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Commentary

Thu 2 May 2019 / Europe

Staunch Keynesian and spiritual disciple

Johan Witteveen will be remembered in the Netherlands as a brilliant economist, the last Keynesian of his generation, a lucid liberal and a life-long adherent of the Sufi spiritual movement. In 2012 he published his memoirs, The Magic of Harmony. The title reflected the pillars of his economic and human wisdom: the natural movement towards harmony and the belief in a spiritual world beyond materialism. Through his Sufi convictions, he found the wherewithal to accept a great many terrible private sorrows.

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Thu 2 May 2019 / Europe

Rationalist suffused with humanity

Hendrikus Johannes 'Johan' Witteveen, economist, philosopher, politician and international public servant, who died on 23 April in the Netherlands aged 97, was best known internationally for his 1973-78 term as IMF managing director. He lived a rich and varied life spanning many worlds, and his academic strength and commitment to economics brought him a succession of roles: the teaching of economics in Rotterdam, and positions in Dutch political life including the posts of finance minister and deputy prime minister.

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Wed 1 May 2019 / Africa

Power struggles weigh on South Africa

After years of poor management, South Africa faces a deteriorating fiscal balance, ballooning government debt and an inefficient and unreliable power grid. These formidable headwinds are stifling growth and deterring corporate investment. The extent to which they can be dealt with depends on the outcome of the election on 8 May. President Cyril Ramaphosa is expected to win, but the size of his victory will determine whether he has the authority to make crucial reforms, as his main opposition comes from within his own African National Congress.

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Tue 30 Apr 2019 / North America,Global

US Treasury misguided on IMF quotas

The US Treasury's welcome stance on sustaining overall International Monetary Fund resources merits support. But its position on quotas will set back multilateralism, promote regionalism and damage US interests, and should be reversed. The IMF should have a large backstop for emergency systemic situations and when quota resources run low. Some separation resources makes sense. Absent the 'new arrangements to borrow', the IMF would rely on massive bilateral loans, creating conditions for opaque deal-making.

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Mon 29 Apr 2019 / Europe

The fall of German banking

The collapse of merger talks between Deutsche Bank and Commerzbank, the No.1 and No.2 German lenders, marks the latest episode in a 30-year downward spiral of German banks that were once by far Europe's best capitalised financial institutions. Chancellor Angela Merkel and Finance Minister Olaf Scholz will now face pressure from France and other European partners for Berlin to invite European bids for either of its top banks. This could invite strong questioning, especially from France, of Germany's ultimate European goals.

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Thu 25 Apr 2019 / North America

Fed on rough road to normalisation

The Federal Reserve, presiding over a shrunken output gap and perkier wage growth, remains the test case for whether any central bank can 'normalise' interest rates. The likelihood is that US rates are already at or close to their summit. Even if the Fed surprises markets by raising rates again, this would still leave its official policy rate barely positive in real terms. While the road to 'normal' looks closed off in interest-rate terms, overall policy neutrality could, in principle, be achieved through other means. In practice, however, it won't.

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Wed 24 Apr 2019 / Europe

Franco-German questions on Europe

The longest-running conundrum in the European Union is: 'Who runs Europe – France or Germany?' With Britain on its way to leaving the EU, France and Germany are preparing in different fashions and with different expectations for a new European chapter in which the continent's two leading economies must come to terms with each other without the moderation of a third major economic and strategic player. If the challenges intensify, Angela Merkel in her twilight phase as chancellor will find President Emmanuel Macron a steely adversary.

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Tue 23 Apr 2019 / Global

Gender balance in central banks

One of the oft-cited arguments used to convince organisations to commit to gender diversity is how it benefits decision-making. Applying such analysis to central banks is tricky, if not impossible, chiefly due to the lack of a robust sample to conduct econometrics. Still, anecdotal evidence and views from central bankers highlight the benefits of diversity in helping to reduce the likelihood of 'groupthink'. Strategies to promote women in finance likewise help promote role models that can change outdated notions about women's abilities.

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Thu 18 Apr 2019 / North America

Fed running out of monetary ammunition

It is clear that President Donald Trump's administration is not concerned with whether the US will have enough resources left to fight the next downturn. The president's quest for an ultra-easy monetary policy at this late stage in the economic cycle might cause the US economy to overheat and thereby rekindle inflation. Moreover, it would leave the Federal Reserve with scant ammunition to fight the next recession. With the Fed funds rate already as low as 2.25%-2.5%, further cuts would leave the central bank with limited room to slash rates.

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Wed 17 Apr 2019 / Europe

Brexit delay may mean end of May

The agreement struck by the EU on the UK's Article 50 negotiating period was a difficult compromise, with few predicting the six-month extension. Theoretically, that should be long enough to facilitate change, if the political will exists. But one major reason to believe October could be too early is that the UK might have a new prime minister by then. Theresa May told Conservative MPs that she would step aside if her deal was passed, having also said in fairly strong terms that she couldn't stay if Article 50 was extended beyond June.

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