The recent recession in UK, which ended in the final quarter of 2009, has lasted for 18 months, the longest period on record. In order to avoid an utterly economic collapse, the Bank of England (BoE) kept cutting interest rates down to a historical level of 0.5 percentage points. In early February, central bank officials decided to temporary halt the bond-buying program, mainly because the inflation rate rose to 3.5 percent in January. The actual inflation rate surpassed the 2% target rate due to a rise in the value-added tax back to 17.5% after the expiration of a temporary cut to 15%, a 70% increase in the oil prices and the weakness of the pound. The general consensus is that the United Kingdom’s economy is still struggling and the Bank of England will have to continue its quantitative easing program worth nearly GBP 200 billion. BoE Governor Mervyn King said that it is “far too soon” to say the bond purchasing plan will not be expanded. Continue reading ‘UK – Behind The Curve’
Tag Archive for 'Budget'
For the last 10 years, the Greeks, the Italians, the Spaniards or the Irish, have enjoyed a good time, spending much more than they afforded. For some of the countries of the 16-member euro currency zone — Greece, Ireland, Italy, Portugal and Spain, the prolonged dream of everlasting consumption has turned into a nightmare. The new reality has raised the probability of default and the risk that the country may be forced-out of Eurozone. Though the prospect is very unlikely, it has to be taken into account very seriously. Since the beginning of the month, when massive problems have emerged within the EU-16, the EUR currency has dropped significantly against the USD, from a level of 1.51 to a level of almost 1.43. According to FX data, the value of the dollar’s net short position fell to around $11.8 billion in the week ending December 13, from 21.8 billion the previous week. Continue reading ‘EUR – On The Verge Of Breakdown’
The Election Conundrum
The presidential election campaign started last Friday in Romania. According to the polls, there are four major contenders: incumbent President Traian Basescu – a Liberal-Democrat (PDL), Mircea Geoana – a Social Democrat (PSD), Crin Antonescu – a Liberal (PNL) and Sorin Oprescu – an Independent. Without any political affiliation, I will impartially scrutinize the presidential candidates’ economic platforms. Among the many topics included in the abovementioned presidential aspirants’ programs, I will put the spotlight on two critical economic issues: near-term economic stimulus and fiscal policy. Continue reading ‘The Election Conundrum’