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Bidenomics Has Roots in Economically Fragile Southern Europe | Instant News


ROME – Global policy trends heavy fiscal stimulus, led by the US, faces test cases in Southern Europe.

Italy, Greece and Spain, which were hit hard in the European sovereign debt crisis a decade ago, are once again running large budget deficits and planning to spend on a large scale to improve their economies.

Italian Prime Minister Mario Draghi and other leaders in the region are betting that ambitious investment can provide a lasting growth boost. If the stakes don’t work out, these countries will be saddled with some of the highest debt ratios in the world, potentially destabilizing the eurozone.

After years of running tight budgets with little room for transformative investments, they now see a once-in-a-generation opportunity to revitalize their economies.

Mr Draghi, presenting his plan to the Italian Parliament, said that it contained not only a list of public works but also “the destiny of the country.”

Many developed countries have accepted President Biden’s belief that aggressive fiscal stimulus and public works can not only repair the economic damage caused by the Covid-19 pandemic but also boost growth in the coming years.

The massive loan plan, exploiting historically low interest rates and central bank support, stands in stark contrast to Western countries’ tilt for austerity after 2010, when many governments cited Greece’s debt crisis as a warning about where excessive deficits could lead.

The European Union, which for years promoted a balanced budget even when it required painful austerity measures, is taking part in borrowing. The middle part is The European Union’s recovery fund is worth 750 billion euros, the equivalent of $ 900 billion, is officially known as the Next Generation European Union. The mix of grants and low-cost loans will be financed by general EU bonds and aim to support investment and improvements that increase productivity and long-term growth.

European Economic Struggle

“This is a clear change in the economic paradigm. Taking debt to finance growth, doing it on a large scale, and on top of the already high existing debt, is something we’ve never seen before, “said Enzo Moavero Milanesi, Italy’s former foreign minister.

Mr. Draghi, who is president of the European Central Bank played a major role in taming The near euro terminal debt crisis of 2012, now has a unique opportunity to destabilize Italy’s struggling economy.

Since the 1990s, Italian leaders have tried to overhaul the country’s sclerotic economy while also running a tight budget. Mr Draghi is the first in decades that can use massive fiscal weapons to help.

The Italian economy has rarely grown by more than 1% annually for the past quarter century. The economy has never fully recovered from the global financial crisis and the subsequent eurozone crisis, and is slumping another 9% in 2020 amid the pandemic and tight lockdowns.

Germany, France and other EU countries supported the recovery fund primarily out of concern Italy and Southern Europe could be caught in another deep economic slump that is once again testing the cohesion and viability of the eurozone.

“I think there is broad agreement at the moment that we need economic growth rather than fiscal tightening to emerge from the crisis and shore up massive public debt,” said Federico Santi, analyst at risk consulting firm Eurasia Group.

Italy will be the largest recipient of EU funding with around € 190 billion, of which € 70 billion is in grants. The country will add nearly € 60 billion from its own coffers to fund investment plans.

Protesters gathered outside the Greek parliament to demonstrate against austerity in 2015.


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Christopher Furlong / Getty Images

Italy’s debt has reached 156% of gross domestic product, mainly due to the pandemic. Greece has increased to 206%, the highest ratio in developed countries after Japan.

Most of Greece’s debt is in the form of bailout loans from other eurozone, without repayment for years, making another Greek debt crisis unlikely for long.

Europe’s main long-term risk on debt sustainability relates to the much larger Italian economy. The future of the euro may once again depend on Mr Draghi’s performance.

“The big risk is that these investments will not increase a country’s ability to grow, which means that they will only stimulate GDP for a few years. The effect of higher demand will then decrease, growth will be lower again but debt will be much higher, ”said Lorenzo Codogno, a London-based consultant and former economist at the Italian Ministry of Finance.

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Financial markets are relaxed about risk, for now, with the expectation the ECB will resume large-scale government bond purchases, keeping sovereign borrowing costs low.

“I think the ECB will maintain an accommodative monetary stance for two to three years no matter what. I hope this provides all the support possible in this phase, ”said Francesco Daveri, an economist at Milan’s Bocconi University.

