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FILE PHOTO: U.S. President Donald Trump displays his signature after signing the $1.5 trillion tax overhaul plan along with a short-term government spending bill in the Oval Office of the White House in Washington, U.S., December 22, 2017. REUTERS/Jonathan Ernst/File Photo
April 23, 2019
WASHINGTON (Reuters) – A 2017 tax overhaul championed by President Donald Trump will cut household taxes more in Republican-leaning states than in states that lean Democratic, according to research published by the U.S. central bank on Tuesday.
The Tax Cut and Jobs Act, signed by Trump in December 2017, reduced tax rates for most Americans, boosting economic growth in 2018 while widening the federal budget deficit.
Trump has often cited the legislation one of his key achievements, although critics say the law mostly cuts taxes for high-income Americans and corporations. Many Americans are also getting smaller tax refunds or owed money than in the past.
The tax law’s long-term effects will include pushing after-tax incomes 1.6 percent higher in states that tend to vote for Trump’s Republican party, compared to a 1.3 percent gain in Democratic-leaning states, according to research published by the Federal Reserve Bank of Atlanta, one of 12 regional branches of the U.S. central bank.
Households in Democratic-leaning states get less help because the law makes it harder to deduct state and local tax bills from a household’s federal obligations. State and local taxes tend to be higher in states that lean Democratic.
The researchers, which included Atlanta Fed economist David Altig and University of California, Berkeley economist Alan Auerbach, considered states to be leaning Republican or Democratic if one party’s share of the vote averaged at least 5 percentage points higher than that of the other party in the last five presidential elections.
For their estimates, the researchers assumed the tax overhaul would be made permanent. Congress, which was Republican-controlled when the bill was passed, made many of the tax cuts expire after 10 years so that the legislation could pass without Democratic support.
(Reporting by Jason Lange; Editing by Bill Berkrot)
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FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid/File Photo
April 23, 2019
By Pete Schroeder
WASHINGTON (Reuters) – The U.S. Federal Reserve on Tuesday proposed a framework for determining when a company has taken control of a bank and must face more rigorous oversight and restrictions, a move that could remove hurdles for banks seeking to attract investors and partners.
The new proposal would for the first time establish clear standards for when the central bank considers a company as taking control of a financial institution, which could be a boon for banks and investors who have had to tread cautiously as such determinations previously were made on a case-by-case basis.
A company that gains control of a bank is considered a bank holding company and, as a result, is subject to Fed supervision and a host of restrictions on other business activities.
The Fed’s efforts to clarify its thinking on bank control could help banks looking for new investors or partners, including private equity or fintech firms, without subjecting them to banking regulations and other restrictions, according to analysts.
Randal Quarles, the Fed’s vice chair for supervision, said in a prepared statement the regulator’s prior practice of determining bank control had become “one of the more ad hoc and complicated areas of the board’s regulatory administration.”
“The proposal would improve the transparency of the board’s control framework by placing substantially all of the board’s control positions into a comprehensive public regulation,” Quarles said.
The proposal is largely similar with the Fed’s existing practices on bank control standards, but is now being made formal through a proposed rule, according to Fed officials.
Specifically, the Fed is attempting to write a blueprint for when a company exerts a “controlling influence” over a bank, which can include a combination of factors such as size of investment, number of seats held on the board, and additional business relationships.
Broadly, the proposal requires companies with greater percentages of voting shares in a bank to have less input in other factors.
For example, a company with 15 percent to 24.9 percent of the voting shares in a bank must have business relationships with the bank that amount to less than 2 percent of its revenue or expenses without being considered a controlling interest.
By comparison, a company with just 5 percent to 9.9 percent of voting shares could have a business relationship worth nearly 10 percent of its revenue and expenses.
The Fed board is set to vote on the proposal at an open meeting later on Tuesday.
