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Racial riots in the US weighs on the country’s economic revival

Racial riot in the US weighs on the country's economic revival
Racial riot in the US weighs on the country's economic revival

The racial riot in multiple cities in the United States after the death of the African American George Floyd, at the hands of the Minneapolis, Minnesota Police, adds an important social factor to the complicated economic reactivation that the country is facing as a consequence of the Covid-19 pandemic. .

US President Donald Trump again criticized the governors of some states for being “weak” and insisted on the need to “arrest people”, according to different national media outlets.

“You have to dominate. If you do not dominate, you are wasting time,” Trump said in a Wall Street Journal report. “You will look like a bunch of idiots. You have to arrest people. And you have to judge people and they have to go to jail for long periods of time,” he added.

The president, who plans to designate the anti-fascist movement Antifa as a terrorist organization by accusing it of being behind the riots, was accompanied by the attorney general, William Barr, who also stressed the need for a strong police presence, and the President of the State. Major Joint, General Mark Milley.

Protests over the past few days, where at least three fatalities were reported, have led to the arrest of at least 4,400 people, according to the Associated Press, as the initially peaceful protests have seen multiple episodes of violence and looting affecting also to the operations of multiple companies and small businesses.

Thus, Amazon has reduced its deliveries and closed its delivery centers in Chicago, Los Angeles and Portland. For its part, the retail chain Target, which had already closed 32 stores around its Minneapolis headquarters, extended this decision to dozens of stores across the country. Apple has also made the decision to keep some of its stores closed with “the health and safety of its equipment” in mind.

From Moody’s Analytics, its chief economist, Mark Zandi, assured Bloomberg that “racial tensions can completely overwhelm the situation” at a time when many Americans still do not know if they will regain their jobs as the economy reopens. “This highlights deep despair in the US,” he added, citing 20% ​​unemployment and 50 million workers who have either lost their jobs or faced cut wages.

New York Governor Andrew Cuomo said Monday that he was considering imposing a curfew on the city as National Guard troops were deployed over the weekend in 15 states and Washington D.C. in an attempt to quell a sixth night of violence in Floyd’s death.

“The social riots really derails the economic recovery for small businesses to try to reopen,” Deutsche Bank Wealth Management chief investment officer Deepak Puri said in Yahoo Finance, who does not see this as something that will permanently hamper economic output. , “but it really worries”.

It is important to keep in mind that the world’s largest economy currently has 1.79 million coronavirus infections that have caused 104,484 deaths. Still, all states have partially reopened, and some of the cities affected by the riots, such as Los Angeles and Washington DC, had already begun to reduce restrictions on non-essential services. New York City, the center of the pandemic in the United States, plans to restart construction, factories, and retail trade starting June 8.

Precisely, the municipal governments and their budgets have been affected by the measures of confinement and the brake of the economic activity and they can hardly pay now to add the additional costs derived from the police overtime to the thread of the protests. Even before these, Democrats in Congress have already passed a bill to commit up to nearly a trillion dollars in funding to state and local governments.

Five questions about (yes, again) an important Brexit week

Five questions about (yes, again) an important Brexit week
Five questions about (yes, again) an important Brexit week

Despite the British saying goodbye to the European Union in January, Brexit is still going on. In fact, this week is yet another crucial moment in the process. Five questions about another important week in this lengthy headache file.

Brexit, isn’t it over yet?

No definitely not! The United Kingdom may not officially be part of the EU anymore, but will continue to adhere to European rules such as free trade, European animal passports and access to fishing until the end of this year.

This so-called transition period gives the UK time to adjust to life after Brexit. What that life will look like remains to be seen: currently Brussels and London are still negotiating their future economic relationship.

How are those negotiations going?

Not so good: they are stuck. As a result of the corona crisis, there have only been three rounds of negotiations, and the EU and the UK are still miles apart on many fronts, such as fisheries and competition.

EU chief negotiator Michel Barnier accuses the British of wanting the pleasures of the EU but not the burdens. “You can’t dance at two weddings at the same time,” Barnier expressed his frustration on German radio channel Deutschlandfunk this week. Across the Channel, top negotiator David Frost thinks that Brussels is immobile.

Michel Barnier (r) and David Frost (l) meet at a meeting in Brussels before the outbreak of the corona virus. Since the virus outbreak, there is only video between the two parties. (Photo: Pro Shots)

What is the biggest pain point?

