US sanctions to be restrictive for European companies

Donald Trump’s announced sanctions on Iran are proving to be quite a headache for European companies that had re-expanded their business in the market since the July 2015 agreement.

It is vital here to draw a distinction between a potential political nuclear agreement between Iran and the other signatories of the previous 2015 accord (apart from the US) on the one hand and the issue of economic sanctions on the other, which would severely hamper Iran’s economic growth as foreign companies working with the country would be subject to hefty penalties from the US. Before 2015 we witnessed the extent of such penalties on banks that had tried to evade sanctions, and a number of banks had actually continued to steer clear of Iran, even after the 2015 agreement as they were not convinced it would last. In this respect, the timing of the ZTE affair is perfect. The Chinese company operating in the telecoms sector and specializing in 5G technology is highly dependent on US components to pursue its growth. After pleading guilty of shipping US components to Iran and North Korea in 2016, it is now facing legal action for failing to comply with measures it was supposed to take against managers involved in the affair. Continue reading

The revival is European*

European citizens are now optimistic on the future of Europe and they feel European. A survey published in a report this month by the Pew Research Center testifies to this, with favorable views of Europe increasing everywhere in 2017, even in the UK. The only country that saw a deterioration was Greece, but this is understandable given the austerity measures imposed on its citizens by the hefty economic adjustment process from Brussels. We can also read the French presidential election result as a referendum primarily fought and won on Europe.

The old continent is regaining greater political strength at a time when growth is also picking up speed. The planets are finally aligning and the outcome is positive. The region’s political environment is more stable and the risk of populism has dwindled.

In a complex, tough and unpredictable world, Europe is now a safe haven of stability, and this haven looks more assertive, particularly with Germany’s impetus.
We all heard Angela Merkel indicate that Europe should take its fate into its own hands as yesterday’s allies look less reliable and yesterday’s enemies are still there, and talking about the need to reform Europe, even if that means setting up a finance ministry and having a joint budget. Continue reading

The French presidential election is first and foremost a decision on France’s position in Europe

The French presidential election primarily comes down to a political choice on the role that French voters want to give to France. The first round of voting showed that French electors were no longer very comfortable with the image they had of France. The traditional governing parties did not make it through to the second round of voting. There is a deep-rooted need for change and a desire to choose the path that French society will take. This malaise can be seen in the choice electors face on Europe – for or against – and this decision overrides all other electoral considerations. We cannot compare electoral programs if the question of European membership is not clarified. This is why the economic aspects of the candidates’ programs are not decisive and voting decisions will not be based on them. Indeed, there has been little talk of economic issues since the start of the campaign, with the candidates focusing more on the over-arching framework for the country.

The predominance of politics over economics was recently witnessed in the US presidential election and in the UK referendum on Brexit. Remainers talked essentially about the economic consequences of Brexit, while Leavers talked about the United Kingdom, its people and this people’s role in the world. The US presidential election followed the same pattern. Donald Trump did not come to power on the back of his economic program, which merely reflected the idea of less State intervention from a strong and reassuring State. It was a political vision of the US, taking on the rest of the world alone, that took Donald Trump to the White House. And these factors should make us stand back and think, not focus just on the economics. Continue reading

Lucrezia Reichlin on the future of Europe

The future of the European Union may not officially be on the ballot in the upcoming elections in the Netherlands, France, Germany, and Italy, but the results will go a long way towards determining Europe’s fate.
Anti-EU sentiment is more widespread than ever, as demonstrated by the feverish campaigns of right-wing populist insurgents like Geert Wilders in the Netherlands and Marine Le Pen in France

Read Reichlin’s post here

Dani Rodrik On The Future Of Europe

This month the European Union will celebrate the 60th anniversary of its founding treaty, the Treaty of Rome, which established the European Economic Community. There certainly is much to celebrate. After centuries of war, upheaval, and mass killings, Europe is peaceful and democratic. The EU has brought 11 former Soviet-bloc countries into its fold, successfully guiding their post-communist transitions. And, in an age of inequality, EU member countries exhibit the lowest income gaps anywhere in the world.
But these are past achievements….

Read here Rodrik’s post

Will the attack undermine the expected recovery in the Euro Area?

The attack against Charlie Hebdo on January the 7th may have disrupted the expected recovery in 2015 in France?
The decline of the Euro, the dramatic drop in oil price and the highly accommodative monetary policy from the ECB are the ingredients of the recovery that will emerge in France and Euro area throughout this year.
However, the attack dramatically increases uncertainty that could radically change behavior limiting then the expectations of recovery.

To highlight this debate we can observe two situations that can be perceived as close to that known currently in France. Continue reading