Economy

GAZA (Reuters) – The Gaza Strip’s Hamas rulers have been unable to pay salaries for 50,000 public sector workers, with officials in part blaming a delay in a monthly payroll grant from Qatar, a crucial aid donor to the impoverished Palestinian enclave.The salary crisis has sparked an unusual amount of criticism on social media in Gaza, including by some of Hamas’ own employees. A drop in tax revenue and a jump in spending has made the situation even more difficult.Most of Gaza’s 2.3 million residents live in poverty, and the economy is dependent on foreign aid. Qatar has paid hundreds of millions of dollars since 2014 for construction projects. It currently pays $30 million per month in stipends for families, fuel for electricity, and to help pay public sector wages.Hamas officials say no salary aid has been received since just over half of a $5-million grant to support the May payroll. The reason for the delay was not clear.In Doha, Qatar’s International Media Office did not immediately respond to a request for comment.”The government is going through a stifling and escalating financial crisis, with a continuous increase in the deficit month after month, which led to the delay of salaries this month,” Awni Al-Basha, the Hamas-appointed deputy minister, told Hamas Aqsa radio.”We are making significant efforts to pay the salaries, and we hope to do so at the end of this week,” he said.Monthly payroll costs Hamas 125 million shekels ($34.5 million) per month, said Basha.On Sunday, Salama Marouf, chairman of the Hamas government media office, said there has also been an increase in spending, particularly for the ministry of health and repayment of bank debts. He called on Qatar to increase the salary grant to $7 million.Gaza has been under an Israel-Egyptian blockade since 2007 when Hamas, which opposes peace with Israel, took control. Public sector employees have not received full salaries since 2013.”With 60% (of salaries) we used to meet the basics of our needs at home. What happens when the salary is completely cut off?” said Mahmoud Al-Farra, an employee at the Hamas government media office. “This a big disappointment.”Some took to social media, questioning whether the crisis was authentic.”Where are the taxes they collect and the grants that enter Gaza go?” one resident posted on Facebook (NASDAQ:META). More

Top Biden administration officials dimmed hopes of an immediate easing of tariffs against China on Sunday even as they signalled scope for a more constructive relationship with Beijing.Speaking ahead of a meeting of Group of 20 finance ministers and central bankers in India, US Treasury secretary Janet Yellen said she was eager to work more closely with China on areas of “mutual concern” following a four-day trip earlier this month that she said put the relationship on “surer footing”. However, at a press conference that followed her remarks, she stressed that while it would be useful to identify ways to de-escalate tensions over time, it is “premature” to relax trade restrictions.“The tariffs were put in place because we had concern with unfair trade practices on China’s side and our concerns with those practices remain. They really have not been addressed and China put in place retaliatory tariffs of its own,” she told reporters. “Perhaps over time this is an area where we could make progress, but I would say it’s premature to use this as an area for de-escalation, at least at this time.”The US is completing a four-year review of the trade tariffs. Jake Sullivan, the White House national security adviser, on Sunday expressed frustration with what he described as a “self-defeating move” by China to impose export controls on critical ingredients to manufacture computer chips beginning on August 1.“We’re not looking to end all trade with China, what we’re looking to do is have a small yard of restrictions on technology with national security implications, and a high fence around that yard,” he told CBS News. “That’s what we’re going to continue to do, And China, of course, will have to make its own decisions.”The Biden administration is considering ways to prevent US investment from helping China’s military. During her trip to Beijing, Yellen said those controls would be “highly targeted and clearly directed narrowly at a few sectors where we have specific national security concerns”.

Sullivan said on Sunday that he expected President Joe Biden and Xi Jinping of China to speak again “at some point”.“It is a big, complex, challenging relationship that has to be managed carefully and that can only really be done effectively from the very top.”Washington has increased its diplomatic outreach to Beijing in recent weeks, with John Kerry, the presidential envoy on climate, becoming the third cabinet member to go to China. Kerry, who arrived on Sunday, is set to meet his Chinese counterpart, Xie Zhenhua and other officials over three days of meetings. More

