Home' Trinidad and Tobago Guardian : December 31st 2015 Contents DECEMBER 31 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
2015: YEAR IN REVIEW | BG19
The US Federal Reserve s decision to boost
interest rates may have negative repercussions
on eurozone economies, according to a poll
published in the Financial Times Sunday.
The Fed raised rates in December for the
first time in almost 10 years, a move planned
as a first step on the way back to normalised
conditions in the wake of the global financial
crisis that became obvious to all in 2008.
"The most important effect [of the increase
in the federal funds rate] will be a lower
euro/dollar exchange rate, which should push
up import prices and hence lead to some
upwards pressure on inflation," Nick Kounis,
head of macro and financial markets research
at Dutch state-owned bank ABN Amro, told
the Financial Times.
Overall, 18 of the 31 economists polled by
the Financial Times, said the rate increase
would push the euro down to the equivalent
of US$1 at some point in 2016.
Eurozone economies have slowly recovered
from the global financial crisis in part because
of initiatives by the European Central Bank.
A mixture of loans to different national
economies, negative interest rates and quan-
titative easing have been among tools
employed by the ECB.
Several countries in the eurozone, such as
Greece, Italy and Spain, have continued to
struggle with high debt levels and slow
growth. With unemployment still in the dou-
ble-digits and national deficits high, these
countries cannot afford big hits on their eco-
Some economists were optimistic when
it came to the impact of the Federal Reserve
rate hike on the eurozone, noting the change
had been expected and that the relevant
authorities would be prepared, while pointing
out a weaker currency could help spur
"The prospect of the Fed raising rates and
the ECB easing policy in December has been
fully priced in by currency markets," Holger
Schmieding, chief economist at Germany s
Berenberg Bank, told the New York Times.
Less than a minute into his
speech, Albert Rivera, the leader
of Ciudadanos, a centrist party
that has stormed the barricades
of Spanish politics, already was
speaking of reformas estruc-
Rivera wants to liberalise Spain s labour
market, clean out the public administration
and overhaul the tax system. These tough pre-
scriptions do not look like vote-winners in a
country that has been through the economic
wringer, but Ciudadanos has risen from single
digits in the polls a year ago to around 20 per
cent today, and was set to act as kingmaker
after Spain s unpredictable general election on
December 20, which took place after this story
went to press.
Like bronzed retirees on the Costa Blanca,
several political ideas are seeing out their last
days in Spain. One of them is that liberals of
Rivera s sort cannot thrive in southern Europe.
Another is the prediction, often heard during
the darkest days of the euro crisis, that the
cuts endured by countries like Spain would
generate a devastating political blowback. On
the contrary, Spain s ruling People s Party,
helped by buoyant growth and jobs numbers,
remains on top of the polls, albeit much weak-
It is a similar story elsewhere on the euro-
zone periphery. Ireland s ruling Fine Gael hopes
to win another term next spring on the back
of a zippy recovery. Portugal s center-right
government finished first in October s election,
only to see a leftist alliance assemble a jerry-
built coalition that will struggle to last a full
term. In Greece Syriza s anti-austerity resolve
crumbled on its first encounter with the Ger-
man-led imperium. Even in Italy, which has
failed to grow since joining the euro, Matteo
Renzi, the centre-left prime minister, is keeping
a ragtag of populists at bay.
However, it was in Spain, the euro zone s
fourth-largest economy, where the backlash
was most feared. Unlike Greece, Ireland and
Portugal, Spain narrowly avoided a full bailout,
but its calamitous crash left more than half
of young workers unemployed.
In January Pablo Iglesias, leader of Podemos,
another political newcomer, addressed vast
crowds in Madrid on the iniquities of austerity
while his brother-in-arms, Alexis Tsipras, led
Syriza to victory in Greece. Europe s panjan-
drums feared the spread of political "contagion"
from Greece across the periphery, starting in
What happened? A year later Tsipras is
dutifully executing the terms of Greece s third
bailout, Podemos support has plummeted
and Ciudadanos has waltzed through the door
that Iglesias pried open.
In Ireland Sinn Fein, a party rooted in ter-
rorism that has tried to reposition itself as the
voice of anti-austerity, is slipping in the polls
after once leading them. Today the populist
momentum in Europe is with right-wingers,
who have exploited the refugee crisis to tap
into cultural as well as economic fears.
