Our editors give us a breakdown of this week’s biggest news stories
United Kingdom: Ross Alexander Hutton
As the latest estimation of the U.K.’s R-number fell to between 0.6 and 0.8, the governor of the Bank of England, Andrew Bailey, said “there was light at the end of the tunnel”, raising hopes of a quicker re-opening of the economy. Yet, behind the reassuring headlines is a more uncertain monetary trajectory. Addressing the Resolution Foundation this week, Bailey acknowledged the “increasingly two-sided nature of the risks we face” – that is, the bank faces a tricky balance between responding quickly to any “clear evidence” that the economy is overheating whilst also anticipating whether to further loosen policy if the spring recovery falls short of expectations. Look no further than the financial markets to see investor expectations of future inflation and interest rates: rather than expecting the bank to introduce negative rates, investors forecast that the MPC will start raising interest rates in 2022. In the context of the U.K.’s public finances, this really matters. The Chancellor told MPs this week that “the public finances are much more sensitive to changes in interest rates and inflation than they were previously”. For now, these are ‘low-key’ whispers but, as the recovery unfolds, one should expect talk over inflation and interest rates to continue for months to come.
Turning to trade, January saw a 40.7% decline in U.K. goods exports to the E.U., according to the ONS. In contrast, the U.K.’s trade with non-E.U. countries grew only grew by 1.7%. While it the findings of the ONS report were expected, the historic decline in trade is still staggering. Indeed, Head of Economics at the British Chambers of Commerce, Suren Thiru, said “the significant slump in U.K. export of goods to the E.U., particularly compared to non-E.U. trade, provides an ominous indication of the damage being done post-Brexit with the E.U. by the current border disruption”. James Sproule, Chief Economist at Handelsbanken in the U.K. went further by concluding that “U.K. exports have felt the impact more severely than their European counterparts”. Even though the ONS cautioned against concluding the data points to Brexit alone as there ‘may’ have been businesses using up stockpiles from before the Brexit negotiations deadline, but the culprit of the new trading relationship is clear: non-tariff barriers preventing frictionless trade.
Europe: Peter Hourston
The European Medicines Agency granted a “conditional marketing authorisation” for Johnson & Johnson’s Janssen single does Covid-19 vaccine this week. Clinical trials in the US, South Africa and Latin America involving over 44,000 participants found the jab had a 67% efficacy in preventing symptomatic cases. However, this masks disparities between the trial sites: at 72 per cent in the US and 66 per cent in Latin America but only 57 per cent in South Africa where it was less effective against the local 501.v2 variant. The side effects of the vaccine included pain at the injection site, headache, tiredness, muscle pain and nausea but generally clear after a few days. The EU has already ordered 200 million doses and can exercise an option to buy 200 million more. Deliveries to the EU are meant to start in April but problems with J&J’s production capacity might delay this. The European Commission said that it was communicating with its vaccine contractors to “ensure that deliveries take place as agreed and ensure quick deliveries of sufficient numbers of doses”.
Italian Prime Minister Mario Draghi has ordered new lockdown controls until the start of April due the spread of the more transmissible variant of Covid-19 first detected in the UK. From Monday bars, restaurants and schools will close in any Italian region that has more than a weekly average of 250 cases per 100,000 inhabitants. On Friday, Italy recorded 26,824 new cases and the entire country will be placed in lockdown over the Easter holidays. To support businesses affected by the latest measures, Draghi also announced an extra €32 billion in spending. Italy is current delivering 170,000 daily doses of vaccine but will shift prioritisation from health and key workers to the elderly. Out of the 5.7m vaccines that have been delivered so far only 30 per cent have been received by the over 70s, despite 80% of deaths occurring in this age category.