Investors are expecting UK inflation to have slowed when figures for June are published on Wednesday — the question is how quickly.Expectations for UK policy rates ramped up sharply last month following unexpectedly strong wage numbers and stubbornly high consumer price inflation data, as markets priced substantially higher interest rates to bring down inflation to the Bank of England target of 2 per cent.The June numbers will be watched also by the government, as Prime Minister Rishi Sunak has made it one of his five goals to halve inflation over the course of this year.Economists polled by Reuters forecast that UK inflation slowed to 8.2 per cent in June, down from 8.7 per cent in the previous month. That would still be above the Bank of England forecast of a decline to 7.9 per cent.Sandra Horsfield, economist at Investec, expects a sharper decline to 8.1 per cent, driven by lower petrol and, to a lesser extent, food price inflation. However, she forecasts core inflation, which strips out the more volatile food and energy prices, to be unchanged at 7.1 per cent.“As concerns primarily centre on the sticky nature of core inflation, merely seeing lower headline inflation would not deter additional tightening,” said Horsfield. She expects that the Bank of England will increase rates by another half percentage point to 5.5 per cent in August following the same increase in May. “Indeed, we doubt the MPC will be confident enough to pause raising rates in September either,” she added.Markets are pricing that the Bank of England will increase interest rates to 6 per cent by the end of the year. To reverse some of the recent surge in interest rate expectations that pushed up mortgage rates, “data will have to show clear signs that disinflation is accelerating”, said Horsfield. Valentina Romei Will the euro keep rising against the dollar? The euro hit a 16-month high against the dollar this week as traders ramped up their bets that the Federal Reserve will stop raising interest rates ahead of the European Central Bank.The euro has risen by more than 2.9 per cent against the greenback since the start of July to trade at $1.1233, its highest level since March 2022, boosted by US inflation slowing faster than expected to 3 per cent for the year to June. The outlook for inflation in the eurozone looks more difficult, with consumer prices in Germany rising 6.8 per cent for the year to June, higher than economists had forecast. Traders still fully price in two more 0.25 percentage point rate rises for the ECB, but have removed bets that the Fed will move beyond a widely anticipated rate rise in July.“The euro had no difficulty at all taking out its spring high against the dollar this week,” said Jane Foley, head of FX strategy at Rabobank. “But what’s interesting now is that you’ve seen members of the ECB Governing Council talking about weakening economic data, in contrast to sentiments from [ECB president Christine] Lagarde last week,” she said. The eurozone has already entered a technical recession, with output across the bloc shrinking by 0.1 per cent in each of the past two quarters, and German house prices falling at a record rate this year and manufacturing struggling with weaker demand from China. “It could be that once we get to September the market may realise that the eurozone has growth issues of its own, interest rates have peaked and suddenly the euro doesn’t look very attractive any more,” Foley said. Mary McDougallWhat will retail sales tell us about the health of the US consumer? Retail sales data for June to be released on Tuesday will offer insight into the health of the US consumer as the labour market begins to slow. Economists polled by Reuters forecast that the Census Bureau will report a 0.4 per cent increase in overall retail sales in June from the previous month, following an increase of 0.3 per cent in May. Excluding the autos sector, retail sales for June are expected to have risen 0.3 per cent. Bank of America analysts believe that last month’s figures will be lower than the estimate, however, in part because the bank — which has a large retail presence in the US — has seen a decline in its own credit and debit card spending. The analysts cite a 0.2 per cent decline in card spending in June, consistent with the recent slowdown in the labour market. Bank of America therefore expects the Census Bureau data to show a 0.2 per cent decline in retail sales ex-autos for June, and a 0.1 per cent drop in the core control group. The US reported last week that hiring had slowed in June after months of unexpected strength. That slowdown — which is nevertheless still modest — could put some pressure on spending, and comes amid expectations of a recession, tight financial conditions and slowing inflation, all of which crimp spending. Kate Duguid More

