Early on Friday, October 7th, the British Pound registered a drop of more than 6 per cent against the US dollar before regaining the majority of its losses. The short-lived fall was registered soon after Asian currency markets started negotiating. The pound lost 6.1 per cent to $1.1841, which is the lowest value registered since May 1985 and the major intraday fall since UK voted to leave the EU on June 24th, when the currency registered a dip of 11.1 per cent. Even if the British Pound climbed up again quickly, in the afternoon was still trading much below the $1.26 levels of the previous day, down at 1.8 per cent at $1.2381. The main cause of the move could have been a rogue automated algorithm or, traders say, the tough attitude acquired by the French president Francois Hollande over Brexit negotiations who stated that “The UK has decided to do a Brexit, I believe even a hard Brexit. Well, then we must go all the way through the UK’s willingness to leave the EU”.

 

A week in the financial markets

 

Our Homemade Article

Switzerland: a way out for Britain? by Andrea S. Liverani for BESA

 

What to expect for next week?

On Monday, October 10th, the Nobel Price for Economics will be awarded. The most suitable candidates, according to the annual prevision made by Thomson Reuters, are Olivier J. Blanchard, “for contributions to macroeconomics, including determinants of economic fluctuations and employment”, Edward P. Lazear, “for his development of the distinctive field of personnel economics” and Mark J. Melitz, “for pioneering of firm heterogeneity and international trade”.


From October 9th to 13th, the 23rd World Energy Congress will be held in Istanbul, Turkey. The main theme for Congress “Embracing New Frontiers” promises an innovative concept and content. The focus of the financial markets will be on a possible deal between Russia and OPEC. Russia’s energy minister Alexander Novak said on Friday he doesn’t expect to find a deal with OPEC during the Congress in Istanbul and consequently oil price per barrel fell near $50.


The EU Institutions will brief the Eurogroup on the development accomplished by Greece in implementing the milestones agreed during the first review of Greece’s economic adjustment program. The positive achievement of these milestones would guarantee the disbursement of the remaining €2.8 billion from the total of €10.3 billion (the first part of this overall sum was disbursed in June 2016). The remaining crucial points are related to privatizations, energy sector reforms and measures regarding bank governance.

 

WRITTEN BY THE BESA RESEARCH TEAM

PLEASE DIRECT ANY INQUIRY TO AS.BESA@UNIBOCCONI.IT

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