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December

Mon 5 Dec 2016 / Europe

European fragmentation accelerates

Italy’s No to Prime Minister Matteo Renzi’s constitutional reform proposals signals further European fragmentation that could eventually escalate into the departure of a large member country from the euro. Following Renzi's resignation announcement last night, Italy’s short-term future is in the hands of President Sergio Mattarella, who has to decide whether to reappoint Renzi or ordain an ‘institutional government’ to carry on until the next general election due in early 2018.

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Fri 9 Dec 2016 / Europe

Theresa, Ted and Maggie

Edward Heath became British prime minister in 1970, Margaret Thatcher in 1979. Heath and Thatcher share with Theresa May a status of being Conservative radicals, embroiled in controversy with the European Union, and hostages to the winds of global politics. Heath lasted only four years, Thatcher 11. Heath faced a formidable Labour challenger, Thatcher faced hard left Labour. How long will Theresa May, Downing Street’s Conservative incumbent, last? 

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Fri 2 Dec 2016 / Europe

Inconsistencies scupper OBR projections

Philip Hammond, the British chancellor of the exchequer, revealed in his autumn statement plans to shrink the budget deficit at a slower rate than his predecessor George Osborne had set out last March. Osborne failed to meet his targets, but Hammond is more realistic. Shrinking the deficit puts downward pressure on GDP growth. Austerity continues to represent government fiscal policy, but has been scaled back. The independent OBR gauges the cyclical deficit and the level of spare capacity, and yet still frequently gets it wrong.

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Wed 7 Dec 2016 / North America,Europe

The watershed of 1976

Britain’s autumn 1976 financial upsets are full of lessons for today. A crucial turning point came with agreement by Prime Minister James Callaghan’s government – in a 7 December cabinet meeting, 40 years ago today – on an application to the International Monetary Fund for a record $3.9bn loan. The wrenching UK debate catalysed a wholesale retreat from Keynesianism and a new primacy of monetary policies. Now, 40 years later the curtain of Keynes may be rising again.

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Wed 14 Dec 2016 / Europe

‘A pivotal moment in British history’

The 1976 crisis began with a major sterling fall, and concluded when the British government requested what was then the largest loan – $3.9bn – in the history of the International Monetary Fund. As Permanent Secretary Tom Scholar put it, '1976 was a pivotal moment in British modern economic history, and marked a significant change in course.' He was speaking at an 8 December meeting organised at the Treasury, marking the 40th anniversary with the launch of Richard Roberts' book, When Britain Went Bust - The 1976 IMF Crisis.

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Fri 16 Dec 2016 / Europe

The Battle of Brexit

A majority of British MPs supported Remain, and the vote to leave drove a wedge between the people and Westminster, says Brian Reading. The EU is in crisis, and government's ambivalence towards Brexit's details can only cause European uncertainty to fester.

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Wed 14 Dec 2016 / North America

Witteveen’s warnings for policy-makers

When the US is about to raise interest rates for only the second time in 10 years, the world would do well to heed Johannes Witteveen. The former IMF managing director was in London last week to commemorate the anniversary of a clandestine visit to Downing Street in December 1976. Among the lessons of the 1976 sterling crisis commemorated by Witteveen, one stands out: when international confidence in a nation’s economy starts to plummet, for whatever reason, it takes a mighty effort to win it back again.

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Fri 2 Dec 2016 / Europe

In defence of monetary financing

The ultimate objective of central banks is to increase the welfare of people through designing and implementing monetary and financial regulatory policies. Coordination between monetary and fiscal authorities is crucial, yet this has become weaker with the modern approach to central banks as independent institutions. However, independence in no way precludes such useful co-operation. We need central banks and governments which are willing to defy convention.

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Thu 8 Dec 2016 / Asia Pacific,North America

Threats of Trump trade stance

Like many of Donald Trump’s statements, it is unclear whether he really means what he says about withdrawing from the Trans-Pacific Partnership trade deal on his first day in office. However, Trump may be serious in his stated aim of replacing this mega-regional deal with a series of bilateral ones. While withdrawing from the TPP altogether would be damaging to global trade and US leadership in Asia, Trump’s preference for bilateral deals instead raises its own problems.

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Thu 22 Dec 2016 / North America,Middle East,Europe

A new 30 Years War in the making

The assassination of Andrei Karlov, Russia’s ambassador to Turkey, was a low point in a tragic week. Aside from the individual human consequences, Karlov’s death places greater strain on Russo-Turkish relations. Moscow and Ankara had been in talks about reaching an agreement over the Syrian conflict. The opportunity for resolution seems in doubt. Circumstances in the region are strikingly similar to another bloody conflict that has haunted European memories over four centuries.

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