Interesting macro economic piece from Ambrose Evans-Pritchard contrasting the differences in approach between the US and the Eurozone after COVID and the longer term risks to monetary stability in the longer term. Biden has indicated a massive rescue package with 2021 adding as much stimulus as that applied in 2020 to counter the effects of COVID. In contrast the Eurozone looks set to repeat the mistakes that it made Post Lehman and retreating into austerity and debt brakes. On the back of this Bank of America has issued a forecast of US growth of 4% for 2021 while at the same time downgrading the Eurozone to a negative 3.7%. Geneva University’s Professor Charles Wyplosz is very downbeat expecting an initial Eurozone bounce that will quickly fade followed by a slow and muted recovery. So is this another lost decade for Europe. If anyone should know it is likely to be Professor Wyplosz who co-authored the IMF’s admission that it was hugely at fault during the last Eurozone debt crisis. The US can get away with this because it has an independent central bank and it is populist with the money going directly into people’s pockets. Europe does not have this flexibility and politics in the North South divide will tie the ECB’s hands. At the core of this is the unsatisfactory design of the Euro itself. A political nettle that nobody wants to grasp and potentially existential.
Like some of its competitors Monese was focused on overseas expansion when COVID struck and quickly changed tack. The fact that it is now looking again might well be influenced by the stimulus that Biden is expecting to inject in to the US while at the same time looking to leverage itself in a market place which is beginning to look a bit slow on the uptake given its early espousal of all things technological but not money. At the same time several countries in Europe have a stretched and limited banking system which will not be much use to fund at least a partial recovery from the pandemic. The interesting thing will be the valuation of some of these outfits. They all share one thing in common. None of them make any money.
A story for finance ministers everywhere. As part of his measures to stimulate the UK economy throughout the pandemic Chancellor Rishi Sunak temporarily suspended the payment of Stamp Duty on domestic property transactions. He never did commit himself to what he thought that this would do in the real world. The end result was a domestic property mini boom with prices rising nearly 8% in the face of a COVID induced recession. Somewhat counter intuitive you might say. However it was only temporary and is due to end on 31st. March this year. As a result a whole raft of transactions are now in the process of being rushed through before the deadline. However he is now under pressure to scrap it completely. Practically every economist in the country has commented that it is a bad tax for everybody reducing mobility, changing people’s behaviour and distorting the market overall. The jury’s out on whether he will succumb to the pressure but whatever he does there will be a lot of people who will still not thank him. Sometimes you can’t please everyone.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
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