Turkish President Recep Tayyip Erdogan announced an inflation target of below 10 per cent and promised a fiscal contraction to achieve this on Friday. The budget deficit would be cut from 4.3 per cent to 3.5 per cent of GDP through public finance reforms such as removing extrabudgetary spending and reform of public tendering. Increases in the central bank interest rate at the end of last year gave the lira a strong start to 2021 but recovery in the exchange rate has recently slowed thanks to a stronger dollar and rising US treasury yields. Erdogan’s recent support to free-market economics has been “welcome but there was little else that was meaningful and concrete in terms of major reform initiatives,” said one anonymously quoted London-based investor in the FT.
Africa & Middle East: Camille Capelle
After the Pope’s historic visit 4-day to Iraq, which finished this Monday, controversy and criticism have emerged over his decision to take the trip despite the potential health risks for those who came to see him. While Pope Francis himself has already been vaccinated, his visits where the religious leader spoke without a mask could still put other people at risk. When asked about this Pope Francis said that he had prayed a lot on his decision to take the trip, and that the same force allowing him to take the trip would also keep the people safe. Many argue that his trip was more than worth the risk, as he spread a message of hope and support at a time when it was most needed.
On Wednesday, a new interim government was approved in Libya in order to keep the peace and lead the country until the elections scheduled for December of this year. Following this, the UN Security Council has put out a unanimous demand for the immediate withdrawal of foreign troops and mercenaries from the country and to respect the current ceasefire agreement. The organisation claims that the presence of 20,000 of these troops have remained in Libya since the close of 2020, despite withdrawal and an arms embargo being some of the main terms of the October ceasefire agreement.
Ethiopia’s central government has rejected allegations of ethnic cleansing practices in the Tigray region. Following similar allegations by international organisations, the US Secretary of State requested for a neutral peace-keeping force to replace current troops in Tigray to ensure the safety of the people. Previously, the UN had made similar accusations of war crimes, urging that Eritrea put an end to the mass killings and sexual violence by withdrawing its troops.
North America: Amelia Brown
An impeachment investigation against New York governor Andrew Cuomo will be opened in the State Assembly, the speaker announced this week. The investigation comes as seven women have come forward with accusations of sexual harassment/assault, and a report that Cuomo and his aides altered reports about the mortality rates in the state’s nursing homes earlier in the pandemic. New York City Mayor Bill De Blasio, who has often feuded with the governor,and called him out for “bullying,” has joined almost all NY Senators and other state politicians in calling for Cuomo to resign. Cuomo has denied any inappropriate behavior, both in regards to the harassment accusations, and the nursing home scandal, saying it would be “anti-democratic” for him to resign just based on both sets of accusations.
On the one year anniversary of coronavirus’ designation as a pandemic, a more cheerful highest record was set: 100 million doses of vaccines administered in the US. This light at the end of the tunnel has influenced Americans’ optimism about the economic recovery as well–the University of Michigan’s consumer sentiment index rose to 83; the index is still down from where it was in March 2020 (89) but up from the mid-70s of February. This points to greater consumer confidence in the market, and we could anticipate growing consumption as state economies start to open back up this coming week. However, inflation concerns loom with the potential consumption boom and the $1.9 trillion relief/stimulus package President Biden signed Thursday.
During the wake of polarizing opinions in the Americas about the British Monarchy following Oprah’s interview with Meghan Markle and Prince Harry, Canada is searching for a new governor general. The position is an appointed representation of the Canadian Monarch, Queen Elizabeth II, who acts as a viceregal; their powers include dissolving Parliament and calling elections independently of the Prime Minister. The position was previously held by Julie Payette, who resigned over accusations of workplace conditions akin to harassment. With the search on for a new one, Prime Minister Justin Trudeau has gotten heat for his advising of the appointment in the first place. An independent advisory committee was put together this week to make the suggestion of a new appointment (which technically the Queen picks). The practice of the advisory committee was implemented by the previous PM, but was abandoned by the next government until now.
