Carney predicts £16bn bounce to UK economy from Chequers Brexit deal - Canadanewsmedia
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Carney predicts £16bn bounce to UK economy from Chequers Brexit deal

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Mark Carney, Bank of England governor, has told Theresa May’s cabinet that the economy could expect a £16bn bounce if the prime minister negotiates a Brexit deal based on her Chequers compromise plan.

The latest detail to emerge from Mr Carney’s cabinet presentation on Thursday will further enrage Eurosceptics; Tory MP Jacob Rees-Mogg accused the governor of “imitating a screaming banshee”.

However, Mr Carney’s endorsement of Chequers, the prime minister’s blueprint for the UK’s post-Brexit relations with the EU, capped a good week for Mrs May as she prepares to travel to an EU summit in Salzburg next week to try to pave the way for a Brexit agreement in November.

Eurosceptic cabinet ministers including Michael Gove and Andrea Leadsom sat in silence throughout Mr Carney’s presentation. They did not challenge the governor after he set out his grim assessment of the risks of a no-deal Brexi t, according to several people in the room.

Mr Carney warned of rising inflation, increased unemployment, net emigration and a 35 per cent fall in house prices in the event that Britain leaves the EU next year in a chaotic, no-deal scenario.

Carney said we would recover three-quarters of the growth lost after the 2016 referendum because Chequers would imply more access to the European market than under current assumptions

But the Financial Times has learnt that Mr Carney also told ministers that if Mrs May succeeded in negotiating a deal similar to the Chequers plan — which foresees a free trade area in goods and agriculture — there would be an economic bounce.

One cabinet source said: “Carney said that we would recover three-quarters of the growth lost after the 2016 referendum because Chequers would imply more access to the European market than under current assumptions.”

The governor said the 2016 Brexit vote had knocked roughly 1 per cent off the size of the economy, compared with the BoE’s May 2016 forecasts, and that after a good Brexit deal Britain could recover most of that lost output, amounting to £16bn.

The optimistic assessment of the Chequers deal, Mr Carney said, came from “a pick-up in investment, more people to move jobs, and a pick-up in consumer confidence and underlying activity”.

The BoE declined to comment on the presentation.

If planes are going to stop flying, that’s a huge economic shock, but the question whether that happens is purely political. I do feel sorry for people who have to put numbers on these things which are fundamentally unknowable

The EU has rejected aspects of the Chequers plan but Mrs May remains confident she can negotiate a deal including a single customs area and a free trade area in goods and agriculture, covered by common EU rules.

With the BoE’s Monetary Policy Committee assuming a smooth withdrawal from the EU but a more challenging longer-term outlook, the potential bounce from agreeing Chequers is a reasonable assumption, according to Jagjit Chadha, director of the National Institute of Economic and Social Research.

“But Chequers is itself a bit worse than a [Norway-style] European Economic Area agreement with less migration and less market access,” Mr Chadha added.

Economists lined up on Friday to criticise the governor’s specific house price forecast of a drop of 35 per cent in the event of a disorderly no-deal Brexit and his warning that the BoE would raise interest rates.

Jonathan Portes, of King’s College London, said: “If planes are going to stop flying, that’s a huge economic shock, but the question whether that happens is purely political. I do feel sorry for people who have to put numbers on these things which are fundamentally unknowable.”

Mrs May’s allies were quietly relieved at the inability of her pro-Brexit Tory critics to mount a sustained attack on the prime minister.

Mr Rees-Mogg’s pro-Brexit European Research Group had to abandon plans to publish detailed papers setting out an alternative to Chequers over divisions in their ranks about what they should say.

Meanwhile, talk of a leadership challenge to Mrs May quickly fizzled after it emerged that few Tory MPs were willing to support the idea of a coup, openly discussed by about 50 ERG members on Tuesday.

Iain Duncan Smith, former Tory leader, called the idea of a leadership challenge to Mrs May “stupid”, although Eurosceptics could still wreak havoc if they choose to vote against any Brexit deal struck by the prime minister.

Downing Street is increasingly confident that Mrs May can secure a deal, but there was annoyance that details of Mr Carney’s bleak assessment of the risks of a no-deal Brexit reached the press.

