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US Headlines Special 3: The Outcome
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29 February 2016 |
Constantly sparking debate, the issue of immigration has once again caused friction as figures released showed new migration in the UK are at new highs. The BBC reports that ‘the difference between the number of people leaving and arriving was 320,000 in the year to September.’ This in turn has sparked controversy within the UK as following the announcement of the date of the EU referendum, both the ‘in’ and ‘out’ campaigns have been fighting with vigour. Nonetheless, the government has pledged to meet a target of 100,000 by 2020. Whether this will be possible, in particular in the wake of an ‘in’ conclusion to the referendum is debatable, as whilst the UK will have means to place a halt or as Cameron likes to suggest an ‘emergency brake’ on immigration, will they be able to enforce it immediately?
As the UK debates whether to remain or leave the European Union and with one of the main topics of discussion being immigration, Greece has pointed that it will not continue to bear the brunt of the crisis. Bloomberg reports on Ioannis Mouzalas, the Greek minister for migration who states, ‘Greece will not become the Lebanon of Europe, a warehouse for souls.’ Continuing along this trend and arguing that the current fixtures in place to deal with the migration crisis are only temporary, EU Home Affairs Commissioner Dimitris Avramopolous said that ‘there is a danger, there’s a risk, that the whole system will completely break down.’ Nonetheless, despite the looming problem, it appears that hardly any solutions are being created and rather there is a lot of talk and no action.
Across the Atlantic, Donald Trump was challenged on the issue of immigration with some new and embarrassing information emerging leading to the debate ‘quickly turning nasty’ as the Guardian comments. Hence Florida senator Marco Rubio presented Trump with the argument and information that proved that previously to this election, in 2011 Trump favoured ‘a path to citizenship and that Trump criticised the 2012 Republican nominee, Mitt Romney, for talking about “self-deportation” explains the Guardian. In turn this returns to the question posed in previous weeks as to whether politicians act because of belief or because of contextual knowledge that would help them progress their own careers?
Not only is there a crisis over immigration occurring in Europe currently, but the economy is also suffering greatly as well. Reuters reports this week that ‘German inflation turned negative in February for the first time in five months.’ This trend followed similar suit in France and Spain whereby prices also fell. This news is disconcerting considering that Greece is expected to need greater economic support in the coming months.
In other news, at the G-20 summit discussions over economic policy which included physical and monetary were conducted. It was at this summit that the European Central bank hinted the possibility of greater quantitative easing in the near future. Bloomberg explains that ‘given the dimming of the global outlook and downward pressure on inflation coming from energy prices, a reduction in their deposit rate from the current minus 0.3 percent and even a boost to the pace of quantitative easing may be on the cards. The ECB’s Governing Council is due to announce its decision in Frankfurt on March 10.’ Nonetheless, the ECB seem to continuously be exerting monetary QE relief and arguably the Eurozone area has become dependent. Is this the right action to take? Hopefully new and longer term solutions will be found. This is appears necessary considering recent reports demonstrate how the Eurozone inflation rate has sank back to zero. Hence, the recent surge in oil prices has resulted in prices falling and lack of inflationary pressure. Bloomberg explains that this raises ‘concerns that this will depress wages and undermine consumers’ willingness to spend. Against the backdrop, the Governing Council may cut its inflation forecasts at its meeting on March 10 and loosen monetary policy again.’ Is the Eurozone heading back into recession?
It has all kicked off in the UK this week as politicians begin to turn on each other following allegiance with the two sides of the campaign in particular between British Prime Minister, David Cameron and London Mayor Boris Johnson. This week has seen various large businesses sign a letter to the Prime Minister supporting the ‘in’ campaign and encouraging Britain to remain within the UK. Nonetheless, some businesses refrained from posing their support to Cameron. Work and pensions secretary Iain Duncan Smith has argued that exiting the EU would not be a ‘leap into the dark’ but rather a ‘stride into the light’ reports the BBC. He continually justifies his opinion on the Andrew Marr show when stating, ‘It has stood alone in war but it has also defined trade around the world…Britain is a phenomenal country. It has stood alone and fought for freedom. It has bene a global trader, it can again be a global trader.’ Many of the arguments about staying within the European Union come out of the idea of uncertainty with many saying that the issues in favour of leaving have been resolved by the deal that Cameron has been working on over the last few months. However, building on the ideas of Duncan Smith, are we taking the easy route by staying with the European Union? Is the fear of the unknown a valid reason to vote in? The question remains, and it will be interesting to see what information comes to light as the campaign continues to heat up.
