Prob­a­ble pos­si­bil­i­ties for 2016

Financial Mirror (Cyprus) - - FRONT PAGE - By Dr. Jim Leon­ti­ades

Now that 2015 is rapidly fad­ing in the rear view mir­ror, it is time to con­sider what we may ex­pect in the prob­a­ble fu­ture. The fol­low­ing are some prob­a­ble pos­si­bil­i­ties:

PM Alexis Tsipras loses

Greece:

The ECB:

The Euro:

EU Sta­bil­ity and Growth Pact:

Global Stag­na­tion:

his cur­rent gov­ern­ing ma­jor­ity as more mem­bers of his coali­tion mutiny and balk at en­forc­ing the Eurogroup’s lat­est aus­ter­ity pro­gramme. New tax mea­sures fail to bring in the ex­pected rev­enues. A new elec­tion is pro­grammed. Po­lit­i­cal and eco­nomic un­cer­tainty pre­vails. Grexit is once again in the head­lines.

Se­nior Draghi will keep the print­ing presses of the Euro­pean Cen­tral Bank rolling, print­ing money in an ef­fort to stim­u­late a slug­gish Eu­ro­zone growth and in­fla­tion through his Quan­ti­ta­tive Eas­ing (bond buy­ing) pro­gramme. But de­spite his re­solve to “do what it takes”, Eu­ro­zone in­fla­tion will re­main weak and be­low the ECB’s tar­get of 2%. Ger­many con­tin­ues to op­pose the de­mand cre­at­ing ac­tions re­quired to bring the Eu­ro­zone econ­omy out of its high un­em­ploy­ment, slow growth pat­tern.

The euro hits par­ity with the dol­lar. Most of the de­cline of the Eu­ro­zone cur­rency has hap­pened but there is still more to come. It is no co­in­ci­dence that there was mar­ginal i mprove­ment in the Eu­ro­zone econ­omy about the time Mario Draghi ini­ti­ated his QE pro­gramme. A sub­stan­tial con­tri­bu­tion to this im­prove­ment was made by the as­so­ci­ated drop in the Euro, aid­ing Euro­pean ex­ports.

France and Italy be­come in­creas­ingly at odds with EU bud­get rules, chal­leng­ing Ger­many’s eco­nomic lead­er­ship. For 2016, nei­ther coun­try will agree to meet the 3% gov­ern­ment deficit tar­get of the EU’s sta­bil­ity and growth pact. The French fi­nance min­is­ter hints that the coun­try’s deficit may in­crease even more fol­low­ing the Paris ter­ror­ist at­tacks. Dis­sat­is­fac­tion with Ger­man eco­nomic aus­ter­ity pre­scrip­tions in­creases within the Eu­ro­zone.

The pos­si­bil­ity that the world has en­tered a pe­riod of long term global eco­nomic stag­na­tion re­ceives in­creas­ing at­ten­tion. Har­vard’s Larry Sum­mers, the most force­ful ex­po­nent of this view, sug­gests that the no­tion that the cur­rent slow growth of world economies is “only a tem­po­rary con­se­quence of the 2008 fi­nan­cial cri­sis” is ab­surd. He states that the world has now en­tered a new macro eco­nomic epoch whose main fea­ture is a glut of saving and de­fi­ciency of de­mand.

USA

Refugee

China:

Euro­pean Pol­i­tics:

UK Pol­i­tics:

Elec­tion:

cri­sis.

Cyprus Tourism:

Cyprus Econ­omy:

Labour Dis­putes:

Par­ties of and right ground in the ex­treme left con­tinue to gain Euro­pean pol­i­tics.

Jeremy Cor­byn, leader of Bri­tain’s Labour Party, is re­placed af­ter a long ac­ri­mo­nious in­ter­nal strug­gle which comes close to split­ting the party.

Hilary Clin­ton wins the Demo­cratic nom­i­na­tion and goes on to win the Pres­i­dency.

The refugee cri­sis con­tin­ues. Europe’s ef­forts to out­source the mi­gra­tion prob­lem to Tur­key fail. Ar­range­ments with Tur­key to con­tain the refugees from flood­ing into Greece and Italy are un­suc­cess­ful. Many thou­sands of refugees con­tinue to press at Europe’s bor­ders. Poland and Hun­gary along with other East Euro­pean coun­tries chal­lenge the of­fi­cial EU po­si­tion on mi­gra­tion. The EU’s Schen­gen “free bor­ders” agree­ments col­lapse.

China’s econ­omy con­tin­ues to stum­ble even while grow­ing at a rapid (but re­duced) rate. In­vest­ment is par­tic­u­larly hard hit. The gov­ern­ing au­thor­i­ties in­ten­sify ef­forts to stim­u­late lo­cal con­sumer de­mand. Both ex­ports and im­ports de­cline. Stock mar­ket volatil­ity in­creases.

Cyprus tourism hits a new record, giv­ing the en­tire econ­omy a wel­come boost. Aided by ar­rivals that have been di­verted by ter­ror­ism re­lated events from both Tur­key and Egypt, the 2001 level of 2,700,000 in­com­ing tourists is sur­passed for the first time. The Cyprus Tourist Or­gan­i­sa­tion claims credit for the achieve­ment.

The Cyprus econ­omy con­tin­ues its slow growth at­tended by high un­em­ploy­ment. Non-per­form­ing loans, higher even than those of Greece, con­tinue to be a ma­jor prob­lem, con­tribut­ing to a short­age of credit and ham­per­ing ef­forts to stim­u­late the econ­omy. Prod­ded by the Troika of in­ter­na­tional lenders, the Cyprus Par­lia­ment has to ad­dress the is­sue yet again, fo­cus­ing par­tic­u­larly on strate­gic de­fault­ers. A tur­tle-fast ju­di­cial process con­trib­utes to the dif­fi­cul­ties.

Labour strife in­creases in Cyprus as the gov­ern­ment tack­les the pri­vati­sa­tion of CYTA and EAC. Po­lit­i­cal op­po­si­tion par­ties in­ten­sify their ef­forts to for­ward var­i­ous al­ter­na­tives in an ef­fort to save th­ese im­por­tant sources of

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