China widened the fluctuation band of its currency. A measure to reassure the markets following the slowdown in growth, but also a real business strategy. Interview with Sebastien Barbe, senior economist at Credit Agricole-CIB. Doubling the maximum fluctuation of the yuan is a diplomatic act, with a real strategic significance …
China conducted today to double the ceiling of fluctuation of the yuan. Should we consider the measure as a real movement towards liberalization of the Chinese currency? What impact will the measure on the evolution of the currency? Our questions to Sebastien Barbe, senior economist at Credit Agricole-CIB.
As of today, the yuan is really undervalued, or does it happen, as claimed by Prime Minister Wen Jiabao, to its equilibrium level?
It is difficult to answer this question with certainty. We lack precise figures which we can really conclude. This is indeed some, however, is that the yuan is much undervalued than five years ago. China has actually taken steps since constant progressive revaluation of its currency. If during the subprime crisis the exchange rate with the dollar was frozen, the yuan has appreciated against many currencies of emerging countries over the period. It is better to resonate well in terms of real effective exchange rate.
Doubling the maximum fluctuation of the Chinese currency translate into a genuine process of internationalization? Does it not rather a symbolic approach?
In reality, these two aspects will play. But the increased ceiling remains above all a measure of scale. Eventually, the Chinese will be able to fluctuate even more their motto. This is a significant step towards liberalization of the yuan. If in the future the Chinese are more confident about international politics, they are probably glad to have introduced this measure. It is a reform that will eventually play and count. At the moment, it's more of an accompaniment of the process of internationalization of the yuan. The symbolic is seen in turn at different levels. A message of confidence, first, compared to the rate of growth. A willingness to reassure the markets, while China's growth tends to slow down. By extending the maximum fluctuation of the yuan, they take the chance to see their currency appreciate more, which would hurt exports and thus their international trade. It's a real soft landing that is looming for the Chinese. We can then analyze this decision as "an act of economic diplomacy" aimed at their trading partners. If China loose a little ground on the control of its currency, it will have greater legitimacy to demand a return to its partners, by being much more demanding. Specifically, it could expect from Europe, its largest importer, that it demonstrates a much better coordination. The measure is reflected, and will add weight to China in its trade relations.
While doubling the currency became effective today, the yuan was at the opening down to the dollar. How do we tend to expect in the future?
The assessment should continue, perhaps not spectacularly, at least as concerns about the European market will also remain strong. Europe is the largest importer of China, a major evaluation on the rise of the yuan should now be discounted. Within a year or two, things may have to evaluate more quickly. To give you a figure, we believe that the yuan could appreciate the full year from 2.5% to 3%. Even up to 4.5% in the event of Europe show signs of recovery. But to date, caution should remain the watchword.
Nicolas Sarkozy is the "worst manager in history," Friday accuse Michel Sapin and Jerome Cahuzac, two experts on public finance team of Francois Hollande.
This attack follows the satisfaction of the Head of State after the announcement of a 2011 deficit lower than expected.
"Nicolas Sarkozy is carrying the six worst deficits in history recent budget," wrote the former finance minister and the chairman of the Finance Committee of the National Assembly, in a statement.
They recall that before the crisis, the largest deficits of the Fifth Republic had been achieved when Nicolas Sarkozy was budget minister (1993-1995).
"The figure of 5.2% budget deficit in 2011 compared to the GDP hides the continuing and disturbing increase in debt of France," they continue.
"The other significant figure announced by INSEE, is that the increased revenue from taxes paid by the French," they add.
Nicolas Sarkozy promised if elected to bring the public accounts in balance in 2016, for the first time since 1974. Francois Hollande provides balance in 2017.
Wall Street opened sharply higher Monday, the Federal Reserve chairman, Ben Bernanke, who hinted that the Fed will continue its accommodative monetary policy to support demand and help lower the unemployment rate.
In early trade, the Dow Jones took 0.80% (104 points) at 13,186 points. The Standard & Poor's, wider, gained 0.84% (11 points) at 1,408 points while the Nasdaq composite advanced 0.84% (26 points) to 3094 points.
Growth of the U.S. economy will have to accelerate job creation that do fall further unemployment, Ben Bernanke said Monday.
"An additional significant improvement in the unemployment rate will probably require a more rapid growth of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies , "he said.