However, financial market pressures could start to emerge in the long term if economic growth is sluggish again, debt remains high and the ECB tightens its monetary policy, economists say.

While the thinking behind the US and European fiscal packages is partly parallel, the scale is much bigger in the US, which has so far introduced fiscal measures worth around 26% of its GDP, far outpacing all stimulus efforts in Europe.

A bar in Venice last week after coronavirus restrictions were relaxed.


Photo:

manuel silvestri / Reuters

European spending plans are not aimed at increasing household spending but rather at increasing the productive side of the economy, through investment in digital and physical infrastructure, education, environmental efficiency and other long-term needs.

Mr Draghi also aims to improve Italy’s inefficient public administration training and technology, as well as streamline the notoriously indolent justice system.

If the efforts of Mr Draghi and his Greek and Spanish counterparts do not bear fruit, the experience is likely to lead to renewed pressure for fiscal discipline from Europe’s financially conservative north. But if the return to big loans pays off, it will reinforce calls for a European fiscal union to use the EU’s collective power to invest in weaker economies.

“If Bidenomics works in the US, President Biden will go down in history as the new Roosevelt,” said Moavero. “In Europe, the effects may set a precedent that will be difficult not to repeat.”

Write to Giovanni Legorano at [email protected]

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India Travel Ban: US Restrictions, Covid-19 Cases and What You Need to Know | Instant News


Why did the Biden administration restrict travel from India?

The US suspended nearly all travel from India from May 4 during the devastating wave of Covid-19 that has broken a global record for new cases. The country of around 1.3 billion people has seen an increase in infections of more than 1 million in the past week alone, bringing the total number of cases since the start of the pandemic to over 18 million. The death toll has surpassed 200,000 and is expected to be much higher. The surge came as the Indian government relaxed restrictions and struggling to vaccinate its population, with a variant that could potentially function as an accelerator.

When did the US-India travel ban start?

The travel ban took effect May 4. Those who are exempted will still be allowed to travel to the US after the restrictions are put in place. The travel ban is not limited until it is lifted by President Biden.

Is everyone prohibited from traveling to the US from India?

Travel restrictions will not apply to US citizens or permanent residents and their spouses. Other individuals who may qualify for exemptions include humanitarian workers, certain journalists and academics, and students starting studies in the fall, according to a State Department decree. The exceptions reflect other countries affected by the pandemic-related travel restrictions. Most other travelers who have been in India during the 14 day period prior to their attempted entry to the US will be banned.

New York City’s John F. Kennedy International Airport is the main US entry point.


Photo:

Angus Mordant / Bloomberg News

Do people who are still allowed to travel to the US from India face any conditions when they arrive?

Individuals exempt from travel restrictions still have to meet other US requirements for international travelers. The Centers for Disease Control and Prevention currently require that all air travelers bound for the US have evidence of a negative Covid-19 test no later than three days prior to arrival, regardless of vaccination status. Travelers are then asked to take the test again three to five days after their arrival in the US and self-quarantine.

How many airlines and airlines operate between the US and India?

United Airlines Holdings Inc.

and Air India are the two airlines currently offering non-stop flights between the US and India. United operates four round-trip flights between the two countries every day. Air India in April had between three and six flights scheduled every day, according to Cirium, a flight data provider.

What if you already booked a flight from India?

Unless travelers are among the exemptions outlined by the US government, they will be barred from entering the country after May 4 even if they have already booked tickets. A United spokesman said in a statement that the airline would comply with the new restrictions and would issue refunds to travelers who had booked flights and were barred from entering the US.

Have other countries prohibited travel from India?

More countries have effectively banned travel from India during the surge. The list includes the UK, Canada, Australia and the United Arab Emirates. Several governments have urged their citizens to avoid all travel to India or increase quarantine requirements for those arriving from the country.

How many people travel from India to the US each year?

Indians made about 1.5 million visits to the US in 2019, according to the National Travel and Tourism Office.

