Our editors give us a breakdown of this week’s biggest news stories
United Kingdom: Ross Alexander Hutton
Earlier this week, it was revealed that an ‘IT error’ caused a glitch in the number of cases reported at the end of September – meaning that nearly 16,000 cases went unreported. This comes at a time of intense pressure on an already strained testing system which has become the focal point of the U.K. government’s strategy to combat the spread of the virus. Despite this uncomfortable anomaly for the government, the latest estimation for the R-number is slightly lower than last week, signalling that the measures already introduced may be having some effect but the extent to which progress has been made remains in question. Concerns over this very question lead to the Scottish Government announcement of tougher restrictions, with England is expected to follow as Boris Johnson is set to announce further measures on Monday amid an uprising of resistance in the Tory backbenchers against curfews.
In a speech to the virtual Conservative party conference, Boris Johnson downplayed speculation that he had lost his ‘mojo’ in a bid to reassure his MPs and activists that he will lead the country out of the pandemic into a brighter future. However, Johnson’s attempt to regain control of the political agenda fell short with few concrete policies and the haunting reminder of the forbidding winter ahead. Similarly, the Chancellor’s speech was rather short and anticlimactic as the only notable aspect of his address was the commitment to ‘balance the books’, reaffirming the expectations of tax rises and spending cuts ahead.
With the U.K. economy growing only 2.1% in August, less than half of growth expected, qualms are being raised that Britain’s economic recovery could be teetering on the edge of reversal in the final quarter of the year as Samuel Tombs, Chief UK economist at Pantheon Macroeconomics, predicts “the second wave of Covid [will instil] more consumer caution and compels the government to shut hospitality businesses in Covid-19 hotspots once again”. Hence, the Chancellor announced the expansion of the Job Support scheme – ‘Furlough 2.0’ in all but name – to cover two thirds of the salaries of employees who work for U.K. firms forced to shut because of Covid restrictions.
Brexit talks are moving. Engagement is intensifying. There is certainly a sense of cautious optimism that a deal can be struck in the next few weeks as signs of movement have emerged from both sides. It would seem the U.K. negotiating team may be willing ‘to move’ on a legal dispute mechanism for a potential negotiated agreement which could unlock the issue of the so-called level playing field, with the E.U. exploring possible concessions on fishing rights. As ever, these talks are irrefutably fluid and it will all come down to each negotiating team trusting the other.
Europe: Peter Hourston
Foreign ministers from Armenia and Azerbaijan have agreed a tentative ceasefire in Nagorno-Karabakh during talks brokered by Russia in Moscow. Russian Foreign Minister Sergei Lavrov confirmed that the ICRC would mediate the cessation of hostilities and the two sides would exchange their war dead and prisoners of war. Fighting in the disputed territory, which is internationally recognised as part of Azerbaijan but has a majority Armenian population has resulted in hundreds of deaths and thousands of displaced persons since last month. There was great expectation on Russian President Vladimir Putin to resolve the crisis, due to Moscow’s hegemonic status in the region. The Russian military has a defence pact with Armenia, but has also warm, but strained relations with Azerbaijan. However, the latter is also closely allied with Ankara, with Armenian President Armen Sarkissian telling the FT that Turkey was trying to create “another Syria in the Caucasus.” Video footage released by Azerbaijan showed Turkish manufactured drones attacking Armenian targets, as Ankara tries to display its recently advanced technical capabilities.
The Turkish lira further devalued against the dollar this week forcing the government to try and raise the cost of borrowing by increasing the interest rate on the foreign-currency swap facility by 1.5%. Lira has lost a quarter of its value this year but the Turkish President Recep Tayyip Erdogan has generally been opposed to the central bank raising its benchmark lending rate, despite inflation running at 11.75%. However, the monetary authority did increase its one-week repo rate from 8.25% to 10.25% last month. Turkey’s central bank does not hold the same level of operational independence as the US Federal Reserve or Bank of England. The fall in value against the dollar also puts pressure on Ankara’s relationship with Washington, with the Turkish military also planning to test a Russian S-400 air defence system.
