The pound has hit its lowest level since January amid Brexit worries, as the European Central Bank’s new chief economists takes questions

The European Central Bank last looked at its monetary policy framework 16 years agoFinland’s central bank governor, Olli Rehn, has reiterated his call for the European Central Bank to conduct a long-overdue review of its policy framework. The upcoming change of leadership at the institution – with Christine Lagarde, the International Monetary Fund’s managing director since 2011, likely to succeed Mario Draghi as president – offers an important opportunity to heed that call.When the ECB was established 20 years ago, central banks were generally not too clear about the details of their policy frameworks. At that time, some ambiguity may have been helpful, because of the flexibility it offered when the ECB started operating. Furthermore, it allowed central bankers with different experiences and perspectives to agree on a framework, even though they may not have agreed on its precise details.Related: It's high time to create a World Carbon Bank | Kenneth Rogoff Continue reading...

Retailers say total sales fell by 1.3% in June while annual rate of growth slowed to 0.6%Fears that Britain’s economy has come to a standstill have been heightened by a report from retailers showing annual consumer spending at its weakest since their records began in the mid-1990s.The British Retail Consortium said clarity over Brexit was urgently required after falling sales in June came as a marked contrast to the bumper World Cup and weather-related activity of a year earlier. Continue reading...

Bank that once seemed to have beaten big US rivals at their own game is a national embarrassmentLittle more than a decade ago, Deutsche Bank seemed to have achieved the remarkable feat of beating the big Wall Street banks at their own game. Germany’s biggest financial institution, fuelled by an acquisition spree, a long bull market and willingness to pay fat bonuses, owned one of the world’s top five investment banks.Its rise looked natural and inevitable. Why wouldn’t the biggest bank in the eurozone’s biggest economy be able to compete with JP Morgan and Goldman Sachs and outmuscle Barclays, the UK’s would-be investment banking champion? In the summer of 2007, just before the arrival of the global financial crisis, Deutsche’s share price reached €110.Related: What went wrong at Deutsche Bank? Continue reading...

We could use a global carbon tax to give developing countries incentives to phase out coalAlthough much derided by climate-change deniers, not least Donald Trump, Alexandria Ocasio-Cortez’s Green New Deal hits the nail on the head with its urgent call for the US to lead by example on global warming. But the sad truth is that, for all the needless waste produced by Americans’ gluttonous culture, emerging Asia is by far the main driver of the world’s growing carbon dioxide emissions. No amount of handwringing will solve the problem. The way to do that is to establish the right incentives for countries such as China, India, Vietnam, Indonesia and Bangladesh.It is hard to see how to do this within the framework of existing multilateral aid institutions, which have limited expertise on climate issues and are pulled in different directions by their various constituencies. For example, to the dismay of many energy experts, the World Bank recently rather capriciously decided to stop funding virtually all new fossil-fuel plants, including natural gas. But replacing dirty coal plants with relatively clean natural gas is how the US has managed to reduce emissions growth dramatically over the past decade (despite Trump’s best efforts), and is a centrepiece of the famous “Princeton wedges” pragmatic options for minimising climate risk. One cannot let the perfect become the enemy of good in the transition to a carbon-neutral future. Continue reading...

CBI warns uncertainty is crippling UK economy with country at risk of lagging behind G7 competitorsThe rising threat of no-deal Brexit has set Britain on course for the biggest decline in business investment since the financial crisis, the Confederation of British Industry has warned.Paving the way for weaker future economic growth, the CBI warned that business spending in the UK economy was set to decline by about 1.3% in 2019 compared with a year ago – the steepest drop since the last recession in 2009. Continue reading...

The scale of the climate emergency requires nothing less than full government engagementWith just 11 years left to prevent irreversible damage caused by the climate emergency, there are still options to wean the world’s economy off its reliance on fossil fuels. However, anything less than putting Britain on a war footing will not be enough.The government response so far has been timid. Theresa May introduced a net-zero carbon emissions target for 2050, but there are reasons why the Conservatives haven’t gone further: her party is hard-wired to fail. Clinging to a belief in the power of free markets, it neglects the fact that to decarbonise the economy greater investment from the state is required.Tinkering at the margins of an economic model driving environmental breakdown is guaranteed to deepen the climate emergency Continue reading...

