Fed holds rates steady, indicates it is not ready to start cutting

WASHINGTON — The Federal Reserve on Wednesday sent a tepid signal that it is done raising interest rates but made it clear that it is not ready to start cutting, with a March move lower increasingly unlikely.

In a substantially changed statement that concluded the central bank’s two-day meeting this week, the Federal Open Market Committee removed language that had indicated a willingness to keep raising interest rates until inflation had been brought under control and was on its way toward the Fed’s 2% inflation goal. 

However, it also said there are no plans yet to cut rates with inflation still running above the central bank’s target. The statement further provided limited guidance that it was done hiking, only outlining factors that will go into “adjustments” to policy.

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the statement said.

During Fed Chair Jerome Powell‘s news conference, he said policymakers are waiting to see additional data to verify that the trends are continuing. He also noted that a March rate cut is unlikely.

“I don’t think it’s likely that the committee will reach a level of confidence by the” March meeting, Powell said.

“We want to see more good data. It’s not that we’re looking for better data, we’re looking for a continuation of the good data we’ve been seeing,” he added.

Markets initially took the news in stride but slid following Powell’s comments casting doubt on a March cut. The Dow Jones Industrial Average surrendered more than 300 points in the session while Treasury yields plunged. Futures pricing also swung, with the market assigning about a 64% chance the Fed would stay put at its March 19-20 meeting, according to CME Group calculations.

While the committee’s statement did condense the factors that policymakers would consider when assessing policy, it did not explicitly rule out more increases. One notable change was removing as a consideration the lagged effects of monetary policy. Officials largely believe it takes at least 12 to 18 months for adjustments to take effect; the Fed last hiked in July 2023 after starting the tightening cycle in March 2022.

“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement said. That language replaced a bevy of factors including “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

‘Moving into better balance’

Those changes were part of an overhaul in which the Fed seeks to chart a course ahead, with inflation moving lower and economic growth proving resilient. The statement indicated that economic growth has been “solid” and noted the progress made on inflation.

“The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance,” the FOMC missive said. “The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”

Gone from the statement was a key clause that had referenced “the extent of any additional policy firming” that might come. Some Fed watchers had been looking for language to emphasize that additional rate hikes were unlikely, but the statement left the question at least somewhat open.

Going into the meeting, markets had expected the Fed could begin reducing its benchmark overnight borrowing rate as soon as March, with May also a possible launching point. Immediately after the decision, stocks fell to session lows.

Policymakers, though, have been more circumspect about their intentions, cautioning that they see no need to move quickly as they watch the data unfold. Committee members in December indicated a likelihood of three quarter-percentage point rate cuts this year, less ambitious than the six that futures markets are pricing, according to the CME Group.

More immediately, the committee, for the fourth consecutive time, unanimously voted not to raise the fed funds rate. The key rate is targeted in a range between 5.25%-5.5%, the highest in nearly 23 years.

The Fed has been riding a wave of decelerating inflation, a strong labor market and solid economic growth, giving it both leeway to start easing up on monetary policy and caution about growth that could reaccelerate and drive prices higher again. Along with 11 rate hikes, the Fed also has been allowing its bond holdings to roll off, a process that has shaved more than $1.2 trillion off the central bank balance sheet. The statement indicated that the balance sheet runoff will continue apace.

The ‘soft-landing’ narrative

Many economists now are adopting a soft-landing narrative where the Fed can bring inflation down without torpedoing economic growth.

Separate reports Wednesday indicated that the labor market is softening, but so are wages. Payrolls processing firm ADP reported that private companies added just 107,000 new workers in January, a number that was below market expectations but still indicative of an expanding labor market. Also, the Labor Department reported that the employment cost index, a gauge the Fed watches closely for signals of inflation coming through wages, increased just 0.9% in the fourth quarter, the smallest rise since the second quarter of 2021.

More broadly, inflation as measured through core personal consumption expenditures prices rose 2.9% in December from the prior year, the lowest since March 2021. On a six- and three-month basis, core PCE prices both ran at or below the Fed’s target.

In a separate matter, the Fed also announced it was altering its investment policy both for high-ranking officials and staff. The changes expand the scope of those covered to include anyone with access to “confidential FOMC information” and said some staff might be required to submit brokerage statements or other documents to verify the accuracy of disclosures.

The changes follow controversy over multiple Fed officials trading from private accounts at a time when the central bank was making major changes to policy in the early days of the Covid pandemic.

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Taiwanese youth voice income, housing concerns ahead of crucial elections

While cross-strait relations remain an overarching theme in Taiwan’s presidential and legislative elections this weekend, many young voters are more concerned with domestic issues, such as low wages and housing, that preoccupy them as much as or even more than the threat of an invasion by the People’s Republic of China. FRANCE 24 met with several of them. 

Some 19.5 million Taiwanese are eligible to vote in the island’s presidential and legislative elections on Saturday, January 13. Some 2.8 million, or 15 percent, are aged between 20 and 29 years old. 

Voters will determine Taiwan’s next leader from among three candidates: the Democratic Progressive Party (DPP)’s Lai Ching-te, the Kuomintang (KMT)’s Hou Yu-ih and the Taiwan People’s Party (TPP)’s Ko Wen-je. 

Incumbent President Tsai Ing-wen from the pro-independence DPP is due to step down at the end of her second consecutive term in May.     

Read moreTaiwan’s presidential election: Who are the candidates in the high-stakes vote?

Despite not being a large enough cohort to determine the outcome of an election, young people nevertheless represent a sizable chunk of Taiwan’s electorate capable of tipping the scales in a neck-and-neck race. 

With less than a day to go before the election, political groups have called on young people to return home and vote.  

Taiwan’s voting system relies on household registrations to determine voter eligibility. Despite moving to other cities for work and study, many young Taiwanese remain registered in their home town, so they must return in order to vote. 

While many have already bought tickets and packed their bags for the weekend, some remain uncertain whether they’ll cast their ballots on Saturday.  

Eligible youth participation in the past two elections ranged from 56.3 to 72.7 percent

Stagnant wages 

“I still haven’t decided yet if I’m going to vote … if I do, I’ll take the bus first thing tomorrow morning,” said Wang Miao, a 25-year-old woman working in Taipei’s IT sector.  

Wang’s hometown is in Kaohsiung, a southern port city over 400km from the capital. 

“The thing is, I don’t feel like the elections are going to change anything … Wages are low, and inflation is still high,” she said. 

IT worker Wang Miao pictured in Penghu County. © Wang Miao

While median wages in Taiwan grew 2.37 percent in 2023, average consumer prices increased by 2.5 percent over the same period, outpacing wage growth.  

“My company gave us a 1.5 percent raise last year, which is ridiculous compared to inflation,” said Xu Jing-chen, a 29-year-old engineer working in Hsinchu, a city southwest of Taipei.  

On the way back home to the coastal city of Tainan, Xu said he feels frustrated at the current politics because the available options seem unlikely to resolve the issues that young people face. 

“They’re all talking about raising the minimum wage, but I don’t make the minimum, so how does that affect me? I’m only voting out of civil duty … As far as I can tell, none of the candidates are offering any concrete solutions to improve our lives,” he said. 

While Lai proposes to increase the monthly minimum wage of publicly traded companies’ employees to 30,000 New Taiwan Dollars (NTD) (or €880.40), Hou proposes a general hike of minimum wage to NTD 33,000 (€968.70) from the current NTD 27,470 (€806.37). Both are significantly lower than the NTD 43,166 (€1265.13) median wage in Taiwan. 

“The only option for me, if I want to increase my salary, is to move abroad, maybe to the US. But my parents are here, my home is here,” Xu said.  

Hoping to start a family with his girlfriend, Xu said he has been looking to purchase an apartment in Hsinchu. 

Unaffordable housing 

“The market is crazy. A simple two-bedroom can cost over NTD 10 million (around €292,000), and that is without a parking space!” Xu said. 

Due to low interest rates, tax cuts and market speculation, housing in Taiwan is notoriously unaffordable, with an average unit costing over 9 times the median annual wage, far exceeding the price-to-income ratio of 3 times the annual wage recommended by the UN.  

Other young Taiwanese also talk about housing concerns. 

Wu Qian-hue, a 26-year-old graduate student working part-time and living with her parents in the suburbs of Taichung, a bustling city in central Taiwan, said soaring rents have prevented her from moving out. 

