Euro-Area Finance Chiefs Brace for Fresh Fight Over Budget

(Bloomberg) — Euro-area finance ministers will debate the final key elements of a small budget for their currency bloc, as the region seeks to cap two years of difficult negotiations over a tool that falls far short of the original sweeping vision of French President Emmanuel Macron.

The discussion on the budget, whose broad outlines were already agreed in June, will seek to bring to a conclusion difficult talks that pitted the fiscal restraint of the EU’s hawkish North against the South’s calls for spending to stimulate the economy. But entrenched differences over aspects of how this pot of money will be financed may mean an accord remains elusive.

The agreed budget would create a pot of about 20 billion euros ($ 22 billion) to facilitate investments and reforms and help give a boost to poorer nations, rather than help support economies in a downturn, as was initially intended. These funds, which would be part of the EU’s broader budget and distributed over seven years, will be used to help countries see through investments and reforms and help poorer nations catch up.

Proponents argue that the pared-down budget could still be a foot in the door that could evolve into something more powerful in times of crisis. Skeptics of the plan say it’s a toothless tool that could nonetheless help incentivize laggards to reform.

Stumbling Blocks

A key issue ministers will debate is whether the instrument can be financed entirely from the EU’s broader budget, paid in by all the bloc’s 28 governments, or whether it could be topped up by other funding sources in the future.

Countries led by France have been pushing for a deal that would allow funds to be added through further contributions. The Dutch and other fiscal hawks have pushed for it to be funded exclusively from the EU’s budget, a restriction that would limit its total size.

A compromise could include a so-called “enabling clause”, which would pave the way for countries that wish to top up the budget to do so in the future. But the Dutch have insisted that this would only be on a voluntary basis, a red flag for other members.

The other main issue to be discussed involves the details of the so-called co-financing rate, which determines how much money governments will receive from this budget for a project and how much they have to put up themselves. This contribution could vary depending on the member’s economic situation, being reduced during a downturn.

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Egypt overhauling tax procedures to lure investors: finance minister

© Reuters. FILE PHOTO: Egypt's Finance Minister Mohamed Maait gestures during a news conference in Cairo, Egypt © Reuters. FILE PHOTO: Egypt’s Finance Minister Mohamed Maait gestures during a news conference in Cairo, Egypt

By Yousef Saba

CAIRO (Reuters) – Egypt hopes to boost feeble foreign direct investment (FDI) by automating and simplifying customs and tax processes, Finance Minister Mohamed Maait said on Monday, acknowledging that much still needed to be done.

Egypt is coming out of a three-year IMF-backed reform program that helped stabilize the economy after the turmoil that followed a 2011 uprising, and growth rose to 5.6% in the financial year that ended in June. But barring the oil sector, FDI has been falling.

“I have to be very honest. There is a lot of work we have to do in order to make us more attractive to foreign direct investment,” Maait told Reuters in an interview on the sidelines of the Euromoney Egypt conference.

Along with devaluing the currency by half, introducing a value-added tax and slashing fuel subsidies, Egypt has also taken steps to tackle bureaucracy. Egyptians can now file their taxes electronically, which Maait called “a significant step”.

Now the government is working on a bill to unify tax procedures, Maait said. “By the end of October, we will have the chance to issue the first draft to the business community, to civil society,” he added.

“Just yesterday, I contracted a company to automate all these unified tax procedures.” He said IBM (N:) and SAP (DE:) secured the contract but did not disclose its value.

Changes to income tax would be procedural, and no changes would be made to overall tax policy or tax rates, he added.

Automated customs procedures are already in place at Cairo airport, Maait said, and are being developed at Port Said.

EUROCLEAR DEAL

Maait credited the IMF-backed reforms with helping to lure foreign investors back to government treasuries, which had dropped last year due to emerging markets turbulence.

In April, Egypt signed an agreement with Euroclear, Europe’s biggest settlement house for securities, to allow holders of its sovereign debt to clear transactions outside the country.

Maait said at the time that he expected domestic debt to become “euroclearable” in October.

“It is on track, but might not be next month,” Maait said on Monday, adding that a legal change was needed to govern the process and he hoped it would be ready at the beginning of 2020.

Egypt would be Euroclear’s 47th market, said Sudip Chatterjee, head of global capital markets at Euroclear.

Maait also said Egypt’s long-delayed program to sell stakes in state-owned enterprises would resume in the coming months, though he did not specify when.

“We strongly believe the private sector will be the main driver for this economy and for creating jobs,” Maait said. “We have to do a lot to give them the confidence, and to make the environment for them easy to do business.”