A number of factors explain the left s strug-
gle. In part it is the difficulty of turning insur-
rections into political parties. Coalitions must
be built and maintained, outrage transmuted
into a policy platform. Podemos began life as
a fusion of grassroots indignados and a cabal
of hard-left political-science professors, and
the fissures sometimes show:
This year a gentle tack toward the centre
has seen some senior figures quit in disgust.
Sinn Fein s dark history renders it toxic for
many Irish voters. In August an anti-euro fac-
tion split off from Syriza.
Europe s anti-austerity parties also have
learned that their crusades are hard to conduct
inside the euro zone, with Brussels supervising
their every fiscal move. Grounded in interna-
tionalism, none of the new left populists wants
to leave the single currency. Pablo Bustinduy,
a Podemos candidate, said that his party s
attacks on austerity go "hand in hand" with
a pro-European message. He is scathing, how-
ever, about the pro-austerity turn the euro
zone has taken. The Europe that the new left
professes to love often seems to be simply a
figment of its imagination.
Despite this, the right is in no position to
crow. European politics has not yet returned
to its pre-crisis routines. Although Podemos
standing in the polls has faded, Spain s politics
has fractured and Iglesias support may turn
out to be vital in forming a government---he
has had a good campaign.
In Ireland, Spain and Greece once-stable
systems have become primeval political soups
from which all manner of governments may
emerge. The left s cause retains vitality:
Podemos dedication, grounded in the suffering
of the indignados, could yet prove more endur-
ing than Ciudadanos clever but bloodless pro-
More to the point, Podemos anger could
prove useful, even if its reheated socialism is
no cure for Spain s economic ills. The country s
corrupt politics were crying out for the dis-
ruption that both Podemos and Ciudadanos
Young Spaniards were walloped by the crash,
but the PP has pandered to the old: last week
the unpopular Prime Minister Mariano Rajoy
pledged to slash income tax for Spain s retirees.
Little wonder, noted Jorge Galindo of Politikon,
a Spanish Web site: The PP is polling first
among voters 65 and older, fourth among
everyone else. This is not a strategy for the
long term. Nor do the tired Socialists appeal
to Spain s disaffected young.
Despite the strong recovery, only 12 per cent
of Spaniards say that they trust their country s
institutions---the lowest figure in the European
Union---and more than one-fifth of the labor
force remains jobless. Even those with jobs
often struggle to pay the bills. The PP s reforms
have helped, but Spain still is a country strat-
ified by age and status in which protected
insiders enjoy secure employment and pension
rights while young outsiders struggle to gain
These conditions are ripe for any party that
can credibly promise rupture and regeneration.
The next government will face difficulties,
starting with yet more austerity: Spain s deficit
remains the euro zone s highest. Podemos still
will have lots to talk about.
In debt-ridden, over-regulated, high-unem-
ployment Spain, however, the real challenges
lie elsewhere. Time to get moving on those
@2015 The Economist Newspaper Ltd.
The eurozone is not expected to wel-
come any new members in the coming
years, as the region s long crisis seems
to have put some countries off, deputy
European Commission chief said in a
newspaper interview Monday.
"No new members are expected to
join in the next few years," Valdis Dom-
brovskis told the daily Die Welt.
Dombrovskis is the EU Commissioner
in charge of the euro and social dia-
Out of the 28 EU member states, 19
have signed up to the single currency.
"Before a country joins the euro, it
must have a fixed exchange rate to the
euro. This mechanism is the waiting
room for eurozone membership," Dom-
But at the moment, no EU member
is in the "euro waiting room", with the
exception of Denmark, which has a
special status, he said.
Dombrovskis said that Bulgaria and
Romania had both expressed interest
in taking the first step to joining the
And preliminary talks have also been
held with the previous government in
"But it may be the case that the new
government in Warsaw is somewhat
more reserved," Dombrovskis said.
"Initially, joining the euro seemed
attractive to the new EU members. But
the euro crisis changed this. And the
Greek crisis all the more so," he said.
The last countries to join the euro
were Latvia in 2014 and Lithuania in
Economists: Potential instability for Eurozone
Anti-austerity parties: Down but not out
...No further expansion
seen 'in next few years'
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