“What’s the point? I can barely pay for my daily expenses and that’s it. I barely have any savings, everything I make goes to pay my bills. There’s nothing left at the end of the month. Living with my family helps me avoid getting into debt,” she said. 

“One day I’d like to have a place of my own, but for now it’s a dream,” Wu said, lamenting her city’s high housing costs.  

“Everything’s more expensive now … House prices in Taipei are crazy. For now, I can only afford to rent. I’m glad [that] I receive a subsidy for it,” said Pheonix Hung, a 27-year-old artist working in Taipei.  

Hung added that she plans to vote for Lai in the upcoming presidential election because of his party’s policies on housing, which introduced rent subsidies for single people and households with young children in 2019.  

Taiwanese artist Pheonix Hung pictured in Taipei.
Taiwanese artist Pheonix Hung pictured in Taipei. © Phoenix Hung

Computer science student and first-time voter Sung Zhi-ming, 22, said he chose to remain in accommodations provided by his university, where he shares a room with three other students, because of high rents. 

“I don’t really have a choice. It’s either this or back home, which is too far to commute every day,” said Sung, who comes from Hualian, a city on Taiwan’s east coast. 

Sung said he plans to vote for the Taiwan People’s Party’s Ko Wen-je, a candidate popular among younger generations for his outspoken manner and focus on domestic issues. 

Both Ko and Lai propose to tax vacant properties to encourage owners to put them on the rental market.  

Cross-strait relations 

But Taiwan’s relations with its giant neighbour remain at the forefront of some young people’s minds. 

Sung, who finished his military service last year, said he’s worried about a potential Chinese invasion

Taiwan requires all male citizens of military age to serve for four months in the national army, a period that was extended to one year starting in 2024. 

“I know we hear about it all the time, Chinese drills, Chinese balloons and Chinese ships in the Taiwan Strait, and we’re all kind of numb, by the end of the day … but at the same time, you can’t not think about it,” he said.

Read more‘People don’t want to talk about war’: Taiwan civil defence battles invasion risk denial

Sung said he plans to vote for the KMT, a party that favours closer ties with Beijing, in Saturday’s legislative election. 

“My parents have always voted for the KMT. … We feel like they are more capable of making peace with China. We don’t want a war,” he said.  

While echoing Sung’s sentiments, Wu said she prefers to vote for the DPP. 

Although both parties aim to maintain the status quo, the DPP differs from the KMT ideologically in that it rejects the “One China” principle. The “One China” principle is a diplomatic consensus between mainland China and the KMT that only one “China” exists, without the sides agreeing about which country is the “real” China. 

“They’ve [the DPP] managed to safeguard Taiwan’s independence, despite the pressure from China … We can’t appease China forever; we have to stand up for ourselves,” she said.  

“Of course, I worry about war, but what can you do? It’s not really up to us whether China will invade or not, is it?” Wu said.  

“At the end of the day, you just have to live with it and carry on,” Wang said. 

“The threat of invasion isn’t going to go away any time soon, but that doesn’t mean we can’t care for other issues. We have all sorts of problems, and China is not the biggest one,” she said.  

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We can tackle climate change, jobs, growth and global trade. Here’s what’s stopping us

We must leave behind established modes of thinking and seek creative workable solutions.

Another tumultuous year has confirmed that the global economy is at a turning point. We face four big challenges: the climate transition; the good-jobs problem; an economic-development crisis, and the search for a newer, healthier form of globalization.

To address each, we must leave behind established modes of thinking and seek creative workable solutions, while recognizing that these efforts will be necessarily uncoordinated and experimental.

Climate change is the most daunting challenge, and the one that has been overlooked the longest — at great cost. If we are to avoid condemning humanity to a dystopian future, we must act fast to decarbonize the global economy. We have long known that we must wean ourselves from fossil fuels, develop green alternatives and shore up our defenses against the lasting environmental damage that past inaction has already caused. However, it has become clear that little of this is likely to be achieved through global cooperation or economists’ favored policies.

Instead, individual countries will forge ahead with their own green agendas, implementing policies that best account for their specific political constraints, as the United States, China and the European Union have been doing. The result will be a hodge-podge of emission caps, tax incentives, research and development support, and green industrial policies with little global coherence and occasional costs for other countries. Messy though it may be, an uncoordinated push for climate action may be the best we can realistically hope for.

Inequality, the erosion of the middle class, and labor-market polarization have caused significant damage to our social environment.

But our physical environment is not the only threat we face. Inequality, the erosion of the middle class, and labor-market polarization have caused equally significant damage to our social environment. The consequences are now widely evident. Economic, regional, and cultural gaps within countries are widening, and liberal democracy (and the values that support it) appears to be in decline, reflecting rising support for xenophobic, authoritarian populists and the growing backlash against scientific and technical expertise.

Social transfers and the welfare state can help, but what is most needed is an increase in the supply of good jobs for the less-educated workers who have lost access to them. We need more productive, well-remunerated employment opportunities that can provide dignity and social recognition for those without a college degree. Expanding the supply of such jobs will require not only more investment in education and more robust defense of workers’ rights, but also a new brand of industrial policies for services, where the bulk of future employment will be created.

The disappearance of manufacturing jobs over time reflects both greater automation and stronger global competition. Developing countries have not been immune to either factor. Many have experienced “premature de-industrialization”: their absorption of workers into formal, productive manufacturing firms is now very limited, which means they are precluded from pursuing the kind of export-oriented development strategy that has been so effective in East Asia and a few other countries. Together with the climate challenge, this crisis of growth strategies in low-income countries calls for an entirely new development model.

Governments will have to experiment, combining investment in the green transition with productivity enhancements in labor-absorbing services.

As in the advanced economies, services will be low- and middle-income countries’ main source of employment creation. But most services in these economies are dominated by very small, informal enterprises — often sole proprietorships — and there are essentially no ready-made models of service-led development to emulate. Governments will have to experiment, combining investment in the green transition with productivity enhancements in labor-absorbing services.

Finally, globalization itself must be reinvented. The post-1990 hyper-globalization model has been overtaken by the rise of U.S.-China geopolitical competition, and by the higher priority placed on domestic social, economic, public-health, and environmental concerns. No longer fit for purpose, globalization as we know it will have to be replaced by a new understanding that rebalances national needs and the requirements of a healthy global economy that facilitates international trade and long-term foreign investment.

Most likely, the new globalization model will be less intrusive, acknowledging the needs of all countries (not just major powers) that want greater policy flexibility to address domestic challenges and national-security imperatives. One possibility is that the U.S. or China will take an overly expansive view of its security needs, seeking global primacy (in the U.S. case) or regional domination (China). The result would be a “weaponization” of economic interdependence and significant economic decoupling, with trade and investment treated as a zero-sum game.

The biggest gift major powers can give to the world economy is to manage their own domestic economies well.

But there could also be a more favorable scenario in which both powers keep their geopolitical ambitions in check, recognizing that their competing economic goals are better served through accommodation and cooperation. This scenario might serve the global economy well, even if — or perhaps because — it falls short of hyper-globalization. As the Bretton Woods era showed, a significant expansion of global trade and investment is compatible with a thin model of globalization, wherein countries retain considerable policy autonomy with which to foster social cohesion and economic growth at home. The biggest gift major powers can give to the world economy is to manage their own domestic economies well.

All these challenges call for new ideas and frameworks. We do not need to throw conventional economics out the window. But to remain relevant, economists must learn to apply the tools of their trade to the objectives and constraints of the day. They will have to be open to experimentation, and sympathetic if governments engage in actions that do not conform to the playbooks of the past.

Dani Rodrik, professor of international political economy at Harvard Kennedy School, is president of the International Economic Association and the author of Straight Talk on Trade: Ideas for a Sane World Economy (Princeton University Press, 2017).

This commentary was published with the permission of Project Syndicate — Confronting Our Four Biggest Economic Challenges

More: Biden administration’s antitrust victories are much-needed wins for consumers

Also read: ‘Dr. Doom’ Nouriel Roubini: ‘Worst-case scenarios appear to be the least likely.’ For now.

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These are the paradigm shifts Israel urgently needs

The opinions expressed in this article are those of the author and do not represent in any way the editorial position of Euronews.

Victory for Israel is not just on the battlefield — it is also through regional reconsideration and a shared desire for life, prosperity, creative development, and a better future, Erel Margalit writes.

