Issue 126:2017 10 26: News Highlights

26 October 2017

A Lens On The Week


BREXIT: Something somewhere seems to be moving but what it is and in which direction it is really very hard to say.  The rumour mill whirls in Brussels.  Did Mrs May plead with Juncker for help over the dinner table or didn’t she?  If she did, who leaked it?  If she did not, why did they make it up? None of us really knows and a febrile press with the difficult job of reporting on things “seen through a glass darkly” rushes off with the latest rumour like a terrier with a bone.

Still, there is the occasional encouraging sign.  In an open letter to EU embassies and to those EU citizens who have contacted the Home Office, Mrs May has said that EU citizens who are currently living lawfully in the UK will be allowed to stay here even if there is no agreement with the EU.  That must make sense and gives away nothing as it is obviously where we will end up.  The discussions on the budget, too, seem to be becoming more specific with the dispute focusing on the UK’s contribution to pensions payable to retired EU officials.  Is it the €3.5 billion we suggest, or the €11 billion demanded by Brussels?  And behind all this there seems to be a drift towards a discussion of future trading relationships.  Despite the EU position that there has been insufficient progress on financial matters to justify trade talks, the 27 are at least beginning to talk about it amongst themselves.  It would not be surprising if the next meeting of the European Council saw progress here.

All this, little as it is, must strengthen the hand of Mrs May.  Her strategy is to balance the pressures to which she is subject against each other.  She can tell the EU that certain things are off the table because she could not sell them to the Tory right.  As trade talks develop she will be able to tell the nuttier Brexiteers that certain things are part of the price for a deal for which business is crying out.  It is a difficult act but one thing keeps the balls in the air: the public are unlikely to forgive any politician who pulls this particular house down to promote his or her career.

RULES OF REDEMPTION: Foreign Office Minister, Rory Stewart needs to be more careful with his language.  His comment that “unfortunately the only way of dealing with [returning Jihadis] will be, in almost every case, to kill them” came over oddly in a country which has renounced capital punishment.  It now seems that he didn’t quite mean it like that, so it remains to be decided how exactly the 800 or so people who fall into this category should be treated.  The obvious answer is that they have to be looked at one by one.  Some will be harmless enough having, perhaps, renounced Isis when they saw how it operated.  Others are very dangerous indeed.  Trying to impose rules will simply obstruct the vision of those who need to make the necessary judgements.

The fatuity of rules was well illustrated on Monday’s Newsnight.  Labour MP Jared O’Mara has resigned from the Women and Equalities Select Committee because of misogynistic and homophobic posts in 2002 and 2004.  Mr O’Mara is now 36 so he was in his early 20s when he made the comments, which he says no longer reflect his views.  The depth of his contrition is hard for those of us who have not met him to measure, although subsequent revelations would seem to impel a good dose of scepticism, but the right approach cannot possibly be that adopted by someone called Marie Le Conte on Newsnight who tried to set guidelines under which unfortunate comments made in early teens were okay (unless very offensive indeed), comments in or after one’s late twenties had to be taken seriously but those made in the early 20s were a grey area.  What a load of artificial drivel.


SPAIN: Tension mounts as rival gunslingers prime minister Mariano Rajoy and Catalan leader Carles Puigdemont continue to face each other across the dusty, sun-drenched plaza mayor of Spanish politics.  They’re both motionless, each waiting for the other to make the first move.  Senyor Puigdemont’s right hand is poised above the weapon holstered on his hip – a declaration of Catalan independence.  At the first sign of movement Señor Rajoy will draw his own weapon – the constitution’s article 155, imposing direct rule.

The stand-off can’t last for much longer, and indeed it looks as if they’re about to start blazing at each other; today (Thursday 26 October) the Catalan parliament is due to respond to the central government’s declaration last Saturday that it will impose direct rule as Senyor Puigdemont ignored Madrid’s demand that he clarify his position.  The next day – Friday 27 October – the central government is due to vote on invoking article 155.

The partisans of Catalan independence have vowed to undertake massive civil disobedience if Señor Rajoy’s weapon is fired.  Meanwhile the townsfolk are diving for cover – 1302 companies have moved their headquarters out of Catalonia since the referendum.

ELECTIONS: In the Czech Republic, Andrej Babis is due to become the new prime minister as his Action of Dissatisfied People party came first in last week’s elections, with 29.7% of the vote (the ODS party came second with 11.3%).  Andrej Babis is the country’s second richest man and has been described as “the Czech Donald Trump”.  He has been finance minister but was sacked over tax irregularities and is facing charges of fraud about the alleged misuse of EU funds.  His government is likely to join other central and eastern European governments in opposition to the EU’s migrant and refugee policies.