The new European Central Bank boss should resist pressure to lower interest rates further stillWelcome to Frankfurt, Christine Lagarde. A new job as head of the European Central Bank awaits. There are only so many supranational jobs on the political and economic circuit and you have nabbed a second one after seven years at the helm of the International Monetary Fund.There is much work to be done, not least the task of rescuing a eurozone economy that has seen four years of steady growth across most parts of its 19-member currency bloc start to evaporate.Related: George Osborne must understand the IMF role is no popularity contest | Nils Pratley Continue reading...

Plans have been mooted for tax-free zones to offset post-Brexit tariffs. But are they needed? And do they actually work?

Depending on who you speak to, Le Freeport is a high-security storage facility or a money-laundering risk

Alexis Tsipras’s party promised to fight EU-imposed austerity, but instead embraced it. Sunday’s polls will punish themIn January 2015, progressives the world over hailed Syriza’s general election victory as a rejection of EU-imposed austerity and the dawn of a new era for Greece. Four years on, Alexis Tsipras’s once radical party goes to the polls on Sunday as a dead man walking – it’s now a confused political mishmash of leftists, social democrats, conservatives and rightwing populists that defends the very neoliberal policies Syriza once threatened to destroy the eurozone over.Related: Resurgent centre-right party poised for victory in Greek electionRelated: Tsipras faces fight to stay in power after EU elections mauling Continue reading...

Non-Farm Payroll report beats expectations, but wage growth remains tepid

Falling productivity and Brexit uncertainty to blame for wage stagnation, says ONSBritain’s dismal track record at increasing labour productivity following the financial crisis a decade ago has cost workers as much as £5,000 in missing income, according to official estimates.The Office for National Statistics said the failure to maintain productivity growth – a key measure of economic output per hour of work – was one of the main reasons for a lost decade of pay growth for British workers. When companies are able to do more with less, they can increase salaries.Related: UK productivity grows by just 0.5% in 2018 amid Brexit uncertainty Continue reading...

Institute of Directors’ survey finds companies are more pessimistic about economyConfidence among British business leaders has been knocked by Theresa May’s resignation and uncertainty over who will succeed her as prime minister, according to a survey.Firms became more pessimistic about the economic outlook, with a key confidence measure falling to a six-month low of -28% in early June from -19% in April in a survey by the Institute of Directors. The figure reflects a net balance of firms saying the economy would improve minus those expecting a deterioration. The findings are based on a poll of 900 company directors carried out between 22 May and 5 June. May announced her resignation on 24 May. Continue reading...

Will the Evening Standard editor take a seat at the top table? Don’t put your money on it just yet…If George Osborne’s “friends” were not advertising the former chancellor’s interest in the top job at the International Monetary Fund, would we even take the idea seriously? One suspects not. The UK has a strong candidate to push to be managing director of the IMF. He is Mark Carney, governor of the Bank of England.Osborne’s claim seems to rest on the idea that the current editor of the Evening Standard is a skilful political animal who could attract votes from around the world, and thus find a way through the IMF board’s opaque selection process.Christine Lagarde’s nomination to run the European Central Bank has prompted speculation over who could replace her as managing director of the International Monetary Fund. Continue reading...

Politics is not about a struggle over a fixed pot of money, says Mary Mellor, and the best way to end austerity is to reject it as an ideology, says Peter McKennaAditya Chakrabortty (It’s reckless. But a Tory cash splurge could win an election, 3 July) is right to point out the hypocrisy of the political right about public expenditure. While progressive proposals for public spending are decried as burdening the hard-pressed taxpayer, the right is happy to use public money to rescue the banks or boost their electoral chances.As I explain in my book Money: Myths, Truths and Alternatives, neoliberal economics is built on a fairytale about money that distorts our view of how a contemporary public money system operates. It is assumed that public spending depends on extracting money from the market and that money (like gold) is always in short supply. Neither is true. Both the market and the state generate money – the market through bank lending and the state through public spending. Both increase the money supply, while bank loan repayments and taxation reduce it. There is no natural shortage of money – which today mainly exists only as data. Continue reading...