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The 7 October massacre committed by Hamas has shifted the ground beneath Israelis’ feet in profound ways. 

The terror onslaught on communities of mainly unprotected civilians has shattered the unwritten but imperative social contract between the state and its citizens, a contract by which citizens serve in the military, and in turn, we — particularly those of us who build their lives near enemy lines — are defended by the country’s security apparatus.

That contract came crashing down with the unprecedented, gruesome terror attack broadcast to the world, representing the single biggest intelligence and security failure since the establishment of the state.

To restore what has been lost, Israel must now usher in an urgent paradigm shift on multiple fronts: security, diplomatic, and economic.

On the security front, the devastating aftermath of the hours-long assault brought a disastrous end to the containment doctrine upheld for many years — that Israel can appease the neighbouring terror-run territory by helping transfer finances to it, hoping they are used to build the Gazan economy, and praying that indiscriminate rocket attacks on Israeli cities are minimal.

Action against Hamas is not just an act of self-defence

Over the years, Hamas has rolled in $2.5 billion (€2.27bn) annually in Gaza, with finances flowing through Iran, Qatar, and a network of global charitable organisations. 

Most of this money goes towards funding the lives of luxury for top Hamas leaders, building tunnels under Gazan cities, shoring up the terror infrastructure in the territory, and acquiring weapons and ammunition.

This apparatus was aimed squarely at Israeli civilians on 7 October, with catastrophic consequences. 

It must be clear now that coexistence with a terror group is impossible, and Hamas must be fought and defeated, just as Western powers fought and defeated the so-called Islamic State, and the US fought and defeated Al-Qaeda before that.

Israel has a duty to eradicate Hamas and other Palestinian terror groups as a security threat to its people. 

Citizens from across the gamut of Israeli society will no longer tolerate the danger posed by Hamas’ evil vision of terror, and Israel’s soldiers will fight this war until its conclusion. 

Israel’s decisive action against Hamas is not just an act of self-defence; it is a stand against terrorism that threatens global peace and security.

But war alone is not a policy. Adroit diplomacy must be at the heart of any winning strategy.

Moderate allies — including Palestinians — want to see a transformed Middle East

Indeed, by leveraging diplomatic ties and economic agreements with major moderate Arab states like the UAE, Morocco, Bahrain, Egypt, Jordan, and Saudi Arabia, Israel must craft an exit strategy for the war that would drive extensive reconstruction efforts in Gaza, in conjunction with robust economic development incentives for Palestinians.

Currently, however, it appears Israel’s plans for the day after the war are woefully underdeveloped.

Regional moderate allies, including Palestinians, have a stake in seeing a transformed Middle East and must be tapped as welcome partners for a solution to end the conflict, together with the US, NATO, Europe, and the UK. 

This sort of strategic alliance would not only bolster Israel’s security but also lay the groundwork for a united front against extremist ideologies that plague our region.

A Mideast re-alignment will have to include elements of existing cooperation and partnership between Israel and Arab allies in sectors like agriculture tech, water tech, cybersecurity, and healthcare. 

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If we do so, Gaza could one day be a place where schools, hospitals and places of worship are free of the terror tunnels and the Hamas terrorists, where people can work quality jobs and have a chance at a better life in coexistence with Israel.

The PA is the only partner capable of administering Gaza

Critically, stakeholders should work together to boost support for the eventual Palestinian Authority-steered leadership of Gaza that would rebuild the Palestinian enclave and chart a new course for the Strip and the region. 

Moderate Palestinians in Jerusalem and the West Bank, with whom we and our portfolio companies have worked for years as colleagues, friends, and partners, are our allies for a future of peace and coexistence.

For this to take place in Gaza, the Palestinian Authority will need to be reformed to re-earn the trust of both the Palestinian and Israeli people, as well as the international community. 

It must rid itself of the crippling corruption that its leaders have let flourish and denounce once and for all any support for terror. 

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But we must also recognise that the PA has been a key security partner for Israel, helping fight extremists for some three decades. It is the only partner capable of administering Gaza.

Victory for Israel lies in the shared desire for a better future

On the economic front, Israel must envision a transformation of its communities and capitalise on existing partnerships and programs developed by its robust tech ecosystem to draw talent, drive job creation, and build inclusive institutions. Innovation is ultimately the key to a collective future.

By fostering local and regional economic development, Israel has the potential to forge fresh opportunities across various domains — from professional fields and education to the military, high-tech sector, and on the ground — ushering in a new era.

Victory for Israel is not just on the battlefield; it is also through regional reconsideration and a shared desire for life, prosperity, creative development, and a better future.

The day after the war is Israel’s opportunity to reshape Gaza and the Middle East as a whole.

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Erel Margalit is a former Knesset member, Israeli high-tech investor and social entrepreneur. He is the founder and Executive Chairman of the Jerusalem-based venture capital firm Jerusalem Venture Partners, and Margalit Startup City, the international collection of thematic socio-economic hubs.

At Euronews, we believe all views matter. Contact us at [email protected] to send pitches or submissions and be part of the conversation.

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Tunisia must break free from reliance on short-term economic fixes

The opinions expressed in this article are those of the author and do not represent in any way the editorial position of Euronews.

Tunis’ political decision to mobilise resources for escalating expenditures without addressing the need to curb spending, downsize the government, and reduce the state’s economic footprint is a looming disaster, Sadok Rouai writes.

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Tunisian President Kaïs Saïed recently declared that central bank autonomy should not equate to independence from the state. 

Saïed insisted that autonomy applies to monetary policy but not the financing of the state budget. This comes in the wake of the recent postponement of the IMF mission to discuss the monetary fund’s deal for Tunisia.

President’s declaration against the Central Bank’s autonomy has marked the apex of a series of assaults on its sovereignty, aimed at overturning Article 25 of its current statute which prohibits direct financing of the state budget. 

The bank’s governor, Marouane El Abassi, had previously warned that central bank financing of the budget would spike inflation uncontrollably and replicate the Venezuelan scenario in the country.

But what motives underlie Saïed’s unsettling efforts to overturn Article 25?

Populist rejection to consolidate one-man rule

More than a year has passed since Tunisia inked a $1.9 billion (€1.73bn) preliminary agreement with the IMF, led by then-Head of Government Najla Bouden’s economic team on 15 October 2022. 

The agreement targeted financial imbalances through measures like cutting untargeted subsidies, trimming the public sector wage bill, and reforming loss-making public enterprises.

Saïed’s populist rejection of the IMF deal, citing it as a tool of Western imperialism, follows his moves to consolidate one-man rule since September 2021. 

Governing Tunisia unilaterally through decrees, bypassing the constitution, and suppressing critics, Saïed has overseen a worsening economic crisis marked by growing poverty, essential item shortages, and soaring prices. 

He considers that implementing IMF reforms could trigger protests, posing a challenge to his political control.

The commitment to implement crucial reforms for the finalisation of the IMF deal has therefore been long delayed. 

This resistance escalated further with Saïed’s recent sacking of the minister of economy and planning, who had spearheaded the IMF negotiations and remained committed to the implementation of the agreed reforms.

A quick fix won’t do

In the interim, faced with limited access to foreign financing, the authorities have heavily leaned on local funding, particularly from the banking system. 

They accumulated arrears with both foreign and local suppliers. Tunisia thus experienced a significant decline in imports and distribution of subsidized commodities, leading to frequent shortages.

Local banks face a capacity limit to finance the state budget, prompting calls to push the Central Bank to do so. This is a red alert — Tunisia must break free from reliance on short-term fixes at this perilous juncture.

Bilateral donors must vigorously support systemic economic reforms and Central Bank sovereignty within an IMF deal. There’s no alternative path for Tunisia’s economic future.

Advocates proposing amendments to the Central Bank’s statute argue that reintroducing direct budget financing if within legal limits, would be sustainable and minimally impact inflation. 

They contend that such financing would eliminate intermediation costs imposed by the banking system. 

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However, this perspective overlooks the risk of potential abuses and misuse of the law, offering a convenient yet temporary solution for the government. 

The political decision to mobilise resources for escalating expenditures without addressing the need to curb spending, downsize the government, and reduce the state’s economic footprint is a looming disaster.

History does repeat itself

Tunisia’s own economic history should serve as a cautionary tale against compromising the Central Bank’s independence. 