The EU offers the UK a free trade agreement with the condition that the British commit to European agreements on matters such as taxes, labor standards and environmental standards. In this way, Brussels prevents the British from losing weight, for example, at work standards and thus gaining a competitive advantage. The EU sees preserving European standards as creating a “level playing field”, which is the main pain in the negotiations.

The UK also wants a free trade agreement and claims to maintain high standards after Brexit, but refuses to commit to European standards. “The so-called level playing field would chain our country to European rules and standards, in a way that is unprecedented in this type of free trade agreement,” said Frost after the last round. “If they understand that we will never agree to this, then we can only make progress.”

Analysts say that the British do not want to agree to European standards, because otherwise it will be more difficult for the UK to conclude a trade agreement with other countries. For example, if the British continued to keep European rules, a trade deal with the United States could not be about agriculture, because the US chlorine chicken should not enter the European market.

On to next week: why is it so important?

The fourth round of negotiations will start on Monday. That is currently the last round on the agenda for an important deadline at the end of June. Before July 1, the British have to decide whether they want to extend the transition period beyond December and thus stick to European rules for longer. The parties would thereby give each other more air to reach an agreement. The EU has said several times that it supports an extension.

The Johnson government has said time and again that it does not want to extend the transition period and that it wants to have Brexit completely complete from 2021 onwards. Johnson warned he might even want to walk away from the negotiating table in March if not enough progress is made before July.

Will the entire Brexit process still lead to a no deal?

If we have learned one thing since the referendum in 2016, everything can become liquid under pressure. Last fall, the British also seemed to be leaving the EU without an agreement, but after a concession from Johnson, things hit the road and a deal was rolled out.

So it is still too early to answer this, but with another week of stagnation in the negotiations, the dreaded no-deal scenario seems to be one step closer.

The automotive industry in Europe will collapse more than 30% in 2020

The automotive industry in Europe will collapse more than 30% in 2020
The automotive industry in Europe will collapse more than 30% in 2020

The sector will record the worst evolution since 1999, according to a study by Euler Hermes. Germany, United Kingdom, France, Spain and Italy, which represent 75% of the European Union car market, the decrease in April reached 84%, compared to the 42% global drop.

Europe’s automobile industry is down more than 30% so far in 2020. Both new car registrations and the business climate plummeted in April. “High-frequency indicators based on Google Trends now point to renewed interest in cars, but, with the exception of Germany, that will not be enough to drive a strong rebound in car purchases before the third quarter,” says a report by the insurer Euler Hermes.

Due to confinement measures across Europe, which caused a massive restriction of public mobility and the closure of both car dealers and showrooms and car registration agencies, European car markets registered unprecedented declines in April: Germany, 61%; France 89%, Spain 97%, the same percentage as in the United Kingdom; and Italy, 98%.

The fall in the automobile market stood at 31% year-on-year for Germany, 43% for the United Kingdom, 48% for France, 49% for Spain and 51% for Italy. For the five main markets, which represent 75% of the European Union, the decrease reached 84% in April, compared to the global drop of 42%, equivalent to -1.6 million new cars.

But the worst figure is the business climate, which sets record lows. Confidence indicators released in late April by Eurostat mark a further deterioration in the current and future business climate for manufacturing and retail. This decline was largely driven by Germany, which represents approximately 45% of European production in terms of value and around 25% in terms of volume. But similar declines are seen in most car-making countries, especially when it comes to orders and production expectations.

The greatest interest does not materialize in purchases
Admittedly, the data points to a renewed household interest in automobiles, but this still does not seem strong enough to materialize in vehicle purchases, except in Germany. The frequency of Internet searches for “car purchases” and “car prices” are seen as a proxy for households’ interest in cars, and in particular their willingness to buy a vehicle in the short term. In general, there is an average gap of three to four months between the upturn in interest in cars on the Internet and the recovery of new vehicle registrations.

Taking as a reference the weekly figures available through Google Trends, until May 10 interest in cars in Germany, the United Kingdom, France, Italy, Spain and Belgium had decreased sharply from February to the first days of April.

