Tags: uk | prime minster | theresa may

UK Prime Minister Wins Confidence Vote

UK Prime Minister Wins Confidence Vote
British prime minister Theresa May arrives on December 13, 2018, in Brussels for a European Summit aimed at discussing the Brexit deal, the long-term budget and the single market. The 27 European leaders gather for a crucial European Union summit with the British Prime Minister seeking a compromise to save the Brexit deal. (Ludovic Marin/AFP/Getty Images)

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Thursday, 13 December 2018 03:32 PM Current | Bio | Archive

In the United Kingdom, Prime Minister May has the confidence of 63 percent of the governing Conservative Party Members of Parliament (MPs).

The Prime Minister faces the leader of the opposition, Mr. Corbyn, who a couple of years ago had the confidence of 19 percent of the then-opposition Labor MPs.

These two examples of British political leadership are arguing over how best to implement the views of 52 percent of the British people who voted in the “Brexit” referendum in favor of the UK leaving the European Union.

Today, it seems like 99 percent of the UK population just does not care anymore.

It now looks like the confidence vote will, at the margin, increase the prospects of a negotiated exit from the European Union (EU).

There can be no party “coup d'état” or “putsch” against the Prime Minister as Party leader for a year now. That means that Prime Minister May can offer Parliament a negotiated deal or some adjusted version of it or the “hard” exit that the UK law currently mandates. The Prime Minister might prefer to offer Parliament a negotiated deal or “no” exit at all, though that is extremely unlikely.

The point is that even if the extreme wing of the Prime Minister’s Conservative Party doesn’t accept the democratic vote of confidence in the Prime Minister, they have fewer alternatives today than they did have yesterday, and it is the Prime Minister who gets to present the options from which the extreme wing can then chose.

Prime Minister May is in Brussels today to “try” and get some language treats(?) to the political statement around the withdrawal agreement.

We can expect the British pound to remain volatile.

Italian Budget Deficit Is Trimmed Down

Meanwhile in Italy, there is a new “trimmed down” budget plan.

The dull rhythmic thumping noise that is audible across the world’s financial capitals is the sound of economists repeatedly bashing their heads against their desks.

The Italian government is now promising(!) a budget deficit of 2.04 percent of Italian GDP.

Let’s pause for a moment to reflect on that.

Economic data is widely inaccurate on a good day. Economic forecasting is not a “precise” science. Economists use decimal points to prove that they have sense of humor, not because they believe anything that comes after the decimal point.

To project a budget deficit to two decimal places is the ultimate triumph of politics over economics.

However, the Italians rushed to point out that their deficit will probably be less than the French deficit. This is “true” and it’s all part of the political game.

Nevertheless, one thing is for sure, the Italian budget deficit will not be 2.04 percent of the Italian GDP next year.

All this is not supportive for the euro.

ECB Policy Decision

On the subject of problematic forecasting, the European Central Bank (ECB) Governing Council met today on policy and stated it expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term, which hints “lower for longer.”

The net purchases under the asset purchase program (APP) will end in December 2018 but will still reinvest maturing bonds and still reinvest coupon payments.

U.S. Import and Export Prices

U.S. import prices declined 1.6 percent in November, following a 0.5 percent rise in October. A 12.1 percent decrease in petroleum prices led the November decline in fuel prices and was the largest monthly drop since petroleum prices fell 17.2 percent in January 2016. Prices for nonfuel imports fell 0.3 percent in November, after ticking up 0.1 percent in October.

The price index for U.S. exports fell 0.9 percent in November, after advancing 0.5 percent in October. This the largest 1-month decrease since the index fell 0.9 percent in January 2016. Lower nonagricultural prices in November more than offset rising agricultural prices.

Initial Jobless Claims

In the week ending December 8, the advance figure for seasonally adjusted initial claims was 206,000, a decrease of 27,000 from the previous week's revised level, which is important for investors to take note of.

The 4-week moving average was 224,750, a decrease of 3,750 from the previous week's revised average.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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In the United Kingdom, Prime Minister May has the confidence of 63 percent of the governing Conservative Party Members of Parliament (MPs).
uk, prime minster, theresa may
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2018-32-13
Thursday, 13 December 2018 03:32 PM
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