In the early 1980s, populist economic mismanagement led to a surge in the budget deficit from 2.8% of GDP in 1980 to 8.1% in 1983. 

Much as what we are witnessing today again in the country, the state favoured convenient shortcuts over the necessary but challenging structural reforms.

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Starting in 1982, Tunisia’s then-minister of finance and planning asked the Central Bank Governor to execute a series of accounting transactions that would provide direct financing to the Treasury beyond the confines of the budget. These transactions amounted to 5.8% of the GDP at the end of 1983.

By the late 1980s, this approach proved short-sighted and a failure, and Tunisia in the end had to resort to the IMF for assistance in addressing its financial imbalances.

Despite initial efforts to safeguard the Central Bank’s independence, there has been ongoing interference, marked by a high turnover of governors prematurely relieved of their duties. Initially stable with three governors serving for 22 years from its establishment in 1958 until the 1980s, subsequent appointments — excluding the current one — have seen seven out of ten governors removed prematurely due to political considerations.

Tunisia’s government has to see the light

Bilateral donors must underscore the imperative of preserving the independence of the Tunisian Central Bank and advancing its modernisation, alongside crucial negotiations for an IMF deal. 

The prohibition on direct Central Bank financing to the budget has been in place since 2006. For Tunisia to move backwards and invoke policies that proved to be clear failures in the 80s, is to send the country’s fragile economy reeling into freefall.

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Tunisia’s Central Bank has made notable progress in transparency, but further improvements are needed. 

These include preventing government representatives from joining its Board and establishing clear criteria for the appointment and dismissal of its governor and directors, adhering to legal deadlines for annual report publication, engaging external experts for policy evaluations (as seen in successful initiatives in England, Australia, Ireland, Chile, Spain, and elsewhere), making archives accessible to researchers, and announcing significant decisions through press conferences.

The inevitability of structural economic reforms in Tunisia today is crystal clear. 

As the country’s parliament just recently adopted the 2024 budget, the timing of this discourse is opportune. Bilateral donors and multilateral institutions must persist in encouraging Tunisia to engage in meaningful negotiations with the IMF and to safeguard the independence of its institutions. 

Tunisia’s economic future hangs on it. 

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Sadok Rouai is a former Senior Advisor to the Executive Director of the IMF and former Head of the Banking Supervision Department at Tunisia’s Central Bank.

At Euronews, we believe all views matter. Contact us at [email protected] to send pitches or submissions and be part of the conversation.

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As inflation falls, corporate America won’t rush to pay the price

U.S. President Joe Biden delivers remarks during an event to celebrate the anniversary of his signing of the 2022 Inflation Reduction Act legislation, in the East Room of the White House in Washington, U.S., August 16, 2023. 

Kevin Lamarque | Reuters

In recent weeks, President Joe Biden has been doing everything he can to point the finger at big corporations for high prices.

“Too many things are unaffordable,” the president said.

“Stop the price gouging,” Biden said on another recent occasion.

The blame game may be good retail politics, and the president has announced some real actions to alleviate consumer financial stress, forgiving as much student debt on the margins as he can under the law, unveiling various plans to eliminate “junk fees,” and using new powers under the Inflation Reduction Act to bring down key drug prices.

Some recent research supports the case that corporations have taken more advantage of the current inflationary era than they really need to do. But amid the political pressure, don’t expect corporate America to be swayed.

As the Federal Reserve signals for the first time that it’s getting comfortable with the decline in inflation, and even short of declaring “mission accomplished” seemed to say this week it doesn’t wholly disagree with the market view that rates cuts are the next phase in its monetary policy, the one major force in the economy not talking about cuts in a major way is corporations.

That’s been on the mind of Fed presidents as the central bank contemplates a big shift. Richmond Fed President Tom Barkin, a former corporate sector CFO, recently told CNBC that one area he monitors and speaks to companies about is price setting. Companies won’t be giving up their power to raise prices “until they have to,” Barkin, who will be a voting member of the FOMC next year, said.

It’s been a hard-won advantage. Over the past two decades, price setters “have been beaten up,” Barkin said, by the combination of ecommerce, globalization, access to new supply and the power of big box retailers. “If you go back to 2018-2019, you had people who really weren’t into raising prices [as they] didn’t think they had the power to do it. I’m out there talking to price setters now and there are some who have taken a step back and said, ‘Okay, we’re on the backside of this,’ but I still talk [to others] who are looking to get more price.”

During an interview later in November with Barkin at CNBC’s CFO Council Summit in Washington, D.C., the subject came up again, and an informal poll of CFO Council members in the room on the subject of pricing plans for 2024 was taken. A majority said their companies would be raising prices next year; a minority said they would keep pricing the same; none said they would be lowering prices. 

“I’m looking for the point where they’re no longer taking outsized price increases because they’re worried the volume and the market won’t sustain it,” Barkin said.

That is happening in certain goods markets where the Covid outsized demand has waned, and as the pressures in the real estate market with high mortgage rates have cut down on purchases for the home. It’s also a function of a massive freight market recession, which has sharply lowered transportation costs for shippers after a period of huge contract rate increases during the pandemic boom. A recent decline in energy prices has also lessened input cost pressures.

Costco CFO Richard Galanti said after its earnings this week that inflation for the quarter just ended was in the 0% to 1% range. But the big moves were in the “big and bulky items,” like furniture sets due to lower freight costs year-over-year, as well as on “things like domestics,” he said. And what he called the “deflationary items” were steeply down in price, as much as 20% to 30%.

Toys are another example.

No one wants to be the first to cut prices

Overall, though, the economy is not headed for deflation, and the Fed’s stance this week may have given companies more room to keep prices where they want if real wage growth proves sustainable. Inflation is falling faster than wages,” said KMPG chief economist Diane Swonk. “That does not equate to deflation. The goal is to keep that trend going, so that consumers regain the purchasing power lost to inflation.”

But with any easing of rates, the central bank is “willing to throw the dice, and enable the economy to grow more rapidly rather than risk recession,” Swonk said. “That is a major shift from where we were a year ago. They knew that the decision to call an end to rate hikes would trigger financial markets to ease. That was like a stealth cut in rates. It will stimulate the economy. Improvements in inflation are expected to continue, but the pace at which price increases decelerate could slow.”

The recent tailwinds from a softer freight market may be near their end, too. A logistics CFO speaking on a CNBC CFO Council member call on Tuesday about the market outlook said that after one of the longest stretches in recent history for a freight recession, the trough may have been reached. “Truck rates may start bouncing off of a bottom here,” said the logistics CFO on the call, where chief financial officers are granted anonymity to speak freely.

While the Fed may get its wish of a “soft landing” for the economy, that doesn’t mean prices will land as softly for consumers, according to Marco Bertini, a professor of marketing at business school Esade who studies pricing strategy and pricing psychology. “Companies will do what they want and will never react at the speed you want them to, especially after they have been increasing prices,” Bertini said. “Why would I be the first to cut my margins when we just went through a period where we had the world’s best excuse [inflation] to recover margins?” he said.

At some point, companies will need to reassess pricing strategy, especially with margins more than recovered for many, and this period of rapid inflation in the U.S. doesn’t have a precedent for companies to use as a barometer of how to shift. “It’s uncharted territory for the U.S. market,” Bertini said.

That’s part of the reason why not one CFO raised their hand at the CNBC CFO Council Summit when asked if any were considering a price decrease for 2024.

“Imagine I am the first to say I am holding on prices, and make that known to customers? That’s how a price war starts and the competitive advantage from being the ‘good guy’ lasts two seconds,” Bertini said. “No one wants a race to the bottom. The gains over the past few years evaporate in a few months.”

Deflation versus slowing of price increases

There are some signs that the pricing conversation is starting to become more prevalent inside companies beyond the goods areas where demand has been hit hard. But recent declines in pricing don’t indicate that companies will continue in that direction across a broader array of products and services.

“The Fed doesn’t want to see deflation,” said one retail sector CFO on the recent CNBC CFO Council call. “They just want to see inflation cool. And they want to see us get to the point where we can’t raise prices anymore.”

While the CFO said there has been a “settling in the market in the last couple of months, I wouldn’t call it deflation.”

But he pointed to transportation costs as a deflationary force that is having an influence on importers, “a one-time kind of release of supply and demand imbalances … but it’s a price correction to me that is different than deflation. … I think we’ve kind of been through an interesting phase of price correction. But I’d say things are pretty stable from our perspective.”

