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1. By Tawanda Musarurwa
HARARE – Government has
said it will support workers
of foreign firms that will
have failed to comply with
the indigenisation require-
ments - with legal backing .
Cabinet has directed that on
April 1, 2016, all line Minis-
tries invoke section 5 of the
Indigenisation and Economic
Empowerment Act (Chapter
14;33) against all non-com-
pliant businesses in their
sectors.
Youth Development, Indi-
genisation and Economic
Empowerment Minister Pat-
rick Zhuwao today said he
does not expect companies
to close on the basis of mere
‘stubbornness’.
But if in the case that any
firms do have their operating
licenses revoked, Govern-
ment will step in to assist
the workers with legal help,
he said.
“Any one that runs a busi-
ness and is serious about
that business will com-
ply, further to that I have
received representation from
worker organisations saying
that they are concerned, and
I have told them that it is
the fiduciary responsibility of
the directors of such compa-
nies to make sure that they
look after their workers.
“I have sought legal from
three lawyers, and I am also
seeking legal advice from
two more lawyers to make
sure that I have a strong
case. I will support any
employee that is rendered
jobless by any company
closure.
“If a company stopped
operating by virtue that the
management and directors of
that company have failed in
their fiduciary responsibility
I will support those workers
in going from a legal point
of view in going after those
particular directors, both in
their individual and institu-
News Update as @ 1530 hours, Wednesday 30 March 2016
Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw
Govt to support non-compliant firm’s workers
Minister Zhuwao

2. tional capacity,” said Minister
Zhuwao.
Corporate directors’ fiduci-
ary duties or ‘duty of care”
basically requires directors
to make a business decision
based on all available and
material information and
to act in a deliberate and
informed manner.
That is, they must act in
good faith for the com-
pany's best interest and
second, they must believe
that the actions promote the
best interest of the com-
pany based on a reasonable
investigation of the options
available.
Legal experts say fiduciary
duties or ‘the duty of care’
of corporate directors and
officers is a special case of
the duty of care imposed
throughout the law under the
general heading of negli-
gence.●
2 news
Padenga posts solid results
BH24 Reporter
HARARE -Crocodile skin
producer, Padenga posted an
operating profit of $9,9 mil-
lion for the year to Decem-
ber 31, 2015 up from $8,9
million in the prior year,
despite revenues declining
during the period.
Revenue for the period was
down marginally to $27,4
million from $27,9 million
previously.
Management attributed the
decline in revenue to lower
sales in the alligator busi-
ness where only 8 586 skins
were sold against 14 890
skins prior year.
Overall the group man-
aged to sell more crocodile
skins, bigger size as well as
improved quality skins.
And Padenga also bene-
fited from lower input cost
as a result of the depreci-
ating rand, and low infla-
tion. In addition to the
growth in operating profit,
the group’s profit margins
also improved, rising to 36
percent from 32 percent
previously.
At the same time profit after
tax margins improved to
26 percent from 21 percent
from FY2014.
The overall positive perfor-
mance was driven by the
group’s flagship Zimbabwe
crocodile operation, whose
turnover increased by 7
percent to $25,7 million.
The Zimbabwean operation
accounts for 94 percent of
total turnover. Earnings per
share was up 21 percent to
1,34 cents.
The board has declared a
dividend per share of 0,41
cents, which was a 37 per-
cent bump from a dividend
per share of 0,35 cents
declared in the prior year
comparative.●

3. BH243

4. BH244

5. BH24 Reporter
HARARE -Diversified miner
RioZim’s gold output for the
year ended December 31,
2015 rose by a significant 85
percent to 42 328,75 ounces
from 22 857,5 ounces in
2014
This was on the back of the
re-opening of the Kado-
ma-based Cam & Motor mine
in April last year, which
contributed 15 873,3 ounces
during the period under
review.
The group’s Renco Mine,
which is based in Masvingo
continued to contribute the
large portion of its gold
output, having produced
RioZim’s entire 2014 gold
production and still the bulk
of the 2015 output.
The overall gold operation
posted an operating profit
of $5,3 million during the
period under review. How-
ever losses at the Empress
Nickel Refinery (ENR), result-
ing in the group posting a
$150,000 operating loss.
Broadly, RioZim’s revenue
was 14 percent down at
$56,5 million, due to the
weak mineral prices that pre-
vailed during the period.
Going forward, the group’s
management is anticipating
positive outturn in the medi-
um-to-long-term due to its
restructured balance sheet
as well as the resumption
of operations at ENR for a
return to sustained profita-
bility.●
5 news
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6. BH246

