The policies of austerity in Greece will be evaluated in the elections of January 25

  • 31 December 2014

Greek parliament announced its dissolution, since even in the third and final vote to elect the new President of the Republic has been able to collect a sufficient majority to elect the technical Stavros Dimas. The constitutional provisions in such circumstances require them to hold early elections. The Greek Parliament, therefore, said that early parliamentary elections will be held on January 25th.

The favourite party – in the lead in all recent polls – is Syriza; training anti-austerity left led by Alexis Tsipras, a forty year old who stood out against the austerity policies that Greece has endured until now.

Tsipras said: “Europe must take the lead in something. What matters in democracy is the vote. And the future of my country I will decide my fellow citizens and not the hawks euro. The task of the Greeks is a choice between new cuts and the Troika or hope. “

The leader of Syriza, in fact, hopes that, with the election victory of the end of January, will start “the end of those who brought Greece into the abyss.” The main difficulty, which makes no bones about speaking out in the speeches of the election campaign, has come -within February-end in an agreement with the Troika (composed of the International Monetary Fund, European Central Bank and European Union) to unlock new aid and avoid default. “There is one thing not negotiable: – declared the leader of Syriza – we want to get out of the memorandum without new cuts tears and blood.” Consequently the austerity measures for two billion, demanded to grant the last tranche of seven billion loans would not be implemented.

SYRIZA, specifically, should find an agreement for the financing of recent loans and the granting of a precautionary credit for a repositioning in a large scale of Greek government bonds in the markets. Under the agreements, in exchange for these loans, was granted the promise of reform about rising the retirement age, the increase in VAT on tourism and greater flexibility in collective redundancies. Measures on which SYRIZA has no intention of negotiating, as on the domestic front would raise the minimum wage and pensions, in addition to blocking the layoffs of public sector and privatization. On the private, also, the intention is to provide free electricity to the poor families.

The position of the IMF was extremely cautious and aims to gain time: there are immediate needs funding for Greece, and the talks on the last tranche of funding for 7.2 billion euro (about 240 total aids) have been suspended pending the formation of the new government.

The program of SYRIZA however expected that Greece does not undermine the stability of the banking system of the European Union, therefore, is excluded exit the euro. Even on the outside front Tsipras intends to safeguard the Greek central bank, therefore, said they did not want to take unilateral decisions on the debt or to affect in any way the private savings, although aiming to intensified fight against tax evasion.

As for the public debt Tsipras said to aim at reducing up to 70% or, more realistically, a moratorium on payment of interest on debt that has grown to around 9 billion euro. The implementation of the policy measures proposed by Tsipras is in each case subject to the financial support of the ECB to ensure.

The German Finance Minister Wolfgang Schauble promptly warned Greece about the importance of completing the path of reforms undertaken. Schauble has, in fact, stated that the agreements made with the Troika “must be respected”, so the next government will still have to comply with the guarantees offered to Europe by the outgoing Prime Minister Samaras, whether it will also make use of the aid euro zone.

Germany’s position, therefore, is clear: if Syriza will ask for a moratorium on debt repayment, Greece could be forced to abandon the single currency, but did not trigger any domino effect, because now the euro is protected by MES (Mechanism European stability, with 500 billion) and its banks are in the shelter of the recent reform of the sector.

The countries for which it is feared a political contagion are Italy, which is on the eve of the election of a new President of the Republic, Spain (where elections will be held in 2015 and where is Podemos, movement akin to Syriza, is gaining valuable points in recent polls) and Portugal (which set the elections in the first half of the year). In fact, in recent times seems to have accentuated fatigue against austerity policies in the weaker countries and against bailouts in creditor countries, especially Germany. The parties and movements openly Euro sceptic, according to the latest polls, are gaining ground both in Spain and in Italy; while the German attitude seems increasingly inflexible.

The German statements, however, do not seem to take into account the free vote of the people Greek. The attitude of Germany proves to be away from basic democratic principles, protected and supported throughout Europe. The explanation, purely economic, it could be that in the event of default Greek, to pay would first of all the German public bank, which owns a large part of the 260 billion debt Greek, together with key member states of the euro zone and the ECB.

However, the threats made by Germany would not be applicable, since only the ECB, in principle, could cut lending to Greek banks.