Consumers have been 'as resilient as they could be,' says former Walmart U.S. CEO Bill Simon

In food distribution, costs for key commodities continue to experience deflation on a sequential basis. But consumers going out to eat won’t see that in the prices they pay.

“We’re in a period where restauranteurs have taken many prices up,” said another retail CFO on the call. “They’re seeing that deflation in their underlying ingredients, so they’re actually going to start seeing a little bit better performance in terms of their bottom line. Now that they’ve taken the prices up, we just don’t think they’re gonna take it down very quickly.”

The science of pricing, according to Bertini, dictates that as long as a company can point to an externality — in this case, higher input costs — the buyer ultimately accepts the situation, and price stickiness is the result.

But the current environment is edging into more of an “unstable equilibrium.”

“When inflation is in the public domain, it’s perfect to collaborate in a perfectly legal way to increase prices. Now the shocks are gone and costs slowly coming down, and the appetite to be the one to decrease prices and get market share gain is increasingly getting bigger,” he said. “But being the first will take some time, because they’re still enjoying it. … What it will take in most markets is a competitor who sees a clear path to getting lots of market share.”

When the party will end for corporations

This difficult balance is also coming during a period of time when the consumer has defied expectations of a slowdown in spending, making it harder for companies to pinpoint just how big the market opportunity really is. Retail sales, as an example, just came in much stronger than expected.

“We’re still trying to understand how strong November retail sales should have been relative to normal, and relative to what’s happened the last three years. It makes it hard,” the logistics CFO said on the recent CNBC CFO Council call.

The view from Costco CFO Galanti after its earnings this week is instructive. Speaking about food, he said it’s been a different story than with goods: “There hasn’t been significant price cuts passed on to the consumer yet.”

“There are a few things that are up and a few things are down, but no giant trend either way. Look, as you’ve known us for a long time, we want to be the first to lower prices. We’re out there pressing our vendors as we see different commodity components come down and certainly on the non-food side as we saw shipping costs come down, things like that. And so, probably a little more than less, but we’ll have to wait and see.”

If the period of price increases is to end, expect there to be a lag between that and other forces in the economy, such as the Fed, said Bertini. “Who wants to end the party early? They will want to see some really strong evidence that the party has ended.”

Another analogy from a CFO on the recent CNBC Council call may have put it best:

“We’re all a bunch of cars on a highway. You’ve got the customer, a retailer, you’ve got the manufacturer. Maybe you’ve got capital providers. And who hits the brakes first? Who wants to hit the brakes before the person in front of them hits the brakes?” 

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Long Covid is distorting the labor market — and that’s bad for the U.S. economy

Charlotte Hultquist

Charlotte Hultquist

Weeks after Charlotte Hultquist got Covid-19 in November 2020, she developed a severe pain in her right ear.

“It felt like someone was sticking a knife in [it],” said Hultquist, a single mother of five who lives in Hartford, Vermont.

The 41-year-old is one of millions of Americans who have long Covid. The chronic illness carries a host of potentially debilitating symptoms that can last for months or years, making it impossible for some to work.

For about a year, Hultquist was among those long Covid patients sidelined from the workforce. She would fall constantly, tripping just by stepping over a toy or small object on the floor. She eventually learned that the balance issues and ear pain resulted from a damaged vestibular nerve, a known effect of long Covid. After rigorous testing, a physical therapist told Hultquist she had the “balance of a 1-year-old learning to walk.”

Her body — which she said felt like it weighed 1,000 pounds — couldn’t regulate its temperature, causing dramatic swings from cold to hot.

More from Your Health, Your Money

Here’s a look at more stories on the complexities and implications of long Covid:

Her work on the Dartmouth Hitchcock Medical Center’s information desk required a sharp memory of the hospital’s layout — but long Covid dulled that clarity, too. She had to quit her job as a patient care representative in March 2021.

“I couldn’t work when my memory just kept failing,” Hultquist said.

There remain many unknowns about long Covid, including causes, cures, even how to define it. But this much is clear: The illness is disabling thousands, perhaps millions, of workers to such an extent that they must throttle back hours or leave the workforce altogether.

In other words, at a time when job openings are near an all-time high, long Covid is reducing the supply of people able to fill those positions. The dynamic may have large and adverse effects on the U.S. economy.

Long Covid “is certainly wind blowing in the other direction” of economic growth, said Betsey Stevenson, a professor of public policy and economics at the University of Michigan who served as chief economist for the U.S. Department of Labor in the Obama administration.

Up to 4 million people are out of work

Mild symptoms, employer accommodations or significant financial need can all keep people with long Covid employed. But in many cases, long Covid impacts work.

Katie Bach

nonresident senior fellow at the Brookings Institution

Katie Bach, a nonresident senior fellow at the Brookings Institution, has published one of the higher estimates to date. She found that 2 million to 4 million full-time workers are out of the labor force due to long Covid. (To be counted in the labor force, an individual must have a job or be actively looking for work.)

The midpoint of her estimate — 3 million workers — accounts for 1.8% of the entire U.S. civilian labor force. The figure may “sound unbelievably high” but is consistent with the impact in other major economies like the United Kingdom, Bach wrote in an August report. The figures are also likely conservative, since they exclude workers over age 65, she said.

“Mild symptoms, employer accommodations or significant financial need can all keep people with long Covid employed,” Bach said. “But in many cases, long Covid impacts work.”

Impact akin to extra year of baby boomers retiring

Other studies have also found a sizable, though more muted, impact.

Economists Gopi Shah Goda and Evan Soltas estimated 500,000 Americans had left the labor force through this June due to Covid.

That led the labor force participation rate to fall by 0.2 percentage points — which may sound small but amounts to about the same share as baby boomers retiring each year, according to the duo, respectively of the Stanford Institute for Economic Policy Research and the Massachusetts Institute of Technology.

Put another way: Long Covid’s labor impact translates to an extra year of population aging, Goda said.

For the average person, the work absence from long Covid translates to $9,000 in foregone earnings over a 14-month period — representing an 18% reduction in pay during that time, Goda and Soltas said. In aggregate, the lost labor supply amounts to $62 billion a year — equivalent to half the lost earnings attributable to illnesses like cancer or diabetes.

What’s more, foregone pay may complicate a person’s ability to afford medical care, especially if coupled with the loss of health insurance through the workplace.

A separate Brookings paper published in October estimated about 420,000 workers aged 16 to 64 years old had likely left the labor force because of long Covid. The authors — Louise Sheiner and Nasiha Salwati — cite a “reasonable” range of 281,000 to 683,000 people, or 0.2% to 0.4% of the U.S. labor force.

About 26% of long-haulers said their illness negatively affected employment or work hours, according to a July report published by the Federal Reserve Bank of Minneapolis. Those with long Covid were 10 percentage points less likely to be employed than individuals without a prior Covid infection, and worked 50% fewer hours, on average, according to Dasom Ham, the report’s author.

Return to work can be ‘a really frustrating experience’

Outside of these economic models, the labor impact was borne out in numerous CNBC interviews with long Covid patients and doctors who specialize in treating the illness.

Just half of the patients who visit the Mayo Clinic’s Covid Activity Rehabilitation Program can work a full-time schedule, said Dr. Greg Vanichkachorn, the program’s medical director.

“Because of the brain fog issues in addition to physical symptoms, many patients have had a really frustrating experience trying to get back to work,” Vanichkachorn said.

Those able to return, even part-time, sometimes face hostility from employers and co-workers, he added.

For one, many of the hundreds of potential long Covid symptoms are invisible to others, even if disabling for the afflicted. Difficulty meeting a work deadline due to brain fog or extreme fatigue, for example, may not be met kindly by their colleagues.

Long Covid is so different for so many different people.

Alice Burns

associate director of the Program on Medicaid and the Uninsured at health-care nonprofit The Henry J. Kaiser Family Foundation

“There are some people out there who don’t even think Covid exists,” Vanichkachorn said.

Meanwhile, long Covid can put even accommodating employers in a tricky situation. It can take several months for a patient to make progress in treatment and therapy — meaning some businesses may need to make tough retention, hiring and personnel decisions, Vanichkachorn said. Lengthy recovery times mean a patient’s job might be filled in the interim, he said.

And patients’ symptoms can relapse if they push themselves too rigorously, experts said.

