- Alexis Tsipras (head of coalition of left of centre political parties) expected to win, possibly ushering in a radical economic program.
- He proposes undoing recently-imposed austerity measures, restructuring external debt and totally changing the banking sector, but might just be electoral hot air.
- Investors concerned that he will force a Greek default (on its debts) and exit from the euro (Grexit).
- Closer trade ties (huge increase in German exports to China).
- Similar views on economic policy (in 2008 financial crisis both countries found themselves on same side of post-crisis debates).
- Closer politically (German motivation is closer economic ties, China motivation is to counter-balance US).
- Happened after comments from Mario Draghi, the president of the European Central Bank (ECB).
- He hinted again that ECB might soon start a QE (Quantitative Easing) in an attempt to stimulate the eurozone economies.
- QE means lower euro interest rates hence smaller return on euro denominated assets.
- US & UK slight tightening (Fed + BoE expected to gently raise main lending rates).
- Europe continued loosening (ECB expected to keep rates down + try anything to prevent recession & deflation).
- Japan unsure (in midst of huge stimulus plan, but economy gyrating so markets unsure what path BoJ will pursue).
- No - oil price fall is damaging/painful but potential peace dividend with Farc will go a long way, economically, to offset this.
- Currency has fallen by 45%, share price of national energy company (Ecopetrol) has halved, current account deficit will widen (oil > 50% of exports) as will budget deficits (oil accounts for 17% of govt. revenues).
- But positive economic impact of ongoing peace talks with Farc guerrillas (aiming to end 50 years of insurgency, which often hit oil pipelines) is expected to offset economic negatives of oil-related slowdown.
- Bad for oil exporters (i.e. Russia + all OPEC countries - except maybe Saudi Arabia).
- Hurts capital intensive extractive businesses in the medium term.
- Benefits households immediately as cheaper petrol means more disposable income + lower shipping costs, hence good for consumption so, YES, good for global growth.
- 30% tax on purchases of foreign currency and more than doubling of interest rates to over 50%.
- Temporary ban on over-the-counter currency trades + increase in the level of compulsory foreign currency sales by exporters (from 30 to 50%).
- These controls effectively limit the exchangeability of the currency and are aimed at limiting contagion from the Russia crisis.