(Reporting by Pete Schroeder; Editing by Paul Simao)
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FILE PHOTO: A demonstrator holds a poster with a picture of Saudi journalist Jamal Khashoggi outside the Saudi Arabia consulate in Istanbul, Turkey October 25, 2018. REUTERS/Osman Orsal/File Photo
April 23, 2019
WASHINGTON (Reuters) – White House senior adviser Jared Kushner said on Tuesday he had urged Saudi Arabia’s crown prince, Mohammed bin Salman, to be transparent about the circumstances surrounding the death of Saudi journalist Jamal Khashoggi.
Taking questions at a Time magazine forum, Kushner was not specific about when he had spoken to the crown prince about the October killing of Khashoggi, a U.S.-based journalist, inside the Saudi consulate in the Turkish city of Istanbul.
But Kushner spoke to Salman by phone in the days after the death and met with him in Riyadh during a February tour of Gulf capitals.
“The advice I gave was, be as transparent as possible,” Kushner said. “We have to make sure there is accountability for what happened.”
Khashoggi’s death at the hands of Saudi agents in Istanbul sparked an outcry and tarnished the crown prince’s image.
The U.S. Central Intelligence Agency believes https://reut.rs/2GCT4FJ the crown prince ordered the killing, which Saudi officials deny.
President Donald Trump has been criticized by U.S. lawmakers for not taking a stronger stand against Saudi Arabia over Khashoggi’s killing.
“Look, I’m not going to dispute American intelligence services’ recommendations,” Kushner said when asked about the intelligence community’s conclusion.
Trump has said the U.S. partnership with Saudi Arabia is important for the U.S. economy and for maintaining stability in the region.
(Reporting By Steve Holland; Editing by Bernadette Baum)
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Children walk along a breakwater at Coral beach in La Guaira near Caracas, Venezuela, March 23, 2019. “A person who has a minimum wage can’t come [to the beach]. The anguish that has all Venezuelans is food. First the flour and the rice.” said Carla Cordova. REUTERS/Ivan Alvarado
April 23, 2019
By Shaylim Valderrama and Ivan Alvarado
CARACAS (Reuters) – A night at a bar is interrupted by a power outage, going to a baseball game is prohibitively expensive, and a trip to a nearby beach requires months of savings. But many Venezuelans have not given up on finding ways to smile.
Despite an economic crisis that has led to shortages of food and medicine and has prompted more than three million to emigrate, Venezuelans are seeking ways to have fun and spend time with family in the hope of easing their discomfort.
Still, the increased frequency of blackouts and a political showdown between the socialist government and the opposition has cast a cloud of uncertainty, leaving many Venezuelans bereft of simple pleasures.
Venezuela fell to the 108th place in the 2019 World Happiness Report prepared by the United Nations, down from 102nd place in 2018. In the Western hemisphere, only Haiti was below the oil-rich nation, ranking 147th out of 156 countries studied by the U.N.
The happiness report – which in its first edition in 2012 placed Venezuela in the 19th position – is based on indicators such as gross domestic product per capita, generosity, life expectancy, social freedom and absence of corruption.
Venezuela was plunged into darkness with two massive blackouts in March, generating water shortages and prompting the government to suspend work and school. Earlier this month, the government launched a power rationing plan, and electricity remains intermittent in many parts of the country.
In search of distraction, Venezuelans from the country’s capital of Caracas have long taken to the nearby seaside state of Vargas to spend weekends with family and friends on the shores of the Caribbean.
“You put your mind in another place,” said Leonel Martinez, a 26-year-old soldier while relaxing on the sand with his girlfriend while her nephews played nearby. “It’s a way to think about something besides what is happening in the country.”
But in a country where the monthly minimum wage amounts to just $6 per month, the $15-$20 a day trip to the beach can require months of savings and advance planning.
Martinez, who said he used to take the 40-kilometer (25 mile) trip to the beach frequently, said it was the first time he had gone in a year.
“It’s not something you can do every day, because of the situation in the country,” said Martinez.