Meanwhile, the UK’s economic situation remains positive. The BBC reports how ‘UK economic growth in the last three months of 2015 has been confirmed at 0.5%...supported by steady growth in the services sector.’ It goes onto explain that ‘the UK economy remains one of the fastest growing of the developed nations.’ ‘In’ campaigners however argue that this is likely to be threatened if the UK chooses to leave the European Union. Moreover, a need for more balanced growth it is necessary as production and net trade continue to slow.
Last week City Careers article reported on the expansive coverage of BT’s services and this week the BBC provides us with information explaining that ‘communications watchdog Ofcom said BT must open up its cable network and allow competition to improve UK internet connections.’ Whilst a break up of BT is ‘still an option’, it is more likely that BT are going to have to allow competitors to use their infrastructure more freely, for example Openreach. The BBC explains that ‘companies such as Sky, Vodafone and TalkTalk, who pay to use the network, say that BT underinvested in Openreach, leading to poor service with interruptions and slow speeds.’ It is clear that BT has a monopoly over the sector and is fighting to remain one body however, its strategies to remain at its 28% profit margin will need to remain within the current structure and not through acquisition of further assets as this could lead and secure a break up of BT.
In other business news, the pharmaceutical industry continues to be at the forefront of mergers and acquisitions as companies attempt to expand and further specialise. Reuters explains that ‘drug distributor McKesson Corp said it was buying two privately held cancer care companies, Vantage Oncology LLC and Biologics Inc, for a total of $1.2 billion to boost its specialty pharma distribution business.’
Another supermarket is struggling…this week the Guardian reports on how Tesco are considering cutting more than 39,000 jobs in the next three years as it continues to experience ‘slumps in profits’. Nonetheless this is all speculation and these cuts in order to ensure less loss may be achieved through cutting hours. The Guardian however, continues to explain its concern over the hefty losses which appear to not be diminishing anytime soon; ‘The retailer reported a £6.4bn pre-tax loss last year, one of the biggest in British corporate history. Tesco’s large out-of-town supermarkets have suffered as British households have changed shopping habits, moving away from buying food in one weekly shop and turning increasingly to convenience stores, online and the discounters Aldi and Lidl.’ Are the major supermarkets the next thing to go on the high street?
There is a lot of negativity in the air at the moment, and Citi’s current predictions that a global recession is about to commence are adding to this pessimism. They believe that one central problem and causes of this global recession will be because of China as ‘the long-standing fragilities in the world economy relate to the structural and cyclical slowdowns in China and its unsustainable exchange rate regime’ explains Bloomberg. In contrast however, these predictions contradict those presented this week by the Telegraph whose headline suggests that China will remain at the forefront of global economic growth. The paper argues that the slowdown in China is because of changes in growth rather than in actual decline: ‘The change in the pace of growth is as much by design as by accident. China’s policymakers made a deliberate decision a few years ago, to move the economy away from an investment-led, export-driven model towards one in which domestic consumption plays the dominant role. The country’s leaders want growth that is sustainable.’ Nonetheless, the Telegraph does recognise that there are a few problems but suggests that China has a greater ability, unlike any other country in the world, to come up with various policies to help rectify situation, it states that ‘the country’s leaders want growth that is sustainable.’ Let’s hope this optimistic outlook remains positive and that the predictions for 2016’s economic outlook do not need to be revised again.
As with the global economic outlook, the negativity within the oil sector remains unchanged, with an abundance of threats present to the market. Bloomberg predicts that electric cars are going to cause the new oil crisis as it explains that the falling price of batteries will lead to an increase in alternative sources to oil for example the need for oil for cars will be replaced with electricity. Bloomberg goes onto stress that this will cause great trouble for oil producers who are arguably underprepared for these changes to the market and the threat of competition. This pressure will also be added to by the falling prices of electrical cars which currently are unaffordable to the everyday consumer. Whilst this would lead to a decline in global emissions, would a further decline in oil could be devastating for economies worldwide? It would appear that way for the Arab states who face $94 billion of debt following the oil slump in addition to businesses worldwide including Italian manufacturers.