EU is the new sick man of Europe; GCC foreign assets to hit $2.5 trn; Discriminating the rich!; Why cheap gold won't cut India's deficit

1 EU is the new sick man of Europe (Graeme Wearden in The Guardian) Public support for the European project has fallen and distrust between countries is growing, according to a new survey that shows the damage caused by the region's debt crisis over the last few years. The well-respected Washington-based Pew Research Center warned that support for the EU has slid over the last 12 months, from 60% in 2012 to just 45% this year.

In a report titled "The New Sick Man of Europe: the European Union", Pew showed that backing for European integration tumbling in France. The people of Europe are increasingly gloomy about economic conditions, disillusioned about their leaders, and losing faith in the whole idea of European Unity, the poll found.

2 GCC foreign assets to hit $2.5 trn (Issac John in Khaleej Times) Economic growth in the GCC is poised to moderate, but net foreign assets of the six-member bloc are projected to exceed $2.5 trillion by the end of 2013, the Institute of International Finance, IIF said. The IIF, the leading global association of financial services firms with more than 470 member institutions, said after registering an average growth of 5.8% in 2012, GCC growth is projected to moderate to 3.8% in 2013 due to flattening oil production.

With a projected decline in crude output, the consolidated external current account surplus for the GCC is likely to decline from a peak of $389 billion in 2012 to $334 billion in 2013, “but still leading to a sizeable accumulation of foreign assets, which could rise to around $2.5 trillion by year-end”, the IIF said in its GCC report. The growth of the non-hydrocarbon sector, more representative of economic activity, is forecast to stay robust at around five per cent this year. The IIF expects average oil prices to be $108 per barrel this year.

The report presents forecasts of key macroeconomic indicators based on two oil scenarios: a baseline scenario with oil prices stable at $108 a barrel through 2020; and an alternative scenario which assumes a drop in oil prices to $85 per barrel starting in 2014 and lasting through 2020.

3 Discriminating the rich! (Neeta Lal in Khaleej Times) Should the state provide security to its rich citizens who are facing a threat perception? This raging debate flared anew in the Indian public space following the government’s offer to provide top level security to billionaire Mukesh Ambani after a terror group threatened to blow up his one-billion dollar Mumbai home ‘Antilia’. Presuming that Ambani’s security would be at the taxpayers’ expense, vociferous public protests went up. Social media sites seethed with rage while activists’ screamed outrage.

The possibility that the head honcho of the Reliance conglomerate — whose personal worth is valued by Forbes magazine at $21.5 billion — may enjoy free security cover by a resource-crunched state was anathema to many. Who can blame them? India is swamped by so many other dire problems that need looking into: a whopping 450 million poor people, nearly 50% of the country’s households, which don’t have access to a toilet, rampant diseases, child malnutrition and such like.  

Such was the vehemence of protests that Home Minister Sushil Kumar Shinde had to swiftly clarify that the cost of Ambani’s protection (about Rs 1.5 million per month) will not be borne by the government but by the businessman himself. Ergo, the tycoon is now swathed in “Z Category” security, becoming India’s first private individual to be accorded this level of protection. 

However, despite Ambani footing the bill of the state-proffered security, there’s disenchantment still amongst a sizeable constituency. Their contention is basically this: How can the country’s security machinery — stretched to breaking point and hardly battle-worthy (evident from India’s rape epidemic!) — be deployed for the safety of someone who can easily get the best protection money can buy?

Ambani’s company already provides protection for him. But naturally, the company can’t claim to possess the government’s exhaustive wherewithal to tackle a full-blown terror attack. As for the protesters, by all means scrutinise the elite’s businessman’s commercial dealings or his wrongdoings. But discrimination on the grounds that an individual is well-off, and is therefore not worthy of state protection even in the event of a terror threat, is wrong. Why crucify the poor man for his bank balance?

4 Why cheap gold won’t cut India’s deficit (Biman Mukherji & Debiprasad Nayak in The Wall Street Journal) The slump in gold prices in mid-April sparked hopes that India would be able to narrow its current account deficit, as less would be spent on buying gold. But those hopes appear misdirected as the fall in prices to a two-year low prompted a buying spree. “Whatever advantage we would have had due to lower price has been negated by higher demand,” said Madan Sabnavis, chief economist at CARE Ratings.

A love of gold has been one of the main contributors to India’s current account deficit, which widened to a record 6.7% of gross domestic product in the October-December quarter, the latest period for which GDP data are available.

The current account deficit is seen by analysts as the main drag on the Indian rupee. In April, the deficit grew more than 70% from March, fueled by a buying spree in gold after prices slumped just ahead of the peak wedding season, which runs to June. India has raised the import tax on gold to 6% from 2% over the last year-and-a-half in the hope of reducing gold purchases. But that hasn’t stopped the buying.

The Reserve Bank of India Monday announced a policy measure that would effectively make it tougher to import gold, saying only jewelry exporters would be allowed to use a credit facility for importing gold consignments. Traders said measures to reduce gold imports would probably drive up smuggling, which has already been growing in the last two years. “You see the Indian gold consumer is like water. Do what you will, but he will find his way around,” said Girish Choksi, a bullion dealer based in the Indian city of Ahmedabad.