Only in a culture that sees power as white, posh, male and western could the man who masterminded austerity be considered for a top jobImagine: you have been very publicly sacked from your job and the mistakes you made have had dire consequences for society. When planning your next steps do you a) rethink your career goals and consider doing something different with less responsibility; b) go for a job you’re completely unqualified for; or c) go for a big promotion with even greater stakes for society? I assume most of us would go for a), and even if we wanted to, we wouldn’t have the option of b) or c) without facing rejection.However, that’s not the case for our former chancellor George Osborne, who after presiding over the worst economic recovery in recorded history, with severe and deadly public spending cuts, went for option b) and managed to become the editor of the Evening Standard – a job for which he is totally unqualified. And how has that gone? Losses of £11.5m aren’t too shabby. So, sensing now is the time to cut and run, he’s in the running for the top job at the International Monetary Fund (IMF). Yes, it’s yet another example of a privately educated white male failing upwards. But it also shows us how without an ideological change at the top we are stuck with the same pool of arrogant neoliberals. Continue reading...

Rolling coverage of the latest economic and financial news, including the latest runners and riders to run the International Monetary Fund

Former UK chancellor’s austerity agenda will count against him, say opponentsGeorge Osborne’s interest in running the International Monetary Fund has met immediate criticism because of the former chancellor’s austerity policies and Brexit-related question marks over the UK’s international standing.Osborne, the editor of the Evening Standard, has signalled to friends that he views himself as a potential candidate to replace Christine Lagarde, the current head of the Washington-based fund, who was nominated to lead the European Central Bank this week.Christine Lagarde’s nomination to run the European Central Bank has prompted speculation over who could replace her as managing director of the International Monetary Fund.Hey, why not? If Trump is nominating people who got everything wrong about monetary policy for the Fed, why not someone who insisted that austerity is expansionary for the IMF? https://t.co/VlBZeCYGRJIt is difficult to imagine that in these pre-Brexit day, any UK candidate would enjoy the support of the EU. The temptation to show the benefits EU members have is too strong. — Osborne eyes chance of replacing Lagarde as head of IMF via @FT

Ofwat concerned over plans to charge ‘significantly’ more to cover utilities’ day-to-day costsWater companies have been rapped on the knuckles over plans to charge customers “significantly” more to cover their day-to-day costs from next year.The water regulator said it had substantial concerns over the business plans of Thames Water, Anglian Water, SES Water and Yorkshire Water for the early 2020s. Continue reading...

Bottom half of all workers are paid only 6% of total pay, says International Labour OrganizationNearly half of all global pay is scooped up by only 10% of workers, according to the International Labour Organization, while the lowest-paid 50% receive only 6.4%.The lowest-paid 20% – about 650 million workers – get less than 1% of total pay, a figure that has barely moved in 13 years, ILO analysis found. It used labour income figures from 189 countries between 2004 and 2017, the latest available data.Related: ILO warns of rise in social unrest and migration as inequality widens Continue reading...

Former chancellor and current Standard editor seeking to be first Briton in post, reports suggest

Move reinforces expectations of fresh stimulus package for ailing eurozone economyThe prospect of a fresh stimulus package to support the ailing eurozone economy when Christine Lagarde takes up the reins as boss of the currency bloc’s central bank sent shares higher across Europe and the US on Wednesday.The FTSE 100 closed up 0.7% at 7,609 points after starting the week at 7,497, while the New York S&P 500 sailed to another record high and moved closer to the 3,000 mark. Continue reading...

If confirmed as president, rebooting eurozone growth should be among top prioritiesChristine Lagarde’s nomination as the next president of the European Central Bank was not widely expected.