Asia Pacific: Satyajit Mohanan
New Zealand’s Prime Minister Jacinda Arden is banking on her successful response to the coronavirus pandemic six days before the country’s election which is scheduled on the 17th of October. Opinions pools show the PM Ardern’s Labor Party is expected to win the October polls. New Zealand’s Labor party is facing the conservative National Party, who have promised more jobs and fewer taxes if they win. Many New Zealanders have praised the governments handing of the pandemic. The country which is free of coronavirus had only 1,514 confirmed cases and just 25 deaths in a population of 5 million. PM Ardern, 40, who became the world’s youngest female leader in 2017 is running for re-election on a platform of boosting infrastructure spending, improving healthcare and housing.
China continues to be the only economy to mark positive growth among the coronavirus affected economies of the world. China’s service sector which accounts for about 60% of the economy and half of urban jobs, grew for the fifth straight month in September with hiring increasing for the second month in a row. The Caixin/Markit services Purchasing Managers’ Index (PMI) rose to 54.8 from August’s 54.0, the highest reading since June and staying well above the 50-mark that separates monthly growth from contraction. These developments indicate a massive recovery for the country’s domestic demand
Africa & Middle East: Camille Capelle
On Thursday, the US announced that it was sanctioning 18 banks affiliated with Iran in an attempt to further shut Iran out of global international transactions. This is a further blow to an already struggling economy as the US hopes it will prevent them from sponsoring “the Iranian government’s malign activities.” Although the UN and several global leaders have called for the removal of these sanctions, the US is refusing to suspend sanctions as their presidential elections draw nearer. The main concern is that the sanctions will impede the government’s ability to buy vital supplies of food and medical treatment, and make humanitarian trade increasingly problematic.
The Israeli government extended the ban on public gatherings until next Tuesday. While COVID-safety is said to be the reason for these measures, several government ministers have been caught disregarding the rules. The pandemic has given the government the power to declare states of emergency lasting a week and vastly limiting people’s ability to travel outside of their homes or gather. Critics accuse the government of using the pandemic as an excuse to implement a kind of censorship and prevent protests from continuing after weeks of public anger and discontent.
North America: Amelia Brown
Twitter announced on Friday new guidelines to prevent the spread of ‘misinformation’ from US politicians, including the Presidential candidates and their campaigns, and US accounts with significant followings. Published in a blog post as an update to the company’s Civic Integrity Policy, the new guidelines are part of Twitter’s specific goal to stop election interference and de-escalate potential violence following November 3rd. Some of the new rules include: No one on Twitter can claim an early election victory before it is authoritatively called; Tweets calling for interference or violence during or after the election will be removed; Trying to share a tweet with a misinformation label will prompt a direction to a credible source, and labeled tweets from significant accounts will have likes, retweets, and replies turned off.
Canadian Prime Minister Justin Trudeau said the country was at a “tipping point” this week, as they hit a new daily record of cases. The second wave has caused provinces to tighten restrictions after relaxing them after ‘flattening the curve’ after the first wave. A short-term model predicts that the country will see total cases ride to 197,830, and deaths ride up to 9,800, although the country already surpassed September modeling of cases and deaths.
Hurricane Delta made landfall on Mexico’s coast Wednesday, landing as a Category 2 storm. Almost 40,000 people were evacuated in the Yucatán peninsula to shelters. Although the 100mph winds toppled trees and powerlines, there were no immediate reports of deaths. The hurricane then went on the gulf coast, continuing to Louisiana where similar destruction happened.
South America: Annie Smith
Brazil has surpassed 5 million coronavirus cases since the pandemic began, as of Tuesday. The country is the third worst-affected for coronavirus infections and has the highest death toll in Latin America at nearly 150,000, the second-worst death toll in the world behind the United States. BBC’s South America Correspondent, Katy Watson, noted that despite the milestones, “life here feels like it is returning to normal – shops, restaurants and some schools are starting to re-open.” Additionally, cases and deaths have been falling since the peak of 7,000 fatalities a week, although the virus is still prevalent in Brazil; and despite initial criticism of President Jiar Boslonaro’s handling of the pandemic, his approval ratings have now risen due to government handouts to around 60 million Brazilian workers.
