A 2014 World News Tour by The Corner

In Europe, the year starts coping with the damages of ECB’s policies, which have harmed more than helped the Southern economies, our analyst Luis Arroyo believes. After all, the FED has managed to steer the US towards the path of growth, while the ECB is unable to make its policies work. But the truth is, they are not entirely the ECB’s but the Bundesbank’s procedures commanded by Ms Angela Merkel.

Germany is expected to create 180,000 additional jobs in 2014, reaching the record figure of 42 million workers and an unemployment rate of 6.8%, despite considerable net migration and the continuing trend increase in labor market participation, Alberto Lozano points out from Berlin. Meanwhile, its Eurozone neighbours are suffering from scary unemployment figures.

The Spanish Stock Exchange will close the year with profits exceeding 20%, only surpassed in Europe by the German DAX. This good performance is due to the evolution of many Spanish companies’ benefits, but also to the fact that most of the great firms in the FTSE listed at very low prices after three consecutive years of losses, points out our market expert Francisco López. Looking ahead, analysts still seem strongly committed to Spanish equities in 2014, since it expected annual returns exceeding 15% or 20%. The key will be in corporate profits and, of course, that European politicians and the ECB do not enable a new crisis of the euro.

Away from Europe’s tribulations, Latin America is going to experience a robust growth in 2014, while figures are a bit less optimistic than those of 2013. Our LatAm correspondent David Brunat recalls that the Economic Comission for Latin America and the Caribbean (ECLAC) foresees an expansion of 3,2% to the regional GDP, thanks to a favorable external environment and a good consumption performance in the whole region. The key for Latin America’s stability will be, once again, the export sector.

Panama is expected to lead the growth with an impressing 7%, while Venezuela will be pulling the rope in the opposite site – ECLAC gives Caracas a meagre growth of 1%. In this rather engaging picture, the main danger for Latin America is it’s own people, for private consumption has shown signs of instability in the last seasons and is cause of worrisome.

In the U.S., 2013 was the year of the monetary expansion and the fiscal restraint, our Washington correspondent Pablo Pardo reports. The US economy went through the sequester, the Government shutdown and another debt ceiling drama. The fiscal consolidation was full of drama and poor designed, so it hampered the economy and, in the end, reduced the tax receipts more than the government expenditure. In the meantime, the Federal Reserve kept its massive bond purchases, the labor market reached new highs in a frenzied speculative bubble, and the labor market improved beyond the expectations. None of the catastrophes forecast by Mitt Romney in the 2012 Presidential election happened. The deficit is plummeting, inflation is non-existent, and the economy is growing.

And 2014 will bring some of the same. But there will be some changes. First and foremost, the political gridlock in Washington will get better–the Republican Party is still recovering from its catastrophic attitude during October’s government shutdown and subsequent debt ceiling crisis, and in November there are Congressional elections. Further, the establishment of the Republican Party is feeling stronger, so the Tea Party will keep on making noises, but will have little effective clout. If the current trends continue, the economy will accelerate its pace of growth, but will still be below the 3 percent year-on-year rate, the Fed will slowly withdraw its monetary stimulus and the labor market will keep on improving, slowly but surely.

There are Rumsfeldian unknown knowns, however. The stock market is, in industries such as social networks, unsustainable. But, so far, the US economy seems poised for a relatively quiet 2014.

We’ll see how the Obamacare implementation unfolds, New York correspondent Ana Fuentes says. The President needs to gain momentum after his popularity plunged in 2013 due to the chaotic website debut. In theory, giving health coverage to 48 million Americans who now have no insurance or are poorly insured will be a massive step, although for now Obama’s intended big piece of legacy is not fully working and has cost billions of dollars to the taxpayers. In January all citizens are obliged to purchase insurance. The idea is that by including the so-called invincible youth, prices will go down for everyone.

In Asia, China is anxious about reforms and it’s not because of a fall on exports, but because of the country’s incapability to continue absorbing the expensive investments that for years triggered miraculous growth, analyzes our Beijing correspondent Iris Mir. Could be China making the same mistakes than in 2008? Could the country be falling into the investment trap again?

The Internet is playing a dramatic role in the development of China’s consumption. Encouraging information products could become a new engine of growth. But the success of such an ambitious 2.0 plan will depend on the new reforms announced by mid-November at the Communist Party Central Committee plenum.

2013 saw the Indian currency hit an all time low. The Current Account Deficit (CAD) and the Fiscal Deficit touched new highs, explains our Bangalore contributor Srikanth Vasuraj. Inflation crossed 8% and the common man was left reeling under huge price rise in essential commodities, making the monthly budget unmanageable. However, next year could be the beginning of a new era thanks to the emergence of the AAP, the “Common Man’s Party”.

Looking at other corners of the world, Iceland Sigrún, author of the Icelog, points out to two major events taking place in her country:

A new coalition government, lead by the Progressive Party (centre party) with the Independence Party (conservative) – the two parties that, together or with others, have been in government for 63 years out of the 69 years since the founding of the Icelandic republic in 1944. This government has given great promises of debt relief, funded by estates of the failed banks. It already seems to be retracting on its promises. Its course in the coming year will be closely scrutinesed by Icelandic voters – and by international organisations such as the IMF and the OECD, as well as others in the international community.

After the banking collapse in October 2008, the Icelandic parliament decided to set up an Office of a Special Prosecutor to investigate alleged criminality in the Icelandic banks. In December the Reykjavík County Court sentenced the first senior bank managers, this time of Kaupthing bank, and the bank’s second largest shareholder to 3-5 1/2 years prison. The ruling has been appealed and the Supreme Court will rule on it in the coming year. Nothing is certain until then but so far, the court system has been able to handle serious financial crimes. Iceland has similar legislation in these matters as other Western countries, which again raises the question why authorities in other countries are satisfied with impunity for bankers when investigations resulting in (often record) fines abound.

About the Author

Ana Fuentes
Columnist for El País and a contributor to SER (Sociedad Española de Radiodifusión), was the first editor-in-chief of The Corner. Currently based in Madrid, she has been a correspondent in New York, Beijing and Paris for several international media outlets such as Prisa Radio, Radio Netherlands or CNN en español. Ana holds a degree in Journalism from the Complutense University in Madrid and the Sorbonne University in Paris, and a Master's in Journalism from Spanish newspaper El País.

Be the first to comment on "A 2014 World News Tour by The Corner"

Leave a comment