Category Archives: Economics

Ukraine crisis puts Sunak under new pressure to axe national insurance rise

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Tory MPs and business groups urge chancellor to scrap increase intended to fund NHS and social care amid fears of stagflation

Chancellor Rishi Sunak is under renewed pressure from MPs and business groups to rethink plans to increase national insurance next month, as fears grow that Russia’s invasion of Ukraine will dramatically worsen the cost of living crisis and plunge the economy into “stagflation”.

Both Tory and Labour MPs believe Sunak can still be persuaded to ditch the 1.25 percentage point rise – announced last September to fund the NHS and social care – and want him to use the potentially devastating effects of events in Ukraine on prices as justification for what they say is an urgently needed U-turn.

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Ukraine war a ‘catastrophe’ for global economy as stock markets plunge

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Moscow stock exchange remained closed during the week, while the rouble fell to record lows

The London stock market has suffered its biggest weekly losses since the start of the global pandemic in March 2020, as investors took fright at the escalation of the conflict in Ukraine.

Shares plunged in the City following news of a fire and Russian capture of Ukraine’s Zaporizhzhia nuclear power station, with the one-day drop of more than 250 points in the FTSE 100 index taking the weekly loss to 6.7%.

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Only 6% of G20 pandemic recovery spending ‘green’, analysis finds

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Review of G20 fiscal stimulus spending counters many countries’ pledges to ‘build back better’

Only about 6% of pandemic recovery spending has been “green”, an analysis of the $14tn that G20 countries have poured into economic stimulus.

Additionally, about 3% of the record amounts governments around the world have spent to rescue the global economy from the Covid-19 pandemic has been spent on activities that will increase carbon emissions, such as subsidies to coal, and will do little to reduce greenhouse gases or shift the world to a low-carbon footing.

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Eighty-year-old study of British slave trade is back in the bestsellers list

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Capitalism and Slavery, by the future first prime minister of Trinidad and Tobago Eric Williams, argues that the abolition of slavery was motivated by economic, not moral, concerns

A book of unpalatable truths about Britain’s slave trade has become a UK bestseller, almost 80 years after author Eric Williams was told by a British publisher: “I would never publish such a book, for it would be contrary to the British tradition.”

Capitalism and Slavery was first published in the US in 1944. It was published in the UK by the independent publisher André Deutsch in 1964, with a number of reprints over the next 20 years.

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Sanctions are neither new nor guaranteed to work – just look at Cuba

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Analysis: Economic penalties have been meted out since Napoleon’s day but there’s little proof they achieve the desired outcome

Waging war by economic means is nothing new. Napoleon imposed an ineffective embargo on British exports in the early 19th century and during the first world war there were attempts by both sides to starve each other into submission.

But since 1945 sanctions have been used with increasing frequency as a means of trying to change either the policy stance or the regimes in targeted countries.

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UK and New Zealand sign free trade deal

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Government claims it will boost bilateral trade by 60% but critics call its benefits ‘economically marginal’

Britain and New Zealand have signed a free trade deal, which the UK government said would boost bilateral trade by 60% by eliminating tariffs, cutting red tape and enabling freer movement of professional workers.

Most business leaders welcomed the deal, which was agreed in principle in October and follows on the heels of a similar agreement with Australia, but the National Farmers’ Union (NFU) said it would lead to unfair competition in their sector.

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Ukraine conflict leads EU to rid itself of Russian sacred cows

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Analysis: Images of war, US and UK allies and Volodymyr Zelenskiy have all helped create a new political necessity

A bonfire of EU shibboleths on the economy, conflict, finance, energy supply, migration, and even the bloc’s future shape and size, has been lit by the conflict raging in Ukraine.

Battlefield images, the leadership of Ukraine’s president Volodymyr Zelenskiy, who has framed the war as being between European democracy and brute bullying power, and the challenge of coordinating with UK and US allies who are pushing for more while having less to lose, has created a new political necessity.

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What sanctions have been imposed on Russia over Ukraine invasion?

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We look at different economic measures deployed around world to counter aggression from Putin

Countries around the world have imposed an unprecedented array of economic and other sanctions on Russia after Vladimir Putin’s invasion of Ukraine, targeting its finance, energy and military-industrial sectors as well as individuals and sporting events.

Here are some of the measures adopted by the US, EU and UK, with countries including Japan, Taiwan, Australia and New Zealand all taking similar steps:

The EU, US, UK and Canada have agreed to prevent the Russian central bank from deploying its €640bn (£540bn) of international reserves “in ways that undermine the impact of our sanctions”.

