[Skip to Content]

Register to receive the weekly OMFIF Commentary, on the stories behind global economic and financial news.

* Required Fields

Member Area Login

Forgotten Password?

Forgotten password

Analysis

Commentary

Turkey must decide on Cyprus

by Chrys Georgiou in Limassol | Mon 20 Feb 2017

Cyprus reunification will be on the world agenda this year. Turkey, as ever, will maintain a considerable influence on negotiations. The false optimism regarding the prospects of reunification is based on a misconception: that the Turkish-Cypriot side is able to negotiate on its own, without following whatever position Ankara seeks to advocate. This is wishful thinking. Regardless of how significant the benefits would be, producing a sustainable solution has been and always will be the first priority when reaching an agreement.

view full

Emmanuel Macron moves to the fore

by Jacques Lafitte in Brussels | Fri 17 Feb 2017

Views have been gaining ground that French presidential candidate Marine Le Pen, the leader of the right-wing National Front, may win the spring election. I disagree. The chances that she can win are vanishingly small. The central scenario is clear: Le Pen and Emmanuel Macron, the social-liberal candidate, will make it to the election's second round on 7 May. Macron will unveil his programme in early March. If he makes smart openings to the centre-right, he might receive a significant boost in the polls and move past Le Pen into the Elysée Palace.

view full

EU must change – or collapse

by Brian Reading in London | Fri 17 Feb 2017

The European Union and single currency are coming unstitched, and time is running out for pretending otherwise. The union has never lived up to its founders’ expectations and, since 1957, three treaties have fundamentally changed the EU. There were 54 signatures to these treaties, though only 10 were backed by referendums. The German people never consented to swapping the D-mark for the euro. As part of the bargain, the Europeans agreed to create the ECB in the image of the Bundesbank. This has backfired – a one-size ECB has fit none.

view full

The ECB has got it exactly right on the euro

by Waltraud Schelkle in London | Thu 16 Feb 2017

The Trump administration has criticised Germany for allegedly supporting a dollar-euro exchange rate that allows Berlin to ‘exploit’ the US and run a large trade surplus. Ironically, the German government seems to agree with this allegation by Peter Navarro, the new president’s chief trade negotiator. If a novice US negotiator and German hawks agree that the European Central Bank’s policy is too lax and hence the euro too weak, surely ECB President Mario Draghi and his board of central bankers must be doing something right.

view full

Target-2 and Germany’s election dilemmas

by David Marsh in London | Wed 15 Feb 2017

Each of the quintet of currencies that constitute the IMF’s special drawing right is beset by considerable strain. The euro may be the most problematic. Germany faces considerable dilemmas over the single currency - and the Bundesbank is drawing exceptional attention to the repatriation of gold reserves. Germany’s rising claims under the ECB’s Target-2 system for settling intra-euro area balances, transformed into a programme for reallocating surpluses from Germany to less creditworthy euro members, signal danger ahead.

view full

Sterling world’s most stable reserve currency

by Bhavin Patel in London | Wed 15 Feb 2017

Over the past five years sterling has been the most stable currency of those that comprise the International Monetary Fund's special drawing right, despite the major depreciation over the past year. The SDR itself has been relatively stable over the past two years, as the fluctuations of its constituent currencies have tended to balance each other out. 2017 may see the dollar continue to dominate, but the importance of the SDR components within multicurrency reserve management will be crucial to understanding exchange rate risks.

view full

Troika must find Greek answer

by Danae Kyriakopoulou in London | Tue 14 Feb 2017

For the past 18 months, Greece had largely stayed out of the headlines. The relative calm has its origin in the country’s third bail-out, which provided a timeline for Athens’s medium-term funding. But Greece’s return to the front pages over the past few weeks can be traced back to the ‘extend and pretend’ approach that was adopted to achieve the 2015 agreement. It is no surprise that fears have re-emerged that Greece may have to leave the euro. A solution must come by 20 February, when euro area finance ministers meet.

view full

Dilemma over renminbi convertibility

by Adam Cotter in Singapore | Mon 13 Feb 2017

China has been on a public relations offensive to dispel concerns that the its foreign exchange reserves, now below $3tn, have fallen below a ‘psychological barrier’. Beijing’s dilemma is whether to accelerate or slow the renminbi convertibility drive. The short-term focus has shifted from currency internationalisation to stabilising outflows and the exchange rate. Capital flight, driven by confiscation risk and concerns over China’s outlook, is a principal factor. In 2016 China's net foreign financial assets increased by over $200bn to a record high.

view full

Latin America seeks new global partners

by David Smith in Buenos Aires | Fri 10 Feb 2017

Brazil and Argentina, long locked in a rivalry that extends far beyond the soccer field, have pledged common cause this week. Their presidents convened an urgent summit on 7 February in Brasilia to send a strong message to Washington and an offer of change to Europe and Asia. Both leaders stressed the urgent need for Mercosur, the subregional trading bloc whose full members include Argentina, Brazil, Uruguay and Paraguay, to strengthen its international position. The target partners for a new Mercosur must be Europe and Asia.

view full

Fragile Tory party unity on Brexit

by Brian Reading in London | Fri 10 Feb 2017

Pragmatism has united the Conservative party for the first time since the UK’s entry into the EU. The Labour party, by contrast, is divided by its principles. British party politics have been turned upside down. Those who voted remain out of fear may now change their minds. It is too early to predict whether doom-laden economic forecasts were mistaken or merely premature. The new unity that the Conservative party has built is fragile, and is precariously tied to the UK’s ability to weather the risks and uncertainties ahead.

view full