January 11, 2019 / 8:34 AM / 5 months ago

Daily Briefing: Romania takes turn at the EU helm

LONDON (Reuters) - The country's most powerful politician has a conviction for vote-rigging, the ruling party is trying to pass a law to decriminalise certain corruption offences, and the political elite are consumed by parochial infighting. Not, in short, the most promising environment for Romania to take on the rotating presidency of the European Union.

Romanian President Klaus Iohannis welcomes European Commission President Jean-Claude Juncker in Bucharest, January 11, 2019

On its six-month watch, Bucharest has got to deal with Brexit, European Parliament elections in May and tough talks on the next long-term EU budget - and that's besides other pressing matters such as a looming trade row with the United States and a slow-down in the euro zone.

European Commission President Jean-Claude Juncker has already expressed concerns over whether the bloc’s second-poorest country is ready to step up to the challenge; Romanian officials will try to persuade him in meetings in Bucharest today that they are.

Brussels-watchers argue that the scope for the EU presidency-holder of the day to influence - or indeed to screw up - European business has diminished as the zone has expanded to take in more countries; and few doubt that the real decisions are still made in Brussels, Paris, Rome and a handful of larger capitals.

But the persistent doubts over Romania’s graft-fighting credentials are nonetheless poor optics for a club that above all prides itself on being a defender of the rule of law.

As the Brexit debate rumbles on in parliament, data already suggest Britain's economy has slowed to a near stand-still. GDP figures due out at 0930 GMT will give more clarity on the extent of the hit, with economists polled by Reuters expecting growth of 0.3 percent in the three months to November - less than half the pace of the summer.

Spain’s minority Socialist government will present its 2019 draft budget proposal today after the weekly cabinet meeting. The budget is due to include further belt-tightening to bring the public deficit down, even as Spain comes off the strong growth it has enjoyed over the past three years.

Prime Minister Pedro Sanchez needs the backing of various smaller parties to get the plan through. Failure by parliament to pass the draft could prompt a snap election.


World stocks are approaching one-month highs, having enjoyed a 3 percent rally so far in their first full week back at work.

In fact this is the third straight week of gains and the latest boost comes thanks to the Fed’s Jerome Powell who has reiterated he will be “patient” about raising interest rates and thanks to signs that trade talks between Washington and Beijing are moving to higher levels.

This side of the Atlantic, the ECB’s message, delivered by its own minutes and by Francois Villeroy, was that it was keeping options open amid risks to the outlook for the eurozone economy with the possibility of TLTROs down the line. So chances are central banks will keep topping up the punchbowl.

The dollar is down again though it has recovered a bit from three-month lows, its weakness supporting other currencies. Those such as the Aussie and Kiwi dollars have rallied and so have emerging currencies, led by China’s yuan. That has risen to five-month highs and is set for its biggest weekly gains since the 2005 revaluation.

U.S. stock futures are flat after rising on Thursday for the fifth straight day while European shares look set for a strong session. Oil meanwhile continues to extend its winning streak, with Brent up 8 percent so far this week.

The euro is up 0.2 percent, though it stays off the three-month highs vs the dollar hit earlier this week despite the spate of bad news on the economy. Sterling continues to meander, awaiting direction from Brexit and possibly from the monthly GDP data for November due a bit later. Given recent weak PMIs, a robust number is unlikely.

Also on the data front, U.S. core inflation for December is awaited with forecasts of a 0.2 percent month-on-month rise. In the UK, the monthly GDP estimate for November is due to be released.

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own —

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