“You can bring a [long Covid] diagnosis to your employer, but it doesn’t allow you to say, ‘I need to be part time for X number of months,” said Alice Burns, associate director of the Program on Medicaid and the Uninsured at health care nonprofit the Henry J. Kaiser Family Foundation. “It may be more months or fewer months; it may mean you can return 10% or 80%.

“That’s just because long Covid is so different for so many different people.”

Why the long Covid labor gap matters

Jerome Powell, chair of the Federal Reserve, mentioned Sheiner and Salwati’s long Covid research in a recent speech about inflation and the labor market.

Millions of people left the labor force in the early days of the pandemic, due to factors like illness, caregiving and fear of infection. But workers haven’t returned as quickly as imagined, particularly those outside their prime working years, Powell said. About 3.5 million workers are still missing, he said.

While most of that shortfall is due to “excess” (i.e., early) retirements, “some of the participation gap” is attributable to long Covid, Powell said. Other big contributors to the shortfall include a plunge in net immigration to the U.S. and a surge in deaths during the pandemic, he added.

“Looking back, we can see that a significant and persistent labor supply shortfall opened up during the pandemic — a shortfall that appears unlikely to fully close anytime soon,” the Fed chair said.

That shortfall has broad economic repercussions.

When the U.S. economy started to reopen in early 2021 from its pandemic-era hibernation — around the time Covid vaccines became widely available to Americans — demand for labor catapulted to historic highs.

Job openings peaked near 12 million in March 2022 and remain well above the pre-pandemic high. There are currently 1.7 job openings per unemployed American — meaning the available jobs are almost double the number of people looking for work, though the ratio has declined in recent months.  

That demand has led businesses to raise wages to compete for talent, helping fuel the fastest wage growth in 25 years, according to Federal Reserve Bank of Atlanta data.

While strong wage growth “is a good thing” for workers, its current level is unsustainably high, Powell said, serving to stoke inflation, which is running near its highest level since the early 1980s. (There are many tentacles feeding into inflation, and the extent to which wage growth is contributing is the subject of debate, however.)

A worker shortage — exacerbated by long Covid — is helping underpin dynamics that have fueled fast-rising prices for household goods and services.

But the labor gap is just the “tip of the iceberg,” said Stevenson at the University of Michigan. There are all sorts of unknowns relative to the economic impact of long Covid, such as effects on worker productivity, the types of jobs they can do, and how long the illness persists, she said.

“When you’re sick, you’re not productive, and that’s not good for you or for anybody around you,” Stevenson said of the economic impact.

For example, lost pay might weigh on consumer spending, the lifeblood of the U.S. economy. The sick may need to lean more on public aid programs, like Medicaid, disability insurance or nutrition assistance (i.e., food stamps) funded by taxpayer dollars.

Economic drag will rise if recovery rates don’t improve

In all, long Covid is a $3.7 trillion drain on the U.S. economy, an aggregate cost rivaling that of the Great Recession, estimated David Cutler, an economist at Harvard University. Prior to the pandemic, the Great Recession had been the worst economic downturn since the Great Depression. His estimate is conservative, based on known Covid cases at the time of his analysis.

Americans would forgo $168 billion in lost earnings — about 1% of all U.S. economic output — if 3 million were out of work due to long Covid, said Bach of the Brookings Institution. That burden will continue to rise if long Covid patients don’t start recovering at greater rates, she said.

“To give a sense of the magnitude: If the long Covid population increases by just 10% each year, in 10 years, the annual cost of lost wages will be half a trillion dollars,” Bach wrote.

Charlotte Hultquist

Charlotte Hultquist

Hultquist was able to return to the workforce part time in March, after a yearlong absence.

The Vermont resident sometimes had to reduce her typical workweek of about 20 hours, due partly to ongoing health issues, as well as multiple doctor appointments for both her and her daughter, who also has long Covid. Meanwhile, Hultquist nearly emptied her savings.

Hultquist has benefited from different treatments, including physical therapy to restore muscle strength, therapy to “tone” the vagus nerve (which controls certain involuntary bodily functions) and occupational therapy to help overcome cognitive challenges, she said.

“All my [health] providers keep saying, ‘We don’t know what the future looks like. We don’t know if you’ll get better like you were before Covid,'” Hultquist said.

The therapy and adaptations eventually led her to seek full-time employment. She recently accepted a full-time job offer from the New Hampshire Department of Health & Human Services, where she’ll serve as a case aide for economic services.

“It feels amazing to be recovered enough to work full time,” Hultquist said. “I’m very far from pre-Covid functioning but I found a way to keep moving forward.”

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Essequibo referendum: Is Venezuela about to seize part of Guyana?

Venezuelan President Nicolas Maduro is organising a referendum on Sunday to decide whether to create a new state in the Essequibo territory, an area currently under the control of neighbouring Guyana. Does Caracas have the means for its territorial ambitions, or is it just political grandstanding?

On December 3, Venezuelans vote for or against the creation of a new Venezuelan state in the Essequibo region. In the eyes of Venezuelan authorities, it is a “consultative” referendum designed to put an end to over 200 years of territorial conflict. 

However, there is one big problem: the land Venezuela wants to potentially extend control over is recognised by the international community as a part of neighbouring Guyana – a sparsely populated country with some 800,000 inhabitants.

The issue has become an obsession for populist President Nicolas Maduro, who often repeats the phrase “El Essequibo es Nuestro” [The Essequibo is ours] in his speeches.

Among four other questions, the referendum asks citizens whether they favour “the creation of the Essequibo state and the development of an accelerated plan for comprehensive care for the current and future population of that territory”.

The outcome of the vote is hardly in doubt according to French daily Le Monde, which reported Thursday that the referendum “will take place without observers” and that no one dared to campaign for the “no” vote.

This situation is causing concern for Guyana’s leaders. Caracas is threatening to deprive its eastern neighbour of more than half of its territory and to make the approximately 200,000 inhabitants of Essequibo Venezuelan citizens.

“The long-term consequences of this referendum could be Venezuela’s de facto annexation of a region which covers 160,000 square kilometers, a significant portion of Guyana [215,000 km²],” says Annette Idler, associate professor at the Blavatnik School of Government at the University of Oxford and a specialist in international security.

On top of significant gold, diamond, and aluminium deposits, the Essequibo has become an offshore paradise for oil and gas interests. Since Exxon discovered hydrocarbon deposits off the coast, black gold has given an unprecedented boost to the economy, raising Guyana’s GDP by no less than 62 percent in 2022.

© Guillermo Rivas Pachecor, Paz Pizarro, Jean-Michel Corbu, Patricio Arana, AFP

Writing in 2015, an American specialist in Latin America, Jose de Arimateia da Cruz, argued the discovery of these underwater oil reserves “strengthened Venezuela’s determination to support its territorial claims on this region”.

The Venezuelan government has been particularly angered by Exxon’s choice to negotiate exclusively with the Guyanese government, suggesting that the US oil giant recognised Guyana’s sovereignty over these waters and the Essequibo region.

A territorial dispute dating back to 1811

The territorial dispute over Essequibo dates back to the colonial era. In 1811, when Venezuela proclaimed its independence, it believed the region was part of its territory. Despite the claims, the United Kingdom, which occupied the territory of present-day Guyana, placed the region under the authority of the British crown. In 1899, an arbitration court ruled in favour of the UK, even though the United States had supported Caracas.

The dispute resurfaced in 1966 when Guyana gained independence. The Geneva Agreement, signed by the UK, Venezuela, and British Guiana, urged countries to agree to a peaceful resolution through dialogue, but Guyana has since sought a resolution through the International Court of Justice (ICJ) – a procedure which Venezuela rejects. 

If the Venezuelan government is pushing for a referendum now, it is partly “because the International Court of Justice declared itself competent in April to settle the dispute”, says Idler.

Maduro does not want to recognise the ruling of the ICJ – a branch of the UN with nonbinding legal authority. He even called on United Nations Secretary-General Antonio Guterres to mediate between Venezuela and Guyana.

Venezuela's President Nicolas Maduro casts his vote during a consultative referendum on Venezuelan sovereignty over the Esquiba region controlled by neighbouring Guyana, in Caracas on December 3, 2023
Venezuela’s President Nicolas Maduro casts his vote during a consultative referendum on Venezuelan sovereignty over the Essequibo region, controlled by neighbouring Guyana, in Caracas on December 3, 2023. © Venezuelan Presidency via AFP

There is also – perhaps most importantly – a domestic political element to the referendum. “We must not forget that the presidential election takes place in a year, and Nicolas Maduro is trying to rally support around him by playing to the national sentiment of voters,” explains Idler.