The dollar turned down against the euro after these statements. The single currency was trading at over $ 1.33.
Values, Lions Gate Entertainment gained almost 5% in early trade, after the flying start to his latest production, "The Hunger Games", which produced 214 million dollars in revenue for its first weekend of operation.
Investors monitor the numbers of the promises of housing sales (at 14:00 GMT), expected up 1% in February after rising 2% in January.
The S & P 500 fell 0.5% last week, a relatively modest decline but still the sharpest recorded over a week since late December.
India should seek to turn its airlines to refuse to participate in the program of the European Union to tax carbon emissions in the airline, said Monday , a senior administration official Reuters India.
China first allowed its air transport sector to participate in this program.
Since 1 January, all airlines flying from airports in the EU are subject to a trading system of emission quotas for greenhouse gas (ETS).
A company failing to observe these rules is liable to a tax of 100 euros per tonne of carbon emitted quota allowed. The EU ban of up to serve European airports.
If the EU were to proclaim such prohibition, she risks being subjected to similar retaliation from New Delhi.
"There are many things we could do if the EU did not return to his demands. We have the power of the economy. We not bleed as much as them, "the official said, adding that the Union's position would affect its economy and airlines
… …… The Indian government expects to receive formal approval from several departments before giving the order to its airlines not to participate in the program of the Union ……
… "The question is: are you (the Union) in bringing about a global trade war?", the official said ….. Beijing
…. The opposition to the European system of emission allowances has escalated last week with the cancellation of orders Airbus. ()
India does not provide for the time to reach such an end, but it does not exclude it either, the official said.
Amber Dubey, head of aviation at consulting firm KPMG, said that Indian industry was booming with a significant increase in the size of the civil and military fleets.
"The issue of EU ETS raises fears of trade war between the EU and the world. There is a chance that the government uses these big aircraft orders as a tool in its negotiations ", he told Reuters.
The European aircraft manufacturer Airbus, an EADS subsidiary, owns 73% of the Indian market of commercial aviation. He has in his notebook over 250 aircraft ordered by Indian companies, IndiGo, Go Air and Kingfisher.
The Slovenian subsidiary of Renault announced Thursday it would cut production in April and would eliminate 13% of positions at about 2220, due to lower sales in Europe.
"We have had in recent months a decline in orders resulting from a severe contraction of the European market. Because market conditions do not improve (…) we don ' will more probably night shift on April 26, "said the subsidiary Revoz, which produces models Twingo, Clio and Wind.
Production Revoz had peaked at 212,860 cars in 2009, falling to 174,127 in 2011. The subsidiary did not provide a target for this year.
The night shift existed since 2007 but was suspended from May to September 2011 due to a shortage of electronic parts produced in Japan, a direct consequence of earthquake of March 11.
Revoz said she planned to increase the number of positions in the second half of 2013, when it will produce two new models to be developed under the partnership between Renault-Nissan and Daimler.
The new car registrations have fallen sharply again in February in the euro area, mainly due to the weakness of French and Italian markets, announced Thursday the European manufacturers association of motor.
Aegon announced Friday results for the fourth quarter below expectations, within the scope of past depreciation on assets backed by mortgages in the U.S. and a series of restructuring charges related to cost reductions.
The Dutch insurer that owns Transamerica U.S. life insurer, has emerged over the last three months of the year a net profit of € 81 million while that 15 analysts polled by Reuters had expected an average figure of 176 million.
In total, impairment and other charges totaled nearly 300 million euros, said Aegon, which has however proposed a dividend of 0.10 euro per share, the gèrement above the consensus, which was 0.08 euro.
The taxable income of the insurer stood at 346 million euros, while analysts had expected 368 million.
EDF Group and Italian utilities A2A Thursday announced an extension until December 30 of the shareholders in Edison, the second electrical Italy, which the French group tries to take control through negotiation .
This new extension of a pact that came to an end Wednesday comes a month after an agreement on the principles of the reorganization of Edison, after several months of fruitless discussions that have long stumbled on valuation issues but also " patriotism "economy.
A2A, which leads the consortium of Italian shareholders engaged in discussions with EDF, had said Monday that the deadline for concluding the negotiations could be delayed until Christmas.