7. BH24
TAA:DI251386-Y22
7

8. By Funny Hudzerema
HARARE– The 2016 tobacco mar-
keting season opened today at the
Tobacco sales Floors with the first
bale being sold at $4, 50 per kg.
However prices topped the $4,70
per kg level while the lowest price
was $0, 50 per kg.
Officially opening the marketing
season Agriculture, Mechanisa-
tion and Irrigation Development
Minister Dr Joseph Made said
agricultural sector is expected to
grow mainly anchored by tobacco.
“Ladies and Gentlemen agriculture
remains the mainstay of the econ-
omy which is projected to grow
by 3, 4 percent in 2016 mainly
anchored on tobacco production.
“It is therefore expected that
tobacco merchants will pay fair
prices for the tobacco to ena-
ble farmers to have sustainable
returns on their tobacco,” he said.
He added that farmers deserve
better prices for them to re-in-
vest in tobacco production and
the expectation is that buyers
will match quality tobacco with
high prices at both auction and
contact floors. This year tobacco
production is projected to decline
by 20 percent due to reduction in
tobacco growers during the 2015
growing season due to draught
conditions. Dr Made also said
Government has reduced the
tobacco levy on tobacco growers
from a rate of 1, 5 percent to
0, 75 percent with effect from
January this year. TIMB board
chairman Mrs Monica Chinamasa
said TIMB was committed to
increase the efficiency of auction
system by continuously imple-
ment a number of reforms. “Thus
for the first time in the history of
tobacco marketing in Zimbabwe,
electronic marketing of tobacco
will be witnessed running side by
side with the conventional system
of marketing on the auction floor.
“E-marketing will significantly
improve transparency in the pric-
ing of tobacco and there is also
an added advantage of accessing
sales information in real time,”
she said. To date almost 72 000
growers have registered to sell
during this season compared to
91 000 who registered by the
same time last year. Boka Tobacco
Auction Floors operations director,
Mr Moses Bias said the 2016
tobacco selling season has started
well with better prices despite the
poor quality of the tobacco since it
is the first leafs.
“We have laid down 2 500 bales
as compared to 800 the same
period last year due late opening
of the auction floors and we can
give the average price of tobacco
since it is the first day,” he said.
Farmers were also busy opening
new accounts in compliance with
the new directive where proceeds
from the sale of their crop will
be deposited into their accounts
unlike the previous seasons where
they were paid cash. Farmers
were however complaining that
the new payment system restricts
them from accessing all their
money as they are only allowed
to withdrawal a maximum of $
1000 per day. “We come from
remote areas which are far from
banks and it’s difficult to travel
to and from the banks,” said one
farmer●
8 news
Tobacco season starts
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9. BH249

