The NASDAQ reached an all-time high yesterday as Donald Trump announced he wants to more than halve the US corporation tax rate, from 35% to 15%. But he knows that doing so comes with a big price tag – one that, in the context of a fraught debate about the US national debt and deficit, is an almost impossible sell to Congress. The solution? Dynamic modelling: counting the economic growth gains that the cut might create when calculating its cost, to show that in fact there is a net benefit to the Treasury’s coffers.
When the finance ministers of the world’s largest economies gathered in Washington over the weekend they had in front of them IMF analysis of the global economy that for once was quite up-beat. The growth forecast is higher, financial markets are buoyant, and a long-awaited cyclical recovery is underway in many economies.
With the UK now set for a general election on 8 June, attention has turned to the party manifestos. Given the general expectation that the Conservatives will win a large new majority, their platform is of particular interest. With very little constraining political opposition, UK Prime Minister Theresa May has the freedom to be as innovative as her admittedly cautious nature allows. The election is a chance to formalise her own, post-David Cameron agenda: a manifesto version of what she has already done with her cabinet. What she says on Europe and Brexit will be picked through minutely. So, what should we look for from a May manifesto?
Theresa May’s decision to call a general election on 8 June is timed to minimise disruption to the negotiations with the EU. The early stages were always going to be about modalities - about who will participate, what they will discuss and when - and that can still happen in the run up to the election. The serious discussions, requiring high-level political backing, will need to wait until the new German government is in office after elections there in the autumn.
With the UK Parliament likely to dissolve on the 2-3 May, ahead of the 8 June election, there will now be a frantic scramble for the UK government to complete the passage of legislation currently in train. This process, known as the wash-up, was thought to be relatively obsolete with the introduction of fixed-term parliaments. Revived now it will be controversial, as the normal process of parliamentary scrutiny is substantially truncated.
Central bankers have never operated in a political vacuum, even though many of the most important are at least operationally independent. For some, that independence is now being eroded - or even directly challenged. The result is a creeping politicisation of policy, at a critical decision point for monetary policy, which may have long-lasting economic implications.
When you mention EU states competing to win a prestigious and powerful European regulatory agency from Britain after Brexit, most people would probably think of the European Banking Authority. But the European Medicines Agency (EMA) is also up for grabs, and the most intriguing bidder is Bucharest.
The early stages of any negotiation are all about positioning. The Brexit negotiation is no different. British Prime Minister Theresa May’s letter invoking Article 50 - and the draft negotiating guidelines issued by European Council President Donald Tusk - are both exercises in positioning. Each sets out objectives and constraints, as the two sides compete to shape the negotiations in their favour.
When the European Commission holds its public hearing on the Capital Markets Union (CMU) tomorrow, one of the key questions will be how to promote fintech while ensuring consumer confidence. Tools such as crowdfunding have become a potentially revolutionary means of alternative financing, giving the CMU serious growth potential. At the same time, they present new policy challenges on solvency, cyber risk and data access.