‘IN THIS WORLD THERE IS NO CRISIS’
For Venezuelans, queuing for food is a daily ordeal. They also are used to trying multiple pharmacies and hospitals in search of the medicines they need, and more recently have grown accustomed to collecting water from streams.
But that has not stopped Joaquin Nino, a cash-strapped 35-year-old father of two, from taking his kids to an amusement park in southern Caracas.
“We have to work miracles just to have some fun,” Nino said.
At a parade in eastern Caracas celebrating Holy Week, revelers dressed in straw hats topped with flowers sang, banged drums and blew trumpets to tropical beats. With the sun beating down, one marcher who gave his name as Carlos remembers how in past years onlookers would douse those marching with water to cool them down.
“Now, because of the problems with the water, that probably will not happen,” he said.
In central Caracas, a group of men of all ages meet every Sunday to play softball while a handful of their relatives watch. The wire fence that once surrounded the field was long ago stolen. The lights, which once allowed the group to play at night, were also pilfered.
“I always come because my husband plays,” said Delia Jimenez, a 62-year-old industrial designer who jumps up from the stands whenever her husband comes up to bat. “We have fun and we shake off our stress.”
A few blocks away, groups of young people come together to break-dance, which they say is a way to disconnect. But some admitted that they had not been eating enough recently to be able to spend as much time dancing as they used to.
“When we’re out here dancing, we don’t think about the state of the country,” said Yeafersonth Manrique, a 24-year-old drenched in sweat after a long practice. “In this world there is no crisis.”
(See related photo essay here: https://reut.rs/2vcGsOS)
(Editing by Vivian Sequera, Pablo Garibian and Diane Craft)
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FILE PHOTO: People walk through one of the main pedestrian shopping areas, Preciados street, in central Madrid, Spain, June 14, 2018. REUTERS/Paul Hanna
April 23, 2019
(Reuters) – Euro zone consumer confidence fell unexpectedly by 0.7 points in April from the March number, figures released on Tuesday showed.
The European Commission said a flash estimate showed euro zone consumer morale decreased to -7.9 this month from -7.2 in March.
Economists polled by Reuters had expected a rise to -7.0.
In the European Union (EU) as a whole, consumer sentiment fell by 0.6 points to -7.7.
Both indicators remain above their respective long-term averages of −11.3 for the euro zone and −10.4 for the EU as a whole, the Commission said.
(Reporting by Piotr Lipinski in Gdynia)
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FILE PHOTO: A woman walks past a “debt clock” screen, installed by Bruno Leoni Institute’s analysts, displaying Italy’s public debt at the Termini central station in Rome, Italy February 15, 2018. REUTERS/Alessandro Bianchi/File Photo
April 23, 2019
By Francesco Guarascio
BRUSSELS (Reuters) – Public debt in Greece and Italy, the two most indebted countries in the euro zone, grew last year while the bloc as a whole saw its liabilities decrease, the European Union statistics office said on Tuesday.
Rome’s growing debt, which is also higher than Brussels had predicted, is seen as further stretching EU fiscal rules that require countries with high debts to gradually bring them down.
Italy, whose eurosceptic government adopted free-spending policies last year that have so far had little impact on growth, had debt equivalent to 132.2 percent of national output in 2018, or 2.3 trillion euros ($2.5 trillion), up from 131.4 percent in the previous year, Eurostat said.
Up to 0.2 percent of the Italian debt was due to derivative contracts, which are usually used to hedge against risks but triggered losses for 4.7 billion euros in 2018, Eurostat data show. Other euro zone countries have reduced their debt thanks to derivatives.
Although Rome has decreased its losses on derivatives from the 5.4 billion euros posted in 2017, the negative impact over the country’s debt has exceeded 25 billion since 2015, data show.
The European Commission, which monitors euro zone states’ budgets, refrained in December from starting disciplinary steps against Italy over its growing debt.
It predicted then that Italian debt would be 131.1 percent of gross domestic product in 2018 — lower than Tuesday’s data showed.
