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US Headlines Special 3: The Outcome
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21 December 2015 |
With the US election heating up, each candidate is beginning to clearly set their opinion on topical issues such as immigration. This week Hilary Clinton challenged her two competitors Trump and Rubio arguing that America is already great and that it is wrong to deport individuals in the fear of terrorism. The fear of terrorist attacks is not only influencing future American policy but also European. The Guardian and TIME magazine have both argued that in the face of Britain’s renegotiation and with the fear of terrorism, the British public are likely to vote to leave Europe due to the borderless policy of the European Union. However, as the Guardian points out immigration until 2004 was mainly due to asylum seekers and it was not until 2013 that EU immigration was ‘a major component of immigration into Britain’. It also suggests that British citizens will need to make the link between the two – however, has British opinion not already been formed? The recent Paris attacks which are continuously being investigated have revealed that the terrorists who plotted the massacre were freely able to travel across Europe giving evidence for the link and potentially the justification for some to vote to leave the EU. In other immigration news, Angela Merkel and her immigration stance hits the headlines again this week as she re-establishes her position not to cap immigration but to ‘“tangibly” reduce the number of refugees and migrants entering Germany’ according to the Guardian.
Centring European discussion this week was the talks held discussing Britain’s relationship with Europe. On Friday the BBC reported that ‘David Cameron has said there is a “pathway to a deal” on new terms for Britain’s membership.’ Nonetheless, he argued that his February deadline may be a challenge as he plans to present an alternative to leaving the European Union ahead of the referendum in 2017. Similarly, German Chancellor Angela Merkel stated, "I am optimistic because we all want a compromise. But work on substance needs to be done. Treaty change might be possible. Not now, but perhaps later” whilst the ‘French President Francois Hollande said there could be adjustments over’ reports the BBC. It will be interesting to see over the next few months what exactly the renegotiation will give Britain and whether it will be a success.
Moving away from Britain’s renegotiation and focusing on the Eurozone economy, Reuters summarises a recent article in German magazine Wirtschaftswoche by European Central Bank policymaker Jens Weidmann’s which argues that whilst the European economy is likely pick up next year the high levels of debt and rising interest rates will still continue to constrain the overall Eurozone’s recovery. The question remains will the Eurozone ever recover? Or is the single-currency doomed?
It would appear that the business world is recovering! M&A activity in 2015 has experienced record heights since the crash in 2007. City A.M. reports ‘UK M&A activity is…up 90 per cent from last year to $516.5bn (£344.4bn), according to EY’. This comes as a result of an increase in 110 big deals within 2015. City A.M. goes on to analyse the recent trend stating ‘that UK companies are seen as a particularly attractive acquisition opportunity as they offer a “gateway to the Eurozone.” The value of ‘inbound’ deals, where foreign companies acquire UK ones, rose to $349bn from $103bn in 2014.’ Nonetheless, the Guardian raises warning as the last two merger and acquisition booms have resulted in a crash.
Despite the pickup of the business world in 2015, it would appear that spending amongst consumers this Christmas has fallen within the UK. The BBC reports how ‘UK retail sales grew more weakly than retailers expected in December and the outlook for January sales figures is not strong, according to a survey by the business lobby group, the CBI.’ Therefore, is there a missing link within the chain as increased commercial business activity is not trickling or impacting the wider economy, with the CBI reporting, according to the BBC, that it has been one of the worst years for the retail sector?
With US interest rates increasing, will the UK follow? Sir John Major comments that there is ‘no rapid rise in the UK interest rates’ advising caution about the steps in which follow. He argues that raising interest rates will be a great concern to mortgage owners. Expanding upon these views, if mortgage owners become concerned it is likely that there spending will decrease potentially having negative impact on the UK economy. Mark Carney, the Head of the Bank of England, however suggests that it is likely that there will be an increase in later 2016.
Inflation on the other hand returns to positive figures as the November figures show a rise to 0.1%. The ONS argues that this was because of increasing transport, alcohol and tobacco costs reports the BBC. However, will these figures remain as oil prices sink again with petrol dropping to 99.9p a litre. The Telegraph’s Peter Spence comments on this arguing that the nature of super markets competing will also keep costs low.
Following much deliberation and discussion, the US Fed have finally taken the plunge and risen interest rates by 0.25%. So why is this significant? Kamal Ahmed, business editor for the BBC, examines the situation from a global standpoint proposing both the positive and negative implications of the decision. He argues that ‘when America stirs, the rest of the world takes notice’. However, do they just take notice or do they have to take notice as they are directly impacted by the decision? Ahmed argues the increased rates could be detrimental for emerging markets as it could result in higher debt repayments due to the dollar being more highly demanded as investors seek greater rewards resulting in an influx of money to America. As money moves into America however this could have a negative effect on Asia and Europe as there is a ‘hunt for better returns’ according to Ahmed. Despite this he argues that exports to America will hopefully increase. In turn, from a British perspective this is positive and it may help balance the trade deficit.