Data firm Markit warns that UK private sector weakened in June, suggesting the economy may have contracted in April-June

Dominant service sector came close to standstill in June, according to IHS Markit/CipsThe UK economy has suffered its first quarterly contraction in seven years, a closely watched survey suggests, as the looming threat of a no-deal Brexit paralyses business activity.Growth in the UK’s dominant services sector came to a near standstill in June, confirming a gloomy outlook for a month in which the manufacturing and construction industries plunged into reverse.In a ‘no deal’ scenario, the UK would leave the single market and the customs union immediately with no ‘divorce’ arrangement in place. The European court of justice would cease to have jurisdiction over the UK, and the country would also leave various other institutions including Euratom and Europol.Related: No-deal Brexit could hit Christmas supply of toys, says Sainsbury's Continue reading...

Consumers need protection from dishonest sellers, and the market needs protection from monopolies and cronyism“Love? Love fades away. But things? Things are forever.” So says Tom, played by Aziz Ansari, in a scene from Parks and Recreation. The phrase has become a meme, a tongue-in-cheek defense of modern materialism.The essential thinginess of capitalism has been one of its most-criticized features. Materialism, and specifically consumerism, are almost always used as pejorative terms. Nostalgic conservatives, egalitarian progressives and environmentalists loudly agree on at least one thing: we are just buying too much stuff.It is not whether we consume things that matters, but how we do.Consumers need protection from predatory, corrupt, or dishonest sellers; the market needs protection from monopoly powerThe problem comes when companies become so large they can defend themselves with economic “moats” against competition.Richard Reeves is the author of Dream Hoarders and a senior fellow at Brookings Institution.Read more from the Broken Capitalism series, guest-edited by Richard Reeves. Continue reading...

His plan for tax cuts and spending commitments makes no economic sense. But don’t underestimate its effect on votersYou know what you’re supposed to think of Boris Johnson. He is a cynical joker, a blond wrecking ball spouting Latin, an overprivileged preposteropath. He is a politician to be opposed fiercely, yet never taken seriously.Look at the tools with which journalists are covering his leadership campaign. Dollops of scepticism about his Brexit plans, a few questions about that dodgy past – and a vast yawning incuriosity about any of his other policies. You can see why that is: when one has a star so box office and a show as dramatic as Britain crashing out of Europe within a few months, then who cares about the support acts? Especially if one doubts the Bullingdon buffoon is even capable of having policies. Still, this is an astonishingly easy ride to give a man probably just three weeks away from becoming our next prime minister.Theresa May's would-be replacement has found not just one magic money tree, but a whole forestRelated: UN rapporteur: tax cut plans of Johnson and Hunt 'a tragedy' Continue reading...

James Jamieson urges ministers to inject billions into adult social careLocal authorities should be given the freedom to impose higher council taxes to help cope with the unprecedented funding crisis facing social care services after a near decade of austerity, the Tory chair of the Local Government Association has said.James Jamieson urged ministers to inject billions of pounds into adult social care and give councils more control of local health services to protect elderly and disabled people and give them the support they needed. “It is a measure of a good society how well it treats it most vulnerable,” said the councillor. Continue reading...

European Central Bank provides an arena split between anti-austerians and expansionistsChristine Lagarde will take up the position of head of the European Central Bank as a self-confessed economic outsider who has preferred to emphasise her ability as a listener and tough negotiator during her seven years as managing director of the International Monetary Fund.A lawyer by training, the former French finance minister is credited with turning around the Washington-based IMF after it was thrown into turmoil by the abrupt resignation of her predecessor Dominique Strauss-Kahn following unproven allegations of sexual assault and attempted rape.Related: Women to head top EU institutions for first time Continue reading...

Bank of England boss says Donald Trump’s widening trade spats and Brexit uncertainty are denting growthTrade tensions triggered by Donald Trump’s tariff policies could “shipwreck” the global economy and are having a chilling effect on growth, the governor of the Bank of England has warned.Mark Carney said on Tuesday that policymakers were underestimating the impact of the US president’s trade spat with China, Mexico and the European Union. He added that trade tensions had increased the “downside risks” for a UK economy already grappling with Brexit uncertainty. Continue reading...