In Japan, prime minister Shinzo Abe won last week’s elections.  His party (LDP) won 281 of the lower house’s 465 seats which, with the 29 seats won by his coalition partner (the Komeito party), gives him a two thirds super majority.   But there was a very low turnout (54%) and the opposition was split; its leader had told his members to stand with a new party, the Party Of Hope, but many of them formed their own new party instead.

In Kenya, confusion continues over the re-run of recent elections due to take place this week.  Opposition leader Raila Odinga, whose accusations of irregularities and faults in the election commission triggered the re-run, has said that he will not take part in it as the faults and irregularities still have not been fixed and has urged his followers to boycott it.  His sister Ruth Odinga was arrested for allegedly trying to disrupt election preparations.  The election commission is in disarray: one of its seven commissioners has fled to New York, following alleged death threats; its chairman has said that it’s hamstrung by political interference from all sides; and its chief executive and other officials have taken leave of absence.

ISIS: In the Philippines, President Duterte declared that Marawi has been liberated from Isis-linked Islamic militants (an alliance of the abu Sayyaf and Maute groups) who seized the city in an uprising five months ago.  In Syria, the western-backed SDF, who last week declared victory over Isis in Raqqa, has followed on by moving into Deir Ezzor province and driving Isis from the al-Omar oilfield, the country’s biggest.  Regime forces are also moving into Deir Ezzor province, so it is likely that the victors in the struggle against Isis will soon be fighting each other over the liberated territory.  This is already happening in Iraq, where government forces and allied Shia militias are driving Kurdish forces from territory the Kurds liberated from Isis but which are outside the boundaries of what Baghdad recognised as Iraqi Kurdistan.

Business and Financial

SPACED OUT Night-time central London is a surreal picture, forests of redlights glowing in abstract shapes.  The lights are on cranes that evidence the great building boom that is going on in the London office sector.  Reading the newspapers, one might sense a disconnect; many big office occupiers – bankers, lawyers, accountants, are cutting back on space and delaying taking any new, the entwined fears of economic downturn and Brexit testing commercial nerves.  Goldman Sachs mutter about relocating to Frankfurt, PriceWaterhouseCoopers are going to cheaper provincial offices; even those firms which are recruiting are packing their teams tighter on the same floorplates.  Bad news for those office developers building without a pre-let to a good tenant; the lettings market is slowing and although rents are not yet falling, prospective tenants are getting increasingly attractive incentive packages if they will sign up.

We have been here before, although this time a lot of the space under construction is pre-let.  But there is one part of the market causing concern, the newly fashionably market for co-working, or as it was called, serviced offices.  Much of the new space is let to co-working firms who then will sub-let space to small occupiers on short rental agreements; a year, a month, a week; a desk, a room, a floor.  Most are not sensitive to what they pay per foot; they want convenience, flexibility and all the services.  But in more difficult times, will those occupants stick around?  The two big co-worker providers are Regus and WeWork, but many more are appearing.  British Land has started its own brand, Storey; Fora, owned by property fund Brockton, offers hip space, offpitch but close to prime addresses, at value rents.  This week Regus announced occupancy levels were dipping in its London book; its share price fell a third as investors wondered if this could be the beginning of the end of the co-working space boom.

COPPER CAPPED: Barclays Bank must be one of the key marketing targets for any legal practice at the moment.  Litigation is flowering on all sides of the banks business, what with the bank facing law suits relating to its tie up with Qatar during the 2008 financial crisis, the related actions against three of its most senior executives, actions from regulators and shareholders in the USA for market abuse and manipulation of LIBOR, alleged breach of whistleblowing legislation by chief executive Jes Staley…  and now claims by Red Kite.  No; Barclays has not been abusing rare birds; Red Kite is the world’s largest metals hedge fund, size circa US$2bn, and is run by Michael Farmer, former Tory Party Treasurer.  One of the main metals traded by the fund is copper, which has been through a pretty tumultuous time price-wise over the last ten years as supply expanded, then rapidly contracted, with a huge price crash and now a significant recovery.  The fund is claiming that Barclay’s traders on the London Metal Exchange were aware, through internal staff discussions regarding Red Kite’s activities with the bank, of market positions that Red Kite was taking in copper, and used that knowledge to adjust its own trading accordingly.  As a result Red Kite claims it lost some $850m over three years from 2010 to 2013.  Barclays denies all this, and the case may be a while before it comes to court, but it is another headache for Mr Staley whose strategy for the future growth of Barclays in significantly based on the investment banking division where many of these issues begun.


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