The writer is chair of Rockefeller InternationalThe buzz around “American exceptionalism” keeps on growing, boosted by the strength of the US economy and markets compared with other developed countries — and to a stumbling China. But this confident talk overlooks the extent to which US growth now depends on deficits and debt.Based on those measures, the US has started to look exceptional in a bad way. Once typical, it is now the biggest deficit spender in the developed world. During the pandemic, the US budget deficit tripled to more than 10 per cent of gross domestic product, more than double the peak in other developed economies. In coming years, the US deficit is expected to average close to 6 per cent of GDP — well above its historic norm, and a full six times the average in other developed economies.How did the US steer so deeply into the red? Most countries have ended the spending programmes that were launched to ease the pain of pandemic-induced lockdowns. But all the $6.7tn in new spending from the Biden administration came after 2020 was over. Most of it had nothing to do with pandemic relief. Instead, Joe Biden used the sense of crisis to launch a latter-day New Deal, building infrastructure and industry ostensibly to compete with China and combat climate change. No other government plans to spend as heavily, leaving the US all but alone on the road to deeper deficits. Fans of Bidenomics see it as smart investment. But they ignore the curve-busting scale of new spending and its potential consequences for US debt, inflation, and growth in the long run.The US has been running deficits almost every year since the 1960s without triggering a serious financial crisis. So the conventional wisdom is that deficits don’t matter. Many economists argue that they pay for themselves if the economic growth generated by new public spending exceeds the government’s interest payments. That feat was easier to achieve when interest rates were near zero, however. Now that rates are rising, it’s almost impossible.Though public debt is at historic highs — more than 100 per cent of GDP across the developed world — it is stabilising in Europe but rising relentlessly in the US. With interest rates rising rapidly at the same time, the interest paid on public debt is increasing — and doing so much faster in the US.Within 10 years, US government interest payments will exceed spending on defence and on social programmes such as Medicaid. The Bank for International Settlements says developed economies need to bring deficits down sharply in this high-rate environment or end up with more new debt than new growth. The Biden team clearly feels this advice doesn’t apply to the world’s leading economic superpower. Through 2025, the trillions unleashed by this administration will push government spending up to 39 per cent of GDP, most of it not covered by new revenue. In other big developed economies, spending is poised to fall sharply as a share of GDP, while revenues hold up relatively well.Under pressure from Congress last month, Biden signed the Fiscal Responsibility Act of 2023, creating the appearance of a new restraint. Despite what look like large spending cuts of $1.3tn over 10 years, the US deficit is still projected to hover near 6 per cent of GDP throughout the next decade. Though inflation dipped last week, it’s still running well above 2 per cent, and Biden’s defenders blame its return on anything but his spending plans, including the lingering effect of global supply chain disruptions. While inflation did spike worldwide, it did so most sharply in nations that spent the most during the pandemic. Few spent more than the US. A recent study from the Federal Reserve attributed two-thirds of America’s recent inflation surge to excess demand, and half that increase in demand to deficit spending.But the positive view on American exceptionalism still dominates. Many favour Biden’s calls for bigger government, dismissing fears of a deficit-driven crisis as crying wolf and preparing for a threat that never comes. They scoff at the idea that foreigners might ever tire of financing US spending habits or buying into US markets. America’s flaws pale and its technology dazzles in comparison to rivals in Europe and Asia.So why should anyone care about the US’s deepening debt and deficits? Because it is now one of the most fiscally irresponsible nations. Its deficit has climbed the ranks to worst in the developed world, its public debt is already the third highest after Japan and Italy. To wilfully ignore this new reality is an exceptionally risky mistake. More

On paper, the EU should be an attractive partner for many low- and middle-income countries across the globe. It is the biggest market in the world, its social model is widely admired and it is less pushy on foreign policy alignment than either China or the US.Also on paper, Latin America should be the most promising place for the EU to press this advantage home. The region is culturally close to Europe, it is largely democratic and shares the EU’s founding values, and immigration from it into the bloc has been relatively easy to absorb.But when European and Latin American leaders meet this week for their first summit in almost a decade, their attempts at collaboration will feel like starting, if not from square one, then not much further than square two. At best, the EU-Mercosur trade agreement, under way for decades, will get a political push towards ratification.The likely underwhelming summit is a sign that the EU has not contemplated, let alone articulated, what deeper forms of relationship it can offer non-members beyond traditional trade deals and association agreements. The pandemic and Russia’s war against Ukraine woke European leaders up to their continent’s dangerous dependence on others for the foundations of its security, from energy to microchips. They also found their geopolitical priorities were less widely shared than they may have assumed when this mattered less.The first step to solving the problem — recognising that it exists — is happening, then. Not before time. The construction of post-1945 European unity around economic integration conditioned leaders to seeing the world stage as a market square: a place to sell exports and source raw materials. A marketplace, however, is so easy to take for granted that one forgets it requires political underpinnings — which Europe was long content to let the US sustain. After the 2008 crisis, European leaders were too consumed by internal problems to adapt to America’s increasing dereliction of this role.The pandemic and the war have boosted French president Emmanuel Macron’s concept of “strategic autonomy”, but even this comes with a dose of solipsism. More than standoffish autonomy, the EU needs strategic engagement to get other countries more firmly on its side.Europe’s neglect of the world contrasts with China’s Belt and Road Initiative, which uses geopolitics and infrastructure to reshape trade patterns to its advantage — including by turning the heads of some EU states. The fact that Beijing has not fully succeeded does not mean it has been wrong to try. The EU is, to be fair, catching up. Its pandemic recovery fund, new energy policy and drive to promote technological and industrial investment have righted the balance that made some member states look kindlier on Beijing than on their neighbours. The war has rekindled the political will to use membership prospects to mould others in the EU’s image. The current difficult dealings with Turkey should be a cautionary tale: that country was reforming until it was convinced in the 2000s that the EU’s door was not open in good faith. The EU cannot afford to lose Ukraine in the same way.What is missing still is a committed strategy for deep relationships with countries beyond the conceivable membership candidates. This is not just a matter of, say, securing critical minerals and metals supplies (though it is that too). It is about shaping a world where the EU remains relevant because it has more and closer allies on global issues such as the geography of supply chains, tech rules, multilateral governance and climate change.That is a much higher-stakes ambition than the EU has shown to date. It would require a commensurate devotion of both financial and political resources, and partnership forms going deeper than conventional trade deals. This could mean new forms of participating in the single market itself, or large-scale migration partnerships. As EU leaders contemplate how they adapt their institutions to a larger membership, they should also consider how to create tighter links with far-flung non-members. They should match China’s ambition and aim for a global economy as centred on Europe as possible. But they should aim higher than Beijing in attracting countries not through financial entrapment but by offering deeper, mutually beneficial links. Think of this more-for-more approach as “Belt and Road with liberal democratic characteristics”. That may seem unrealistic. Yet it is of the deepest realism, for nothing less can protect Europe’s interests if the US gives up on the liberal rules-based order after next year’s presidential [email protected] More