Which other countries face travel restrictions or restrictions on the US?

Since the start of the pandemic, the US has banned most travelers from the UK, European Union, Ireland, Brazil, South Africa, China and Iran. The US recently relaxed travel restrictions for some international students, academics and journalists.

Write to Sabrina Siddiqui on Sa[email protected]

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New Zealand Scores Well in Anti-Money Laundering, but Gaps Remain, Watchers said | Instant News


New Zealand has put in place some effective measures to combat money laundering and terrorist financing, but there are still gaps to be overcome, according to a report from the international standards body.

The Financial Action Task Force, a Paris-based organization that also monitors legislation aimed at fighting money laundering and terror financing, said New Zealand’s measures were “yielding good results,” but the country needed to increase transparency of beneficial ownership information. , strengthen sector-specific surveillance reporting suspicious activity and better monitor compliance with financial sanctions to prevent terrorist financing, according to an evaluation published on Thursday. The country was last evaluated by the FATF in 2009, with a follow-up in 2013.

A representative from the New Zealand Department of Home Affairs, which is the body responsible for overseeing compliance with anti-money laundering and terrorism financing regulations, was not immediately available for comment.

“The report recommends increasing the scope and depth of the Reserve Bank [Anti-Money Laundering/Combating the Financing of Terrorism] banking sector oversight, ”a spokesman for the Reserve Bank of New Zealand, another watchdog, said in a statement. “To the extent possible, the Bank is addressing this within the scope of the five-year funding agreement approved last year.”

The FATF lauds many aspects of New Zealand’s anti-money laundering and anti-terrorist financing system. The country’s law enforcement agencies regularly use financial intelligence to detect potential criminal activity and investigate and prosecute offenses, particularly in recovering the proceeds of crime, according to the report.

The group said New Zealand also needs to strengthen oversight of certain sectors, including lawyers, accountants and real estate agents, which have been included in the scope of the country’s anti-money laundering measures in recent years and must now put in place processes and systems. to deal with money laundering and terrorism financing.

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The FATF recommends that New Zealand increase the transparency and availability of accurate and up-to-date beneficial ownership information, such as limited liability companies and partnerships, which can be used to launder illicit funds, after implementing measures to reduce risks associated with companies and limited liability companies. partnerships in recent years.

New Zealand law enforcement also remains wary of funds being used for domestic terrorist attacks in the aftermath mass shootings at two mosques in Christchurch in 2019, said the FATF. Terrorist financing investigations have also been thorough and well-coordinated, the group said in the report.

New Zealand has a strong legislative framework for implementing financial sanctions to combat terrorist financing, such as asset freezes, said the FATF. But the report notes that there are no assets frozen in New Zealand under its financial sanctions regime, which may be consistent with the country’s risk profile.

The FATF also found that some New Zealand entities have different understandings of sanction compliance obligations, due to limited guidance from the authorities and a lack of a mandate for regulators to enforce these requirements.

Write to Mengqi Sun at [email protected]

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Green Germany Could Pump Europe’s Fiscal Push | Instant News


A decade ago, Germany’s stubborn stance on bailouts and loans prolonged the eurozone debt crisis, one reason the region’s economic recovery is lagging behind the US.

Another crisis, another late recovery for Europe, and again the size of the fiscal stimulus is one of the factors. But Germany is not the barrier it used to be, and the rise of the Green Party could propel countries and continents further toward the US model of aggressive government stimulus.

Angela Merkel, the conservative chancellor who has led Germany since 2005, has done it assuaged some of his past refusals to borrow. He not running for re-election This September and opinion polls put the Greens in second place, close behind Merkel’s Christian Democratic Union-led alliance. They can emerge as junior partners or even leaders of the next governing coalition.

The Greens have evolved from an anti-nuclear pacifist party to a pragmatic center-left group that regularly participates in German federal and state coalitions called länder. The party still has a hardline environmentalist wing, but leadership rests in the hands of its moderate wing, including Annalena Baerbock, a 40-year-old lawmaker who was nominated last week to run for chancellor this fall.