Support from both Tory leadership contenders for free ports draws criticismBelfast could be turned into a Singapore-style tax-free zone under proposals being considered by Boris Johnson, the frontrunner to become the new prime minister.At a hustings in the Northern Ireland capital on Tuesday he expressed enthusiasm for the idea, when asked by a member of the audience.Related: Everyman plastic politician Jeremy Hunt mutates into Kamikaze Kurtz | John Crace Continue reading...

Only a fool would trust Facebook with their financial wellbeing. But maybe that’s the point of the Libra currencyFacebook and some of its corporate allies have decided that what the world really needs is another cryptocurrency, and that launching one is the best way to use the vast talents at their disposal. The fact that Facebook thinks so reveals much about what is wrong with 21st-century American capitalism.In some ways, it’s a curious time to be launching an alternative currency. In the past, the main complaint about traditional currencies was their instability, with rapid and uncertain inflation making them a poor store of value. But the dollar, the euro, the yen, and the renminbi have all been remarkably stable. If anything, the worry today is about deflation, not inflation.Related: What is Libra? All you need to know about Facebook's new cryptocurrencyWhat is Libra?Related: Cryptocurrencies have a mysterious allure – but are they just a fad? | Robert ShillerRelated: Libra cryptocurrency: dare you trust Facebook with your money? | John Naughton Continue reading...

Boris Johnson and Jeremy Hunt could learn a lot from the Local Government Association elections. Don’t hold your breathIn the Tory party leadership contest you didn’t hear about, which ended last week, Brexit machismo was not an issue. Promises of fantastical tax cuts and uncosted splurging on farmers and fishing weren’t on the agenda either. In the other leadership battle, key issues wereongoing austerity, the social care crisis, and councils going bust. This contest (unlike the one you have heard of) requires a successful candidate who is, as one insider said acidly, “engaged with reality”.Related: When Tory outsourcing and cuts end in fatal social services errors | Letters Continue reading...

Housebuilders blame Brexit uncertainty for a lack of new residential projectsBritain’s construction industry “dropped like a stone” in June to record its worst monthly performance in more than 10 years as firms blamed the Brexit crisis for a lack of new work.Housebuilders joined civil engineering firms and commercial building contractors to warn that a wait-and-see approach to commissioning projects across the public and private sectors had hit the industry.The purchasing managers' indices, or PMIs, track services sector companies, manufacturers and building firms around the world. Continue reading...

Trade optimism is pushing markets up despite weak factory data in the UK, the eurozone and China

Wall Street hits record high after Donald Trump and Xi Jinping agree to resume talksStock markets around the world have rallied sharply as hopes of a peace deal in the US-China trade war rise.Shares on Wall Street hit intraday highs on Monday after Donald Trump and the Chinese president, Xi Jinping, agreed to resume trade negotiations following a meeting at the G20 gathering of world leaders in Japan at the weekend. Continue reading...

Bob Cannell insists that co-operatives are not another form of capitalism, while Ed Mayo says the limits of neoliberal economics are increasingly evident and extremeIn the long read (There is now an alternative, 25 June) Andy Beckett repeats the canard that co-operatives are another form of capitalism. No they are not. In a capitalist business the owners, because they are protected by private wealth laws, take away a part of the value created and do what they want with it: hide it in tax havens, buy other businesses, spend it on megayachts.Co-operatives are democratic. The workers and other members decide what to do with all the value they create. More is distributed in the community via higher wages and local purchasing, in most cases. The far higher level of engagement of worker owners in their businesses solves the “productivity deficit”. Regions where co-operatives form a substantial part of the economy, such as Emilia-Romagna in northern Italy, enjoy higher levels of community wealth. As they say in Bologna: “When 30% of the local economy is co-operative, capitalism has to behave itself”, because there is an alternative.

Both Tory leadership hopefuls have made promises ranging from tax cuts to defencePhilip Hammond has warned the two Conservative leadership candidates their tax and spending plans would be impossible under a no-deal Brexit.Here is an analysis of what Boris Johnson and Jeremy Hunt have promised and the constraints on their proposals.Related: Hammond warns Johnson and Hunt over spending promises Continue reading...