Euroclear’s Chatterjee praised Egypt’s reforms but said it needed to do more to develop smaller but “people-intensive” sectors such as tourism – a key source of foreign currency – and IT “where there is more job creation”.

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UK’s Javid says finance sector is top priority as Brexit nears: source

LONDON (Reuters) – British finance minister Sajid Javid told representatives of the country’s financial services industry on Monday that the sector was a top priority for him as the country prepares to leave the European Union, a person familiar with the discussions said.

Sajid said he was committed to close dialogue with the largest firms in the sector at the meeting, his first major encounter with the industry since he took over as finance minister in July, the person said.

He met heads of financial services firms and trade bodies at his Downing Street residence.

Brexit topped the agenda as the likelihood of Britain leaving the EU on October 31 without a deal with Brussels increases, a second source said.

“Sajid said the government will be trying to give the message that Britain is still open to international talent,” the source said.

Financial firms in Britain employ large numbers of EU nationals and the sector wants to continue having the flexibility to recruit internationally to remain competive.

Banks, insurers and asset managers in Britain have opened hubs in the EU to minimise disruption if there is a no-deal Brexit, making the sector one of the best prepared.

But industry representatives raised concerns about a potential “cliff edge” in December for derivatives trades worth billions of euros, the second source said.

Brussels has said that if there is a no-deal Brexit, EU investors can continue using clearing houses in London, but only until next March.

This means that clearing houses like the London Stock Exchange’s LCH would have to serve notice to their EU customers by year end to shift positions from London, unless Brussels signalled before then that it will extend the March cut off.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Australian housing finance data: May Home Loans -0.1% m/m (expected -1.0%)

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G20 finance chiefs to warn of trade risks, differ on how ‘pressing’

© Reuters. OECD Secretary-General Angel Gurria (L) and Japan's Finance Minister Taro Aso pose holding the revised OECD Code of Liberalization of Capital Movements during the G20 finance ministers and central bank governors meeting in Fukuoka © Reuters. OECD Secretary-General Angel Gurria (L) and Japan’s Finance Minister Taro Aso pose holding the revised OECD Code of Liberalization of Capital Movements during the G20 finance ministers and central bank governors meeting in Fukuoka

By Francesco Canepa and David Lawder

FUKUOKA, Japan (Reuters) – Global trade tensions threaten an expected pick-up in economic growth this year and in 2020, a draft communique by the world’s financial leaders showed on Saturday, but the policymakers were divided on whether the need to resolve them was “pressing”.

Finance ministers and central bank governors of the world’s 20 biggest economies, the G20, are meeting in the southern Japanese city of Fukuoka to discuss the global economy amid rising trade tensions between China and the United States.

“Global growth appears to be stabilizing and is generally projected to pick up moderately later this year and into 2020,” the draft G20 communique, seen by Reuters, said.

“However … risks remain tilted to the downside. These include, in particular, intensified trade and geo-political tensions,” said the draft communique, which may yet change before it is released on Sunday.

The draft statement, to which all the G20 financial leaders have to agree, contains a sentence in square brackets — which means it was not yet agreed — that trade and investment were important engines of growth.

“We reaffirm our leaders’ conclusions on trade from the Buenos Aires Summit and recognize the pressing need to resolve trade tensions,” the sentence still under discussion said.

If the sentence is dropped from the final statement, it would mean rowing back on an agreement reached by G20 leaders last year in Argentina that while the existing international trade system — the World Trade Orgnisation — needs improvement, it helps world growth and should be fixed.

G20 leaders also agreed last December to review the WTO reform in Osaka later this month. But progress in overhauling the WTO, which still functions under rules created a quarter of a century ago, has been slow, partly because of U.S. actions to block appellate judge appointments.

A Japanese finance ministry official who attended Saturday’s G20 session told reporters that most of the group’s members voiced concern that escalating trade tensions posed a huge downside risk for the global economy.

“With so many countries expressing concern over the fallout (from the trade tensions), there seems to be some momentum to reflect that in the communique. But there’s no conclusion yet” on the language of trade, the official told reporters.

KURODA HAILS MEXICO DEAL

Relations between the United States and China have deteriorated since U.S. President Donald Trump in early May accused Beijing of reneging on commitments to change its ways of doing business with the rest of the world. Washington raised tariffs on Chinese goods and threatened new levies, while Beijing has retaliated.

U.S. Treasury Secretary Steven Mnuchin, who will hold talks with China’s Yi Gang on the sidelines of the G20 gathering, said the United States wants free, fair and balanced trade with China, in part to close a gaping U.S. trade deficit with China.

