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22 February 2016 |
Gaining the attention of 3/6 sections this week is the EU renegotiation with Britain. A date has now been set and the campaigning is likely to take shape in the following weeks however, what has really been decided and what are the consequences. Today’s article focuses on a few of these issues.
The last week has seen the height of the Brexit negotiation with one of the main debates centring on immigration. One of the major out arguments is that immigration is draining the resources of the campaign, however, a report written by the Independent this week suggests otherwise. Quoting Don Flynn, the director of the Migrants’ Right Network, the Independent points out that ‘60 per cent of EU migrants already had a job in the UK before coming and the remainder usually found work shortly after arriving.’ Furthermore, it also draws upon the issue that the out-campaigners arguments upon EU migrants being aware and knowledgeable of in-work benefits and other social benefits in that the UK offers. Hence, ‘University College London research found that EU immigrants were 45 per cent less likely to receive state benefits or tax credits than native Britons between 2000 and 2011.’ Moreover, the article suggests that the attraction to come to the UK is not the benefits system but rather the higher wages on offer in comparison to countries in which individuals are migrating from. One man who would support this argument is UK labour party leader, Jeremy Corbyn who this week has been criticised for suggesting that the emergency brake Cameron has been pursing is useless. The Huffington Post reports on former EU trade commissioner, Peter Mandelson’s comments which suggest that Corbyn is not in touch with his people. Regardless of political individuals’ standpoints, this provokes the argument as to whether this knowledge is understood by the British public and whether they are in fact voting on something they are fully aware of. It will be interesting to see in the following months how both sides campaign and attempt to educate the British public ahead of the vote.
In other immigration news, Austria has decided to take the ongoing immigration crisis into its own hands despite warnings from the European Union that this will break signed rules and agreements. Reuters explains how ‘Vienna announced it would let no more than 3,200 people and cap asylum claims at 80 per day from Friday.’ This comes after an influx of immigrants entering the country last year; ‘around 700,000 migrants entered Austria…and about 90,000 applied for asylum in the country.’ Despite warning regarding these methods, Austria decided to continue with its new policy as they have become dissatisfied with the lack of support offered within Europe’s relocation plan. Consequently, with Britain demanding change as well as Austria, which country will follow suit next?
The summit has been talked about for months and this week it finally happened. Taking place in Brussels, the BBC confirmed that David Cameron finalised his agreement on Friday with the European Union. This agreement will be enforced if the UK chooses to remain in the European Union on 23rd June 2016. Prior to announcing the date, ministers ‘divided up into the leave and remain camps as the campaigns got under way in earnest.’ UK Prime Minister David Cameron has urged individuals to vote to stay in the UK: “The choice is in your hands - but my recommendation is clear. I believe that Britain will be safer, stronger and better off by remaining in a reformed European Union." Similarly, the BBC explains how Theresa May also shares the same view: "for reasons of security, protection against crime and terrorism, trade with Europe, and access to markets around the world" it was in the national interest to remain in.” The deal secured by Cameron is expected to give the UK a special status as the BBC explains that ‘Mr Cameron claims his EU reform deal will give Britain "special status" within the bloc - tackling concerns over migrants getting "something for nothing" from the benefit system and exempting the country from the EU drive for "ever-closer union".’ Reviewing the outcomes of the summit, the Guardian splits David Cameron’s promises and compares them to what he achieved this week and the difference appears substantial. For example, David Cameron wanted ‘a four-year freeze on in-work benefits for EU citizens’, this was shut down a few months ago by European politicians and instead was substituted by an emergency brake system which the UK could enforce when they felt threatened by immigration, something which the UK wanted to be able to enforce for up to 13 years. The outcome was the ‘emergency brake’ system however, the time period was just over half of the demands, with a period of 7 years agreed. This trend of dissatisfaction for the UK follows across all areas of renegotiation. Will the UK therefore definitely vote out? Has the Brexit campaign been made easier?
Moving away from the EU Brexit, the European economic area, the Eurozone appears to be at threat again. The Financial Times reports that ‘The European Central Bank is on course for more aggressive monetary easing to boost flagging growth and weak inflation, amid fresh warnings about the outlook for the global economy.’ However, there is much question as to whether these measures will actually work. The Financial Times quotes Vincent Juvyns, global market strategist at JPMorgan Asset Management who states, “European monetary policy will soon reach its limit...what will really revive the European economy is structural reform, labour reform.” Hence forecasts for the Eurozone economy are continually being reviewed and the OECD has ‘urged governments across the developed world to act “urgently” and “collectively” to bolster activity’. Will developed nations call to the cries of the Eurozone again, or will it crumble?
One of the main arguments of the in-campaign in the Brexit vote is to do with the economy. Many banks including Goldman Sachs have pledged their support to the in-campaign and now telecommunication firms BT and Vodafone are doing the same suggesting that the Brexit would ‘put the UK economy at risk’ reports FTSE Chiefs. The Brexit will put jobs as well as future investments in Britain at risk. This week it is expected that more companies will come forward claiming their alignment with the in-campaign, Sky News reports that ‘between one-third and half of FTSE 100 companies were likely to put their names to the letter’ being sent to Downing Street. As Economists and strategists continue to explore the economic outcomes of a Brexit in the coming months, it will be interesting to see whether the claims of these big businesses are accurate in face of the continuing and progressively worse economic situation in the Eurozone.
