Aurelia Butler

PARIS (Reuters) -The CEO of EDF (PA:EDF) on Monday broke with the convention that bosses of French state companies don’t criticise the government to express “real shock” and indignation after the utility was told to sell more power to rivals at below-market prices. In a memo to managers seen by Reuters, Jean-Bernard Levy said he had tried to persuade ministers to adopt a different course, and was now looking at steps to defend EDF’s interests.Shares in the firm slumped as much as 25% on Friday after the government of President Emmanuel Macron – facing a re-election battle in three months and keen to head off public anger over rising power bills – ordered the utility to sell more cheap nuclear power to rivals.”This is not what we had proposed to the government,” Levy said in the internal memo. Instead, he said, the firm had recommended targeted help for small businesses and the most vulnerable industrial users.”Having fought hard against it, this decision comes as a real shock,” he said of the government move. “Naturally, we have to deal with it. It is going to weigh very heavily on our results.”Referring to the government measures, combined with technical problems at several nuclear plants that forced them offline, Levy wrote: “This news is rocking the company.””Many of you have shared with me your support, and even your indignation, and I share your emotions. You should know that the executive committee and I remain very combative,” he said.”Together with the executive committee, we will study the appropriate measures to reinforce the balance sheet of the group, and all measures that protect its interests. At stake is our capacity to safeguard our strategic development. We plan to make these measures public within a month.”The French state owns 84% of EDF’s shares. The group forecast last week the government decision would knock around 8 billion euros ($9.13 billion) off its 2022 core earnings before interest, taxes, depreciation and amortization.($1 = 0.8764 euros) More

Handelsblatt reported that, according to its government sources, economic sanctions targeting major Russian banks were being considered as an alternative.The Russian rouble gained on the report.A spokesperson for the White House National Security Council rejected the Handelsblatt story.”No option is off the table. We continue consulting very closely with European counterparts on severe consequences for Russia if it further invades Ukraine,” the spokesperson said.A German government source close to the matter told Reuters: “We can’t confirm. It is not decided yet.”Excluding Russia from Swift, which would effectively cut the country off from the global economy, has long been considered the ultimate sanction that Western countries could take against Russia to deter it from taking further military action against its neighbour Ukraine.The Swift system is a global network used by almost all financial institutions worldwide to wire sums of money to each other, and a cornerstone of the international payments system. More

By most international standards, China’s 4 per cent year-on-year growth in the fourth quarter of last year was a pretty solid performance. Yet while it was slightly above most analysts’ predictions, it was the slowest pace of expansion for 18 months — representing a slide from 6.5 per cent growth during the same period of 2020. Overall, gross domestic product grew 8.1 per cent in 2021. Any sustained chill in Chinese expansion will have a global impact: according to IMF numbers, China is the biggest contributor to global GDP and was set to account for more than one-fifth of the total global growth in the five years to 2026.It is notable that the three main factors exerting a drag on the Chinese economy derive in large part from government policies. A months-long series of crackdowns has targeted industries such as fintech, online education and entertainment as well as perceived societal ills such as celebrity culture, gaming and effeminate fashion trends. Sluggishness in the property market, which by some estimates contributes close to 30 per cent of GDP, stems from Beijing’s insistence that real estate developers must reduce debt ratios to within “three red lines” announced in 2020. The crisis at Evergrande, the world’s most indebted property company, and several other developers is weighing heavily on real estate activity.The third impediment to growth is Beijing’s “zero Covid” strategy. Some half a dozen cities are now subject to partial lockdowns as authorities try to trace every person infected with the highly contagious Omicron virus. Goldman Sachs, which cut its projection for Chinese GDP growth this year to 4.3 per cent from 4.8 per cent, cited such Covid-related restrictions as a factor.So China’s slowdown is, to some extent at least, self-inflicted. But it is hard to see that Beijing will grant itself much latitude to relax policies in these three key areas. Each element of its crackdown, on industries from fintech to online gaming, appears to reflect a strongly-held official conviction. The rationalisation of the property market is motivated by the correct assessment that debt levels are dangerously high. And doubts over the efficacy of Chinese Covid vaccines go some way toward explaining Beijing’s zero tolerance posture towards Omicron.Nevertheless, China needs to do something to reinvigorate economic activity to counter what Ning Jingzhe, head of the national bureau of statistics, described as a “domestic economy . . . under the triple pressure of demand contractions, supply shock and weakening expectations”.In an online speech to the World Economic Forum’s annual meeting on Monday, president Xi Jinping struck a pro-growth tone. He said China’s policy of “common prosperity” was not egalitarianism but an intention to “first make the pie bigger” and then divide it properly through institutional arrangements. The People’s Bank of China also seemed concerned about the flagging growth rate, cutting an important lending rate on Monday for the first time since April 2020. Further loosening could be pursued in a judicious way; Beijing should reflect that its debt and property problems were created in part by a previous excess of liquidity. Beijing could also step up engagement with Washington to seek an end to the US-China trade war. Lifting tariffs imposed during 2019 and 2020 by both countries would help to curb inflationary pressures in the US, boost trade and set a more positive tone for cross-border investments that have slumped in the past three years. This might not be enough to boost China’s GDP growth. But it would be a step in the right direction. More

