LONDON (Reuters Breakingviews) - Mario Draghi’s successor may not be the most important appointment at the European Central Bank in the year ahead. Most of those in the running to replace the Italian as president lack his creativity in tackling existential problems, such as a breakup of the euro. Others will have more scope to sway the debate. Ireland’s Philip Lane, who is in pole position to take over as chief economist from Peter Praet, is the sort of freethinker who would have outsized influence, especially in the next economic downturn.
LONDON (Reuters Breakingviews) - Character weaknesses are usually evident by the time people hit their twenties and become hard to fix by their thirties. The euro celebrates its twentieth birthday saddled with flaws dating back to its conception. There were early successes in financial market terms as bond issuance and trading volumes took off, and its share in foreign exchange reserves grew. However, that gave way to a teenage crisis of existential proportions, which dented official reserve managers’ desire to hold the single currency. Temporarily covered up by the drug of cheap central bank money, the weaknesses retain their power to ruin the single currency’s adulthood.
LONDON (Reuters Breakingviews) - What’s the biggest threat to global markets in the coming year? It’s not a rise in U.S. interest rates, or the end of the European Central Bank’s bond buying. Rather, it’s the Bank of Japan. Even small adjustments by Governor Haruhiko Kuroda to ultra-loose monetary policy could agitate global asset prices more than other, widely expected changes.
LONDON (Reuters Breakingviews) - Sterling is the most sensitive barometer of Brexit fears. The pound slumps each time it looks more likely that Britain may crash out of the European Union without a deal. At the same time, however, UK government bond prices strengthen because bleaker economic prospects mean higher interest rates are less likely. The clearest sign that investors have had enough of the United Kingdom would be when both weaken at the same time.
LONDON (Reuters Breakingviews) - Angela Merkel has called time on her own tenure. The politician who has been Germany’s chancellor for 13 years has decided to not seek re-election as chairwoman of her party, the Christian Democrats (CDU). While she nevertheless wants to serve her full term as chancellor until 2021, her country and the rest of Europe will inevitably start looking ahead to what could be a more polarising era.
LONDON (Reuters Breakingviews) - Finance and business will find Libor a painful and expensive habit to kick. Financial contracts worth more than $300 trillion are linked to the discredited London Interbank Offered Rate. Switching to new benchmark interest rates could disrupt economies as well as markets. Avoiding that outcome will take a lot of money, time, and a willingness to reconcile conflicting interests. Breakingviews explains what’s at stake.
LONDON (Reuters Breakingviews) - French President Emmanuel Macron is finding it easier to build bridges to investors than to voters. A conference on infrastructure hosted by his finance ministry on Monday featured several pitches for why Paris is the ideal centre to develop and finance such projects. The message resonated with fund managers and bankers, who detect a new dynamism and confidence in the euro zone’s second biggest economy. But Macron is having a harder time selling these good news stories to the French electorate. An imminent government reshuffle is unlikely to solve his problem.
LONDON (Reuters Breakingviews) - Good intentions and realpolitik rarely mix. That may well be the case with proposals from a trio of international bodies that seek to address some of U.S. President Donald Trump’s gripes with the World Trade Organization while providing ways for other countries to liberalize commerce without his signoff.
LONDON (Reuters Breakingviews) - An exhortation to focus on “the economy, stupid” is often credited for helping Bill Clinton win the U.S. presidency in 1992. That approach will not work for mainstream politicians in Sweden, which holds an election on Sunday.
LONDON (Reuters Breakingviews) - Familiarity can breed respect in financial markets. Take the case of Bank of England Governor Mark Carney, who may be staying at the central bank longer than previously agreed. Continuity would be a comfort to investors facing a host of Brexit-related uncertainties. But it would send a bad signal in the long run.