But the United States is prepared to levy tariffs on virtually all remaining Chinese imports if the “right deal” cannot be reached to satisfy U.S. demands for better Chinese protections of intellectual property and curbs to technology transfers and state subsidies, Mnuchin said.

“If we can’t have that, the end result will be that my expectation is that many companies will move their production out of China to other locations,” due to tariffs, Mnuchin said.

He said his scheduled meeting with People’s Bank of China Governor Yi Gang will not be a “negotiating meeting” on trade issues, reinforcing the view there will be little breakthrough in the row between the world’s two largest economies.

He added that any major progress will rest with Trump’s expected meeting with Chinese President Xi Jinping at a G20 leaders’ summit late this month.

In a rare positive development, the U.S. administration said it will put off imposing tariffs against Mexico after the two countries reached a deal to contain the migration of immigrants crossing the southern U.S. border.

“It’s a very good outcome not just for the United States and Mexico, but for the global economy,” Bank of Japan Governor Haruhiko Kuroda told reporters.

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Trump’s Mexico Move a Double Plus for World: G-20 Finance Update

© Bloomberg. Mulyani Indrawati on June 8. Photographer: Kiyoshi Ota/Bloomberg © Bloomberg. Mulyani Indrawati on June 8. Photographer: Kiyoshi Ota/Bloomberg

(Bloomberg) — President Donald Trump’s decision to ditch plans for tariffs on Mexico is a clear positive for the world economy, according to Indonesian Finance Minister Sri Mulyani Indrawati and Bank of Japan Governor Haruhiko Kuroda.

Indrawati said the move also signaled a broader U.S. willingness to compromise on its trade conflict with China, describing it as “very plus plus” in an interview with Bloomberg Television in Fukuoka, Japan, where finance and central bank chiefs from the Group of 20 nations are meeting this weekend.

Speaking separately to reporters, Kuroda said the impact of Trump’s decision reached beyond the two countries involved and would be great for the global economy, though he cautioned that trade-related issues still loomed large on the list of uncertainties for the economic outlook.

The remarks came during a morning devoted to the challenges of raising tax from the digital economy, one of many questions on the minds of G-20 finance ministers and central bankers struggling to shore up growth amid trade tensions and a global slowdown.

Here’s a look at main themes emerging from the discussions:

TAXING TIMES

France’s finance minister Bruno Le Maire said there has to be an international solution to the taxation issue and that the world now has to grapple with how to measure digital activities and the sale, exchange and use of data.

Le Maire said G-7 countries will seek a compromise on digital taxation at their next meeting in July in France, which could form the basis of a system for other G-20 countries. Once there is a new system, France will scrap its own digital tax, which is based on turnover, taxing the exchange of data and advertising.

But reaching consensus won’t be easy.

“These are complicated issues in a changing environment and something I am sympathetic to,” said U.S. Treasury Secretary Steven Mnuchin. He agreed on the urgency of addressing the matter but not all the ideas being suggested by his counterparts.

Earlier, the prospect of mouth watering new taxation revenues was dangled by OECD Secretary General Angel Gurria. He argued that a push for transparency in the international banking system has already yielded a bonanza in new tax revenue as money crossing borders is declared in a way it previously wasn’t.

Tax dodgers have “nowhere to hide” he told the audience of G-20 officials.

HEROIC BANKERS

“Central banks are heroes,” Gurria told Bloomberg Television in an interview. “The question is how much armory do they still have, how many bullets, particularly silver bullets?”

There’ll be plenty of one-on-one meetings over the weekend too, with the most anticipated being one planned between Mnuchin and China’s central bank chief Yi Gang. Whether the two countries can get beyond their current impasse will be keenly watched.

The G-20 finance group has gathered annually since 1999, with Japan taking presidency for the June 8-9 gathering.

The main players will hail from Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States, and the European Union. Others will also attend, including officials from constituencies such as Singapore, Switzerland, as well as from multilateral organizations like the International Monetary Fund.

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Zimbabwe finance minister criticizes ‘profiteering’ price hikes as new currency falls

© Reuters. FILE PHOTO:  Finance Minister Mthuli Ncube gestures during a media briefing in Harare © Reuters. FILE PHOTO: Finance Minister Mthuli Ncube gestures during a media briefing in Harare

HARARE (Reuters) – Zimbabwe’s finance minister on Wednesday accused local businesses of profiteering for linking price increases of basic goods to exchange rate movements of a new transitional currency.