For its part, the European Central Bank announced that at this time will not interfere in the democratic process to which the electorate must participate Greek to choose the future parliament. The ECB, however, awaits guidance and suggestions from the Greek authorities on ways of verifying the financial assistance program, after the failure to elect the President of the Republic and the resulting early elections: “We will wait your comments and suggestions on how the Greek authorities best to proceed with the verification, and we will discuss with the European Commission and the International Monetary Fund.”

In the same statement, the ECB also stressed that the efforts made by Greece in impressive fiscal consolidation and economic reform should be crowned with a return to growth, expected in the next year.

The next meeting of the board of the ECB, scheduled for January 22, will focus on whether to adopt new monetary stimulus, including the purchase of public debt securities of the member countries of the Euro zone. Greek events are intended to further tighten the controversy in Germany against the possible adoption of quantitative easing (Qe), which provides for the purchase of government debt by the ECB, as it expands the risk of a default or otherwise heavy costs for creditors. The massive purchase of government bonds euro zone aims to inject liquidity into the system. Any decision, three days before the election, it would be an unexpected safety net for Athens at the European level. Doubt greater is the risk that the new government decides Greek, then, despite the help offered, not to repay the securities purchased by the European Central Bank.

The market reaction to the news of early elections Greek was predictably negative. The losses, however, have been limited and, at the conclusion of the session, circumscribed.

Obviously, to be most affected were primarily the economies in the course of rehabilitation and, according to the known script “flight risk”, operators have sold bonds of weaker countries, such as Italy and Spain, and bought those countries most solid like Germany.

In addition to the loss of scholarships Mediterranean, the rate of BTP, shortly after the publication of the news, rose more than 2% (to levels reached last December 17). In parallel with the performance in the same German Bund began a slow descent that led up to a new record low of 0.54%. On the Stock Exchange were penalized titles Italian and Spanish banks (the most exposed in their sovereign debt). The flight from risk, however, has gradually reabsorbed during the session of 29 December.

The Algerian economy hit by the oil prices collapse: fears and reactions

  • 30 December 2014

The oil prices collapse and the global economic difficulties (that still remain today) are considered the main culprits of the fears about the economy of Algeria.

In the words of Madjid Makedhi, appreciated columnist for the newspaper El Watan, the economic, political and social crisis in this period is the result of ” years of mismanagement and opulence ostentation ”.

The major worriers are caused by the need to cope with a massive curtailment of the amount of royalties derived from oil and natural gas, always the financial basis of social projects especially. The local administrative structures, over all, fear cuts in transfers from the state and, therefore, the downsizing of services.

It’s possible understand the Algerian desire for renewal in some projects funding, announced in recent months, in several sectors of the economy.

Firstly the prohibition for Algerian companies to invest abroad (born to prevent the flight of capital abroad) was eliminated. Council of money and credit decide this change, following a directive made by the Central Bank. This directive will apply to all companies, both public and private capital. However, there are limitations, including the complementarities of the sectors to which seeks investment (the company must invest in its own sector). In addition, the Algerian company must hold at least ten percent of the share capital of that in which it decided to invest and will be established roofs inviolable, which will vary depending on individual sectors.

Another area involved in this reform program is the energy sector. Algeria has, in fact, decided to increase this sector, as part of an energy plan that will be developed over five years (2015-2019), the supply of electricity to country. This challenge will result in the creation – from North to South of Algeria –of a network of stations of the latest generation and, therefore, high technology, which, when fully implemented, will deliver more than eight thousand megawatts, thus covering a portion of consistency global demand.

Algeria has also decided to develop an industry that until now has not been among the drivers of the economy: tourism. The Ministry of Tourism has, in fact, well-approved 847 projects that will bring the current offer to a rise of more than one hundred thousand beds. Initiatives-which provide a total investment of 355 billion dinars (about 330 million euro) – will also have an impact on the labor market, as it is estimated that forty-four thousand will generate new jobs.

Attention to the private sector is also a new commitment in support of the public sector, which alone accounts for 20% of the national total. The program provides for improvements, such as raising the quality of the level of private enterprises.

The desire to stimulate tourism can be seen also in the decision to initiate interventions for two and a half billion dollars related to regeneration of the capital.