April marked the beginning of a trend reversal in most cases, confirmed by the data obtained in the first two weeks of May. It was most evident in Germany, where searches for ‘car buying’ and ‘car prices’ already exceed pre-crisis levels, suggesting that households are preparing to buy new cars in the coming weeks. However, for the other countries in the sample, interest in cars has not yet recovered to pre-crisis levels (France, Italy, the United Kingdom and Belgium) and has not even restarted yet (Spain). Given the average delay, it seems unlikely that new vehicle registrations will recover in France before the end of the summer.

What does this mean for companies? The reopening of showrooms and dealerships across Europe is the first priority for recovering demand, as well as the end of mobility restrictions. Actions aimed at reducing inventory could help, specifically for the first acquisitions, since Covid-19 is a factor that causes fear for people who use public transport these days.

“But Europe is a mature market driven primarily by replacement needs, and car buying is not expected to become a priority for most households, unless they are ‘motivated’ to do so,” the report says. Euler Hermes.

In this sense, the resumption of production will contribute to the recovery, as it will give rise to new models, but it will be gradual and not powerful enough to fully reactivate demand.

In the absence of specific measures dedicated to boosting demand in one way or another, such as tax incentives / subsidies / incentives – particularly in favor of low-emission vehicles – the European market will decrease by approximately 30% in 2020. And It will record its worst performance since the start of these statistics in 1999, with 12 million units sold, registering a decrease of 6 million units from 2019.

Brussels wants a recovery fund of 750 billion, the majority of which consists of donations

Brussels wants a recovery fund of 750 billion, the majority of which consists of donations
Brussels wants a recovery fund of 750 billion, the majority of which consists of donations

The European Commission wants to allocate € 750 billion to combat the economic consequences of the corona crisis, Commission President Ursula von der Leyen announced on a press conference on Wednesday. The package must pull the European economy out of the doldrums again, as the block is heading into a deep recession.

Two-thirds (500 billion euros) of Von der Leyen’s billions package is filled with gifts for member states. These amounts therefore do not have to be repaid. The rest of the amount (250 billion euros) consists of loans on attractive terms. The recovery fund, which is called the Next Generation EU, is in addition to the previously agreed European safety nets totaling 540 billion euros.

“The gifts are investments in our common future and have nothing to do with the debts of past member states,” said von der Leyen, referring to criticism from northern member states such as the Netherlands. “This package is for all of us.”

With the aid fund, the European Commission wants to prevent the economic differences between countries from becoming too great and the EU from becoming fragmented. Countries such as Spain and Italy, which traditionally rely more on tourism, will have more trouble restarting the economy than northern countries because of the corona crisis.

It remains to be seen whether the Commission proposal will be successful in all Member States. The Netherlands is strongly against gifts, among other things. On Saturday, the Netherlands, together with Denmark, Sweden and Austria, wrote a speech against gifts. The countries advocate a package of loans. According to these Member States, loans should only be granted if they are subject to reforms.

Recovery fund part of multi-year budget, discount maintained

The recovery fund should become part of the new European multiannual budget, the so-called multiannual financial framework (MFF). In addition to the 750 billion package, Brussels proposed a renewed version of the MFF on Wednesday. The budget, which runs from next year to 2027, would amount to 1.1 trillion euros in that proposal.

The Commission is now proposing a lower amount than in 2018, but the amount is higher than Charles Michel, the President of the European Council, suggested in February. The Netherlands rejected both proposals and was still against an increase in the MFF, partly due to the departure of the United Kingdom from the EU.

In the proposal, the Commission does meet critical northern countries. This way, the discount on the contributions will be maintained. In earlier proposals, the discount no longer occurred. “Due to the economic impact of the corona crisis, contributions to some Member States would increase disproportionately if the rebate is also cut,” the Commission writes.

Christine Lagarde worsens the recession in the Eurozone: GDP will fall between 8% and 12% in 2020

Christine Lagarde worsens the recession in the Eurozone: GDP will fall between 8% and 12% in 2020
Christine Lagarde worsens the recession in the Eurozone: GDP will fall between 8% and 12% in 2020

This has worsened the range of the recession expected for the region as a result of the pandemic by ruling out the less negative scenario raised a month ago by the ECB, which estimated a 5% drop in GDP.

The Eurozone economy will suffer a contraction of between 8% and 12% in 2020, as indicated by the President of the European Central Bank (ECB), Christine Lagarde.