Since the RTGS dollar was introduced in February, prices of staples including sugar, cooking oil and rice have risen as much as 60 percent, squeezing already hard-pressed consumers and fuelling resentment against President Emmerson Mnangagwa’s government.

The RTGS launched at 2.5 to the U.S. dollar on Feb 22 and now trades at around 4.3 on the black market.

Price changes should be determined by inflation trends, minister Mthuli Ncube said, adding that month-on-month inflation was slowing.

“It is actually bad economics to link price increases to the exchange rate. That’s not how you do it, it is profiteering,” Mthuli told reporters.

The southern African nation dumped its hyperinflation-hit local currency in 2009 and replaced it with the U.S. dollar, which has been in short supply since 2016. That has in turn driven shortages of fuel, medicines and other goods, hobbling the economy.

In February Zimbabwe scrapped a 1:1 peg between the dollar and the bond notes and electronic dollars it introduced to compensate for the hard currency shortage, merging the surrogate currencies into the RTGS dollar.

On the official market, the RTGS weakened to 3.03 per U.S. dollar on Wednesday, according to central bank data.

But some retailers in major cities have pegged their prices using the higher black market exchange rate, as well as offering discounts on U.S. dollar purchases.

Ncube, who was announcing a $ 400 million wage deal for public sector workers, said the treasury was monitoring price hikes but would not be drawn on whether it would impose controls.

Although trade in the RTGS is restricted, economists expect the currency to come under more pressure when Zimbabwe starts importing grain as a consequence of a devastating drought this year, likely triggering more inflation.

The year-on-year inflation rate climbed to 59.39 percent in February. Ncube has previously said annual inflation will fall to below 10 percent by year-end.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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There is only one rule about sharing lists of finance advice

The one and only rule: Only share the really good ones

Rule lists are a cheap currency. They aim to capture the deepest wisdom in the shortest form possible without any explanation at all. One eureka moment after another.

They rarely succeed but once in awhile you get one that’s insightful, clever and funny all at the same time.

Here’s a sample of Morgan Houssel’s 29 rules of money:

  • Good investing is 50% psychology, 48% history, 2% finance.
  • Great investing is 40% skill, 20% luck, 40% inability to tell which is which.
  • Bad investing is 40% overconfidence, 40% fees, 20% denial that keeps it all going.

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Zimbabwe plans new currency as dollar shortage bites: Finance Minister

© Reuters. People queue to withdraw US dollars from a money transfer shop in Harare © Reuters. People queue to withdraw US dollars from a money transfer shop in Harare

By MacDonald Dzirutwe

HARARE (Reuters) – Zimbabwe will introduce a new currency in the next 12 months, the country’s Finance Minister said, as a shortage of U.S. dollars plunges the financial system into disarray, forcing businesses to close and threatening unrest.

The southern African nation abandoned its own hyperinflation-wrecked currency in 2009 at the height of an economic recession, adopting the greenback and other currencies including sterling and the South African rand.

But without enough hard currency to back up the $ 10 billion of electronic funds trapped in local bank accounts, businesses and civil servants are demanding payment in cash which can be deposited and used to make payments both inside and outside the country.

Mthuli Ncube told a townhall meeting late on Friday that a new local currency would be introduced in less than twelve months.

"On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years," he said.

Zimbabwe currently has less than two weeks import cover, according to central bank data, and the government has previously said it would only consider launching a new currency if it had at least six months of reserves.

Locals are haunted by memories of the Zimbabwean dollar, which became worthless as hyperinflation spiraled to reach 500 billion percent in 2008, the highest rate in the world for a country not at war, wiping out pensions and savings.

A surrogate bond note currency introduced in 2016 to stem dollar shortages has also collapsed in value.

President Emmerson Mnangagwa is under pressure to revive the economy but, in something of a vicious circle, the dollar shortages are undermining efforts to win back foreign investors sidelined under his predecessor Robert Mugabe.

With less than $ 400 million in actual cash in Zimbabwe according to central bank figures, there are fuel shortages and companies are struggling to import raw materials and equipment, forcing them to buy greenback notes on the black market at a premium of up to 370 percent.

The Confederation of Zimbabwe Industries has warned some of its members could stop operating at the end of the month due to the dollar crunch.

Zimbabwe’s iconic manufacturer of cooking oil and soap, Olivine Industries said on Saturday it had suspended production and put workers on indefinite leave because it owed foreign suppliers $ 11 million.

A local associate of global brewing giant Anheuser-Busch Inbev (BR:) said this week it would invest more than $ 120 million of dividends and fees trapped in Zimbabwe into the central bank’s savings bonds.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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