10. BH2410

11. HARARE – Reserve Bank of
Zimbabwe (RBZ) governor Dr
John Mangudya said he is sat-
isfied with the level of compli-
ance to the indigenisation laws
of the country in the banking
sector, and focus should be on
increasing its role in economic
development and empower-
ment.
Foreign banks operating in
Zimbabwe include Barclays Plc,
Standard Chartered Plc, Stand-
ard Bank Group Ltd, Ecobank
and Banc ABC.
Cabinet last week directed that
with effect from April 1, 2016,
all line Ministries should issue
orders to the licensing authority
to cancel licenses of businesses
that fail to submit their indige-
nisation plans by March 31.
Some foreign firms had been
reluctant to comply with the
law which requires that locals
control at least 51 percent of a
foreign business valued at over
$500 000.
Dr Mangudya told New Ziana
that most foreign owned banks
had their indigenisation plans
approved, but did not reveal
the number of banks which
were compliant.
He cited Banc ABC, which he
said was now just working
on implementing what was
approved in its indigenisation
plan.
“Banks are complying and we
are satisfied with the level of
compliance,” he said.
Dr Mangudya said for the
economic empowerment
component of the indigenisa-
tion agenda to succeed, there
was need to prop up banks to
increase funding in the econ-
omy.
“We want to make sure that
banks start to provide more
money to agriculture, to women
and many other empowerment
projects.”
The said compliance in the
sector was also being guided
by simplified indigenisation
guidelines that the government
introduced in January this year.
Under the new indigenisation
framework, introduced in Jan-
uary, companies in the man-
ufacturing sector have up to
four years to ensure compliance
while the remainder, including
financial services, tourism,
engineering and construction,
energy and telecommunica-
tions, have one year.
A total of 16 sectors are
reserved for locals, while all
government departments,
statutory bodies and local
authorities are now required
to procure 50 percent of their
goods from local businesses.
Besides disposal of shares,
companies can comply by
implementing community devel-
opment projects that can earn
them “empowerment credits.”
All indigenisation applications
will be submitted through the
Zimbabwe Investment Authority
for processing.-New Ziana●
11 news
RBZ satisfied with indigenisation policy compliance of banks

12. BH2412

13. BH2413

14. HARARE -The equities mar-
ket slid today following a
1.01 retreat in the main-
stream industrial index to
close at 97.17.
The downturn was driven by
losses in Natfoods, which
lost a hefty $0,1000 to trade
at $2,1000, while Hippo Val-
ley shifted down $0,0670 to
$0,2700 and Dawn Proper-
ties slipped $0,0039 to close
at $0,0161.
Banker Barclays was down
$0,0021 to settle at $0,0279
and crocodile skin producer
Padenga eased $0,0005 to
close at $0,0600.
However, giant insurer Old
Mutual advanced by $0,0713
to trade at $2,1713 while
ZBFH increased by $0,0050
to $0,0300.
Also on the upside was tel-
ecoms giant Econet and
NicozDiamond, which both
went up by $0,0010 to set-
tle at $0,2430 and $0,0160,
respectively.
The mining index was flat
at 19.53 as Bindura, Fal-
gold, Hwange and RioZim
maintained previous price
levels at $0,0100, $0,0050,
$0,0300 and $0,1040 respec-
tively- BH24 Reporter ●
ZSE14
Industrials slide

15. Movers CHANGE Today Price USc SHAKERS Change TODAY Price USc
ZBFH 20.00 3.00 Hippo -19.88 27.00
NicozDiamond 6.66 1.60 Dawn -19.50 1.61
Old Mutual 3.39 217.13 Barclays -7.00 2.79
Zimre 2.85 1.80 Natfoods -4.54 210.00
OK Zim 1.44 3.50 Padenga -0.82 6.00
Econet 0.41 24.30 Delta -0.07 56.25
SeedCo -0.03 63.98
Index Previous Today Move Change
Industrial 98.18 97.17 -1.01 points -1.03%
Mining 19.53 19.53 +0.00 points +0.00%
15 zse tables
ZSE
Indices
Stock Exchange
Previous
today

16. 16 DIARY OF EVENTS
The black arrow indicate level of load shedding across the country.
POWER GENERATION STATS
Gen Station
30 March 2016
Energy
(Megawatts)
Hwange 551 MW
Kariba 422 MW
Harare 30 MW
Munyati 16 MW
Bulawayo 20 MW
Imports 0 - 300 MW
Total 1058 MW
• Analyst briefing - Old Mutual Zimbabwe, Steward Room, Meikles Hotel, March 30, 1430hrs
THE BH24 DIARY