The EU has banned all transactions with the institution. The US has done the same, and added the Russian finance ministry and national wealth fund. The Russian state has, in effect, been banned from raising sovereign debt; shares of Russian state-owned entities may no longer be listed on EU stock exchanges.

A range of Russian banks – their names have not yet been announced – are also being cut out of the Swift international payments system by the EU, US, UK and Canada. Brussels has said this will “stop them from operating worldwide, and effectively block Russian exports and imports”.

The US has placed Russia’s top 10 financial institutions, representing about 80% of the country’s banking sector, under restrictions, including cutting off the biggest – Sberbank, which accounts for about 30% of Russian banking – and its subsidiaries from conducting transactions through the US system.

The assets of many other Russian banks, including VTB, the country’s second largest, Bank Rossiya and Promsvyazbank, have also been hit with strict asset freezes and/or new business restrictions in the EU, UK, US and elsewhere.

The foreign assets of the Russian president, his foreign minister, Sergei Lavrov, and the defence minister, Sergei Shoigu, have been frozen in the EU, US and UK, as have those of the FSB security head, Alexander Bortnikov, the armed forces chief, Valery Gerasimov, and members of the Kremlin’s security council. The EU has imposed sanctions on all 351 members of Russia’s parliament, the Duma; the US and UK are punishing selected members as are Australia, Japan and New Zealand.

More than a dozen billionaire oligarchs with ties to Putin’s regime, including Andrey Patrushev (oil company Rosneft), Petr Fradkov (Promsvyazbank), Yury Slyusar (United Aircraft), Boris Rotenberg (gas pipeline company SMP), Denis Bortnikov (VTB bank) and Kirill Shamalov, ex-husband of Putin’s daughter Katarina, are on asset freeze and travel ban lists around the world. The US is also sanctioning top state-owned bank executives from VTB and Sberbank. Canada and Australia have also imposed sanctions on multiple oligarchs.

The UK has imposed a £50,000 limit on bank accounts held by Russian nationals in the UK), and the EU a limit of €100,000 in EU banks.

Russian airlines and private jets have been progressively banned from UK and EU airspace and the US is considering similar action but has yet to make a final decision. Aeroflot has said it will cancel all flights to European destinations; multiple European airlines have said they are halting routes to Russia.

The US has in effect banned the Russian energy company Gazprom, the oil pipeline company Transneft, and the power company RusHydro, as well as the country’s biggest freight, rail and telecoms companies, from its credit markets.

The EU has introduced a ban on exports of aircraft and aviation parts to Russia, as well as exports of hi-tech goods including semiconductors, computers, telecoms and information security equipment and sensors. UK and EU-based companies are also banned from exporting to a wide range of Russian defence, naval, transport and communications companies, including the infamous Internet Research Agency troll farm in St Petersburg.

The Uefa Champions League final has been removed from St Petersburg to Paris.

Fifa and Uefa have suspended Russian clubs and national teams from all competitions.

The Formula One grand prix and all World Cup skiing events in Russia have been cancelled.

Russia has been banned from taking part in the Eurovision song contest.

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Moscow braces for rouble to crash at least 25% as new sanctions hit

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Russian currency expected to plunge in first day’s trading since Swift ban and ECB says state-owned Sberbank subsidiaries are set to collapse

Moscow is bracing for economic panic when markets open on Monday morning, with the value of the rouble expected to plummet at least 25% after the US and European Union announced unprecedented sanctions over the weekend.

Those measures targeted the Russian central bank, which has intervened to prop up the value of the rouble following Vladimir Putin’s order to invade Ukraine. They also marked the first time Russian banks have been excluded from the Swift international payments system.

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Western powers have realised Russia is largely immune to sanctions

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Analysis: Only the financial equivalent of unleashing a nuclear arsenal will dent Russia’s foreign assets war chest

The war against Russia is one western countries want to fight with only economic sanctions, not guns.

Russia’s conflict with Ukraine, despite its long gestation and planning by Vladimir Putin and his supporters in the Kremlin, was supposed to end quickly once financial retaliation began. Yes, there would be military skirmishes on the ground, but little more than a few casualties were expected once a range of penalties began to bite.

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Russian central bank buys up roubles to avert stock market collapse

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Bank scrambles to prevent invasion of Ukraine sending Russia’s financial system into meltdown as currency hits all-time low

The Russian central bank has purchased millions of roubles to prevent the collapse of the Moscow stock exchange and prop up the currency after it plunged to an all-time low of 89.60 against the dollar.

In a scramble to prevent the invasion of Ukraine pushing Russia’s financial system into meltdown, officials in Moscow closed the stock exchange while the Bank of Russia mounted a rescue operation to put a floor under the skidding rouble.