Algiers, in fact, had an excessive urban development outside the rules areas. These areas resulted lacking of natural services. The phenomenon of the constant flow of people from rural areas, moving in the cities, in search of work has also resulted in an imbalance urban, where the government seeks to remedy with massive housing programs. In Algeria, under the action of desertification, which made life difficult in many areas of the country, there has been a strong process of internal migration – from arid areas in the coastal areas – that led to the expansion of the exponential population largest city, now struggling with huge problems, related to the housing crisis and that the imbalance in the labor market (with demand stifled by the offer, however low-skilled).

The problems of youth unemployment (especially women) and that of land degradation is at the center of a project funded by Algérie telecom that intends to create in areas far from the metropolis of cybercafé that help people to ‘talk’ more with computer tools . The peculiarity is found in the fact that these spaces will necessarily be operated by women.

Now there is a new opportunity to Algerian women who live in rural areas. This opportunity that combines two aspects: the ability to monetize the effort that will be spent immediately and help the state to proceed with greater speed in the computer literacy program population.

An African growth analysis: it’s necessary a more inclusive development model

  • 28 December 2014

The African continent, according to data provided by the World Bank, is the only continent that has maintained a growth rate solidly positive in recent years and for which we exclude a turnaround in 2015. The growth in sub Saharan Africa amounted to 4.9% this year. Excluding South Africa, which has a more moderate growth, the rest of the continent improves quickly; some countries such as Ethiopia and Zambia have growth rates of 7%, among the highest in the world. According to the World Bank, seven of the ten best performing economies are African and the prospects of the next Outlook are very positive: Africa will continue to grow at 5.5% in 2015.

It should be emphasized that in recent years have been discovered important deposits of natural gas and oil in Mozambique and Tanzania were discovered gas reserves in Kenya and Uganda oil. On the African continent has been implemented a monetary policy to support growth and control inflation, which combines increased investment and that of consumption. A virtuous circle, thanks to local investments and greater confidence, has led to rising incomes.

The World Bank has compiled a list of countries that will record economic growth increased between 2013 and 2015. The presence of many African states (in the World Bank list) is a signal about the involvement of the entire continent in the growth process.

In the ranking ranks second Iraq (despite the instability that reigns after the end of the conflict, it is estimated that the flow of foreign investments along the exploitation of resources, will grow this country of 12.23% between 2013-2015); fourth Sierra Leone (mainly agricultural, but also rich in minerals, especially diamonds. It is expected an increase of 9.54%).

Mozambique and Ghana are in sixth and seventh place. In fact, despite the huge gap between the few rich and many poor, Mozambique especially rich deposits of aluminium, is likely to grow dell’8, 73%, while for Ghana is expected to grow 8.15% thanks oil, gold and cocoa as producer.

Followed in ninth place with a +8, 08% Angola (economy strong and consolidated that attracts even immigrants mainly from the former mother country Portugal and Cuba); tenth Ethiopia (one of the poorest countries in Africa but constant growth of GDP in 2012 and will continue to the extent of 7.96%); to ‘eleventh is the Democratic Republic of the Congo, despite political instability in the Central African country will record economic growth 7.92%.

Although Rwanda is among the poorest countries but which have high economic growth. It is believed to have a growth in GDP of 7.88%, and then, in the list compiled by the World Bank is in twelfth place, followed by Gambia benefiting mainly emigrants’ remittances and the growing tourism development and is expected to grow 7 , 85%.

Zambia, after the privatization of the copper mines in the 90, this African country has grown steadily, even if it has to come to terms with the changes in the price of the metal on the market. It is believed that between 2013-2015 Zambia grow by 7.46% and is in seventeenth place in the rankings of the World Bank. The number eighteen is Tanzania: another country by enviable performance but still one of the poorest countries (in terms of the level of income per capita). However, Tanzania has huge reserve of gold, diamonds and iron. Therefore it is believed that Tanzania will grow by 7.43%.

Finally in twentieth place there Uganda: possesses reserves of oil and minerals, and is likely to grow 7.29%.

The explanation of the African growth, therefore, lies in the combination of several factors, such as the discovery of new deposits of raw materials (supported by the global demand for them), the demographic dynamism and an expanding middle class.

However, there are some gaps in the undoubted growth model that is experiencing the African continent. Africa, in fact, would need to grow stronger, inclusive and sustainable.