GANDHINAGAR, India (Reuters) -U.S. Treasury Secretary Janet Yellen said on Sunday she was “eager” to work with China on areas of mutual interest, including debt restructurings for poorer countries, and that multilateral development banks needed reforms before capital increases could be considered.At a press conference before a meeting of Group of 20 finance ministers and central bankers in India, Yellen said her visit to Beijing last week helped put the U.S.-China relationship on “surer footing” and that the world’s two biggest economies had an obligation to the world “to cooperate on areas of mutual concern”.”There is much more work to do. But I believe this trip was an important start,” Yellen said. “I am eager to build on the groundwork that we laid in Beijing to mobilise further action.”Concerns remain about China’s unfair trade practices, which prompted Washington to impose tariffs on Beijing. “They really have not been addressed,” she said.U.S. corporations want to see an environment where they could “invest and thrive in China”, Yellen said.Washington will continue to cut off Russia’s access to military equipment and technologies that Moscow needs in the invasion of Ukraine, Yellen said.”One of our core goals this year is to combat Russia’s efforts to evade our sanctions. Our coalition is building on the actions we’ve taken in recent months to crack down on these efforts,” she added.India, which chairs the G20 this year, has sought a largely neutral stance on the war, generally declining to blame Russia for the invasion Moscow launched in February last year, urging a diplomatic solution and sharply boosting its purchases of Russian oil even as Western nations seek to squeeze Moscow.Yellen said she would continue to push hard at the G20 meeting, in Gandhinagar in the northwestern Indian state of Gujarat, for “full and timely participation of all bilateral official creditors on pending debt restructurings”.She said she discussed Zambia’s restructuring with her Chinese counterparts and, although it took too long to negotiate, differences were overcome.”We should apply the common principles we agreed to in Zambia’s case in other cases – rather than starting at zero every time. And we must go faster,” Yellen said, adding she hoped debt treatments for Sri Lanka and Ghana could be finalised quickly so the International Monetary Fund (IMF) could move forward with initial loan programme reviews this fall.She said a debt restructuring “user guide” was needed for borrowing countries and other stakeholders to provide clarity about the process.Yellen said the IMF’s Poverty Reduction and Growth trust, which provides zero-interest loans to the world’s poorest countries, needed to be put on sounder financial footing. The U.S. Treasury is ready to assist the IMF to consider options for this, including using internal fund resources, she said.’BETTER BANKS’Yellen also laid out a number of next steps for the evolution of the World Bank and other multilateral development banks, but said that any exploration of capital increases for the institutions can only be considered after implementing reforms aimed at expanding their role beyond poverty reduction to tackle global challenges such as climate change and pandemics.”We should build better banks, not just bigger banks,” Yellen said.She repeated her estimate that multilateral development banks could collectively boost lending by $200 billion over a decade from internal resources through balance sheet reforms now being implemented or considered. They could boost this further by implementing recommendations from last year’s G20 Capital Adequacy Framework report, she said.Among other World Bank reform steps, Yellen said she was pushing for a new set of principles that would allow the “targeted use” of the bank’s concessional financing for global challenges, including climate change and measures to boost such resources.She said she would like the World Bank to explore options for lending to sub-sovereign and supra-sovereign borrowers like the COVAX vaccine initiative.Yellen said the United States was committed to implementing a global corporate minimum tax deal reached in 2021 despite the lack of action by the U.S. Congress to do so. She said negotiations on technical details of the deal’s Pillar 1 – reallocation of taxing rights on large multinationals including big technology firms – were “very close” to completion. More