“Many people previously thought the Green Party would never do economic policy – they just wanted to do organic farming and a vegan Yoga course,” said Sven Giegold, a member of the European Parliament Greens and spokesman for the party on economic issues, in an interview. “But this time it’s over. We are already in government in 11 of the 16 länder and in one of them, the prime minister. We’re not naive. We know how government works. “

Since the Greens have moderated, the whole world has moved to the left, especially to the climate. As such, the Green platform will not look out of place in many mainstream liberal parties. They want to cut carbon emissions faster by raising carbon prices and phasing out coal and internal combustion engines, increasing taxes on wealthy and multinational companies, and promoting future industries, such as renewable energy and artificial intelligence.

Unlike right-wing populist parties, they are deeply globalist, supporting global treaties on trade, human rights and the environment. They are tougher on China and Russia than Merkel, citing the same reasons the US does: geostrategic competition and human rights.

The Green Party is also different from Ms. Merkel in a completely mediocre thing in other countries: a willingness to run a budget deficit.

The prevailing German economic ideology, ordoliberalism, treats debt as almost immoral. Constitutional debt braking requires länders to balance their budgets and limits the structural federal deficit to 0.35% of gross domestic product. In comparison, the (often breached) limit for eurozone members’ deficits, stated in the Stability and Growth Pact, is 3%, and the US federal deficit averaged 5% from 2009 to 2019.

German Chancellor Angela Merkel has become more willing to support the government’s stimulus program.


Photo:

Jesco Denzel / Zuma Press

Merkel’s government has long boasted of a “black zero”: a deficit-free budget that actually pays off debt. Such fiscal discipline is historically prudent, but not in the last decade when the world has chronically lacked demand.

The eurozone has an inherent bias towards austerity because of the Stability and Growth Pact and because a heavily indebted country like Italy cannot borrow that much when it no longer controls its own currency. In the last decade, Germany has reinforced that bias by resisting concerted efforts to save Greece, bolstering the region’s banks or borrowing via Eurobonds to support regional growth.

However, in the last year, Germany has changed. Ms Merkel puts her support behind € 750 billion ($ 907 billion) European Union recovery fund, financed by Eurobonds, a major step towards US-style fiscal unity. His reign too suspend the debt brake to pump pandemic aid into the economy.

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These steps are meant to be temporary; The Greens will make it permanent. “Germany has a bigger problem than debt,” said Giegold. “The biggest problem is the lack of investment [that] risking our competitiveness. “

The Greens want to change the debt brake to allow lending for public investment, which they say is economically astute due to negative German interest rates. “Smart entrepreneurs don’t save, they invest. The smart state does the same, ”the party platform stated.

The party has proposed investing € 50 billion a year in faster internet, research and development, charging stations, expanding railroads, emission-free buses and urban development.

That’s comparable to President Biden’s infrastructure plans when measured as a share of economic output. But the Greens didn’t share A more expansive US hug to the deficit. They are “pragmatic, not dogmatic,” said Marcel Fratzscher, president of DIW Berlin, a German think tank. “I’m not going to put it in anything [economic] camp, even Keynesian. “

The Green Party wants to make the EU recovery fund permanent, expand the EU budget financed by its own taxes, and reform the Stability and Growth Pact so that “excessive pressure to save is prevented and future investment can be further increased,” according to its platform.

The obstacles are quite large. Even if the Greens emerge victorious in September, they will be short of votes to change the constitution. Indeed, the rise of the Green Party does not reflect a leftward shift in German politics, but rather a disintegration of support for the Social Democrats, a partner of Merkel’s current junior government.

Across Europe, traditional centric parties have lured voters, often toward anti-globalist movements on the right. The European Union has lost Britain to an anti-globalist reaction.

For now, leaders in France and Italy are once again eyeing the US race ahead and want to emulate its fiscal formula. Germany seems ready to join them.

Write to Greg Ip on [email protected]

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Germany, France and Italy Begin EU Recovery Plan. Three Questions about the Long-Awaited € 750 Billion Program. | Instant News


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