If final agreement on industrial restructuring and shareholder of Edison, EDF had its way by taking operational control of the Italian group, heavily indebted, with the stated objective to improve its performance but also to use it as basis for developing its gas business.
If the French electrician did not detail the agreement on Edison, A2A said last month that the new reorganization of the company would leave the core of Italian shareholders 31% stake in EDF and 50%.
The rating agency believes that if the 50% discount on Greek debt was effective, it would be considered for it as a credit event, even if the banks say they are "voluntary." The offices of the rating agency Fitch in New York.
The rating agency Fitch Ratings said Friday that the 50% discount applied to banks on Greek debt, if it becomes effective, will be a credit event, according to its criteria, even if the referee of the market (ISDA) think on this point otherwise. The 50% discount on Greek debt "would be seen by the agency as a credit event," said Fitch, contradicting the association reference ISDA. It held that the Brussels agreement should not trigger the CDS of the country, because the Greek debt restructuring is done on a voluntary basis.But it stated that the decisions taken by Heads of State and Government Wednesday are "a positive step to support the financial stability of the euro area".
In addition, the rating agency said that the restructuring of the Greek debt rating could bring the country to "CCC" is currently "B" at best, and now deep in the country category of "speculative". "Fitch Ratings said that an application for the EU to private holders of Greek government debt to exchange their shares against new value with 50% less likely to result in a post-default rating in category B or less, according to the private sector, "according to a news agency.
The United States will lose their triple-A from another major rating agency by the end of the year in the wake of the decision taken in this direction by Standard & Poor's in August, analysts said Bank of America Merrill Lynch.
The trigger for this downgrade, which will come from Moody's or Fitch, will probably be the inability of Congress to agree on a credible long-term plan to reduce the deficit of the United States, said in a note to the bank published Friday.
The United States lost their triple-A in early August for the first time in history, Standard & Poor's lowered its rating to AA +.
"The rating agencies have strongly suggested that further declines were likely to note if Congress did not leave a credible long-term," wrote Merrill economist for North America, Ethan Harris.
"We expect a decline in credit rating late November or early December with the crash of the great commission," he adds.
The bipartisan commission of 12 members of Congress made the issue of challenge, known as "super committee" to reconcile the positions of Democrats and Republicans to reach an agreement on reducing the deficit of at least 1,200 billion dollars by November 23.
If the majority of the board fail to agree on a plan, 1.$ 200 billion in budget cuts will be automatically switched from 2013.
Reductions in government spending will weaken even further the U.S. economic recovery, says Merrill, which now provides an economic growth of 1.8% in 2012 to the United States and 1.4% in 2013.
Moody's Investors Service, the Aaa rating on the United States, is accompanied by a negative outlook, said the decision of the commission was not the only factor studied.
The agency also will look at the results of the presidential election and the expiration of tax cuts of the Bush era end of 2012 to decide on the note.
A failure of the super-committee would be "negative information but it is not decisive for our opinion on the bill," said Steven Hess, Moody's Senior Analyst for the United States last week.
Fitch Ratings on the other hand a stable outlook on its AAA rating of the United States, so that the agency should first lowered its outlook to negative before a downgrade itself.
Three days before the second round, the two finalists of the primary PS tried, during a final debate, to differentiate themselves from each other. In fact, they have few substantive differences on most subjects. Martine Aubry and Francois Hollande, both finalists for the PS primary, clashed in a final televised debate Wednesday, Oct. 12.
Wednesday night was held the final televised debate between Martine Aubry and Francois Hollande. The challenge for each of the two finalists of the primary PS was to hold sway over the other, to ensure victory in the second round of voting, Sunday, October 16. They therefore tried to stand on the issues discussed, but not really succeeding. For if their positions differ in the details, they converge on the merits. Decryption.Martine Aubry and Francois Hollande are indeed "two sides of same coin," according to the expression used by Arnaud Montebourg.
Deficit reduction
Martine Aubry attacked Francois Hollande on the golden rule budget, accusing him of wanting to take the measure proposed by Nicolas Sarkozy, while the PS is opposite from the beginning. Holland defended himself by explaining that the next president will have to give a clear strategy for fiscal consolidation. "The deleveraging is necessary if France wants to keep its triple A and independence," said the Correze elected. He promises to bring the budget back to balance by the end of the quinquennium. Martine Aubry, she will not commit to zero deficit in 2017. "The lack of growth and employment is equally important that the public deficit, said the mayor of Lille."If you put everything on reducing the deficit, we will have no balls to boost growth." The two finalists, however, undertake to reduce the deficit to 3% of GDP in 2013 and master of public debt.