AUCKLAND (Reuters) -Members of a major trans-Pacific trade pact said on Sunday they were gathering information on China, Taiwan and other countries interested in joining the agreement to see whether they were able to meet the pact’s “high standards”.The comments followed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) meeting in Auckland where Britain formally signed the treaty to become a member and a decision to review and update the agreement was also made.Along with China and Taiwan, Ukraine, Costa Rica, Uruguay and Ecuador have also applied to join the pact. A decision on who will join and when will be made collectively.”The membership is currently undertaking an information-gathering process on whether aspirant economies can meet the CPTPP’s high standards, taking into account their experience on their trade commitments,” the members said in a joint statement.The CPTPP is a landmark trade pact agreed in 2018 between 11 countries including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Britain became the 12th member of the pact, which cuts trade barriers, as it looks to deepen ties in the Pacific after its exit from the European Union in 2020.”We continue to discuss how to move forward collectively on accession processes in a way that reflects all our interests and maintains the high standards,” the CPTPP statement said.China’s application to join the pact is now next in line if they are dealt with in the order they were received, but the country faces a number of hurdles to be included.The CPTPP requires countries to eliminate or significantly reduce tariffs, make strong commitments to opening services and investment markets and has rules around competition, intellectual property rights and protections for foreign companies.Damien O’Connor, New Zealand’s trade minister who chaired this CPTPP meeting, said at a press conference there was no time frame for when any decisions on future membership would be made.”It’s a complex area,” O’Connor said of membership applications, adding no single country’s application was discussed on Sunday. China has opposed Taiwan’s application.Earlier in the day, Britain signed the treaty to accede into the pact, although it still needs to be ratified by the country’s government.Britain’s Business and Trade Secretary Kemi Badenoch said at the signing that her country was delighted to become the first new member of the CPTPP.”This is a modern and ambitious agreement and our membership in this exciting, brilliant and forward-looking bloc is proof that the UK’s doors are open for business,” Badenoch said. More

NEW DELHI (Reuters) – India will push its Group of 20 partners at a meeting it is hosting to support its proposal to raise the share of taxes multinational companies pay to countries where they earn “excess profits”, government officials said.India’s proposal, which has not been previously reported, could temper optimism among G20 members such as Australia and Japan that the meeting of finance ministers and central bankers in Gujarat would make progress on a long-awaited overhaul of global corporate taxation.More than 140 countries were supposed to start implementing next year a 2021 deal overhauling decades-old rules on how governments tax multinationals. The present rules are widely considered outdated as digital giants like Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN) can book profits in low-tax countries.The deal, pushed by the U.S., would levy a minimum 15% tax on large global firms, plus an additional 25% tax on “excess profits”, as defined by the Organisation for Economic Cooperation and Development (OECD).But several countries have concerns about the multilateral treaty underpinning a major element of the plan, and some analysts say the overhaul is at risk of collapse.”India has made suggestions to get its due share of taxing rights on excess profits of multinational companies,” one official said. The suggestions have been made to the OECD and will be discussed “extensively” during the G20 meeting on Monday and Tuesday, the official said.Three officials, who asked not to be named as discussions with the OECD were ongoing and the G20 meeting had not begun, said India wants significant increases in the tax paid in countries where the firms do business. They did not specify how much India is seeking.India’s finance and external affairs ministries and the OECD did not respond to requests for comment.Under the agreement, global corporations with annual revenues over 20 billion euros ($22 billion) are considered to be making excess profits if the profits exceed 10% annual growth. The 25% surcharge on these excess profits is to be divided among countries.India, fighting for a higher share of taxes for markets where firms do business, is the world’s most populous country and set to become one of the biggest consumer markets. Indian people’s average income is set to grow more than 13-fold to $27,000 by the end of 2047, according to a survey by the People’s Research on India’s Consumer Economy.The G20 host nation will also propose that withholding taxation be de-linked from the excess profit tax principle. The rules now say countries offset their share of taxes with the withholding tax they collect.Withholding tax is collected by companies while making payments to vendors and employees, and remitted to tax authorities. The OECD in a document issued on Wednesday said a few jurisdictions have expressed concerns over allocating taxing rights among countries. “Efforts to resolve these issues are underway with a view to prepare the Multilateral Convention for signature expeditiously,” it said.($1 = 82.0490 Indian rupees)($1 = 0.8907 euros) More