By presenting himself as the champion of nationalism, “he puts the opposition in a delicate position”, she adds. What’s more, “some observers believe he could escalate the situation with Guyana to declare a state of emergency and cancel the presidential election if necessary”.

Faced with the Venezuelan threat, Guyana is relying heavily on international law. A case was referred to the ICJ on October 3 to prevent Caracas from proceeding with its referendum. 

On Friday, the ICJ called on Caracas to take no action that would modify the disputed lands – but it did not mention the referendum.

Is Maduro bluffing?

The risk is that Venezuela may want to take advantage of international attention being focused on two major conflicts in Ukraine and Gaza. Venezuelan troops are already on the border with Guyana “carrying out anti-illegal mining activities”, reports the Financial Times.

If Venezuela were to genuinely attempt to annex Essequibo, “it could destabilise the entire region”, says Idler. Countries like Brazil or Uruguay could be forced to choose sides in this territorial conflict.

But the annexation threat could also be a bluff. Venezuela may not have the means to seize the territory, says Idler. “The authorities exercise limited control over the border regions from where Caracas would need to launch troops to take possession of this region.”

Venezuela’s president knows that such a move would prompt the United States to reimpose the sanctions that Washington has just lifted on oil exports, says Idler. Economically very fragile, Venezuela may think twice before taking such a risk.

Regardless of how the roughly 20 million eligible Venezuelans vote, little will change in the short term – the people of Essequibo are not voting, and the referendum is nonbinding.

Either way, says Idler, Maduro can hardly afford to act on his nationalist impulse.

“He will then have to choose between discrediting himself in the eyes of voters and facing new American sanctions.”

This article was translated from the original in French.

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The ultimate work perk? This company provides a free place to stay in Spain

Some workers go to great lengths to hide hush trips from their bosses.

But employees of the Polish company PhotoAid needn’t bother.

The company, which helps travelers take their own passport photos at home, allows its employees to stay at an apartment in Spain for free — provided they work while they’re there.

The apartment is in Tenerife, the largest of Spain’s Canary Islands, an archipelago west of Morocco. Employees can stay up to three weeks at a time and can visit as many times in year as they like, depending on demand from other employees.

The company reimburses half of employees’ airfare too, up to 1,000 Polish zlotys ($246), once a year. Flights from Warsaw to Tenerife can start at around $150 for a six-hour direct flight.

Employees can stay up to three weeks at a time at the Tenerife apartment and can visit as many times as they like.

Source: PhotoAid

The company started renting the apartment in Tenerife’s capital, Santa Cruz de Tenerife, in the summer of 2022 as a way to create relationships and build morale among its employees, all of whom work remotely, said co-founder Rafal Mlodzki.

Plus, Mlodzki said he and the other co-founders, Marcin and Tomasz Mlodzki — who are also his brothers — wanted to offer a company perk that would stand out.  

How the ‘workcations’ work

PhotoAid is a small company with a young workforce, so most employees don’t have children, said Mlodzki. But those who do tend to group together and use the benefit in the summer months when schools are closed.

Employees can request to bring their partners too, which the company reviews on a case-by-case basis, he said.  

Employees must abide by several rules, he said, such as the check-in and check-out protocol. Employees must upload a photo of the apartment on arrival, then do the same on departure to show the next group of employees how they left it.

Workcation time spent in Tenerife doesn’t count as employee vacation time, which is up to 26 days a year, said PhotoAid co-founder Rafal Mlodzki.

Source: PhotoAid

On arrival, employees are assigned a cleaning task too, but the company hires a professional cleaner for deep cleans, he said. While drinking wine on the balcony and chatting into the night are regular occurrences, employees are not allowed to drink during work hours, he said.   

Mlodzki told CNBC Travel that employees like to visit Tenerife with coworkers with shared interests. For example, a recent group played sports in their free time, while another group went to music concerts.

‘The best onboarding in the world’

Around 50 of PhotoAid’s 143 employees have now stayed at the Tenerife apartment, many meeting their teammates in person for the first time during their stays. Around 10 were onboarded as new starters there too, said Mlodzki.

“One of the reasons we decided to open this office was the possibility of offering the best onboarding in the world for senior team members. Those onboarded are not only thrilled but also deeply understand the company and their role in it,” said Mlodzki.

Coworkers with shared interests — such as sports and music — travel to Tenerife together.

Source: PhotoAid

“Often, spontaneous moments occur. For example, after a series of 45-minute sets with 10-minute breaks, we might go on a mini mountain trip and continue onboarding informally. It might even transition into an evening on the terrace.

“We just onboarded our new chief operating officer during a workation in Tenerife, and he was deeply impressed. He had never experienced an onboarding like this before.”

Two senior leaders have scheduled a strategic planning and brainstorming session at the apartment this winter, where average temperatures in January are 68 degrees Fahrenheit, higher than 34 F in the Polish capital of Warsaw.

The apartment

The 3,200-square-foot apartment overlooks the port of Santa Cruz de Tenerife. It has three bedrooms, a spacious lounge with board games, two balconies and a small gym. There are also eight workspaces with high-speed internet, computer monitors and ergonomic chairs.

The apartment has eight workspaces with high-speed internet, computer monitors and ergonomic chairs.

Source: PhotoAid

There’s a bakery next door for fresh bread, with restaurants, bars, wineries, and vermuterias (bars specializing in Spanish vermouth) nearby.

Workation as a ‘wow’ factor

When she was interviewing, Aleksandra Staromiejska said the Tenerife benefit made PhotoAid stand out. Now a company digital public relations specialist, she stayed in the apartment for two weeks in May, along with a colleague from her team. 

Aleksandra Staromiejska started her work days early to maximize her time at the beach, she said.

Source: Aleksandra Staromiejska

She started and finished her work early, she said, to spend as much time as possible at the beach, a 20-minute bus ride away. Over the weekend, she and her colleague went hiking in Macizo de Anaga (Anaga mountains).

“I noticed my productivity levels were higher,” said Staromiejska. “I really wanted to do my job quickly so I could finish my work day and have time to go to the beach.”

Vacations to Spain’s Canary Islands are popular with employees of PhotoAid, a company based in the much colder city of Warsaw, Poland.

Source: PhotoAid

“It was actually a very relaxing trip. Just being in nature is something else. My batteries were just charged up,” she said.

The Spanish apartment is often mentioned in employee satisfaction surveys, said Mlodzki.

“When we recruit, it’s an attractive benefit that candidates always react positively to.”

A vacay with the boss?

Enamored by the culture and scenery, Mlodzki said he spends half his time in Warsaw and half his time in Tenerife, staying in the master bedroom at PhotoAid’s apartment. 

Mlodzki acknowledged that some people might feel nervous about spending so much time with their boss. (Indeed, Staromiejska admitted she did before her workation.) But he said it’s great for rapport.

“It’s super interesting for me to get to know more people. To give and get feedback is very enriching for me,” he said.

Rafal Mlodzki, Aleksandra Staromiejska and Michel Jonca. “It’s super interesting for me to get to know more people,” said co-founder Mlodzki.

Source: PhotoAid

From leasing the apartment to paying for employees’ flights, Mlodzki said the investment has been worth it.

 “We think about the Tenerife office as the ‘company charger’ with the goal of reenergizing employees and boosting team spirits that can get depleted by remote work.”

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‘El Loco’ at the helm: What next for Argentina under outsider president Javier Milei?

A former TV personality-turned political maverick, Argentina’s president-elect Javier Milei has promised no half-measures as he bids to make his stricken country “great again”. Riding a wave of anti-establishment rage, the far-right outsider known for his foul-mouthed outbursts will have no time to bask in his stunning victory as he inherits an economy mired in crisis, with no experience and few allies to implement his radical agenda for change.

For years, Argentina’s discredited ruling class has been sitting on a powder keg, unable to lift the country out of a seemingly intractable crisis that has sowed anger and despair in South America’s second-largest economy.

On Sunday, the long-simmering anger boiled over, carrying to power a chainsaw-wielding political outsider who has promised to “blow up” the system and whose own supporters call him “El Loco” (the madman).