“I think the soft scenario, with a GDP drop of 5% in 2020 is already outdated,” said Lagarde during a press conference in which he anticipated that “the Eurozone economy is likely to be between the medium and severe raised by the ECB », which point to a contraction of 8% and 12%.

The ECB will announce its new macroeconomic projections for the Eurozone on June 4, after the meeting of the institution’s Governing Council.

According to the latest forecasts of the entity, the recovery of activity in the euro area would oscillate between 4% and 6% in 2021, according to the different scenarios proposed by the central bank. The ECB anticipates a recovery in the Eurozone’s GDP of between 4% and 6% in 2021.

According to the softer scenario managed by the ECB, which envisages the end of strict containment measures during the month of May and a gradual return to activity thereafter, but which Lagarde already considers outdated, the GDP of the euro area It would record a 5% drop in 2020, which would be more than recovered with the rebound of 6% expected for the activity of the block in 2021.

For its part, in its intermediate scenario, in which strict confinement ends in May, but longer containment measures are maintained, the ECB anticipates a contraction of 8% this year and a recovery of 5% in 2021.

At the same time, under the most pessimistic scenario, with the containment extending until June, followed by strict containment measures, the economy of the euro area would suffer a 12% contraction this year, with a drop in GDP of 15% in the Second quarter, after which quarterly growth of 6% would follow between July and September and 3% between October and December, with annual growth of 4% in 2021.

Renault will produce the Alliance vehicles in Europe after a change in the business model

Renault will produce the Alliance vehicles in Europe after a change in the business model
Renault will produce the Alliance vehicles in Europe after a change in the business model
  • Nissan will be a reference in China, North America and Japan
  • Renault will handle Europe, Russia, South America and North Africa
  • Mitsubishi to Lead Association of Southeast Asian and Oceanian Nations

The Renault-Nissan-Mitsubishi Alliance today announced a new cooperative business model that aims to enhance the competitiveness and profitability of its three companies.

Thus, the main novelty is that each of the brands will be in charge of leading the production of vehicles in different regions.

Under this scheme, Nissan would be a reference in China, North America and Japan; Renault in Europe, Russia, South America and North Africa; and Mitsubishi at the Association of Southeast Asian and Oceanian Nations. Investors have celebrated the decision, leading the company to rise 17.47% on the Paris stock exchange.

Updates to the companies’ product portfolio will follow the leader-follower scheme, and both leader and follower vehicles will be produced using the most competitive configuration.

In this way, the renewal of the C-SUV segment from 2025 will be led by Nissan, while the future renewal of the B-SUV segment in Europe will be carried out by Renault.

In Latin America, B product platforms will be streamlined, evolving from four variants to one for Renault and Nissan products. This platform will be produced at two plants, each of which will produce for Renault and Nissan.

In Southeast Asia and Japan, Alliance members will seek selected opportunities under the same scheme, such as the kei car collaboration between Nissan and Mitsubishi Motors.

With all of the above, nearly 50% of the Alliance models will be developed and produced under the leader-follower scheme by 2025.

The president of the Alliance and Renault Operating Board, Jean-Dominique Senard, pointed out that “the three companies of the Alliance will cover all vehicle segments and technologies, in all geographical areas, for the benefit of each client, at the same time that increase their respective competitiveness, sustainable profitability and social and environmental responsibility “.

Member companies plan to take advantage of the Alliance’s existing benefits in areas such as joint purchases, leveraging their respective leadership positions and geographic strengths to support the business development of their partners. The leader-follower scheme is expected to offer an investment reduction model of up to 40% for vehicles that fully follow this scheme. Those benefits are expected to add to the conventional synergies that already exist today.

In terms of technological efficiency, the Alliance members will continue to capitalize on existing assets to ensure that each member company continues to share the investment in platforms, mechanics and technologies. This exchange has served for the development of engines and platforms and has allowed the launch of the CMF-B platform for Renault Clio and Nissan Juke, as well as the kei car platform for Nissan Dayz and Mitsubishi eK Wagon. The CMF-C / D and CMF-EV platforms will be as follows.

The leader-follower scheme will extend from platforms and mechanics to all key technologies. Thus, Nissan will lead autonomous driving and the CMF-EV platform for electric motors; Renault, connected car technology and the central system of electrical and electronic architecture, as well as CMF-A / B platforms for electric motors; and Mitsubishi will handle the plug-in hybrid for the C / D segment.

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