17. JOHANNESBURG - South
Africa's rand rallied to a
3-1/2 month high against the
US dollar on Wednesday and
government bonds firmed
after Federal Reserve chair
Janet Yellen said the US cen-
tral bank should be cautious
in raising interest rates.
The rand has been under
pressure since Dec. 9 after
President Jacob Zuma fired
respected finance minister
Nhlanhla Nene and replaced
him with an unknown back-
bencher, triggering a dra-
matic sell-off in the cur-
rency.
Although Zuma rescinded his
decision within a few days,
returning Pravin Gordhan,
also liked by investors, to
the finance minister post,
investors are now worried
about undue political inter-
ference in key economic
departments.
Despite Wednesday's gains,
which left the rand at its
strongest since mid-Decem-
ber, it was still far off the
14,6000 level it closed at the
day before Nene's sacking.
At 0839 GMT, the rand
traded at 14,9765 per dollar,
1,21 percent firmer than
Tuesday's New York close.
It briefly scaled a high of
14,9010 earlier on Wednes-
day.
"Emerging markets curren-
cies across the spectrum
have strengthened into the
London open. This follows
on from Fed chair Yellen
comments which have been
interpreted as rather dov-
ish," ETM Analytics econo-
mist Jana van Deventer said.
"Markets are scaling back
expectations for the Fed to
hike interest rates as soon as
April and the Fed rate hike
trajectory is being lowered."
Government bonds also
firmed, and the yield for the
benchmark government bond
due in 2026 slid 17.5 basis
points to 9,17 percent.
The Top-40 stock index was
up 1,26 percent while the
broader all-share rose by 1,3
percent.
Locally, focus was on
whether Gordhan would
answer questions from the
elite Hawks police unit about
a suspected spy unit estab-
lished while he was head of
the South African Revenue
Service (SARS).
"If there are any difficulties
surrounding this topic then
we could see the rand give
back some of the gains," van
Deventer said. The Treasury
did not immediately respond
to Reuters questions on the
issue.
Analysts said another risk for
the rand was South Africa's
Constitutional Court ruling
on Thursday on whether
Zuma should pay back some
of the 240 million rand ($16
million) spent by the state
on renovating his private
Nkandla home- Reuters●
regioNAL News17
Rand rallies to 3-1/2 month high after Yellen's dovish comments

18. The dollar headed for its
worst month in more than
five years after Federal
Reserve Chair Janet Yellen
doused speculation the US
central bank would pick up
the pace of interest-rate
increases. The yen strength-
ened.
A gauge of the greenback
approached the lowest since
June after Yellen said the Fed
would act “cautiously” as it
looks to raise rates against
a backdrop of deteriorating
global economic growth.
During the past two days,
the index lost almost all of
the gains made last week,
when policy makers includ-
ing St. Louis Fed President
James Bullard and San
Francisco Fed President John
Williams said an increase as
soon as next month was pos-
sible. The dollar has dropped
against all its 16 major
counterparts in March.
“The Yellen effect was quite
strong” in weakening the
dollar, said Philip Wee, a
senior currency economist at
DBS Group Holdings Ltd. in
Singapore. “She’s emphasiz-
ing patience.”
The Bloomberg Dollar Spot
Index, which tracks the
greenback versus 10 major
peers, fell 0,3 percent as
of 8:24 a.m. Wednesday
in London, after declining
0,8 percent the day before.
The gauge has slumped 3,7
percent in March, set for the
worst month since Septem-
ber 2010.
The dollar slid 0,4 percent
to 112,20 yen after dropping
0,7 percent on Tuesday. The
US currency weakened 0,3
percent to $1,1319 per euro.
The yen strengthened 0,2
percent to 127,03 per euro.
Trouble Abroad
Global developments, par-
ticularly those in China,
pose ongoing risks to the
Fed’s outlook, Yellen said in
a speech to the Economic
Club of New York on Tuesday.
Appreciation by the dollar
is still expected to weigh on
inflation in months to come,
she said.
Traders slashed the likeli-
hood of a rate increase in
April to zero, down from 6
percent on Monday, and low-
ered the probability of one
in June to 28 percent from
38 percent, based on the
assumption that the effective
fed funds rate will trade at
the middle of the new Fed’s
target range after the next
increase.
“Yellen indicated that core
Fed members take into
account the global context
more than regional officials,”
said Etsuko Yamashita, chief
economist at Sumitomo
Mitsui Banking Corp. in New
York. “A June rate hike would
be difficult as global finan-
cial turmoil earlier this year
affects the real economy with
a time lag.”
Commonwealth Bank of Aus-
tralia, the country’s largest
lender, has revised down its
forecasts for the greenback,
while raising those for the
Australian and New Zealand
dollars, the euro and the
yen.
“The actual US dollar decline
has been more dramatic
than we expected," currency
strategists led by Richard
Grace at Commonwealth
Bank in Sydney, wrote in a
note to clients.
“We have subsequently
revised lower the extent to
which we believe the Fed will
lift interest rates both in the
short-term and in the long-
term." – Bloomberg●
internatioNAL News18
Yellen sends Greenback to worst month since 2010 as Yen advances
Janet Yellen

