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March 12th – The BESA Times

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Thirty-Fourth Edition - Sunday, 12th

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


Notable Headlines

Mario Draghi, ECB President, declared that interest rates will remain unchanged and reaffirmed the quantitative easing programme, which started in January 2015. The tone of the speech was optimistic, as Draghi outlined ECB’s victory against deflation, even if it is too early “to pronounce victory on the inflation front”. In fact, the real protagonist of the press conference occurred on Friday in Frankfurt, was the inflation data: it is the first time in recent years that ECB has registered inflation above its official target of “just under 2 per cent”. Mr Draghi interpreted this important result ascribing it to the key variable represented by wages, which grew significantly and, furthermore, to high energy prices. ECB’s council decided to leave interest rates unchanged because there is no more urgency to proceed with further actions on monetary stimulus. This decision will for sure raise pressure on the ECB from critics who claim to limit this policy, especially from Germany.

China has become the world biggest banking system by assets ($33tn) outpacing Eurozone ($31tn), giving proof of its crucial role and influence in world finance. According to Financial Times, China’s banking system gained the first position at the end of 2016, moving aside Eurozone from the top step of the podium. This result originates from the strong increase in bank landing since 2008 as a response to the global crisis, implemented by the government with aggressive fiscal and monetary stimulus. This process is known as “financial deepening” and represents the growth of the financial system relative to GDP in a specific country. Many leaders and economists praised this policy that contributed to stabilize global economy in a period in which main economies were in deep recessions. However, a comparison with other countries could be distorted by the big amount of sovereign credit among the corporate loans reported on official banks balance sheets.

On Tuesday WikiLeaks revealed documents regarding Central Intelligence Agency’s cyber espionage techniques of widely used devices such as smartphones, internet-connected TVs and other devices. In particular, according to WikiLeaks, CIA developed a malware named “Weeping Angel”, which was built to convert Samsung’s “Smart TVs” into spies, in cooperation with the UK Intelligence services. WikiLeaks said it would publish details of malwares and cyber weapons only after it have been “analysed and disarmed”. Edward Snowden, former contractor at National Security Agency (NSA) who started revealing documents in 2013, wrote on twitter that the publication by WikiLeaks “looks authentic”. At that time, in 2013, the Obama Administration assured to limit strongly the use of this kind of tools and cyber weapons but, after recent revelations, nothing seems to have changed.


What to remember of last week's news?

Donald Tusk has been re-elected president of the European Council for a 30-month term after a European summit in Brussels. Mr. Tusk, from Poland, was elected for the first time in 2014, succeeding to Herman Van Rompuy. His election has registered the opposition of his own country, Poland, whose conservative government expressed a preference for a closer candidate, Jaroslaw Kaczynski.

On Friday morning South Korea’s constitutional court voted to impeach the President Park Geun-hye, following a corruption scandal that shook the country in the past weeks and provoked massive anti-government demonstrations. Powers are now transferred to Prime Minister Hwang Kyo-han, who firstly ordered to the defense minister to prepare from provocations from North Korea. Ms Park’s destiny depends on the constitutional court, which has 180 days to confirm or dismiss the impeachment motion. If the motion will be voted by six of the nine judges, Ms Parks will immediately loose the presidential immunity and may be charged with a criminal investigation.

Italian government proposed a 100,000€ (105,000$) flat tax for wealthy foreigners who transfer their residency for tax purposes in Italy, emulating similar incentives offered ion Britain and Spain. The measure is part of the Italian 2017 budget and is addressed to foreigners or, generally, to people who have been living abroad for a minimum of nine years over the last ten. According to Italian fiscal authorities, the flat tax is renewable every year for a maximum of fifteen years.


Understand in Pictures...

China is facing a particular form of liquidity challenge: huge amounts of cash are getting out of the country. According to Goldman Sachs estimates the total amount is about $1,1tn! Click here to know more about how China is managing this situation. Understand why here.


A Week in the Financial Markets


Our Homemade Article

by Evan Oliner


What to expect for next week?

On March 15th The Nederlands holds parliamentary elections. According to pools the populist Party for Freedom (PVV) could emerge as the country’s first party, guided by Geert Wilders. PVV is an anti-EU and anti-Islam party, close to the French Front National, guided by Marine Le Pen, running for French presidency as one of the favourite parties. After Brexit and Trump election, the possible triumph of PVV at Dutch parliamentary elections would enforce the anti-establishment narrative proposed by populist parties: a very complex situation in a year in which there will also be election in Germany and France and the future of Europe is in play.





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