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February

Thu 11 Feb 2016 / North America

Case for optimism rests on policy

Investors may be generating a bear market without the traditional accompaniment of recession, but there are also grounds for thinking that the markets may be on to something. As Janet Yellen, the US Federal Reserve chair, indicated on Wednesday night, the US central bank is softening its commitment to higher interest rates. The case for optimism rests on policy. The Fed does not have to tighten further and could reverse its December rate hike.

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Mon 29 Feb 2016 / Europe

Monetary union and the Holy Roman Empire

Neither holy nor Roman nor an empire was Voltaire's verdict on the patchwork of several hundred semi-sovereign principalities, townships and fiefdoms spread out over Europe from medieval times up to the early 19th century. The French writer-philosopher would take a similarly dim view of economic and monetary union, which is not working economically, mixes up monetary and fiscal policy and is looking ever less like a union. But one point is clear – EMU is looking increasingly like the Holy Roman Empire.

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Mon 22 Feb 2016 / Europe

Real issues behind Britain’s referendum

The issues behind Britain’s 23 June referendum on membership of the European Union will, among other issues, decide whether Boris Johnson, the mayor of London, becomes the next British prime minister. If Prime Minister David Cameron’s legendary luck holds, the mayor’s decision to oppose him may end up helping Britain – and, in the longer run, even the Conservative party – while also terminally damaging Johnson’s hopes of mainstream political office.

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Mon 29 Feb 2016 / Europe

Let battle begin

On one side of the argument over Britain's continued EU membership is growing public dissatisfaction with the perceived power of political and economic elites. On the other is an appeal to the democratic and technical characteristics which have maintained peace and prosperity in Europe for 70 years. The debate will not be resolved by any one event. But 23 June sets a milestone, for the UK and internationally. Let battle begin!

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Tue 9 Feb 2016 / Europe

After immigration, it’s London v the euro area

Much of the discussion over the deal David Cameron hopes will avoid Brexit has focused on supplements for low-pay European workers with children, but this has obscured a much bigger issue - London's bid for oversight of the euro area's development. Most British politicians and pundits view the euro as a failure, but that is not the case across the Channel. The currency is not going to go away and the euro area will not take much notice of what the UK says - Brexit or no Brexit.

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Mon 8 Feb 2016 / Europe

Europe’s three psycho-battles

Three psychological battles – over migration into Europe, the terms of Britain’s EU referendum and the ECB’s next monetary easing to boost the economy and weaken the euro – will come to a head in the next few weeks, setting challenges for German Chancellor Angela Merkel, British Prime Minister David Cameron and ECB president Mario Draghi. Whoever emerges victorious may achieve ‘winner takes all’ status – while losers could be defeated across the board.

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Mon 1 Feb 2016 / Asia Pacific,North America

Time for US-China swap agreement

In the incomplete architecture of the developing multicurrency reserve system, one key element is missing: a swap line between the US and China. The world’s two largest economies should fill this lacuna by negotiating a swap agreement in each other’s currencies, with the aim of supplying dollar and renminbi liquidity on global financial markets. An accord would emphasise steadying the renminbi against its main trading partners and calm financial markets.

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Wed 17 Feb 2016 / Europe

Renzi’s risky European grandstanding

Italian Prime Minister Matteo Renzi has launched a series of attacks on European Commission President Jean-Claude Juncker and German Chancellor Angela Merkel. The tactician within him must know that Germany’s support remains crucial to extracting the compromises he craves from Brussels. Renzi’s position in the EU – and political survival at home – ultimately depend on this support. Such tactics may win political plaudits from the Italian public, but risk losing a great deal more.

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Mon 15 Feb 2016 / Europe

Time for Draghi-Schäuble deal on money and debt

Rather than persist with an approach risking failure, Mario Draghi, the European Central Bank president, and Wolfgang Schäuble, Germany's finance minister, should engineer tighter euro-wide monetary policy and simultaneously loosen fiscally. Reining back plans for more ECB government bond asset purchases could be balanced by more pragmatic interpretation of euro bloc budgetary objectives, recognising that many southern states are already struggling to meet fiscal goals.

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Fri 19 Feb 2016 / Asia Pacific

Slow start for Shanghai bank

The New Development Bank or ‘Brics Bank’ seems to be getting off to a slow start. The problem could be that Chinese official interest has turned towards the Asian Infrastructure Investment Bank as a vehicle for investment and soft power in Asia. The bank may receive a new injection of enthusiasm in 2016 and ascend to take its place at the top of the development tree. But there could be a lot of hard climbing – and risk of setbacks – before it gets there.

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