The Commission has said it will reassess Rome’s compliance with EU fiscal rules, including the requirement to cut debt, in June, taking into account the final debt data from Eurostat.
A spokeswoman for the EU executive declined to comment on the new figures released by Eurostat.
She said Brussels’ new evaluation of Italy’s position will also be based on new forecasts due in May of debt developments, and on Italy’s report on its fiscal plans for the next three years which Rome had just submitted.
Italy’s 10-year government bond yield jumped to its highest in seven weeks on Tuesday, pushed up mostly by unease over government infighting and an upcoming ratings review.
BUCKING THE TREND
Italy bucked the euro zone trend, as overall debt in the 19-country currency bloc fell to 85.1 percent of GDP last year from 87.1 percent in 2017, Eurostat said.
The bloc’s aggregated budget deficit also dropped to 0.5 percent of GDP from 1.0 percent in 2017.
The fall coincided with Germany’s reduction of its debt to 60.9 percent of GDP, from 64.5 percent in 2017. The bloc’s largest economy also widened its public surplus to 1.7 percent of output from 1.0 percent in 2017.
In Greece, debt climbed to 181.1 percent of GDP in 2018, the largest ratio in the euro zone.
The increase from 176.2 percent in 2017 was mostly due to the last installment of euro zone creditors’ loans as part of the country’s third bailout program which ended last summer.
The recent exit from the bailout program exempts Greece from the normal application of EU rules that require countries with public debt above the 60 percent of GDP threshold allowed by EU law to cut the excess by 5 percent a year.
Cyprus, another of the bloc’s most indebted countries, saw its debt rise to 102.5 percent of GDP from 95.8 percent.
Portugal, which was also bailed out during the euro zone’s debt crisis, saw its debt fall to 121.5 percent of output from 124.8 percent, while Belgium’s debt declined to 102.0 percent of GDP last year from 103.4 percent in 2017.
French public debt was stable at 98.4 percent of output, while the country’s budget deficit dropped to 2.5 percent of GDP from 2.8 percent in 2017.
(Reporting by Francesco Guarascio; additional reporting by Lefteris Papadimas in Athens and Giuseppe Fonte in Rome; Editing by Angus MacSwan)
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FILE PHOTO: The skyline of banking district is photographed in Frankfurt, Germany, April 9, 2019. REUTERS/Kai Pfaffenbach/File Photo
April 23, 2019
By Huw Jones, Sinead Cruise and Francesco Canepa
LONDON/FRANKFURT (Reuters) – European Union regulators are refusing to cut British-based banks any slack over bulking up in the bloc in preparation for Brexit, despite an extension to the process which some have taken as an opportunity to drag their feet.
Cost-conscious banks are reluctant to spend millions more and cause further disruption to already unsettled staff given uncertainty over how and when Britain will leave the EU.
“Businesses are trying to be savvy, to meet the minimum legal requirement and figure the rest out after Brexit,” Hakan Enver, managing director for financial services at recruiter Morgan McKinley told Reuters.
Banks are trying to minimize staff moves despite pressure from the European Central Bank (ECB), which set a proviso to granting licenses that firms would beef up their EU units with more employees and assets over the next one to two years.
This requirement has not changed, a source close to the matter said, even though the EU has given Britain until Oct. 31 to leave, an extension from the original “Brexit Day” of March 29.
“Banks are still expected to stick to the timeline agreed with the ECB,” the source said.
Dozens of banks have already set up new bases in the EU to avoid disrupting services to clients. Regulators issued licenses for them, even though they are thinly staffed, so that they could be operational when Britain was meant to quit the EU.
HSBC, which declined to comment, shifted some staff from London to its Paris subsidiary in case of a no-deal Brexit on April 12, only to recall them when a new delay was agreed.
And a source at a major U.S. bank said it had dozens of staff lined up to move if there was a no-deal Brexit, but stood them down and is now awaiting clarity before any further moves.
