Stockholm (Ekonamik) – After a week of Brexit drama and rising tensions over trade negotiations between Europe and the USA, St Patrick’s day came as a relief to markets.
Prospects darkened for a trade deal between the EU and the United States, with the two parties holding irreconcilable positions and time before the current European Commission winds down and the U.S. 2020 presidential race running out. The impasse is that the EU is trying to circumvent Donald Trump’s threat of a 25% tariff on automobiles while protecting against U.S. agricultural exports to avoid political opposition in Europe like that experienced during the TTIP negotiations. “The United States can’t have a trade agreement with Europe that doesn’t deal with agriculture, and their view is that they can’t have one that does,” U.S. Trade Representative Robert Lighthizer told Congress.
The Eurogroup met to discuss Greek reforms, among other topics. Based on a negative review of progress by the European Commission, the finance ministers from the currency union postponed the disbursal of debt relief measures to Greece until the next meeting in April. The main sticking point was a proposed reform of the protection enjoyed by insolvent debtors with regards to their primary residence, which the EU fears may incentivise strategic defaults.
After two years of talks and two weeks to go until the UK is set to leave the European Union, a rollercoaster week of high drama and three successive key Brexit votes in the House of Commons brought no clear answers and still more questions. Prime Minister Theresa May’s Brexit deal was again rejected, setting up a vote on a motion to rule out that the UK would leave the EU without a deal altogether, which passed. This set up a vote to extend Brexit beyond the March 29 deadline, passing somewhat convincingly, which then set up – another – a vote on Mrs May’s deal by May 20 this week to determine whether an extension to leave with a deal lasts until June – or indefinitely. For Brexiteers, the closer March 29 looms, the further away Brexit seems.
Back in the continent, Zuzanna Čaputová, an environmental lawyer, emerged as the clear frontrunner in Slovakia’s presidential election two weeks before the first round of voting this weekend. She looked set to defeat her closest opponent, Maroš Šefčovič, a European Commission Vice President and the Smer party candidate. She won a 40.5% share of the vote and was will now her opponent in the second round on 30 March. The development is partly due to widespread disenchantment with the current governing coalition, whom voters blame for facilitating an environment of corruption that led to the killing of investigative journalist Ján Kuciak last year. With an economy projected to grow at the fastest rate for developed countries in 2019, wind appears to be in the sails for Ms Čaputová and the Republic’s liberal pro-Western forces.
In China, the national statistics bureau published price inflation figures showing that domestic demand continues to slow down. The data continued to support the view that the Asian behemoth is slowing down. On the bright side, analysts continue to believe that there is a chance that growth may rebound later in the year, once government stimulus starts having an effect.
Ekonamik also discussed Templeton Global Macro‘s recently published Global Macro Shifts report, which reviews how the asset manager incorporates ESG analysis into its economic growth expectations. The publication points out that Argentina, Brazil and Indonesia’s ESG scores are expected to increase while Italy, Turkey and South Africa’s figures will likely deteriorate. These scores are understood to signal deteriorating growth and less attractive investments. In most cases, expected changes in governance are the determining factor.