Latin America: Leo Le Borgne
Former left-wing president Luis Inácio Lula Da Silva has had convictions set forth against him annulled by the Supreme Court. This newest development sets Lula as a potential challenger to Bolsonaro for the 2022 presidential election. He was previously held with criminal convictions following the bribery and corruption investigation nicknamed Operation Car Wash. The prosecutor-general will challenge the decision, however, if the appeal fails Lula will certainly become the focal left-wing presidential challenger.
With the MAS socialist party back in power in Bolivia, a warrant has been announced against ex-president and conservative Jeanine Áñez on the grounds of inciting sedition and terrorism. Áñez served as Bolivia’s interim president during the 2019 coup d’état, which was led by conservative political groups and the military against Evo Morales, who had to flee the country. With Morales’s MAS party delivering a resounding victory with the new president Luis Arce in 2020, the success of the party following the coup is seeking justice against those who initiated a coup against Morales.
Business: Tom Woods
US Republican Senator Marco Rubio has emerged as an unlikely ally for Amazon workers pushing to unionise, citing “a war against working-class values” being undertaken by the tech giant. The employees in question are Amazon workers at a “fulfilment centre” in Bessemer, Alabama, with nearly 6,000 there deciding via postal vote whether to unionise. In an opinion piece for USA Today, Rubio, a fiscal conservative who has opposed industrial action in the past, rallied against the company on the grounds that it has been pushing a “woke” agenda while “turning to conservatives to save them” when “their bottom line is threatened”. He supported his statement by citing what he labelled as Amazon’s “censorship” campaign, which has involved delisting a book that questions some of the assumptions of the transgender movement and refusing to fund pro-life charities such as the Alliance Defending Freedom as part of its AmazonSmile programme. Stating in the article that he generally opposes aggressive unionisation on the grounds that it hurts the economy and workers themselves, he went on to state that “When the conflict is between working Americans and a company whose leadership has decided to wage culture war against working-class values, the choice is easy — I support the workers”. Rubio’s contribution to the discussion raises questions, notably whether Amazon’s workers’ reason for going on strike was a protest against a “woke” culture or, as they have previously stated, an attempt to force better working conditions at the company. Nonetheless, the piece is emblematic of increasing criticism of big tech from all sides of the political spectrum.
Google has launched an attack against Microsoft for supporting a “pay-for-news” bill currently being pushed in the US Congress. On Friday, Microsoft’s president Brad Smith appeared before Congress to discuss the bill, which would make it easier for media organisations to make deals with tech platforms over how their content is distributed. There, he accused Google of taking profit from news providers by becoming the “front page” for news on the internet and thus making it difficult for them to monetise traffic. In response, Kent Walker, Google’s senior vice-president of global affairs, wrote that Microsoft were engaging in “naked corporate opportunism”, “making self-serving claims and…even willing to break the way the open web works in an effort to undercut a rival”. This is just the latest clash in a bitter feud between the two rivals, who currently compete in areas such as cloud computing and video conferencing.
Theory: Cassi Ainsworth-Grace
In anticipation of International Women’s Day, the IMF has published a new article on ‘Engendering the Recovery: Budgeting with Women in Mind’. This is in response to the disproportionate impact of lockdown policies on women and girls across the world. For example, the US Bureau of Labor Statistics found four times more women dropped out of the workforce than men in September 2020, and one million Japanese women have left the labour market since the pandemic first hit in Japan.
Now, the IMF is advocating for economic recovery led by governments across the world to be ‘engendered’, particularly through the budget. Such a strategy would “integrate gender into the policies and processes of public financial management.” Their suggested roadmap includes first assembling evidence, using that evidence to create effective policy designs, allocating the necessary resources towards implementing these policies, and finally tracking and evaluating the impacts and success of these new policies. The IMF maintains its strong commitment to this goal, having worked with 113 member countries on implementing budgetary practices, allocations and tax policies to promote gender equality, as well as seeing 55 countries investing in gender budgeting training with the Fund.
Image source: Stylist