19. By Dan Steinbock
continued from yesterday -
The re-think intensified after
the Islamic State’s (IS) terror
attack in Paris. As EU states
began to re-impose tempo-
rary border controls, the EC
proposed a major amend-
ment to Schengen. As the
refugee crisis has escalated,
divisions among EU member
states have intensified along
the migrant routes causing a
virtual domino effect.
After record number of
migrants flooded southern
Germany from Hungary, via
Austria, Germany re-imposed
its border controls with Aus-
tria. Austria began to limit
road and rail traffic on its
border with Hungary, which
built a fence on its border
with Serbia, as even Denmark
and Sweden started to step
up controls to reduce migrant
inflows. When Copenha-
gen adopted the notorious
“jewelry” bill to seize asylum
seekers' assets to cover their
expenses, all gloves were off.
Yet, member states may rein-
state internal border controls
for up to two years in “excep-
tional circumstances.”
As borders are closing
within the Fortress Europe,
the migrant bottlenecks –
especially the Aegean Sea
between Greece and Turkey
– are at a boiling point, as
reflected by EC President
Donald Tusk’s recent plea:
“Do not come to Europe!
Do not risk your lives and
your money!" It was a day
when the founders of the EU
turned in their graves. The
old pretense of open and
multicultural, democratic and
peaceful Europe was gone.
Instead, the new plan would
see refugees being forcefully
shipped back from Europe
across straits patrolled by
NATO warships, with Greece
as its halfway house and Tur-
key as its waiting room.
Anti-EU opposition
According to an EC report,
the reintroduction of border
controls within the Schen-
gen area could reduce EU
economic output by €500
billion to €1,4 trillion. In
2010, these arguments could
still have shaped the debate.
However, today, it is the
non-economic fears, political
divisions, ethnic and reli-
gious anxieties that dominate
the headlines. As a result,
the support for Merkel and
the EU’s remaining integra-
19 analysis19 analysis
The European 'Union'?