Remaining on the topic of the European renegotiation, the declaration of politicians’ standpoint in the European renegotiation has captured the headlines in the latter half of this week. One particular politician, Boris Johnson, who previously refused to comment on the Brexit and where his allegiance stood, has revealed his hand in a 2,000 word column for the Daily Telegraph. The BBC reports on how Boris sees the EU membership referendum as a "once-in-a-lifetime chance to vote for real change". As politicians from various parties split on the issues, the media has also begun to speculate on the political divisions the EU referendum may cause within parties in particular for the conservative party. Will the UK be left in complete turmoil if it chooses to leave as all the central politicians currently in power are campaigning to remain within the EU?
Are we really heading for an economic downturn? The BBC provides us with some disconcerting news this week as ‘UK and European banks have failed to sell any so-called Coco bonds this year.’ Explaining in more detail what this actually means the BBC clarifies that ‘Cocos - short for contingent convertible bonds - are turned into shares if a bank starts to struggle…European banks raised around €45bn from the bonds last year. But in 2016 none have been issued, according to data company Dealogic, amid wider investor fears about investing in banks.’ Dealogic warns that with the increasing gloom over Europe’s economic outlook intensifying, banks are at threat of not raising the 40bn euros it wanted to raise this year through Coco, as investors become discouraged to invest. Why are the banks not issuing Coco?
In other business news, Apple and the U.S. Department of Justice, have come to blows, as Reuters reports on how Apple has refused to help the US Justice Department ‘access shooter Syed Rizwan Farook's phone by disabling some of its passcode protections.’ This comes as Apple argues that after making years of progress regarding security, by conducting this act for the US Department of Justice they would be undermining their whole brand which centres on the consumer’s demands and safety. Apple has been given an extra three days to justify its argument; it will be interesting to see the outcome of this case.
Furthermore, Ofcom are expected to announce the results of their once-a-decade review this week reports The Telegraph. Ofcom, who are the competition authority of the Telecommunications sector, are expected to ‘propose tighter governance of its [BT] Openreach network division this week as the row over the future of Britain’s broadband infrastructure reaches a crescendo’ reports the Telegraph. Whilst these particular results of the review may only impact BT, it is also expected that Ofcom will recommend ‘broadband providers to advertise the total costs of packages, including line rental’ explains the Telegraph.
Ever since the crash experienced in the Chinese stock markets in August 2015, the Chinese government have been trying to prevent further volatility. One of the measures taken this week is removing ‘the head of its securities regulator’ Xiao Gang with Liu Shiyu, reports the BBC. This comes as confidence was lost following the recent volatility, in Gang’s ability. The BBC explains that this in particular was caused as a result of his invention of ‘China's new "circuit-breaker" mechanism, designed to limit any market sell-off, was deployed twice in January in response to the stock market fall, but then was scrapped altogether after it caused even more panic.’ It will be a matter of time before Liu’s adjustments and control can be judged, however, the changes he chooses to enforce will be increasingly important in the impending Chinese slowdown.
Across the Pacific, the US election is heating up with the results of another two state’s party nomination have been revealed. This week Donald Trump has secured the South Carolina vote whilst Hillary Clinton has beat Bernie Sanders for the Democratic nomination in Nevada. The Presidential race is seen as one of the most controversial and uncertain races in history however, hopefully 1st March known as ‘Super Tuesday’ will reveal more about the Presidential campaign as a further ‘dozen more states make their choice.’ In other American news, the Federal Reserve have cast doubt on the future of the US economy ‘as they assessed the market turmoil that has erupted in 2016’ reports the Financial Times. The article explains and basis’ its argument on the minutes which revealed that ‘“Participants judged that the overall implication of these developments for the outlook for domestic economic activity was unclear, but they agreed that uncertainty had increased and many saw these developments as increasing the downside risks to the outlook.”’ Hopefully this unclear outlook will become a lot clearer and positive in the coming future.
The Guardian reports on what exactly OPEC set out to do as it explains that ‘Low oil and gas prices are close to triggering a wave of bankruptcies and debt defaults among US producers, investors fear. The fall in the oil price to levels that are punishingly low for producers is putting up to $88bn of borrowings potentially at risk. About 30% of the oil and gas industry’s debt is now said to be at distressed levels – meaning companies are experiencing financial or operational problems severe enough to put them at risk of default or bankruptcy.’ Last week City Career Series reported on how the United Arab Emirates were proposing to reduce supply. These struggling reports of US producers however may halt this action keeping oil at lower prices, however, would this be prevented under the grounds of uncompetitive behaviour? One way in which many oil companies could save themselves is through merging with other firms, however, PricewaterhouseCoopers explains that M&A activity in the oil and gas sector fell at the end of the last year. PWC explains that this is because of the uncertainty that remains within the market. However, it is undeniably that if the market chooses to wait too long it could be too late.