ALEX BRUMMER: The EU works badly politically and technically

Cracks are appearing in the euro zone: the EU is malfunctioning politically and technically, according to ALEX BRUMMER

Britain’s remarkable inflation rate leading the G7 and the fall of the pound have roused Brexit critics.

The Resolution Foundation think tank says Brexit has reduced the competitiveness of the UK economy, with alarming implications for productivity and wages.

A Financial Times analysis claims that, six years after the EU referendum, economists conclude that the damage to Britain is real.

The European Central Bank has fallen behind in the fight against rising prices. She is struggling to act due to turmoil in the sovereign bond market

Another reality is that the UK only left the EU on January 31, 2020 and two months later the global economy was crushed by Covid.

It is therefore premature to place too much emphasis on trade and other effects. The UK, as one of the most open economies, suffers more than other countries from global shocks.

The assumption that the EU and the Eurozone in particular is a wonderful thing needs to be corrected. It functions badly at the political and technical level.

As happy as some are to see Emmanuel Macron getting his boost, the idea that Marine Le Pen’s far-right party now holds 89 seats in the National Assembly is horrifying.

In Germany, the government has set aside its Cop26 obligations and is switching its power plants to carbon-emitting coal. The cracks in the eurozone, which nearly burst during the 2011-2012 currency crisis, are reappearing.

This time the focus is on Italy, not Greece, even though the former country is led by former European Central Bank (ECB) supremo Mario Draghi.

The ECB has fallen behind in the fight against rising prices. It is struggling to act due to the turmoil in the sovereign bond market.

Italy’s debt-to-domestic output ratio has soared to 150%, making the UK’s 94% modest. As a result, the yield on ten-year Italian bonds rose from 0.5% in September 2021 to 4%.

This led the ECB to hold an emergency meeting last week when it agreed on a new funding plan to stabilize the eurozone bond market.

Europe effectively fires up the printing presses while much of the rest of the industrial world shrinks.

Among the paradoxes are the number of policymakers calling on the UK government to stabilize the pound.

Holidaymakers heading to the continent this summer will find that the euro is not a great store of value at present.

The euro is on a bearish trajectory against the dollar as investors around the world place their trust in safe-haven US Treasuries.

Economists polled by Reuters believe the US Federal Reserve is bracing for hikes in July and September that would take the official federal funds rate to a range of 2.75% to 3%, opening an even bigger differential with the UK. United.

That, unless governments take coordinated action to avoid it, means further strengthening of the dollar.

Difficult race

No one could complain that Peter Cowgill’s buccaneering management wasn’t paying off for JD Sports investors, including the 49% stake held by the Rubin family.

Long-delayed results for 2021 showed profit before exceptional items was not far off £1billion.

The replacement management’s aim is to normalize governance at the company, which has cleared its brief with competition authorities and has been criticized for undisciplined executive rewards.

There is an insatiable demand for sneakers and all things athletic footwear and people are willing to pay top dollar for the right designer, regardless of the cost of living.

JD is confident enough to forecast similar earnings for the current year as last year. Comparable store sales are soaring with a 5% lead over last year.

Finding a governance-savvy chair is vital. Equally important will be a CEO who does not allow cash reserves to burn a hole in the sole of the business.

Loss leader

The disparity between the American management of the banks rescued after the 2008 crisis and that of Great Britain could not be greater. Washington ordered the quick sale of US stocks, acknowledging losses were inevitable.

In the UK, the initial reaction was to act like nervous idiots worried about a bad reaction to red ink. Some 14 years after NatWest’s implosion, the government still owns a 48.5% stake.

Final sales are postponed for a further 12 months due to market turbulence.

When will this end?