Most African economies, despite starts from very low income levels, progressing with a growth rate lower than the 10% recorded by China in the last three decades. The savings rates are far lower than those of the Asian countries at the time of their economic take-off and many local economies still depend greatly from external financial flows.

According to data provided by the World Bank, the countries with the fastest growth are also those with the least inclusive growth. Kenya, Ghana, Tanzania and Ethiopia are celebrated as examples of the new economic miracle, but growth less inclusive of all.

Furthermore, the growth of Africa does not generate a sufficient number of jobs. On the eve of the Tunisian revolution of January 2011, all economic indicators were positive and no observer had sensed the frustration of a people yearning for freedom and especially young graduates without work, excluded from growth. Across the continent, fewer than 10% of young people have a dignified job, while others feed the so-called informal sector, or work without pay in the family.

Even the African Union said that the current growth is not enough: “Africa needs an economic and social transformation. This will not arise automatically by the current economic growth. You will need to implement strategies and public policies to stimulate economic diversification, strengthen competitiveness and promote activities that create jobs and value in the area. Governments are progressively implementing these strategies, within which the vast natural resources of the continent will have to play an essential role. ”

In addition, Africa invests too little in the exploration of mineral resources. The exploitation of these resources and the profits it generates should be particularly difficult because of the small size and fragmentation of the internal markets of many countries of the continent.

Africa continues to be primarily a supplier of raw materials, which are to be valued in Asia or in the OECD countries, but in spite of the increase in trade (more than quadrupled in ten years) African participation in world trade of intermediate goods (indicator of the ability of a country to perceive the benefits of international trade and global value chains) is slightly more than 2%.

Finally, the emerging economic wealth is not directly proportionate to the growth of the welfare of the population. Problematic and long is, in fact, the creation of stable and effective institutions capable of guaranteeing peace and prosperity. The supply of public services (including health, education, security, justice) is clearly insufficient, as demonstrated by the inability of the countries affected by the health crisis to cope Ebola.

Africa must make huge investments in infrastructure, which also cover the rural areas, where poverty is more concentrated, invest in quality education (able to create a middle class) and diversify their investments in order to create an economy more stable and less tied to fluctuations in commodity prices.

It would be a mistake attributed these shortcomings to the effects of poor governance and embezzlement. Taxes collected by the African states, to finance the public services, very often come mainly from royalties paid by multinational companies operating in the energy, mining and commercial agriculture. As for the tax treatment of local companies, it tends too often to penalize PME regular. While too high a number of large transactions “informal” engage in tax evasion. All these factors are not a sound basis for the social contract between state and citizens. The economic transformation has to contribute to the wealth of businesses, workers and consumers in Africa to enable them to become, thanks to a fair taxation and incisive public policies, the first actors of their welfare.

However, the prospects are not so bleak: the African Development Bank predicts that by 2030 the cost of the middle class of the continent will be 2200 billion dollars (today is $ 680 billion). According to McKinsey and Co., Africa already has a middle class numerically superior to India, which is also the most populous. To a similar conclusion comes the report “Africa Turn”, prepared by the investment bank Goldman Sachs.





Tunisia: Country of the year, between national initiatives and international aids

  • 13 December 2014

Tunisia is a key country among those of the Mediterranean southern board. Indeed, even according to the International Monetary Fund, Tunisia, differently from the other countries in the region, is considered with a relative economic stability.

Tunisia has achieved a growth rate of 2.8% for 2014 and for 2015 the IMF previews a growth rate of 3.7%.

In respect of data referring to the economic growth of Tunisia, the International Monetary Fund says that the weak increase in 2014 is mainly due to the profound socio-political tensions that have passed through the country. The IMF is confident for the future, highlighting in the annual report, that the gradual improvement of confidence in investment will support domestic demand once, failed political uncertainty.

