Wednesday, August 19, 2015
Capital flight dims shine of emerging markets; Europe's challenge is not just about Greece; IS beheads aging antiquities scholar
1 Capital flight dims shine of emerging markets (Phillip Inman in The Guardian) There has been no shortage of disturbing trends in Asian foreign exchange markets this year, even before China shocked traders last week with its unilateral devaluation of the yuan. The Malaysian ringgit and Indonesian rupiah have been in freefall for months, and the Thai baht was haemorrhaging support long before the Bangkok shrine bombing.
Figures showing that emerging markets have suffered a near-$1tn outflow of funds over the last year give another indication that countries billed as the stars of the post-crash economy are now waning. According to a compilation, total net capital outflows from the 19 largest emerging market economies reached $940.2bn in the 13 months to the end of July.
The figure was almost double the net outflow during the nine months following the 2008 banking collapse. Asia is not the only area to suffer. Turkey, Brazil and Mexico are among the other emerging economies to see capital flight back to the US and Europe.
As their currencies shrink in value, it takes more cash to fund foreign debt payments in dollars. The report shows that emerging markets have spent vast portions of their foreign reserves to meet obligations that were much less onerous only a year before. Investors quitting emerging markets either sell property and stock market assets or simply take out and repatriate cash from local banks.
Adding to the weakening picture, the latest survey of investor sentiment by Bank of America Merrill Lynch found that the threat of a recession in China and a broader emerging market debt crisis have eclipsed the eurozone’s woes as principal concerns.
Global trade declined by 8% between December 2014 and May 2015. It had previously recovered strongly since 2009, driven largely by emerging economies feeding off a China-induced stimulus to world trade. The momentum was lost last year, however, and a head of steam that saw a 40% rise in world trade over six years has vanished.
2 Europe’s challenge is not just about Greece (Gavin Hewitt on BBC) At times it seemed that the future of the EU itself was tied to the fate of a country that made up just over 2% of the eurozone's economy. Now Greece has secured a third bailout, worth 85bn euros (£60bn) in loans over three years.
The Germans do not like the fact that the International Monetary Fund is not yet on board. The head of the IMF, Christine Lagarde, said: "I remain firmly of the view that Greece's debt has become unsustainable." The European institutions believe Greek debt will reach 201% of GDP sometime next year.
But, for all the uncertainties, it appears a Greek chapter is closing. For a long period the future of Greece was cited as one of the dangerous unknowns hanging over the European economy. As the Greek crisis subsides the focus returns to the wider health of the eurozone economy.
The eurozone economy is spluttering. There is a recovery - the eurozone is growing at an annual rate of 1.3% - but it is patchy. In the second quarter of the year France and Italy, which account for 40% of the eurozone economy, flat-lined. Italy which had only recently emerged from recession fell back, managing growth of just 0.2%.
The German economy is turning in a solid performance based on exports. But it is vulnerable to a slowdown in China and Japan, where economic growth shrank in the second quarter of the year. The eurozone economy is still smaller than it was in 2008. It remains an economy in fragile health. Unemployment is still above 11%, nearly double that in the US. Even in fast-charging Spain, unemployment is stuck above 22%.
The fundamental challenges to the European economy remain - how to innovate; how to reduce regulations that protect powerful interest groups; how to increase competitiveness in a global economy; how to ensure energy remains cheap; how to modernise - an often difficult and disruptive process.
3 IS beheads aging antiquities scholar (San Francisco Chronicle) The 81-year-old antiquities scholar had dedicated his life to exploring and overseeing Syria's ancient ruins of Palmyra, one of the Middle East's most spectacular archaeological sites. He even named his daughter after Zenobia, the queen that ruled from the city 1,700 years ago.
That dedication may have cost him his life. On Wednesday, relatives and witnesses said Khaled al-Asaad was beheaded by Islamic State militants, his bloodied body hung on a pole in a main square.
The brutal killing stunned Syria's archaeological community and underscored fears the extremists will destroy or loot the 2,000-year-old Roman-era city on the edge of a modern town of the same name, as they have other major archaeological sites in Syria and Iraq.
The Sunni extremists, who have imposed a violent interpretation of Islamic law across the territory they control in Syria and Iraq, claim ancient relics promote idolatry and say they are destroying them as part of their purge of paganism — though they are also believed to sell off looted antiquities, bringing in significant sums of cash.
Known as "Mr. Palmyra" among Syrian antiquities experts for his authoritative knowledge and decades administering the site, al-Asaad refused to leave even after IS militants captured the town and neighboring ruins in May. IS extremists detained the scholar three weeks ago.
Palmyra was a prominent ancient city-state under the rule of the Roman Empire. In the 3rd century, its queen, Zenobia, led a revolt against Rome that briefly succeeded in holding much of the region until it was crushed. The ancient remains, including temples and dramatic colonnades, are a UNESCO world heritage site.
Al-Asaad was also a hard-core supporter of President Bashar Assad, and had been a member of Syria's ruling Baath party since 1954. He had been in charge of Palmyra's archaeological site for four decades until 2003, when he retired. He then worked as an expert with the Antiquities and Museums Department.