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Analysis

OMFIF Analysis: 2017 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 2017 by Analysis contributors. This selection of our top commentaries from each month, ranges over post-conflict models for Latin America, German elections, China’s belt and road initiative, the European Stability Mechanism’s debut bond deal and Britain’s vote to leave the European Union, viewed from a prism that extends from Luxembourg to Bogotá. No doubt this offers, too, in some measure a guide to 2018. OMFIF’s new year forecasts are published in full in our new-look January Bulletin.

January
Landmark on road to Brexit
Uncomfortable truth behind ambassador's departure
By William Keegan in London, 4 January 2017

The sudden 'resignation' of Sir Ivan Rogers, the UK's ambassador to the EU, is a significant landmark on Britain's winding road out of the union, argues William Keegan. The essence is almost embarrassingly simple: Rogers appears to have been forced out because, like the good civil servant he is, he has been 'telling truth to power'. Rogers warned that holding a referendum was risky in the first place and that the result might be an unholy mess. I believe the uncomfortable truth is this: Rogers has in effect been sacked for being right.
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February
Target 2 and Germany's election dilemmas

Weak euro stands out in quintet of currency crises
By David Marsh in London, 14 February 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.
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March
EU's exaggerated UK exit bill
Barnier should leave room for bargaining
By Brian Reading in London, 2 March 2017

Michel Barnier, the European Commission's chief negotiator on the UK’s European Union withdrawal, has outlined plans to present Britain with an exaggerated €60bn divorce settlement bill. His provocative demands – which appear to be winning support in several EU capitals including Berlin and Rome – are likely to be counterproductive. The risk is that Barnier’s negotiating ploy will backfire by making an amicable divorce impossible. All sides would suffer from such an outcome. Negotiations require a sense for political reality.

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April
Colombia opportunities

Post-conflict model for Latin America
By Ben Robinson in Bogotá, 13 April 2017

Until 2008 the northern coast of Colombia was the scene of violent conflicts between paramilitary groups, guerrillas, drug gangs, and government forces. Today, it is a fast-growing tourist destination. The economy’s rapid post-conflict turnaround has been aided by the government’s record for running sustainable fiscal policies and implementing structural reforms. Should Colombia’s current success continue, it is likely to become an increasingly important voice on the world stage.
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May
China belt plans criticised

Belt and Road met with resistance in Eurasia
By John West in Tokyo, 9 May 2017

China’s Belt and Road initiative promises to address Asia’s massive infrastructure deficit and could provide a boost to economic growth through market integration. But in parts of Eurasia, including India, Sri Lanka and Kazakhstan, political leaders and citizens are protesting at allegedly one-sided reforms that unduly favour China and are criticising Beijing’s unilateral, rather than co-operative, approach. Chinese officials may be underestimating the force of public opinion and popular opposition to its perceived colonial ambitions.
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June
Britain can't expect Brexit fair deal

EU ‘tough stance’ will remain
By Jacques Lafitte in Brussels, 13 June 2017

Perhaps the UK’s main error in its plans for leaving the European Union is the belief that the EU has to grant it a ‘fair deal’ that satisfies at least half of British demands. Both sides in Britain – Leave and Remain – may see the negotiating stance of the other 27 EU members as excessively tough, but the EU has not the slightest reason to change it after Theresa May lost the Conservative party’s majority in last week’s general election.
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July
Weidmann should aim higher than ECB
Finance ministry would grant greater influence
By David Marsh in London, 3 July 2017

The ECB is benefiting from an upsurge in optimism about the European economy generated by the waning of populist forces and the election of Emmanuel Macron. There has been much talk of the ECB presidency passing to a German when Mario Draghi steps down in just over two years. Yet rather than aiming for the top ECB post, Jens Weidmann, Bundesbank president, should prepare for a higher prize: becoming the next German finance minister. He could far more decisively influence the reshaping of European integration from that position.
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August
China's 10 great contradictions

Beijing must better balance Marxism and capitalism
By Herbert Poenisch in Beijing, 18 August 2017

President Xi Jinping is setting up a committee on financial stability and development under the aegis of the Chinese State Council. While this may alleviate some shortcomings in China's financial supervision, it does nothing to resolve fundamental contradictions in Beijing. China's leaders are contending with a new version of the 10 major relationships between finance and politics first espoused by Chairman Mao, rooted in the dichotomy between the country's economic success and its Marxist politics.
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September
What Barnier really said

False trail from UK-EU reporting
By William Keegan in London, 5 September 2017

After returning from the annual Ambrosetti economics forum and learning of the reports of the speech given there by Michel Barnier, the European Commission's chief Brexit negotiator, I wondered whether I had been at the same meeting. One headline captured the tone of the reporting: 'British need to be taught Brexit lesson, says EU negotiator.' I spoke with Barnier and detected regret about the vote, but not hostility. Such false reporting, sadly, has been a feature of the UK press for as long as Britain has been in the EU.
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October
Rajoy's task

Questions after Catalan poll
By Danae Kyriakopoulou in Madrid, 2 October 2017

Catalonia's referendum has attracted attention across Spain and Europe, fuelling tensions unseen in the country since its return to democracy 40 years ago. Sunday's chaotic events have distracted observers from the economic and political ramifications. The narrative presenting the dispute between 'oppressors' and 'liberators', and the question marks over what was an illegal plebiscite, have made Prime Minister Mariano Rajoy's conservative government a target. He will have a difficult task navigating the consequences.
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November
ESM expands into dollar market

Mitigating liquidity risk through investor diversification
By Kalin Anev Janse in Luxembourg, 15 November 2017

Investor appetite for Europe has surged in 2017. With the US and UK facing political challenges, Europe has emerged as a safe haven. The economy is expanding sturdily, and many non-European investors are interested in increasing their exposure to the region. The European Stability Mechanism is the only blended euro credit available – now also in dollars. In October the ESM celebrated its fifth anniversary and raised $3bn with its debut bond issuance in the dollar market, diversifying the mechanism's investor base.
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December
Return of the Holy Roman Empire

Drawn-out talks on new German government
By David Marsh in Singapore, 1 December 2017

There are some similarities between today's Europe and the patchwork of around 300 territories and principalities which comprised the medieval Holy Roman Empire of the German Nation. The election of 24 September laid bare modern Germany's growing political fragmentation. Weeks of tortuous coalition negotiations, demonstrating Holy Roman Empire-style complexity, juddered to a halt shortly before midnight on 19 November. Whatever happens, Germany in coming months will not be a place for smooth policy-making.
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