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OMFIF Analysis: 2016 top commentaries

For readers reflecting on a turbulent year, OMFIF has compiled some of our most resonant daily economic and political commentaries, out of the more than 300 published during 2016 by Analysis contributors. This selection by 19 writers from every continent ranges over the US presidential election; conflict, terrorism and coups; revival in Latin America and fiscal stimulus in China; monetary and economic experimentation in different parts of the world; and Britain's vote to leave the European Union, viewed from a prism that extends from Warsaw to Melbourne. No doubt this offers, too, in some measure a guide to 2017. OMFIF’s new year forecasts are published in full in the January Bulletin next week.

Cameron may be blamed for Europe’s disintegration
Bleaker perspectives, three years after UK referendum call
By David Marsh in London, 4 January

David Cameron's plan for a referendum on British membership of the EU started off largely as a domestic political device to defuse dissent over Europe within his Conservative party. It has become a major source of division with and within the rest of Europe. Partly for reasons not of the British prime minister’s making, the vote could mark the descent of a permanent black cloud over the continent.
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Biculturalism and complexities of Brexit
Why Germans mustn’t say the Brits should stay in the EU
By Bob Bischof in London, 29 January

To understand the British psyche, you need a touch of bicultural enlightenment. The more European or German politicians do to convince the Brits to remain in the EU, the more British eurosceptics will say the Europeans are acting for their own advantage. Much depends on how Europe portrays itself in the months leading up to voting day.
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Renzi's risky European grandstanding
Italian attacks on Germany could backfire
By Antonio Armellini in Rome, 17 February

Italian Prime Minister Matteo Renzi has launched a series of attacks on the European Commission 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 – depend on this. Such tactics may win plaudits from the Italian public, but risk losing a great deal more.
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To reform the EU, Britain must leave
Patrician vision versus plebeian pragmatism
By Brian Reading in London, 3 March

To plagiarise Churchill, a British departure from the EU is not the end or the beginning of the end. It is the end of the beginning. David Cameron’s effort to seek EU reform as a means of averting Brexit has failed. But Brexit could be the catalyst for reform. Some fear that, if the UK goes its own way, the EU could break up. Yet, if Britain stays, and there is no reform, the dominoes would fall faster. British exit provides the sole method of keeping them standing.
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'The prosecutors are unstoppable'
Brazil's crisis – a boon for investors
By David Smith in London, 15 March

Luis Inacio Lula da Silva, the former president, was briefly arrested on 4 March as part of the corruption investigation into state oil giant Petrobras. Within hours, the Bovespa stock index in Sao Paulo was up 5% and the real had reversed months of decline against the dollar. ‘The good news is that no one in power seems to have the power to stop this investigation,’ says one opposition leader. ‘The prosecutors are unstoppable.’
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Why Trump reminds me of Modi
Republican candidate could surprise us
By Meghnad Desai in Delhi, 16 March

Both Donald Trump and Narendra Modi defy expectations of people who thought they should be unelectable. Trump’s party establishment, like Modi’s once did, wants him to fail. Many insiders from the Hindu nationalist Indian People’s party predicted, indeed wished, that Modi would not get more than 180 seats in India’s 2014 general election. He disappointed them, winning an absolute majority. Could Donald Trump surprise us? Why not?
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Target-2 imbalances rise again
Unwelcome side-effects of quantitative easing
By Frank Westermann in Osnabrück, 7 April

The European Central Bank’s quantitative easing, announced in January last year, has – as its most visible effect – depressed the euro against the dollar. It has had little impact on headline inflation, largely driven by oil price movements. But the ECB’s programme of purchasing €1tn worth of bonds has had some unwelcome side-effects, by increasing intra-euro area imbalances among national central banks, the so-called Target-2 balances. Read full story

Africans find it hard to hate
A southern view of European unity
By Peter Bruce in Johannesburg, 3 June

It’s hard to find an African equivalent to the resentment so many British people feel towards the European Union. As much as South Africa has pivoted to China and Russia in foreign policy, it is tightly bound to the City of London. Yet, for most South Africans, the Leave campaign smacks of Little Englanders complaining about someone else deciding whether bananas should be straight or curved. Frankly, we have bigger things to worry about.
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Raise Chinese growth, issue more renminbi bonds
Economy could slide further without stimulus
By Yu Yongding in Beijing, 6 June

The Chinese government’s determination to carry through structural reform is welcome, but it is not enough. An equally, if not more, important task is to break the country’s deflationary spiral and stabilise the economy at a rate consistent with its growth potential. Structural reforms will improve China’s growth potential, but they cannot stabilise the economy. Rather, the solution lies in switching to a much more aggressive fiscal policy.
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We Poles know about shifting borders
Aligning European footballing and political maps
By Pawel Kowalewski in Warsaw, 9 June