The tax reform
Until the tax reform presented in the socialist project, whose implementation can take time, Martine Aubry proposes to create an additional income tax to 50% in excess of 100,000 euros per unit tax. It also promises to lower the threshold of the ISF, the government increased this summer from 800,000 to 1.3 million euros as part of the reform of the heritage. François Hollande he does not want to hear about these "crafts". "Tax reform must be done right away to apply from 2013. It will be a comprehensive reform of tax on income, capital and assets," said he.Apart from these differences of opinion on the calendar, the Netherlands and Aubry adhere to the same tax reform, ie a merger of the income tax, the CSG, the earned income tax and capital income and broadening the tax base. They also both agreed that there will be increasing the tax burden with them in power.
Youth unemployment
This is the flagship proposal of François Hollande: contract generation, or the possibility for an employer who hires a young and maintains a senior employment in the same position to be exempt from charges. So it is on this that Martine Aubry decided to attack his opponent more strongly. "Today, companies benefit from 25 billion euros per year to reduce charges for nothing. I find it normal to ask them," defends the member for Corrèze."Any action based on exos charges for young people has never worked, Martine Aubry replied. It still does not create a new tax shelter!" It will be understood, the agreement between the two candidates on the contract generation is impossible. However, the creation of 300,000 contracts for the future is consensus. François Hollande just wish the focus on young people, especially in areas where unemployment this population exceeds 40%.
Banks
What about the proposed Arnaud Montebourg to trust the banks? Both candidates responded obliquely, that is to say, emphasizing the need for recapitalization of financial institutions. "Yes assistance to banks, but with an entry of the state capital, the separation of banks and deposits", explained Martine Aubry. "We will see a default part of Greece. As a result, banks will have to be recapitalized.They need public money. We need a presence in the capital with veto power, "added Francois Hollande. The two candidates are in agreement on this issue.
Retirement
Martine Aubry has tried to attack Holland, citing about a Pascal Terrasse, an adviser to the Correze elected, who would have spoken of retiring at 65. Holland denied. "The first decision that I will take on the issue of pensions is to allow those who have paid 41 years and have 60 years to leave," he said. "It means we will restore the legal age." Employees who have accumulated 41 years can retire at 60 "but they will have a discount," he said. Martine Aubry went a law giving the opportunity to go to 60 employees who have had difficult jobs.The mayor of Lille would also restore the retirement age at the full rate at age 65, against 67 years in the reform of 2010.
The public service
Apart from their differences on the proposal from Holland to recreate 60,000 jobs in Education, the member for Corrèze and the mayor of Lille are both willing to remove the principle of non-replacement of an employee out of every two retirement and to go further in the decentralization of public services. However, when it comes to answer more sensitive questions, such as maintaining a minimum service during strikes and upgrading of salaries of civil servants, they kicked into touch: these issues will be decided through negotiations with the social partners.
Protectionism
That was the trick question of the debate: the de-globalization, a theme dear to Arnaud Montebourg.Martine Aubry response: it is a "regulation of globalization" and "Europe stops being naive in globalization, which protects". The mayor of Lille defends 'fair trade'. "If China prevents us to invest at home, we stop too. If China does not respect the social and environmental rules, we taxa." Francois Hollande said the same thing: "an uncontrolled globalization crushes the weak," "I am for an open economy not available." Both are in favor of introducing a tax on social and environmental EU borders. They have however made their proposal by Montebourg to give France a mechanism for unilateral ban certain products to market "in case of aggression by trade unfairly low prices."
The debt crisis in Europe
On European issues, Martine Aubry and Francois Hollande are on the same wavelength.They are for a default RECORDED part of Greece on a portion of its debt, the cost would be borne by the banks to give Athens time to resume growth and emerge from the spiral austerity / recession. Both believe that Europe should move towards greater economic and political federalism. Concerning the entry of Turkey into the EU, they are in favor of continuing negotiations, but state that is a long way to Ankara.
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