The Banking and Strategy Initiative

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Global Mid-Day report: The last Republican Primary, the new Finance Minister in India and Eurobonds


The new European Banking Authority

English: Herman Van Rompuy, President of the E...

English: Herman Van Rompuy, President of the European Council, at the press conference about the European Union during the 37th G8 summit in Deauville, France. (Photo credit: Wikipedia)

Meanwhile EU President Van Rompuy comprehensively watered down his recommendations but still put together the report suggesting a tighter fiscal union as cover for the new banking union and recommended adopting the same within 2012 though Angela Merkel proposed a harsher look at such ideas. It seems George Soros recommended calling such an organisation European Fiscal Authority in yesterday’s released plans. However, VAn Rompuy’s ideas may be closer to German’s hearts and would still require extensive internal soul searching within the EU citizens as constitutional changes will be involved for the EU-17 in ceding Budgetary control to such a European organisation which could also be the ECB.  The current EBA only manages regulatory supervision of EU banks including conducting stress tests and each nation individually manages their Central Bank with the ECB setting policy. Van Rompuy’s plans also asks for taking all debt above 60% of individual national GDPs to the new “Central Bank” which will have the authority to reject all Budget deficit plans and will advise each state on Specific Taxation and Spending plans. Again the exit route for required borrowing is thru allowing the new European Authority / ECB to issue short term bills

Thursday’s summit is likely to see merkel making clear the kind of Fiscal Union required for such a banking union to be considered.

US Economy

The US markets were fairly better off on Tuesday after having better Case Shiller data even as Utah goes through the last Republican Primary for the 2012 Presidential Elections. Romney is already seen as almost an equal of President Obama in national surveys even before he clinches the party nomination.

Romney has more than 1500 delegates out of the 2500 odd delegates including super delegates with 250 odd delegates to be allotted after Utah is completed at the Delegate conference where the candidature is formalised. Romney looks at a challenge that is coming easier to him every coming day as he retreated to a Weekend resort at Utah with Donors to his campaign ho have also been invited to his New Hampshire retreat later.

Utah is also the hot bed of Tea Party  politics accounting for one of their three big upsets against conservative Republicans in 2010. Utah’s jobless rate is 5.8% much below the National unemployment figures of 8.2% while Big Financials like Goldman Sachs who funded the Republicans in 2012 to a 3/4ths of a million each are setting up shop in Salt Lake City

News Corp Split?

News Corp is looking to split the $24 B Tv and Movie business including the FOX TV Nes and Entertainment networks from his $8.8 B publishing empire that includes the Wall Street Journal in the United States.  The Equity would likely split with at least to thirds going to the entertainment empire which still remains spread all over with The Times, The Australian , tabloid Sun and publisher Harper Collins in the piublishing side just accounting for 10% of the global profits. The split has meant a bout of good news for the embattled promoter Rupert Murdoch with the British Government sanctions against his son in the recent phone hacking scandal that has brought confessions of anton “spying” incidents by many of his senior staff in the publishing business

The British Sky Broadcasting group bid was also lost by News Corp in the melee in London. BKyB licence may yet be revoked with News Corp still holding nearly 40% in the arm

The media and entertainment giant still ants to believe he is the Top Dog in the Nespaper business paying $5B for the Journal in 2007 and then taking a $3 B writedown on his newspaper assets in 2009

Markets obviously welcomed the move and would likely mark up his TV and movie assets much more after the split as FOX Broadcast Network and 20TH Century Fox turned out to be jewels in the crown

A new Finance Minister for India

India will look to quickly cutback its losses on the Rupee and retake lost ground in reforms as Prime minister and Economist Manmohan Singh takes over as Finance Minister from Presidential Candidate Pranab Mukherjee. An arrangement that suitably appreciates Pranab Da’s senior handling of the sensitive portfolio, it also leave the finance Ministry free to pursue the unfinished growth agenda  that was largely seen as touchy politically from the Direct Tax Code and the GST regime to FDI in Aviation and retail. One of the first actions of the new FM who works closely with Economists and PMEAC / Planning  Commission chiefs C Rangarajan and Montek Singh Ahluwalia will start the ball rolling with a new thrust to kickstart larger infrastructure projects caught ith the dust mites. More political interference from coalition partners is unlikely at this point as India goes thrpugh the bottom of its Economic Cycle and the Rupee looks for a leg up after a 28% run on the rupee in the year of which 10% happened in the last 4-5 wweeks looking for measures to stem the Fiscal overruns and a return to growth

China is also treading on policy and banking reform cautiously as groth hits the 7%  watermark

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