Tag Archives: recession

Ukraine

As Yatsenyuk throws in the towel, a grim future for Ukraine

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If it weren’t possible to be more pessimistic about the future of Ukraine and its economy, Arseniy Yatsenyuk’s sudden resignation on Sunday is reason to be even more glum. (Facebook)

No one believes more in the possibility of a post-crisis and prosperous Ukraine than Arseniy Yatsenyuk, the country’s prime minister and, too often, its chief punching bag.Ukraine Flag Icon

Never beloved, even among the pro-European Ukrainians who live in the country’s western regions and who resent Russian interference within their borders, Yatsenyuk’s goal since the fall of former president Viktor Yanukovych, an ally of Russian president Vladimir Putin, has been rightsizing an economy that’s underperformed even by standards of the region, with growth rates dwarfed by authoritarian Belarus, a Russian ally that’s retained Soviet institutions.

Facing few good options, Yatsenyuk simply gave up, hoping that, perhaps, the resignation of Ukraine’s last ‘true believer’ might shake loose enough support for the economic reforms that Ukraine desperately needs to continue its financial lifeline from the International Monetary Fund. Ironically, though Yatsenyuk has personally advocated liberalizing reforms and anti-corruption measures for years, his government is now seen as incapable of delivering reforms and as incorrigibly corrupt.

Yatsenyuk must now know how former Indian prime minister Manmohan Singh surely felt after a decade in office (if not quite in power).

It’s not even the first time the pressured premier resigned. His resignation in July 2014 paved the way for fresh parliamentary elections in October 2014 that restored a majority for a pro-western, pro-European government that was ultimately headed by Yatsenyuk. Continue reading As Yatsenyuk throws in the towel, a grim future for Ukraine →

Canada

Nine things to watch as Canada’s next Trudeau era begins

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Defying expectations in August that pitted the Liberal Party in third place at the beginning of the election campaign in August, Justin Trudeau has now won a clear majority government and a mandate for change in Canada’s 42nd federal election.Canada Flag Icon

So what does that mean for Canada, for US-Canadian relations and for Canada’s role in the world in the weeks and months ahead?

Here are nine policy areas to keep an eye on as Trudeau begins the rapid transition to 24 Sussex Drive, appoints a cabinet and tackles a full agenda of issues that could dominate what will likely be a full four-year term with the kind of parliamentary mandate that should make it much more easier than Trudeau ever expected to enact his policy preferences.

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Climate change. As the Paris summit on climate change approaches in November, Canada’s government will go from being one of the most skeptical participants at the conference to one of the most enthusiastic supporters of action to reduce carbon emissions. Keep an eye on Stéphane Dion, the former Liberal leader from 2006 and 2008 and a former environmental minister, to play a vocal and supportive role. Nevertheless, global climate change policy is mostly set by the G-2 — i.e., the United States and China. So Trudeau’s role at the summit, while productive, will be more about style than any actual substance. Joyce Murray, a popular left-wing MP and British Columbia’s former environmental minister, who was the runner-up to Trudeau in the 2013 Liberal contest, is also a rising star to watch on environmental matters.

Economic policy. At the start of the campaign, the traditionally more centrist Liberals advanced a tax policy to the left of the New Democratic Party (NDP) by promising a middle-class tax cut to be paid for by slightly higher taxes on those who earn roughly more $200,000 annually. During the campaign, as Canada officially slipped into a shallow recession, Trudeau doubled-down by pledging to engage in deficit spending over the next three years to stabilize Canada’s economy, protect jobs and boost infrastructure. It was this move, again outflanking the NDP (whose leader Thomas Mulcair promised to maintain the Conservative Party’s devotion to balanced budgets), that may have convinced voters that Trudeau, and not Mulcair, represented the most striking contrast with Conservative prime minister Stephen Harper.

Ralph Goodale, a former finance minister under Paul Martin; Bill Morneau, a 52-year-old newcomer first elected last night from the Toronto’s business world and Scott Brison, a former Progressive Conservative MP who defected to the Liberals over a decade ago, could all be leading contenders for finance minister. Continue reading Nine things to watch as Canada’s next Trudeau era begins →

Canada

In Depth: Canada’s general election

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With prime minister Stephen Harper’s decision to call an election last week, Canada has now launched into a 13-week campaign that ends on October 19, when voters will elect all 338 members of the House of Commons, the lower house of the Canadian parliament.Canada Flag Icon

By American standards, where Republican presidential candidates will gather for their first debate nearly six months before a single vote is cast (for the nomination contest, let alone the general election) a 13-week campaign is mercifully short. In Canada, however, it’s twice as long as the most recent campaigns and, indeed, longer than any official election campaign since the late 1800s. But the major party leaders have already engaged in one debate — on August 6.