Milei, a former economist and TV pundit with almost no political experience, has surged to power on a wave of anger over decades of economic mismanagement. He has vowed to “put an end to the parasitic, stupid, useless political caste that is sinking” a country crippled by triple-digit inflation, where the poverty rate has reached 40%.

The self-styled “anarcho-capitalist” handily defeated his Peronist opponent, Finance Minister Sergio Massa, in a runoff election on Sunday – defying forecasts of a close race in a contest analysts had described as a tussle between two deeply flawed candidates.

“Argentinians were forced to choose between two very unappealing options,” said Benjamin Gedan, head of the Washington-based Wilson Center’s Latin America Program and director of its Argentina Project. He cautioned against reading the result as a wholehearted endorsement of Milei’s personality or agenda.


© FRANCE 24

“On one side, you had the current finance minister who has presided over an utterly failing economy,” Gedan explained. “On the other, a very radical outsider figure who offered something extraordinarily different: who wants to dolarise the economy, close the central bank, liberalise gun ownership and the sale of organs, a quirky individual who has cloned his dog and claims his pets are his senior advisers.”

Trump, Bolsonaro – and Wolverine

Milei’s astonishing rise to power is a measure of the frustration of Argentinian voters, laying bare the depth of resentment at the ruling class and the country’s state of affairs. It is also a product of television channels plugging provocative talking heads to boost their ratings, mirroring the rise of extremist pundits-turned politicians elsewhere.

Read morePushing far-right agenda, French news networks shape election debate

Argentina’s next president made his name by furiously denouncing the “political caste” on television programmes, while also rambling on about inflation and his sex life. His anti-establishment rage resonated with Argentinians yearning for change, while his dishevelled mop of hair – inspired by X-Men anti-hero Wolverine – and profanity-laden rhetoric only contributed to his notoriety.

Two years ago, Milei’s rising television stardom helped him secure a lawmaker seat in Argentina’s lower house of Congress. He was seen as a very long shot for the presidency only months ago – until he scored the most votes in August primary elections, upending the political landscape.

Before entering the public spotlight, Milei was chief economist at Corporación America, one of Argentina’s largest business conglomerates that runs most of the country’s airports. His flagship economic policies include “dollarising” the economy by 2025 to halt the “cancer of inflation”, meaning he would drop the peso – Argentina’s battered currency – and thereby relinquish control over monetary policy.

Milei has cast himself as a fierce adversary of the state, which he accuses of curtailing people’s freedoms and emptying their pockets. At campaign rallies he often appeared on stage revving a chainsaw to symbolically cut the state down to size. He has vowed to slash public spending by 15%, privatise state companies and reduce subsidies on fuel, transport and electricity.

The president-elect, who is due to take office on December 10, started to outline some of his planned policies in a radio interview on Monday morning, saying would quickly move forward with plans to privatise state-run media outlets that gave him negative coverage during the campaign, describing them as “a covert ministry of propaganda”.

“Everything that can be in the hands of the private sector will be in the hands of the private sector,” he told Bueno Aires station Radio Mitre, adding that the state-controlled energy firm YPF would be revamped so it can be “sold in a very, very, very beneficial way for Argentines”.

Javier Milei brandishes a chainsaw at a campaign event in La Plata on September 12, 2023.
Javier Milei brandishes a chainsaw at a campaign event in La Plata on September 12, 2023. © Natacha Pisarenko, AP

An admirer of former US president Donald Trump, Milei has likewise embraced his maverick status, commanding unrivalled attention throughout the campaign with his provocative statements. He has not shied away from lashing at revered compatriots, including Pope Francis, whom he branded an “imbecile” for defending social justice.

It is no surprise that he has adapted Trump’s best known slogan, promising to “Make Argentina Great Again”.

Like Trump and his Brazilian ally Jair Bolsonaro, Milei has appealed to the conservative vote by promising a crusade against progressive politics. He has described sex education as a Marxist plot to destroy the traditional family unit and has proposed a plebiscite to repeal abortion, which Argentina legalised in 2020. He also rejects the notion humans have a role in causing climate change.

All of this is “very worrying not only for women, but for minorities in general, because Milei is waging the same cultural wars that the far right is waging elsewhere”, said Juan-Pablo Ferrero, a senior lecturer in Latin American politics at the University of Bath.

“He is also rolling back on the human rights agenda that has gained Argentina international recognition” since the transition to democracy, Ferrero added. “Minorities will have to resist his moves in parliament and on the streets.”

Taking another page from the Trump and Bolsonaro playbooks, Milei also made unfounded claims of election fraud before Sunday’s runoff, raising concern about his respect for democratic norms. His victory also means the rise of Victoria Villaruel, his controversial running mate who has minimised the number of victims of Argentina’s brutal 1976-1983 dictatorship.

A ‘stress test’ for Argentinian democracy

In the run-up to the vote, Massa and his allies had warned Argentinians that Milei’s plans would sharply curtail hard-won rights and the public services and welfare programs many rely on. Their margin of defeat suggests the strategy – which Milei had dismissed as a “campaign of fear” – may ultimately have backfired.

“Despite Milei, despite all his campaign mistakes, despite all his peculiarities that raise doubts, concerns (…) despite all of that, the demand for change prevailed,” Lucas Romero, the head of Synopsis, a local political consulting firm, told the Associated Press.

Having cast himself as the “only solution” to Argentina’s woes, Milei will have little time to bask in his victory. Even before his election, analysts had already shed doubt on the feasibility of many of his campaign pledges, starting with his much-touted “dolarizacion”.

Ditching the peso in favour of the dollar requires a hefty stock of greenbacks, and the International Monetary Fund (IMF) has warned that Argentina’s dollar reserves are dangerously low. Analysts have flagged the risk of a run on the peso as people panic believing dollarisation is imminent.

“Milei is someone who promises big new ideas but maybe too big and maybe not feasible,” said Gedan, noting that the president-elect has no parliamentary majority to back him and even less of a foothold in local government. “It’s far from clear he can implement his agenda, given his fledgling party, his few allies in Congress, the small and inexperienced group that surrounds him, and the fact that he controls none of the country’s provinces,” he added.


Milei’s Liberty Advances party counts just seven seats out of 72 in the Senate and 38 out of 257 in the lower Chamber of Deputies. He will be hoping to win support from the mainstream right of former president Maurico Macri, which threw its electoral weight behind him ahead of Sunday’s runoff in a bid to ensure defeat for the incumbent Peronist camp.

“It remains to be seen whether this electoral support will translate into a political agreement,” said FRANCE 24’s Argentina expert David Gormezano. “Will some of Macri’s circle join the government? Will conservative lawmakers offer their support? It’s too early to know.”

The lure of power, and a common detestation of Peronism, could be enough of an incentive.

“One can imagine the conservative camp going a long way to back Milei, including in some of his excesses, in order to get their revenge over the Peronist camp,” Gormezano added, though noting that Milei would still be short of a majority in Congress even with conservative support.

According to Ferrero, Milei’s election signals the “biggest stress test” for Argentina’s democracy since the end of military rule. Under the country’s constitution, “presidents have the power to rule by decree in exceptional circumstances – but that tests the system,” he explained. “We will see to what extent he makes use of those powers.”

There will be plenty of scrutiny of Milei’s first steps on the international stage, too. The Argentinian provocateur has already raised alarm bells in a number of Latin American countries and said he would seek to reduce trade with China, Argentina’s second-biggest trading partner after Brazil.

While Trump and Bolsonaro were quick to hail the election result on Sunday, neither is currently in power. The centre-left leaders of Argentina’s two largest neighbours, Brazil and Chile, have been noticeably more guarded in their response.

Brazil’s President Luis Inacio Lula da Silva on Sunday extended his best wishes to the newly elected president, but did not make direct mention of Milei. He had previously expressed his hope that Argentinian voters would choose a president who supports democracy and the Mercosur trading bloc – which Milei has suggested Argentina should leave.

Milei has criticised Brazil’s president multiple times and labelled him an “angry communist” with a “totalitarian” bent. On Monday, a close Lula aide said Argentina’s president-elect must apologise to the Brazilian leader before talks between the two can be organised.

“He freely offended President Lula,” Social Communications Minister Paulo Pimenta told reporters. “It’s up to Milei, as president-elect, to call and apologise.”

Whether at home or on the international stage, Argentina will be sailing through uncharted – and choppy – waters with “El Loco” at the helm.

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