Venezuela’s economy is showing signs of recovery, its president has claimed, after five years of acute economic crisis and hyperinflation.Nicólas Maduro told the country’s congress that the economy grew 7.6 per cent in the third quarter of last year and probably grew “more than four per cent” in the year as a whole, hailing it as “a marvellous achievement”.“After five years of economic war, boycott and blockades, Venezuela is back on the path of economic growth,” he said in his weekend address, adding that exports jumped 33 per cent in 2021.If Maduro’s figures are accurate — estimates from economists vary significantly — they would be the oil-rich country’s first growth in gross domestic product in eight years. During that time the economy has shrunk by about 75 per cent, turning what was one of the largest economies in South America into one of its smallest.The socialist government’s decisions to loosen currency controls, relax import restrictions and encourage informal dollarisation have revived fortunes. Credit Suisse recently said it expected 2021 growth to come in at 8.5 per cent and predicted further expansion of 4.5 per cent this year.The bank said its assessment “stems largely from the improvement in oil output” as well as more dollarisation, increasing imports, improving tax revenues and other factors.

The economy seems to have picked up with the passing of the worst of the Covid-19 pandemic © Matias Delacroix/AP

Other economists are less bullish but agree the economy is growing again following the worst of the coronavirus pandemic. “Our forecast for 2021 was for consolidated growth of 2.5 per cent, and for 2022 we are predicting growth within a range of 3-5 per cent,” said Tamara Herrera, chief economist at Síntesis Financiera, a consultancy in Caracas.The return to growth, albeit from an extremely low base, comes as hyperinflation in Venezuela finally burns itself out.According to the central bank, monthly inflation was 7.6 per cent in December — its 12th consecutive month below the 50 per cent mark that economists generally regard as the threshold for hyperinflation. Annual inflation last year was 686 per cent, the bank said — down from nearly 3,000 per cent the previous year.Steve Hanke, a professor of applied economics at Johns Hopkins University, says the first hyperinflationary bout, from 2016 to 2019, lasted 28 months — the fifth-longest on record. A second bout in 2020 lasted nine months.

According to the Venezuelan Observatory of Finance (OVF), a non-government body that measures price rises slightly differently, hyperinflation began in 2017 and has not stopped, making this the third-longest bout on record surpassed only by Nicaragua in the late 1980s and Greece during the second world war.The rate of price rises prompted most Venezuelan businesses to switch to using dollars, which are now used for around two-thirds of all transactions in the country.The central bank has also intervened to prop up the Bolívar. “The key in the recent improvement in inflation has been the central bank’s intervention in the foreign exchange market, which is keeping the exchange rate contained,” Credit Suisse said.However even the most optimistic forecasts point to annual price growth in the low triple digits in 2022, which still “constitutes chronic high or galloping inflation”, said Peter West, economic adviser at EM Funding in London. More