“We are inclined to say that while we remain in this holding pattern, we don’t have to move anyone or anything,” the source said, adding that Brexit could yet be scrapped completely.
The Bank of England expects about 4,000 banking and insurance jobs will have moved from London to new EU hubs by Brexit Day, but recruiters and banking sources say the number that have moved so far is much lower than that.
Some banks were behind with plans to be operationally ready and are now using the delay to complete moves of customer accounts to new hubs, a senior official at a global bank said.
Meanwhile, Britain’s Financial Conduct Authority’s has warned financial firms sending staff to new EU hubs to ensure they still have “appropriate senior oversight” of their operations left behind in Britain.
BACK-TO-BACK
Banks have so far moved around a trillion euros in stocks, bonds, derivatives contracts and other assets from London to their new EU hubs. Accounts of EU clients must also be moved to conduct business from these hubs, a process known as repapering.
But there is still a long tail of small customers for whom repapering is a burdensome task of changing IT and controls systems, limiting how much business new hubs can take on despite regulatory pressure to move in to higher gear.
“Nobody is yet really doing any substantive business, but there will be a robust dialogue between banks and regulators about when to transfer substantive amounts of business and client preferences will play a big role,” said Vishal Vedi, lead financial services Brexit partner at Deloitte.
EU regulators gave temporary concessions to banks to obtain a license, such as continuing to book some trades in London, but their tolerance is waning.
“We expect some back-to-back (trading) to continue, though new hubs in Frankfurt will have to show the ECB that they can stand on their own two feet if need be,” a senior banking regulator told Reuters.
Having to build up capital in a new unit is expensive for banks at a time of a slowdown in European investment banking.
European M&A was down 67 percent in the first quarter of the year, while first quarter results due out over the next few weeks are expected to show trading volumes at European investment banks were down 15 to 20 percent.
“The longer the extension period, the longer it will be problematic for firms,” Andrew Gray, head of UK financial services at PwC, said.
(Editing by Alexander Smith)
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People, including passengers of a flight from the Turkmen capital Ashgabat, gather in the baggage claim area upon their arrival at Almaty International Airport, Kazakhstan April 5, 2019. REUTERS/Mariya Gordeyeva
April 23, 2019
By Mariya Gordeyeva
ALMATY (Reuters) – Beset by economic hardship, enterprising Turkmens have found a way to supplement their incomes – smuggling towels and bed linen into neighboring Kazakhstan.
Moving hundreds of items every trip in trademark Chinese plaid bags which at times have clogged airport luggage belts, informal traders – mostly women in their late forties and fifties – hand them over to relatives or local partners to be resold for up to five times the purchase price.
Dressed in traditional Central Asian garb such as headscarves and long skirts, these women arrive on almost every flight from Ashgabat to Almaty, Kazakhstan’s biggest city.
Textiles are among the few items manufactured domestically from local feedstock and prices for items produced by state-owned companies have remained stable for years even as the Turkmen manat lost four-fifths of its value on the black market due to Turkmenistan’s falling gas export revenue.
A deal to resume gas exports to Russia this month brought hope, but turned out to be small and short-term.
Turkmenistan, where president Kurbanguly Berdimukhamedov rules with an elaborate personality cult, is one of the world’s most closed countries.
There are no opposition parties or media critical of the government and Berdymukhamedov, often referred to as Arkadag (Protector), wields sweeping powers.
Turkmenistan rarely allows visits by foreign journalists and the textile trade offers a glimpse into the depth of its economic problems.
INDUSTRIAL SCALE
The trade attracted the attention of Almaty airport officials this year when luggage from Turkmenistan started clogging its belts. The planes, it turned out, were stuffed with textiles.
“My daughter trades at a bazaar (in Kazakhstan) and I bring her goods little by little… which I buy from our (Turkmen) stores,” said a Turkmen woman picking up bags from the luggage belt in Almaty, Kazakhstan’s commercial hub.