At the same time, The Economist has selected two nations to confer the title of the country of the year: the choice fell on Indonesia and Tunisia. The reason lies in their political maturity and progress made at the level of political leaders and ordinary people. From the pages of The Economist, about Tunisia, reads: “The idealism generated by the outbreak of the Arab Spring is in most cases resulted in blood and extremism, with one exception splendid: Tunisia, which in 2014 has adopted a new enlightened constitution, and held two elections, a parliamentary and presidential. The Tunisian economy is in trouble and the political system remains fragile, but pragmatism and moderation of Tunisia have nourished the hope in a region and in a miserable troubled world. ”

On the domestic front, the Tunisian Government has approved, on 10th December the budget law and the state budget for 2015. This act is the result of a study that lasted three months by 300 experts nominated by political parties, trade unions and associations professional, with the aim of boosting the economy of Tunisia, restore the balance in economic and financial, lower the budget deficit to below 5% by the end of 2015, to improve growth and investment and continue the reform of the banking sector and tax. Among the main measures include those relating to the capitalization of public banks, the revival of investment and the fight against parallel trade. Prime Minister Mehdi Jomaa said that the government’s priority right now is to ensure the transition to democracy and hold elections in a climate of stability and security. As for the revival of investment Jomaa outlined the actions taken by his government in this regard and indicated that it will take another two or three years of sacrifices to be able to finish the reforms already undertaken, many of which also affect the public administration, without forgetting the defence of the purchasing power of citizens.

In accordance with the content in the budget law and the state budget for 2015 in order to boost the economy of the country, in view of the difficult market situation, as of January 1, 2015, companies operating offshore in Tunisia can allocate 50% of their production (based on sales made in 2014) for sale on local markets (by changing the limit currently in force by 30%). The Ministry of Economy and Finance of Tunisia stated that this measure is justified by the difficulties encountered by its wholly exporting industrial companies based in Tunisia in conquering new markets.

Also, on the international front, the European Union’s action continues, through the strengthening of EU – Tunisia, with a view to continue to support the democratic transition in the North African country. Aware of the importance of the success of this transition, the European Union (after having granted to Tunisia € 135 million in 2013) has allocated 169 million to the program of action in 2014, to which must be added a further 35 million euro in title Easy Investment Neighbourhood, for a total of 204 million euro in the current year.

In total, the major programs approved for Tunisia in 2014, are seven: they range from economic, to the field of governance and democratic transition, the plan of the company and the parties opportunity, to that of the integrated border management, and institutional support. As part of the Easy Investment Neighbourhood (FIV), the EU also supports the development banks of the European institutions such as the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and those of the member states as the Agence francaise de Développement, KfW, thus contributing to the implementation of development projects that involve substantial investments. In Tunisia, the EU implements its programs of cooperation through the European Neighbourhood (IEV), whose key element is represented by the ” more for more ” which allows the EU to modulate its support financial function of the advances made by the recipient countries to establish a solid and stable democracy able to implement the reforms agreed under the programs.

The European Union has also set to support the agricultural sector, through a program of action on rural agriculture, the EU in favour of Tunisia worth 10 million euro relating to delegations of Ain Draham (governorate Jendouba) and Bargou (governorate of Siliana). Such action is pursued through the support of the Tunisian authorities in the process of modernization of agriculture rural to improve the living conditions of the inhabitants of the affected areas while contributing to ensure the food needs of the country. Enhancing agricultural and non-agricultural premises may in fact encourage, according to the EU and the relevant Tunisian authorities, the economic and social integration of the communities most vulnerable by increasing their economic rent and creating new jobs. Of the 10 million euro project five will be provided in the form of grants to young farmers of the aforementioned rural areas, two million will instead be dedicated to the management of agricultural development program. The remaining three million will be used for the consolidation of the development of the agricultural sector already launched by the International Fund for Agricultural Development in the governorate of Medenine with the intent to address climate change.

Finally, The World Bank will grant Tunisia two loans totalling $ 500 million. The Tunisian Minister of Economy and Finance Tunisian, Hakim Ben Hammouda announced the decision of the World Bank. The first tranche of $ 250 million will be paid in January 2015, and the second in March. The Minister of Economy and Finance has welcomed the decision of the IMF on 12 December last year to release the fifth tranche of the guarantee agreement, worth 104.8 million euro, as “a sign of confidence for investors’ foreigners and that will encourage financial institutions to support Tunisia “.”This trust, said the minister Ben Hammouda, is linked to the success of the transition process of the country realized through the approval of the budget bill on time in 2015”. The minister has also shown confident about the improvement of the note ruler of Tunisia provided by rating agencies for the first quarter of 2015, although he admitted that it will take work seriously for four or five years to be able to retrieve the values of 2010.