Plenty of Harper’s critics suggest the long campaign is due to the fundraising advantage of his center-right Conservative Party. Harper, who came to power with minority governments after the 2006 and 2008 elections and who finally won a majority government in 2011, is vying for a fourth consecutive term. He’ll do so as the global decline in oil prices and slowing Chinese demand take their toll on the Canadian economy, which contracted (narrowly) for each of the last five months.

Energy policy and the future of various pipeline projects (such as Energy East, Kinder Morgan, Northern Gateway and the more well-known Keystone XL) will be top issues in British Columbia and Alberta. Economic growth and a new provincial pension program will be more important in Ontario. Sovereignty and independence will, as usual, play a role in Québec — though not, perhaps, as much as in recent years.

In reality, the battle lines of the current election have been being drawn since April 2013, when the struggling center-left Liberal Party, thrust into third place in the 2011 elections, chose Justin Trudeau — the son of former Liberal prime minister Pierre Trudeau of the 1970s and 1980s — as its fifth leader in a decade. Trudeau’s selection immediately pulled the Liberals back into first place in polls, as Liberals believed his pedigree, energy and sometimes bold positions (Trudeau backs the full legalization of marijuana use, for example) would restore their electoral fortunes.

Nevertheless, polls suggest* that two years of sniping from Harper about Trudeau’s youth and inexperience have taken their toll. The race today is a three-way tie and, since the late spring, it’s the progressive New Democratic Party (NDP) that now claims the highest support, boosted from the NDP’s landslide upset in Alberta’s May provincial election. (*Éric Grenier, the self-styled Nate Silver of Canadian numbers-crunching, is running the CBC poll tracker in the 2015 election, but his ThreeHundredEight is an indispensable resource).

With the addition of 30 new ridings (raising the number of MPs in Ottawa from 308 to 338) and with the three parties so close in national polls, it’s hard to predict whether Canada will wake up on October 20 with another Tory government or a Liberal or NDP government. If no party wins a clear majority, Canada has far more experience with minority governments than with European-style coalition politics, and the Liberals and NDP have long resisted the temptation to unite.

Canadian government feels more British than American, in large part because its break with Great Britain was due more to evolution than revolution. Nevertheless, political campaigns have become more presidential-style in recent years, and the latest iteration of the Conservative Party (merged into existence in 2003) is imbued with a much more social conservative ethos than the older Progressive Conservative Party. The fact that polls are currently led by a left-of-center third party, the New Democratic Party (NDP), also demonstrates that the Canadian electorate, which benefits from a single-payer health care system, is willing to shift more leftward than typical American electorates.

Provincial politics do not often portend changes in federal politics, but the 2015 election is proving to be influenced by political developments in Alberta, Ontario, Québec, Manitoba and elsewhere, and many provincial leaders have not been shy about voicing their opinions about federal developments — most notably Ontario’s Liberal premier Kathleen Wynne.
Continue reading In Depth: Canada’s general election →

Canada

Will Canada have a recession election?

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harpereconomyStephen Harper has a timing problem.Canada Flag Icon

Last week, Canadian officials announced that GDP contracted by 0.2% in May, the fifth consecutive decline in the country’s economic growth. If on September 1, statistics show a further decline for June’s GDP measurements and confirm the earlier 2015 data, Canada will officially be in recession — the generally accepted technical definition amounts to two consecutive quarters of negative GDP growth. Stephen Poloz, the governor of the Bank of Canada, recently cut the benchmark interest rate to 0.5% in July, and he may take further steps to loosen monetary policy if economic conditions continue to deteriorate.

For a prime minister seeking a fourth consecutive term in a general election on October 19, that presents a significant difficulty — and the economy will almost certainly loom large during the campaign’s first debate tonight.

Even if Canada doesn’t technically enter a recession during the election campaign, it will be an unwelcome distraction for a prime minister who in 2011 benefited from the perception that his government’s economic leadership saw Canada through the worst of the US-originated global financial crisis.