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Energy prices surge as Russian invasion of Ukraine stokes fears of global shortages

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European stock markets tumble as crisis fuels near-40% rise in gas price and pushes oil to $105 per barrel

Global markets were thrown into turmoil on Thursday as the arrival of war on European soil sent prices of commodities such as oil, gas and wheat surging, while stock market plunged.

The ramifications of a potentially prolonged conflict involving Europe’s primary supplier of gas sent a chill through markets, affecting prices across a phalanx of asset classes and investments.

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Why a swift economic victory against Russia looks unlikely

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Analysis: country has positioned itself to blunt western sanctions and has a few retaliatory ones of its own

Be ready for a long haul. That was the subtext of Boris Johnson’s message to MPs as he committed to toughening up sanctions against Russia.

The warning to prepare for a “protracted struggle” was both timely and appropriate. There will be no quick knockout blow because Vladimir Putin has had time to prepare and is well dug-in.

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Europe could see out winter on gas reserves if Russian imports stop, says German analysis

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Economic institute says current levels of gas enough for six weeks if mild temperatures continue

Europe could heat its citizens’ homes and power its industry on existing gas reserves for the remaining months of a relatively mild winter even if the standoff with Moscow over Ukraine were to escalate to a total stop on Russian gas imports, a leading German economic institute has said.

Unusually low gas reserves have raised alarm among several European governments in recent months, with storage tanks across the continent on average at only 31% capacity at the start of this week – roughly half as full as in 2020.

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Ukraine crisis: sanctions against Russia come at a cost to the west

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Analysis: The west will adopt step-by-step approach, leaving toughest sanctions as last resort

After all the tough talk of the past month, the sanctions imposed on Russia by the west are unlikely to lose Vladimir Putin much sleep. The response to Boris Johnson’s announcement that five of the less important Russian banks and three individuals would be targeted was: is that it?

The most dramatic news was Germany’s decision to halt approval of the Nord Stream 2 gas pipeline from Russia to western Europe. That will have an impact, but may end up affecting Germany more than it does Russia.

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Fears for Democrats’ midterm hopes as US inflation hits 40-year high – live

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Joe Biden acknowledged that rising prices in the US are having a significant impact on families’ budgets, even as the American economy more broadly continues to recover from the effect of the coronavirus pandemic.

“On higher prices, we have been using every tool at our disposal, and while today is a reminder that Americans’ budgets are being stretched in ways that create real stress at the kitchen table, there are also signs that we will make it through this challenge,” Biden said in a new statement.

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US inflation hits highest level in 40 years in January as prices rise 7.5% from 2021

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Inflation has been driven higher by soaring demand and lack of supply caused by Covid pandemic’s global impact on trade

Inflation in the US climbed to its highest level in 40 years in January, with prices rising by 7.5% from a year ago, the Bureau of Labor Statistics reported on Thursday.

The rise in the consumer price index (CPI) survey – which measures the costs of a wide variety of goods – was the largest since February 1982. CPI rose 0.6% from December, higher than expected.

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The rise in global inflation – the hit to living standards across the world

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Analysis: From Pakistan to the US, Australia to Germany, the cost of living is rising to new highs and causing new hardships

After decades lurking in the shadows, inflation is back. On Amazon, you can find fridge magnets printed with words spoken 40 years ago by Ronald Reagan, before the election that swept him into the White House.

“Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”

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Unesco warns of crisis in creative sector with 10m jobs lost due to pandemic

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Artists finding it harder than ever to make a living despite being part of one of the fastest growing industries

Ten million jobs in creative industries worldwide were lost in 2020 as a result of the Covid pandemic, and the increasing digitisation of cultural output means it is harder than ever for artists to make a living, a Unesco report has said.

Covid has led to “an unprecedented crisis in the cultural sector”, said Audrey Azoulay, the director-general of Unesco, the UN’s cultural body, in a foreword to the report. “All over the world, museums, cinemas, theatres and concert halls – places of creation and sharing – have closed their doors …

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‘No light at the end of the tunnel’: Americans join Hong Kong’s business exodus

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Worsening Sino-US ties, strict Covid rules and the crackdown on dissent have dented the territory’s fabled allure as a business hub, say expats

In July 2018, Tara Joseph, president of the American Chamber of Commerce in Hong Kong, wrote an article in the best-known local English-language newspaper, the South China Morning Post, stressing to Americans the territory’s unique position as an Asian business hub.

“The US is forgetting the differences between Hong Kong and China. Let’s remind them,” she wrote. “Hong Kong continues to have a robust and hearty infrastructure of values, practices and institutions that could not contrast more starkly with those of the mainland system.”

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