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Robert Peston Blog wrote a new blog post titled The deflation that isn't deflation
The Bank of England expects inflation to be zero or very close to zero for most of this year, starting in March. And it says there is a greater than evens chance that it will turn negative, that prices will fall, for much of this period. But the governor, Mark Carney, insists in his letter to the chancellor that this is not deflation. This is what he says: "The UK is not experiencing 'deflation': excluding food and energy, 68% of the underlying categories of the CPI are...
1679 days ago
Robert Peston Blog wrote a new blog post titled Greece and the Eurogroup need a marriage counsellor
The thing about marriages that break down is they can take an unconscionable age either to be mended or to be formally ended - because of a combination of the evaporation of trust, the tendency to blame the other for failure and the difficulty in working out who gets what of the assets and liabilities. So none of us should really have been surprised last night when Jeroen Dijssselbloem, finance minister of the Netherlands and chair of the Eurogroup of eurozone finance ministers, told us that discussions with Greece "covered a lot of ground but we...
1679 days ago
Robert Peston Blog wrote a new blog post titled What is Baltic saying about global slowdown?
Let's start by owning up: I am last with the news. Zerohedge and Bloomberg both noted yesterday, and I didn't, that the Baltic Dry Index has collapsed to a level we haven't seen since 1986 (a year where my memories are not exactly razor sharp, for reasons you can guess). Just in the first six weeks of this year it has fallen almost 30% and it is a third of its peak value of the past 52 weeks. Jimminy. It means, in case you forgot, that...
1679 days ago
Robert Peston Blog wrote a new blog post titled Where is the deal between Athens and Berlin?
I am on my way to Strasbourg, to meet Marine le Pen, leader of the Front National, for the second time in just a few months - for a film I've been making about the significance of the surge in popularity of younger populist parties of left and right throughout Europe. Their rise and rise is both a response to the lamentable economics of Europe and - especially - the eurozone. And they will be the big influence on the region's economic future, for better or worse. Le Pen, for example, is the only French politician...
1680 days ago
Robert Peston Blog wrote a new blog post titled UK plans for possible Grexit
The prime minister this morning chaired a meeting of senior officials to discuss the impact on the UK of possible Greek exit from the eurozone - and to take steps to ensure British banks and companies would not be excessively damaged. Attended by the head of the Treasury, Nick Macpherson, the Treasury's director of financial stability, Lowrie Kahn, and the Bank of England's international director Phil Evans, David Cameron asked for information on the impact on Greece and the rest of the eurozone of Greece leaving the eurozone....
1682 days ago
Robert Peston Blog wrote a new blog post titled Little space for compromise between Athens and eurozone
The onward march of the Front National in France and the implosion of France's Socialist Party seems to have been arrested, at least temporarily, with the election of the socialist candidate in a parliamentary by-election in Doubs in eastern France. The margin of victory of the PS's Frederic Barbier over the FN's Sophie Montel was slim - 51.4% to 48.6%, a difference that hardly shows a resurgence in popular support for France's political establishment. But it will reinforce the confidence of Francois Hollande -...
1682 days ago
Robert Peston Blog wrote a new blog post titled Why has the ECB punished Greece?
The most immediate and serious consequence of the European Central Bank's (ECB) decision to refuse to lend to Greek banks against the security of Greek government bonds is that it is very difficult to see how any bank over there can provide a cent of new credit to even the most deserving borrowers. Which means that if the Greek economy was growing yesterday - which it might have been, on the basis of recent statistics - it won't be any longer. Why would it be impossible for Greek banks to create credit and make...
1685 days ago
Robert Peston Blog wrote a new blog post titled Global debts rise $57bn since crash
After the explosion of borrowing in the boom years that led to the great crash and recession of 2007-08, most governments - especially those of rich developed countries - said they would embark on policies that would lead to greater saving, debt reduction and what's known as deleveraging. They implied they would encourage prudence, so that the sum of household, business and government debt would fall. So what has actually happened to global debt? According to a new study by...
1686 days ago
Robert Peston Blog wrote a new blog post titled IFS spells out general election choice
The IFS's Green Budget starkly illustrates the central economic choice facing voters in May: bigger cuts with a Tory or Tory-led government; higher public sector debt with a Labour one. The contest stems from their differing approaches to balancing the books: the Tories want an overall surplus by 2018 and surpluses thereafter in all "normal" years; Labour wants balance only on the current budget - that's day-to-day spending, excluding investment - by 2020. On the IFS's calculations, that means the Tories would have to make cuts to departmental...
1687 days ago
Robert Peston Blog wrote a new blog post titled Why Syriza wants a five-month cool-off
When I spoke to the Greek finance minister last night, Yanis Varoufakis said that he with his "left-wing heart" had much in common with the hedge fund managers and bankers he was wooing last night. He told me: "It's a strange kind of alliance we are forging between a left-wing government and the financial sector... When you are in a debt deflationary cycle, putting an end to it both benefits the population by bringing it out of the clasps of misery and growing helplessness and increases equity prices."...