Like all other people involved in this informal textiles trading, the woman spoke on the condition of anonymity because traders like her dodge customs duties by claiming their goods are personal belongings not meant for resale.
These de facto smuggling operations reached industrial scale in early 2019, prompting the Almaty airport to lodge an official complaint with the Turkmen flag carrier.
“There were parcels weighing over 50-60 kilograms (110-130 pounds) each,” said Marina Zabara, a complaints inspector at the airport.
Oversized parcels have since disappeared but the flow of textiles continues. A Reuters reporter saw Turkmen travelers pick up parcels of textiles upon arrival in Almaty this month.
“A woman from Turkmenistan moved to our village last year and offered us to sell their textiles,” said a Kazakh trader working at a market on the outskirts of Almaty. “Her mother brings the goods as luggage, as many items as she can.”
At Almaty’s biggest market, traders display Turkmen bedding – often with traditional patterns based on deer and sheep horns or abstract human figures – from fully-packed cargo containers.
“The demand is good, with the most expensive bedding set priced at 10,000 tenge ($26),” said one trader.
Some hotels have also become wholesale buyers, Turkmens say.
The official exchange rate of the manat is 3.5 per dollar, but on the black market a dollar fetches 18.6 manat.
A Kazakh citizen who used to live in Turkmenistan told Reuters that by buying out luggage allowances from other travelers and bribing airline officials, a “shuttle trader” can move up to 200 kilograms (441 pounds) in one trip.
(Additional reporting by Olzhas Auyezov in Almaty and Marat Gurt in Ashgabat,; Writing by Olzhas Auyezov, editing by Ed Osmond)
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FILE PHOTO: Lertviroj Kowattana, permanent secretary of the Thai Ministry of Agriculture and Cooperatives, dressed in a traditional costume, greets Thailand’s King Maha Vajiralongkorn during the annual Royal Ploughing Ceremony in central Bangkok, Thailand, May 14, 2018. REUTERS/Athit Perawongmetha
April 23, 2019
By Patpicha Tanakasempipat and Panarat Thepgumpanat
BANGKOK (Reuters) – Thailand’s royal astrologer cast King Maha Vajiralongkorn’s horoscope on Tuesday in an important ritual to prepare for his elaborate coronation ceremonies next week.
Saffron-clad Buddhist monks chanted as the horoscope for the king’s reign was cast on a golden plaque.
The three-hour ceremony included the inscription of the king’s name and new royal title on another golden plaque, and the carving of the king’s official seal.
Thai culture is steeped in astrology and other forms of divination, and many Thais go to fortune-tellers for everything from guidance on career and love to setting dates for important life events like weddings and business ventures.
Astrology in the royal court, involving rigid rituals and precise calculations, is a world away from commoners’ divinations.
Court astrologers traditionally make predictions about the future at every important transition in the nation’s history.
Court astrologer Chatchai Pinngern cast the horoscope of King Maha Vajiralongkorn in the Temple of the Emerald Buddha, which is attached to the Grand Palace in Bangkok.
Neither the horoscope, which notes planetary alignments based on precise details around a person’s birth, nor its interpretation were made public.
King Maha Vajiralongkorn, 66, was not present for the ceremony but sent a royal representative.
The ceremony also saw the inscription of the king’s new name and title on another golden plate, and an engraving of his royal seal which is an auspicious symbol that is said to show the sovereignty and the majesty of the king.
The royal horoscope and the other two items will play essential roles in Vajiralongkorn’s main coronation events on May 4, as they will be presented to the king by Thailand’s chief of Brahmins, along with other royal regalia.
The coronation ceremonies from May 4 to 6 will be the first the country has seen since Vajiralongkorn’s father, King Bhumibol Adulyadej, was crowned on May 5, 1950.
King Bhumibol reigned for seven decades before he died in October 2016 at age 88.
(Reporting by Patpicha Tanakasempipat and Panarat Thepgumpanat; editing by Kay Johnson and Darren Schuettler)
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