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Draghi’s parting shot leaves next ECB boss with existential dilemma
13 September 2019, 8:56 PM

Christine Lagarde will face a momentous decision in her first year as European Central Bank (ECB) President: give up on reviving inflation or give in to the temptation of bankrolling governments with never ending bond purchases.

The ECB pledged on Thursday to buy bonds “for as long as necessary” for inflation expectations in the euro zone to rise to its aim of just under 2 percent – a commitment that will haunt the central bank’s decision-makers long after current boss Mario Draghi steps down on October 31.

With the bloc’s economy reeling from a global slowdown and incapable of generating enough growth domestically, the ECB could be in the market for years to come, gobbling up significant swathes of the bonds issued by indebted governments.

Squaring Draghi’s pledge with rules that ban the central bank from financing countries’ deficits, and increasingly vocal discontent from some unhappy ECB policymakers, will be Lagarde’s first challenge when she takes office on November 1, the very day the bond-buying gets underway.

“A purchase programme forever means either the final breach of all European Treaties and the beginning of full state financing… (unless) Draghi and his successor get what they want: an inflation rate of 2 percent or more,” Sentix, a Frankfurt-based research firm, wrote in a note.

Odds on the latter happening any time soon were long, with the ECB itself expecting inflation of just 1.3%-1.6% between this year and 2021 and market gauges of long-term price growth stuck even lower.

But Lagarde won’t have the luxury of waiting.

In roughly a year the ECB will have bought a third of Germany’s outstanding government debt, according to estimates by U.S. brokerage Jefferies, coming up against a self-imposed limit.

Scrapping that cap – designed to prevent the ECB from becoming a blocking minority in any debt restructuring – or diverting purchases to other countries would likely invite fresh legal challenges and accusations Frankfurt is rewarding profligate governments.

But giving up on the ECB’s mission to bring inflation back to its target was not an option for an institution that has price stability as its sole aim.

Lifting of the share of a country’s debt that the ECB could own – likely to 50%, which would still prevent it from becoming the majority owner – was seen by analysts as a possible solution.

This would see Frankfurt go down the route of the Bank of Japan (BoJ), which has hoovered up 45% of its government’s debt as part of an increasingly desperate effort to revive a stagnant economy via quantitative easing (QE) and fiscal largesse.

“This is QE forever and a next step in the euro zone’s Japanification,” Carsten Brzeski, an economist at Dutch bank ING said. “The conclusion that only fiscal policy can still make a difference also echoes Japanese experiences.”

But new ECB President Lagarde would be likely to face push-back on such a move from a sizeable section of the Governing Council, more than a third of which opposed new bond purchases on Thursday, including the central bank governors of France and Germany.
“The very fact there are so many members opposing this could act as an anchor preventing the ECB from following the BoJ,”Angel Talavera, an economist at research group Oxford Economics,said.

POLICY REVIEW

Lagarde has a wild card, however. She has hinted at launching a review of the ECB’s tools and policy framework to weigh up their costs and benefits.

Economists said this could be used to bolster the case for even more stimulus or, on the contrary, acknowledge that the current inflation target is too ambitious and money taps must be finally closed.

When the ECB was founded in 1998, its main preoccupation was to stop prices from rising too fast.

It set its central goal as an inflation rate of “below 2 percent”, tweaked to “below, but close to, 2% over the medium term” in 2003 to clarify that deflation – or falling prices -would not be tolerated.

But that level of price growth has proven elusive since the euro zone debt crisis of 2010-12 due to a combination of sluggish lending, weak domestic demand in peripheral countries and excess savings in Germany.
While nothing is known yet about the spirit of Lagarde’s review, Dirk Schumacher, an economist at French bank Natixis,said he saw it as increasingly difficult for QE supporters to justify more largesse.

“The burden of proof is shifting and if inflation has gone nowhere a year from now it will be hard for the doves to say we need more of the same,” Schumacher said.

Tunisians prepare for the polls as unpredictable election looms
13 September 2019, 6:12 PM

Tunisia’s presidential election on Sunday is the most unpredictable in its short experience of democracy, a contest with no overwhelming front-runner at a time of economic angst.

It will shape not only indebted Tunisia’s approach to foreign relations and the vexed issue of public spending, but also test its consensus model of politics and the way it practices democracy.