1688 days ago
Robert Peston Blog wrote a new blog post titled ECB's power of life or death over Greece
The biggest threat to an orderly resolution of Greece's new debt crisis is that the European Central Bank ceases to fund Greece's banks. And the ECB may well feel obliged to turn off the tap, since right now it is only financing those banks because the country is officially complying with the terms of its IMF and eurozone bailout. So at the moment that Greece was deemed not to be in compliance, it is difficult to see how the ECB could continue to provide emergency liquidity assistance to Greek banks....
1689 days ago
Robert Peston Blog wrote a new blog post titled Why is the Treasury's interest rate so low?
How should the government take advantage of the record low interest rates it pays? There are two big immediate causes of the rising price of UK government bonds or debt - whose effect is that it is cheaper than it has ever been for the Treasury to borrow for maturities of ten years and thirty years. First, inflation in the UK, driven mainly but not totally by falling oil prices, is heading towards zero in April and may turn negative or into deflation thereafter. Inflation...
1692 days ago
Robert Peston Blog wrote a new blog post titled Carney attacks German austerity
The governor of the Bank of England, Mark Carney, has tonight made what can only be described as a thinly-disguised attack on the German government's refusal to spend and borrow more to promote growth throughout the eurozone. Germany is not once mentioned by name in his speech - entitled "Fortune favours the bold" - which he gave this evening on the fringes of the eurozone, in Dublin. But in saying that monetary union cannot work without fiscal union - or the ability and willingness of countries with...
1693 days ago
Robert Peston Blog wrote a new blog post titled A slower recovery
There has been a slowdown in the British economy, driven by weaker construction, manufacturing and energy production - although it would be premature to see this as an end to the recovery. GDP, or national income, grew 0.5% in the fourth quarter of the year, compared with 0.7% in the third and a recent peak of 0.8% in the second. That looks like a trend. That said, annual growth in the last three months of the year was still a healthy 2.7%. In 2014 as a whole the economy expanded 2.6%....
1695 days ago
Robert Peston Blog wrote a new blog post titled Why aren't markets panicking about Greece?
The Greek people don't seem desperately grateful for the 240bn euros in bailouts they've had from the eurozone and IMF - and here is one way of seeing why. The country's economic crisis was caused in large part because its government had taken on excessive debts. So at the time the crisis began in earnest, at the end of 2009, its debts as a share of GDP were 127% of GDP or national income - and rose the following year to 146% of GDP. As a condition of the official rescues,...
1696 days ago
Robert Peston Blog wrote a new blog post titled Can Labour pay for university fee cut?
We may be about to learn how much of a constraint Labour's promise to make no unfunded spending promises really is. Because I have been told that Labour's leader, Ed Miliband, wants to next month announce an eye-catching policy of cutting maximum university fees for students by a third, from £9,000 to £6,000. But this would not be cheap: it could cost around £2.5bn a year, based on the £7.6bn that is expected to be lent to students this year to pay for their tuition fees. In...
1696 days ago
Robert Peston Blog wrote a new blog post titled Why no le Pen or Farage at Davos?
Paloma Faith opened her set at Google's Davos jamboree by shouting - with no apparent sense of irony, as the vintage Bollinger flowed - "let's spread the 1%". What she meant, presumably, was "let's find a way to redistribute some of the almost-50% of the world's wealth controlled by the richest 1%" - who undoubtedly include Paloma Faith. The World Economic Forum at Davis isn't thronged by the best-heeled 1% of course. It's in effect the annual general meeting of the top 0.01% - the super elite...
1698 days ago
Robert Peston Blog wrote a new blog post titled Will cheap euros save the eurozone?
So the European Central Bank has embarked on cash creation through quantitative easing some six years after the Bank of England and the US Federal Reserve embarked on what was then regarded as an unconventional monetary policy. And the size of the programme, relative to eurozone GDP or output, is not a million miles from what those other central banks did. In other words, it isn't trivial. If the ECB buys all it might, it would create well over a trillion euros of new money, for the purchase of government bonds -...
1699 days ago
Robert Peston Blog wrote a new blog post titled A lucky chancellor
Maybe George Osborne will be seen as a lucky chancellor, because the fall in oil prices and the rate of inflation has happened at the most perfect time for the Tories - and presumably the Liberal Democrats too - in relation to the electoral cycle. But there is a caveat, to which I will return. Here is his bliss. The spending power of businesses and households has been significantly increased by tumbling oil prices. In fact the Bank of England's minutes released today suggest...
1700 days ago
Robert Peston Blog wrote a new blog post titled Will euro QE work?
On Thursday we get the what and how much of eurozone quantitative easing. Among investors and the media, I've rarely encountered quite so much fevered expectation about a policy that is very unlikely to do more than provide additional painkillers to an economy that needs rather more radical structural treatment (see my post of 14 January). So it might be worth thinking about what QE is supposed to do that could be useful. Well, as Ben Bernanke, the former chairman of the US...
1702 days ago