20. 20 analysis20 analysis
tionists is weakening across
the region. As long as the
migration crisis will linger, it
fuels the rise of the anti-EU
opposition across old party
lines.
Chancellor Merkel has warned
that border controls have
potential to fragment the EU
“into small states” that are
not equipped to cope with
a globalised world. Indeed,
with its more than 500 mil-
lion people, a truly integrated
Europe could absorb even
2-3 million refugees. In the
short term, that would cause
a modest increase in GDP
growth – particularly in main
destination countries (Ger-
many, Sweden, Austria) – and
energise the region’s stag-
nating economy and greying
demographics. The medi-
um-term growth effect would
depend on the refugees’ inte-
gration into the labor market.
However, in the absence of
common institutions, the
influx of immigrants into
Europe is undermining the
Schengen, disintegrating
the EU, inflating differences
among member states and
boosting the support of
euro-skeptical opposition
parties from Heinz-Christian
Strache’s right-wing Freedom
Party of Austria and Czech
President
Milos Zeman to Marine Le
Pen’s Front National in France
and the increasingly xenopho-
bic Alternative for Germany
(AfD). Indecision virtually
ensures mounting support
for radicalisation and anti-EU
views. In German regional
elections, the AfD eroded
the power of the Chris-
tian Democratic and Social
Democratic coalition, while
unleashing a debate within
the former whether Merkel
will be a liability in the 2017
federal elections. In Eastern
Europe and Balkans, Schen-
gen is already largely history
as fences prevail among most
states.
Yet, labeling all the opposi-
tion parties as "populist" or
worse will not mitigate the
reality of the issues they
address, including unemploy-
ment, income inequality, and
the fear of foreigners. If the
moderate middle fails to lead
out from economic stagna-
tion, the not-so-moderate
groups will always offer a
way.
Geopolitical friction
In March 2014, Washing-
ton and Brussels initiated
sanctions against Russia in
response to developments in
Crimea and Eastern Ukraine.
Since then, the hope has
been that sanctions and the
Ukraine crisis would quash
President Putin’s politics and
boost Ukraine’s economy.
In reality, Ukraine has been
pushed to a default, while
the sanctions have united
Russians behind Putin whose
popularity rating remains
83%.
Critics of the sanctions argue
that the ultimate US/EU
objective is not to encour-
age pro-market policies in
Russia but to clip Russia’s
economic future in a new
Cold War. Meanwhile, sanc-
tions have deepened stagna-
tion in Europe, and reduced
the impact of euro econo-
mies’ fiscal policies and the
effectiveness of the ECB’s
quantitative easing (QE). The
repercussions are reflected in
diminished global growth.
The showdown with Russia
and Ukraine is also a reflec-
tion of Europe’s increasing
assertiveness, which has
been prominent particularly
in the EU members’ interven-
tions amid the ‘Arab Spring.’
In the early 2000s, Presi-
dent George W. Bush’s White
House believed that the
War in Iraq would achieve a
virtuous domino effect in the
region, supplanting “authori-
tarian tyrants” with “genuine
democracies.”
In the early 2010s, France,
Britain and the NATO seized
the opportunity for regime
change in Europe’s southern
periphery. Years of misguided
policies in the Middle East
and North Africa, coupled
with the unwillingness to

21. 21 analysis21 analysis
cooperate with Putin’s Russia
amplifying destabilisation
across the region and the
very refugee crisis that Brus-
sels would now like to contain
to its periphery (Greece,
Turkey).
Eclipse of monetary effect
Currently, the prime reason
for the semblance of stability
in Europe is the ECB, which
- after the disastrous rate
hikes of Jean-Claude Trichet
- opted for US-style non-tra-
ditional monetary policies.
Since fall 2011, an elusive
calm has been sustained
by Mario Draghi’s pledge to
defend the euro “at any cost,”
record-low interest rates and
rounds of quantitative easing.
Yet, realities are different, as
evidenced by the euro's dras-
tic 23 percent plunge from
$1,45 in fall 2008 to $1,13.
Recently, the ECB launched a
relatively large easing pack-
age, cutting all policy rates
and further expanding QE to
€80 billion per month. Yet,
markets were no longer that
impressed. Just as the Fed’s
Bernanke a while ago, Draghi
has been forced to acknowl-
edge that even non-tra-
ditional monetary policies
cannot overcome structural
challenges.
That is the job of fiscal
policy, which would require
the kind of common insti-
tutions that Brussels lacks.
As a result, economic uncer-
tainty, political divisions, and
strategic friction are likely to
be reinforced by increasing
market pessimism as the ECB
has few alternatives but to
continue to exhaust its policy
tools.
Recently Eurozone banks
have also been hit by a slate
of shocks, while equity sell-
off has sparked concerns
about their profitability. In
Italy, non-performing-loans
(NPLs) have soared, which
has resulted in efforts to
“resolve” some local banks.
French banks are suffering
from the ECB’s squeezed
rates. In Germany, Deutsche
Bank suffered a loss of €6.8
billion in 2015, after scan-
dals and lawsuits, while
the regional state-owned
Landesbanken are coping with
adverse markets. With heavy
debt burden, Spanish banks’
NPLs remain at elevated
levels.
As the EZ banks grow more
fragile, they are less likely to
support the ECB’s monetary
easing in the real economy.
By the same token, a sys-
temic banking crisis, coupled
with political repercussions,
can no longer be excluded.
Changing sovereign risks
The erosion of Europe is not
inevitable. Currently, finan-
cial and monetary conditions
in the Eurozone actually
reflect a slight improvement
suggesting that the region is
still on a rebound. However,
economic indicators sug-
gest that growth is slowing,
because of the region’s new
threats and the weight of the
old ones.
If the ECB’s policy tools
continue to soften, banking
system remains fragile and
Brussels cannot defuse the
new threats, Europe’s sover-
eign creditworthiness could
face substantial downside
risks – despite half a century
of integration.
A Brexit alone could spark a
downgrade to the UK, while
providing another push for
independence movements
from Scotland to Catalonia.
Such moves would shift spot-
light on the fragile sovereigns
in Western Europe’s southern
periphery, force new scrutiny
of indebted core economies
(France, Spain) and increase
scrutiny of several EU mem-
bers in Central and Eastern
Europe (CEE), which cur-
rently benefit from the EU’s
enhanced creditworthiness.
Of the 19 Eurozone sover-
eigns, 16 are investment
grade today, while three
remain speculative grade