As a boy in Poland, I was surprised to learn that England was not a separate country, though it had its own soccer team like Scotland, Wales and Northern Ireland. Knowing how frequently they change, we Poles like to collect historical maps. What happens if England wins the European championships on 10 July, 17 days after their fans voted for Brexit? Parents will have to explain to their offspring a new kind of European champion, one that’s moving out of the EU.
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Safeguarding Britain's interests
Successful EU operations owe much to UK influence
By Michael Jay in London, 12 June

Much of Britain’s EU debate has focused on economics. This ignores the EU’s positive impact on Europe and the rest of the world, seen, for example, over the Iranian nuclear programme and the EU naval operation against piracy off the coast of Somalia. Do we want to continue to exert our influence over Europe’s future and its world role? The US, every member of the EU and all our major Commonwealth partners wish us to do so.
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The die is cast
Referendum has changed much, settled nothing
By Philip Middleton in London, 23 June

The referendum has polarised British politics. It will ultimately lead to a significant political realignment in both personalities and parties. It has helped open a Pandora’s box on the Continent. And it raises existential and urgent political issues for EU institutions and for national governments. In short, the referendum has changed much, and settled nothing. The die is cast; but we are far from the end of the game.
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Seizing opportunity from EU crisis
Consequences of Britain's Russian roulette
By Ernst Welteke in Frankfurt, 18 July

With his ill-considered referendum, David Cameron played Russian roulette – and lost. The list of losers extends wider. Underlined by the renewed terrorist atrocity in France and the attempted Turkish military coup, Europe faces rising challenges. The EU must aim to improve content, institutions and transparency. Britain’s decision is a disappointment and a setback, but it’s a chance to move forward. Unless Europe grasps this, further failures await. Read full story

Erdogan's 'gift from God'
After Turkey’s purge, stability is relative
By David Tonge in Istanbul, 27 July

The impact of Turkey's failed military coup may be greater at home than abroad. Of the external factors setting limits on Turkey, its ties with the US and EU may be weakened, relations with the IMF are unlikely to change much, while those with Russia seem set to improve. President Erdogan has long been pressing to amend the constitution to reinforce his powers. The coup attempt, which he has called ‘a gift from God’, gives him the chance of realising that aim.
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China, Cuba and the urban poor
Extending theory into World Bank practice
By Marsha Vande Berg in San Francisco, 1 September

Paul Romer, the new World Bank chief economist, emphasises as critical to successful charter cities the creation of new rules for better societies. Urbanisation, rising inequality and persistent poverty, even in otherwise prospering countries, invite collective thinking and good ideas. He cites China as a dramatic demonstration of both the potential and the challenges of experimenting with new sets of rules. Romer is in an optimal position to supply appropriate answers.
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Britain should look east
Engaging with Asia would force UK to become more competitive
By Mark Crosby in Melbourne, 23 September

For Britain and the EU, Brexit is an opportunity to reset, not a time for retribution. The EU’s overly ambitious but underachieving drive for economic centralisation has distracted from the desperate need for strong reforms in Europe’s major economies. Outside the EU, the UK should focus on these reforms and engage with growing and dynamic regions of the global economy, while doing its best to continue engaging with its sclerotic neighbours.
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Trump will not end the march of progress
Europe must nurture greater Atlantic unity
By John Kornblum in Berlin, 10 November

Somewhere along the way, Donald Trump discovered that his mindless narcissism was a perfect counterweight to the increasingly complicated messages sent by leaders of modern liberal political culture. He seemed to sense that, for many Americans, the new post-modern culture was arriving too quickly. We can now see more clearly that the post-modern world, too, is marked by the painful frustrations which have marked every societal advance.
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Why Trump should work with China
Infrastructure co-operation, AIIB membership: the wider message
By Kishore Mahbubani in Singapore, 17 November

Trump should cast aside his hawkish instincts on China and seek co-operation with America's number one geopolitical competitor. In particular, he should experiment with a massive infrastructure partnership with China. America's No. 1 priority is economic growth. In view of America’s evident fiscal challenges, Trump will need a strong economic partner to achieve his infrastructure plans – and the superpower in this field is China.
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Fed hike signals monetary inflection point
Fiscal boost and pricier oil set scene for more rate hikes
By Danae Kyriakopoulou in London, 15 December

The Fed’s rate hike marks an important step towards what OMFIF has called a ‘point of inflection’ from monetary to fiscal policy. The Fed joins other central banks in scaling back monetary loosening. Future scenarios range from quick fiscal stimulus, rising inflation and several rate hikes, to a cautious Fed in the face of economic slowdown as Trump faces congressional resistance and loses market confidence. Emerging economies should prepare for either.
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