While outsiders, especially in Arab states, are watching the fortunes of the moderate Islamist Ennahda party, many Tunisians have been engrossed by the candidacy of a media magnate who was imprisoned last month on suspicion of tax fraud, and whose campaign has focused on the poor.

However, after years of rising unemployment, high inflation and reduced spending on public services and subsidies, many Tunisians feel frustration with politics, adding to uncertainty over the outcome and turnout.

“Things aren’t clear. I still don’t see a candidate that is qualified and worthy of running Tunisia,” said Houda Ben Ayed, a woman waiting at a tram stop in Tunis.

Though Sunday’s vote is unlikely to produce a clear winner,with the two top candidates to hold a run-off if none of them win an outright majority, it will still influence a parliamentary election on October 6.

Tunisia’s revolution began with the self-immolation of a desperate vegetable seller in December 2010, then mass protests that forced strongman ruler Zine El-Abidine Ben Ali to seek exile in Saudi Arabia and soon spread across the Arab world.

Eight years on, Sunday’s highly competitive, wide open election shows how Tunisia’s path to democracy has run smoother than in Egypt, Libya, Syria, Yemen or Bahrain, where people attempted to follow its example in throwing off autocratic rule.

The televised debates between most of the 24 men and two women running for office were widely watched by voters hoping to whittle down their choices – a far cry from the unopposed 99% election victories under Ben Ali, now lying sick in a Saudi hospital.

The crowded field boasts some of Tunisia’s biggest names,including current and former prime ministers and the first ever presidential candidate from the country’s strongest party, as well as the detained media magnate, Nabil Karoui.

They represent a myriad of ideas unthinkable in most Arab elections, pitting secular liberals against moderate Islamists, free traders against economic protectionists and supporters of the 2011 revolution against those of the old regime.

No incumbent is running, since former President Beji Caid Essebsi died in July aged 92 and the interim president, MohammedEnnaceur, did not stand.

POWER SHARING OR POLARISATION

Most elections since the revolution have led to power-sharing agreements between the rival parties, as politicians sought to avert dangerous polarisation between Islamists and liberals or to present a united front to deal with economic crisis.

It is uncertain whether that consensus model will continue. Sunday’s election may push parties to stake out harder positions in the October parliamentary elections against sharing power with ideological opponents.

The president, although the most significant figure in national politics, has direct control only over foreign and defence policy, with the prime minister chosen by parliament overseeing most other portfolios.

Several candidates have challenged this arrangement, calling for changes to the constitution to give the president more power. It is one way in which Sunday’s vote will affect how Tunisian politics work.

The case of media magnate Karoui is another. His opponents say he has used his charity and his television station illegally, and that if he wins, it would represent a blow to democratic principles.

Karoui denies wrongdoing and complains his detention has denied him the right to contest the election on equal terms with his rivals. On Friday a court said he would stay behind bars while waiting for a final verdict in the case.

His supporters say his arrest shortly before the start of the campaign over a tax fraud case that was initiated years ago is evidence of undemocratic behaviour on the part of the authorities, who they say are trying to silence him.

ISLAMISTS

Continuity is most clearly represented in the race by Prime Minister Youssef Chahed, whose administration has implemented economic reforms since 2016 as part of an IMF loan programme.

Whatever his fate in Sunday’s poll, those reforms highlight the difficulties that the next president and government will face, caught between popular demands to raise spending and the insistence of international lenders that Tunisia cut back.

A strong showing for the Ennahda party would not necessarily lead to a big shift in policy. Banned under Ben Ali as an Islamist party, it has played a big role in most governments since the revolution.

Though it has pushed a more moderate image in recent years, portraying itself as a “Muslim Democrat” party, many Tunisian liberals worry it still harbours a more conservative Islamist agenda.

The main focus of its extensive party machine – the most established in the country – has been on the parliamentary election rather than the presidential race, which it is entering for the first time with deputy leader Abdelfatteh Mourou as its candidate.

However, in a possible sign of its concern about the tightness of the race, party leader Rached Ghannouchi has called on other conservative candidates to withdraw.

Bahamas in the eye of the storm as Dorian set to hit on Sunday
1 September 2019, 6:51 AM

Hurricane Dorian is set to slam the Bahamas on Sunday as a dangerous category 4 storm, pounding the islands with up to two days of torrential rain, high waves and damaging winds before taking aim at the U.S.mainland.