The government handouts in Brazil were introduced in April but are due to end in December, and Fundação Getulio Vargas (FGV), a think tank, has found that the end of these monthly emergency payments could send 15 million people back into poverty. More than 67 million people have received handouts, or about 44% of Brazil’s households, alleviating the impact of the pandemic. Now, efforts to continue the handouts are stalled in Congress, with disagreements over how to fund the programme without breaking a constitutional spending cap, and even Bolsonaro’s supporters are worried about the country’s budget deficit. Economist Marcelo Neri, head of social policies at the FGV, told the BBC, “Brazil was the country in Latin America that had the most generous handout programme but it wasn’t the one with the best [fiscal] conditions… We’ll see [whether it worked] in a year’s time.”
A caravan of Honduran migrants heading towards the United States was stopped in Guatemala last Sunday, with nearly 3,500 migrants sent back to Honduras. President Alejandro Giammettei noted that his government sent back the caravan over concerns that they might spread COVID-19. On the days prior, hundreds of Guatemalan police and military personnel set up roadblocks to force migrants, including young children and disabled people, to turn back. Fifteen people from the caravan requested refuge in Guatemala as a result, according to the IGM.
Science & Technology: Paula Plechschmidt
This September Nvidia announced plans to acquire ARM, a British semiconductor and software design company. However, this deal seems to be facing scrutiny from China, as it remains unclear how this deal will affect the global chip industry. As Arm has a joint venture with investors in China, Chinese antitrust regulators have the right to review the deal.
Microsoft has announced to its employees that they will have the option of working from home permanently. This reflects the shift away from in-office work which coronavirus has forced to facilitate. The surprising productiveness of employees has convinced Microsoft that this evolution of the workspace should be supported, as it allows individual work styles and business need to be sustained.
Business: Tom Woods
Multinational technology company IBM has announced it is to split in two to allow it to focus more on more lucrative emerging business opportunities such as cloud computing and AI. To do this, it plans to create a new company called NewCo, which will focus on legacy IT infrastructure and spin off from its main enterprise. IBM, which is headquartered in New York State, has existed and thrived as a company for over 100 years largely as a result of responding to innovations in the market and pivoting when necessary. This latest move may be especially challenging for it however, with a challenging cloud computing market already dominated by the titans Amazon Web Services and Microsoft.
HSBC has pledged to become carbon neutral by 2050, following similar announcements from fellow banks Barclays and Lloyds. To do this, the firm pledged to strictly adhere to the demands of the 2015 Paris Agreement in its own operations, which it hopes will keep get its own operations and supply chain to net zero by 2030. Although the announcement may sound promising, it has come under fire from critics for a lack of detail that could hold the company accountable. Furthermore, it is likely that the firm will continue to help finance fossil fuel and environmentally damaging projects. When quizzed over this at a press conference, HSBC refused to rule out divesting from such companies and projects.
Theory: Cassi Ainsworth-Grace
On the 2nd of October, the European Central Bank (ECB) issued a report that the central bank will begin consultations on a digital euro. This digital euro would serve to complement the current offering of cash and wholesale central bank deposits, and can be used by individuals and businesses for their payment solutions. The report sets out the design of the digital currency, the situations in which it would be useful as well as the challenges it may pose to monetary policy and financial stability.
The emphasis of the report is not “when” this digital currency will be on offer, but “if”. The ECB has set out that it will decide whether to launch a digital euro project in the middle of next year. Fabio Panetta, a member of the ECB executive board has observed a long-term trend in the “decline in demand for cash as means of payments”, with the Covid-19 pandemic only servicing to encourage the use of digital payments. A digital euro would allow those in the euro-zone to place deposits with the ECB directly, an option that is only available with commercial lenders, governments and central banks of other countries.
The St Andrews Economist 