1 UK loses triple-A rating (Jill Treanor & Katie
Allen in The Guardian) The UK has been stripped of its last AAA rating as
credit agency Standard & Poor’s warned of the economic, fiscal and
constitutional risks the country now faces as a result of the EU referendum
result.
The two-notch downgrade came with a warning that
S&P could slash its rating again. It described the result of the vote as “a
seminal event” that would “lead to a less predictable stable and effective
policy framework in the UK”. The agency added that the vote to remain in
Scotland and Northern Ireland “creates wider constitutional issues for the
country as a whole”.
That downgrade was swiftly followed by a cut to the
UK’s credit score from rival agency Fitch. Intensifying the pressure on the
UK’s standing on international markets, Fitch cut the UK’s rating to ‘AA’ from
‘AA+’. The UK had already lost its top rating with Fitch back in 2013.
S&P was the last of the big three ratings
agencies to have a blue-chip rating on the UK’s credit-worthiness. Moody’s,
which stripped the UK of its top notch rating amid the austerity cuts of 2013, said
last week it might further cut its view of the UK. Rating agency moves have the
potential to make it more expensive for the government to borrow.
The pound hit fresh 31-year lows and £40bn was wiped
off the value of the UK’s biggest companies on Monday, despite efforts by
George Osborne to quell investors’ concerns about the economic and political
ramifications of the Brexit vote.
Expectations are mounting that the Bank of England
will cut interest rates – possibly to zero from their historic low 0.5% – to
stimulate the economy, and yields on government bonds fell below 1% for the
first time, which could spell cheaper mortgage rates.
2 India needs $1.5trn for infrastructure (Gulf News)
India needs more than $1.5 trillion in investment in the next 10 years to
bridge infrastructure gap as the government intends to connect seven hundred
thousand villages with roads by 2019 as part of a massive modernisation plan,
Finance Minister Arun Jaitley said.
“We have been able to sustain growth in the phase of
global slowdown essentially on the strength of the infrastructure creation in
India where the gap is huge,” said Jaitley. “Over the next decade, we require
over $1.5 trillion in India alone to fill up the infrastructure gap.
“In investing large public finance into
infrastructure, for instance, we have seventeen hundred thousand villages in
India. We intend to connect each of them by 2019,” he said. He also spoke of
massive rural sanitation programme as part of India’s current infrastructure
programme.
“In terms of highway construction this year alone
our target is 10,000 kms. Our railway system is over 100 years old. We are
going in for a massive modernisation,” he said. About arranging funding for the
massive development, he said “we realise that starting point is public
finances. It is only when the public finances are put into it, you start
attracting and the activity begins a lot of private funds”.
3 When populism distorts democracy (Javed Jabbar in
Dawn) One of the world’s oldest parliamentary democracies, the UK used an
inappropriate electoral system which enabled mere populism to distort the
long-term vision of a mature democracy.
Even without a written constitution, a referendum
with fundamental implications for the future of the country should have been
determined by at least a two-third majority of votes, and not left to be
decided by a narrow margin of less than 4pc. A simple majority is valid to
enact normal, day-to-day legislation. But it is inadequate to decide on a
subject that has far-reaching dimensions embracing not just narrow national
interests but larger regional and global values.
The physical proximity of the UK to Europe is an
unchangeable reality and related links will always remain. However, the result
by only a thin margin will have very thick repercussions. Several are already
evident. New uncertainty in the financial sector. Big dips in stock markets.
New unknowns for mainland Europeans working in the island country and vice
versa. Unprecedented economic imponderables for the country, the continent and
the world.
The major setback is to the concept of how to build
formal structures for regional cooperation. The multiple institutions of
cross-border cooperation which evolved in Europe over the past 40 years were
innovative and direction-setting. Regional pacts in other continents looked
towards the EU as an inspirational model.
The small margin of the result also
disproportionately magnifies the representative credentials of emerging
xenophobic elements like the UK Independence Party. It encourages similar
elements in France, Germany and elsewhere.
This is in a country that bothered so little about
respecting the borders of other countries when it imposed colonial and imperial
interests for centuries. It is also clear that the voting principles and processes
of old democracies are not necessarily pertinent in a complex new world.
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