22. 22 analysis22 analysis
(Portugal, Greece, Cyprus)
and two have negative out-
looks (France, Finland). With
a major shakeup, downside
risks would increase signif-
icantly for those with spec-
ulative grade and negative
outlooks, while investment
grade positions would begin
to soften.
If the migration crisis has
inflamed the Brexit debate
and is fueling Schengen’s
erosion, anti-EU opposition
and geopolitical friction, is it
likely to de-escalate in the
foreseeable future? Well, as
Merkel’s support is eroding
in Germany, the chancellor
has sought an agreement
with Turkey, which is already
hosting 2,7 million refugees
from the 5-year-old Syrian
civil war.
Recently the EU and Turkey
reached an agreement that
will force asylum seekers (of
whom 40 percent are chil-
dren) who take clandestine
routes to be sent back. In
exchange, Turkey will receive
€6,6 billion in aid, visa-free
access for its citizens in
the Schengen zone and the
eventual resumption of talks
on its EU membership. The
deal has been denounced as
impractical, legally suspect,
hard to enforce and inhuman.
In the short-term, coordi-
nated immigration policies
could actually provide a tem-
porary boost in several EU
economies, while alleviating
the adverse impact of aging
populations over time. In the
medium-term, more concilia-
tory policies with Russia and
Ukraine, Syria and the Middle
East would go a long way to
defuse tensions.
However, in the absence of
credible, coordinated and
medium-term immigration
policies, uncontrolled immi-
gration is likely to continue to
undermine Schengen, boost
anti-EU forces, and contribute
to further geopolitical friction
within and around Europe’s
periphery – especially in
Greece, which is amid its
Great Depression and Turkey
that’s amid multiple frictions
internally and externally.
What if these are the
“good years”
While Europe's growth poten-
tial has been significantly
diminished in the past half
a decade, it is supported
by record-low policy rates,
rounds of QE, the collapse of
oil prices and cheaper euro.
It is thus tempting to ask
If these truly are the “good
years" of the rebound, how
will Europe cope with the
“bad years” in the future?
What the European economy
needs is more fiscal accom-
modation and investment to
translate lingering growth
to structural recovery. Yet,
only structural reform efforts
have the potential to solidify
the future of Europe, with
or without the euro. In the
medium-term, the region's
economic uncertainty contin-
ues to be fueled by the splut-
tering US recovery, Japan’s
contraction and China’s
deceleration.
In a very long-term perspec-
tive, what we are witness-
ing is the steady erosion of
Europe’s economic power,
political clout and strategic
weight.
Today, Europe still accounts
for about 24 percent in the
world economy. As long-term
projections suggest, that
share is likely to halve by
2050, in part because of the
region’s secular stagnation
and because of the relatively
faster growth of emerging
economies.
However, the erosion of
Europe in the world econ-
omy can be accelerated or
decelerated. The past half
a decade shows the poten-
tial of deceleration, which
has pushed Europe to the
brink. In the coming months,
the challenge is to halt and
reverse that trajectory.
The longer procrastination
prevails in Brussels and the
core member states, the
harder will be the challenge.
– EconomyWatch●