Chancellor says no-deal Brexit would drain £26bn that rivals claim could be a ‘war chest’

Manufacturing sector scales back orders after stockpiling and slowdown in EuropeUK manufacturers have recorded the sharpest drop in factory output for more than six years amid mounting concerns over Brexit, as growth in consumer borrowing eased to the lowest level in more than five years.The monthly snapshot from IHS Markit and the Chartered Institute of Procurement and Supply showed that activity levels in the UK manufacturing sector dropped to the lowest level since February 2013 in June, as firms scaled back their orders due to existing high stock levels. Continue reading...

Cryptocurrencies, new payment systems and digital banking all signal a financial revolution that needs better oversightBanking supervision teams at the Bank of England “now receive the equivalent of twice the entire works of Shakespeare of reading each week”. So says Huw van Steenis, the author of Future of Finance, a report commissioned by the Bank’s outgoing governor, Mark Carney.One might argue with the word “equivalent”. Few regulatory submissions rival the bard’s output in their timelessness or vivid use of language: the Bank of England would probably send them winging straight back to their originators if they did. But Van Steenis’s point about the volume of reporting is a valid one. The system of banking supervision has become highly complex, with a risk that the forest is entirely lost from view in the midst of thousands of trees.Related: The growing risk of a 2020 recession and crisis | Nouriel Roubini Continue reading...

Agreement to cut 99% of tariffs is first with developing country in Asia and swiftly follows deal with South American blocThe European Union has signed a landmark free-trade deal with Vietnam, the first of its kind with a developing country in Asia, paving the way for tariff cuts on almost all goods.The EU has described the deal as “the most ambitious free trade deal ever concluded with a developing country”.Related: Is free trade always the answer? Continue reading...

Group for central banks says borrowing by firms with low credit scores is growing alarmingly, especially in US and UKCorporate borrowing poses a danger to the global financial system and could trigger a crisis in the same way US sub-prime mortgages sparked the 2008 banking crash, the organisation that represents the world’s central banks has warned.Citing the US and the UK as the worst offenders, the Bank for International Settlements (BIS) said in its annual health check of the global financial system that a dramatic rise in borrowing in recent years by businesses with low credit scores meant the market for corporate debt was becoming increasingly unstable.Related: The sub-prime timebomb is back – this time companies are lighting the fuse Continue reading...

Favourite to be PM is challenged over how he would invest in services and cut taxesBoris Johnson has said he would be willing to increase public borrowing to pay for infrastructure projects as he was pressured over how a government he led could invest heavily in new schemes and public services while also cutting taxes.Johnson, the overwhelming favourite to replace Theresa May as prime minister in just over three weeks, said that while there was fiscal “headroom” to spend more, if needed he would use low interest rates to borrow for new infrastructure.Personal style Continue reading...

The increasing absurdity of the Tory party’s march towards isolation would need Joseph Heller to do it justice‘There was only one catch and that was Catch-22, which specified that a concern for one’s own safety in the face of dangers that were real and immediate was the process of a rational mind.” As explained in Joseph Heller’s great novel, one had to be crazy to want to do combat duty, but “anyone who wants to get out of combat duty isn’t really crazy”.Lots of people are talking about George Clooney’s new television series of the book, but I also recommend to the many people who fear they are being driven crazy by this Brexit nonsense that, at least to my mind, there is no substitute for a return to the original novel.Hunt and Johnson are vying with each other in an absurd battle of increasingly unrealistic promises Continue reading...

Rolling coverage of the latest economic and financial news, as traders monitor the meeting in Osaka for signs of a break in the trade deadlock between the US and China

The president reckons Beijing will jump at a trade deal because the country’s grow is slowing. Martin Farrer takes a closer lookDonald Trump has claimed ahead of his crunch meeting with Xi Jinping that China’s economy is “going down the tubes” and that Beijing is desperate to do a trade deal to avert a bigger slowdown.So is there any truth to the US president’s claims? Continue reading...

Rolling coverage of the latest economic and financial news, as US president blasts India for raising tariffs on American goods