Bahamas Prime Minister Hubert Minnis begged residents of Abaco and Grand Bahamas to head for the main island to escape the “devastating, dangerous” storm.

“I want you to remember: homes, houses, structures can be replaced. Lives cannot be replaced,” he told a news conference on Saturday, adding that 73,000 people and 21,000 homes were at risk to storm surges of up to 15 feet (4.6 meters).

Late on Saturday, the Miami-based National Hurricane Center(NHC) said Dorian was packing maximum sustained winds of 150 mph(240 kph) and was about 155 miles (245 km) east of Abaco.

After churning over the Bahamas, it is expected to veer northwest and could spare Florida a direct hit.

Communities further north in Georgia and South Carolina raised alert levels on Saturday, with residents filling sandbags as authorities tested infrastructure and hurricane drills.

Despite the more favorable forecasts for Florida, town authorities there told people to remain vigilant and a tropical storm watch was issued for a more than 120-mile stretch (193 km)of the state’s coast, meaning sustained winds of up to 73 mph(117 kph) were possible within 48 hours.

Most tourists who planned to leave the Bahamas got out before the main airport closed on Friday night.
Jeffrey Simmons, the deputy director of Bahamas’ department of meteorology, said Dorian will cause prolonged periods of large swells and storm surges along the north coast of Grand Bahama and the north and east coast of Abaco.

“We are asking residents in those areas to leave the coastline,” Simmons added. “We expect a storm surge of up to 15 feet. In addition to that we have a spring tide that can increase the surge by 2 to 3 feet.”

Potential damage to the Bahamas from Dorian could be exacerbated by the fact that its westward motion is forecast to slow, keeping it over the islands for longer, the Bahamas National Emergency Management Agency said in a statement.

Grand Bahama and Abaco are hubs of the Bahamas’ thriving tourism industry. But after days of evacuations only 26 tourists are left on Grand Bahama, authorities said on Saturday.

“We have been for the last few days asking all tourists to leave the island in anticipation of the hurricane,” said Kwasi Thompson, minister of state for Grand Bahama.

Hawks logo
Hawks breakthrough in VBS investigation
6 July 2019, 7:22 AM

The Hawks are hoping to make a breakthrough in their investigation into VBS Mutual Bank after they raided and seized documents and computer hard drives at the Free State Development Corporation (FDC) in Bloemfontein on Friday.

The FDC has recently been in the news following allegations that they received 104 million rand from the VBS mutual bank.

The bank illegally took deposits from municipalities and other entities before it was looted and rendered bankrupt.

Hawks spokesperson Hangwani Mulaudzi says they hope their investigation will lead to arrests… ” It relates to the VBS ongoing investigation. There were some documents, gadgets… that we needed to seize… and were successfully taken by the team. They are now going to be analysed, and based on what we get, it will be included in our docket. Due to the length taken, we want to make sure the matter is dealt with as soon as possible.”

Koroneka Trading and Projects Director Babadi Tlatsana
Former Ministers implicated in corruption
23 June 2019, 7:28 AM

Koroneka Trading and Projects Director Babadi Tlatsana has implicated former ministers, Lynne Brown and Dipuo Peters in corruption.

Tlatsana concluded her testimony at the State Capture Commission in Johannesburg on Saturday afternoon.

In a tape recording, allegedly between SA Express GM Brian Van Wyk and Tlatsana, Tlatsana explains how money laundered from the North West government through SA Express was divided among government officials and ministers.

The looted money she said, totalled over R97 million. It’s alleged to have been used to bribe former ministers Brown and Peters- who allegedly each received R10 million.

Tlatsana was quizzed by Deputy Chief Justice Raymond Zondo: “The whole amount of 20 million rands that your close corporation got in December was to be paid to the two ministers – of ten million each? ”

Tlatsana is still seeking payment from the North West government in regards to her agreement.

She also told the commission how unsafe she felt after finding out what arrangement SA Express had secretly entered into with the North West government.

She detailed how she and her family were being followed around, including how documents pertaining to her case have disappeared at the police station.

Tlatsana says she is still getting death threats and phone calls and feels very scared. Tlatsana says she reported the matter to the police but they have not done anything about it.

The commission is expected to resume on Monday.

 

Watch Tlatsana’s testimony in video below: 

 

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