Now, both Liberal leader Justin Trudeau and New Democratic Party leader Thomas Mulcair will be able to use the economy’s flagging performance as a weapon against Harper. In particular, Mulcair’s emphasis on creating jobs has boosted the NDP to a (very narrow) first place in polls. In May’s provincial elections in Alberta, Rachel Notley and the Alberta New Democrats rode a wave of voter dissatisfaction to end 44 years of consecutive Tory rule. The outgoing premier, Jim Prentice, only recently returned to politics after a prior stint as a Harper loyalist in federal government, became the first political victim of lower oil prices in energy-rich Alberta.

He might not be the last. Continue reading Will Canada have a recession election? →

Venezuela

‘Pragmatic’ Merentes winning control over Venezuela economic policy, but to what end?

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When Venezuelan president Nicolás Maduro appointed Nelson Merentes as his new finance minister shortly after Maduro’s controversial election in April, no one knew whether Merentes would actually be the official in charge of economic policy.Venezuela Flag Icon

That’s because the former finance minister Jorge Giordani, the longtime policymaker in the era of former president Hugo Chávez, remained planning secretary — and in a huge public-sector country like Venezuela, there’s little left untouched by central planning.  Giordani, more than anyone else, was responsible for the statist economic policies of the Chávez era, including currency and price controls.

But this week, there was no mistaking that Merentes is now ascendant — Edmée Betancourt, who had served as president of Venezuela’s central bank (BCV) for just over three months, stepped down in favor of Eudomar Tovar, an economist who was most recently the head of Venezuela’s currency exchange (CADIVI).  Betancourt, a former commerce minister, was seen as closer to Giordani and the more ideological, statist wing of chavismo, while Tovar and Merentes are associated with a more pragmatic, moderate view of economic policy.  Rumors swirled last week that Giordani might soon leave the planning ministry, abandoning a recent push to raise taxes, to take up an ambassadorship soon.

Leave aside for a moment that in an era of central bank independence, neither Giordani nor Merentes would be dominating the BCV’s monetary policy in a country with sounder financial institutions.  If Merentes and Maduro really want to shake up Venezuela’s economy for the better, they should start by reintroducing a line between the ruling Partido Socialista Unido de Venezuela (PSUV, United Socialist Party of Venezuela) and the institutions of the Venezuelan state — starting with the BCV, but also with the national oil company, Petróleos de Venezuela, S.A. (PDVSA).

Merentes’s rise should provide at least some cautious optimism — if Giordani would have doubled-down on statist Chávez-era policies, at least Merentes seems to realize that Venezuela’s basketcase economy has some problems.  The central bank’s reserves are dwindling, Venezuelan GDP growth has slowed to nearly nothing, and inflation has reached its highest level since before Chávez came to power in 1999 on the road to a potential hyperinflationary collapse.

But it remains far from clear that Merentes is willing to embark upon a program of true economic reform or whether Maduro has both the political capital and the political will to enable him to do so.  Moves to devalue the bolívar both officially and unofficially earlier this year was a start in bringing the Venezuelan currency’s stated value in line with its real market value, but the currency has decline further in value throughout they year: despite an official value of 6.3 bolívares to the dollar, its real value has dropped from around 20 at the time of the April 14 election to more than 30 or 35 today.  Maduro took steps to tweak the currency exchange system through the introduction of SICAD auctions earlier this spring — because the vast majority of U.S. currency comes to Venezuela through the government’s sale of oil products, the government must develop a mechanism to sell those dollars to importers who need hard currency.  But neither Maduro nor Merentes have been in a rush to hold regular dollar auctions (only around $600 million has been auctioned off so far in 2013) or to deliver the actual dollars from the government to the private sector.  But the fuss over SICAD and currency exchange is really just a stop-gap measure — if the ‘pragmatists’ can’t even get this right, it leaves little faith in their ability to overcome more fundamental problems with Venezuela’s economy.

Maduro and Merentes still hope that they can borrow their way out of Venezuela’s current malaise, and the government had the brass to float the possibility two months ago that Merentes would go on a roadshow to New York and London to gauge appetite for Venezuelan bonds.  That roadshow plan quickly fell apart when it became clear that there’s little appetite for risky Venezuelan debt among global investors — yields on Venezuela’s benchmark bond have been in the double digits since Maduro’s election. Continue reading ‘Pragmatic’ Merentes winning control over Venezuela economic policy, but to what end? →