“We’re trying to show the rest of the EU that we are ready for a no-deal scenario, so that wasn’t exactly helpful,” said one ally of the prime minister. Mrs May had explicitly warned ministers not to leak “highly market-sensitive information”.

Mr Carney and Number 10 are now likely to face a strong Eurosceptic backlash, with the BoE governor already identified by Mr Rees-Mogg as “the high priest of Project Fear”.

Mr Rees-Mogg said: “The governor of the Bank of England is meant to be able to influence events through the modest movement of his eyebrows, not by imitating a screaming banshee.”

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IMF warns storms clouds gathering for global economy – The Globe and Mail

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One of the International Monetary Fund’s top officials warned on Tuesday that storm clouds were gathering over the global economy and that governments and central banks might not be well- equipped to cope.

The fund had been urging governments to “fix the roof” during a sunny last two years for the world economy, IMF First Deputy Managing Director David Lipton said.

“But like many of you, I see storm clouds building, and fear the work on crisis prevention is incomplete,” he said at a banking conference hosted by Bloomberg.

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He also warned that strains could leave policymakers under pressure and in uncharted waters.

“Central banks would likely end up exploring ever-more unconventional measures. But with their effectiveness uncertain, we ought to be concerned about the potency of monetary policy.”

Many governments won’t have much room for manoeuvre, either, having already racked up high debts.

“We should not expect governments to end up with the ample space to respond to a downturn that they had 10 years ago,” Lipton said. Stimulus may also be a hard sell politically, considering the financial burden it creates, he said.

The biggest immediate risk, though, is the current trade war between the United States and China. If all of the threatened tariffs are put in place, as much as three-quarters of a percent of global GDP would be lost by 2020, the IMF has estimated.

“That would be a self-inflicted wound. So it is vital that this ceasefire (recently announced between Washington and Beijing) leads to a durable agreement that avoids an intensification or spread of tensions.”

If it doesn’t and a stalemate sets in, there could be a damaging “fragmentation” of the global economy that causes a downturn, he said.

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Goodyear halts tire production in Venezuela as economy slips – Prince George Citizen

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VALENCIA, Venezuela — Goodyear Tire & Rubber Co. is halting production in Venezuela, making it the latest international corporation to abandon a South American nation in economic crisis, officials said Monday.

Spokesman Eduardo Arguelles told The Associated Press that Goodyear-Venezuela had made the “difficult decision” to no longer produce tires in the country, which has seen an economic contraction worse than the U.S. Great Depression.

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“Our goal had been to maintain its operations, but economic conditions and U.S. sanctions have made this impossible,” Arguelles said.

The company had endured tens of millions in losses in recent years as the Venezuelan bolivar plummeted in value against the U.S. dollar. The company based in Akron, Ohio, moved to deconsolidate its Venezuelan subsidiary in the fourth quarter of 2015, but continued to operate with a staff of about 1,100 from the depressed industrial city of Valencia.

Workers who arrived at the plant Monday were stunned to find it was no longer in operation.

“They closed doors without saying anything,” said Luis Aponte, a union worker who said government workers were on site assessing the situation.

There was no immediate response from the government.

The announcement came after a letter issued “to whom it may concern” circulated online stating the company had been forced to cease operations and that starting Monday no one in Venezuela would be authorized to continue producing the company’s products.

The letter also said Goodyear would fulfil its financial obligations to workers.

Goodyear’s retreat from Venezuela adds it to a growing list of corporations that have ceased operations in the country. Some of those enterprises, like General Motors, had assets including factories and vehicles seized by the government. Others chose to cut their losses because shortages, inflation and currency and prices controls made business difficult.

Kellogg, Bridgestone, Kimberly-Clark and General Mills have all closed or reduced operations in recent years.

Julian Rodriguez, 62, said he spent over three decades working for Goodyear and was unsure how he’d make ends meet after losing his only source of income.

“This is a grave situation,” he said.

The International Monetary Fund has estimated that inflation in Venezuela could top 1 million per cent by the year’s end.

President Nicolas Maduro activated an economic recovery plan in August that including increasing the minimum wage and printing a new currency, among other measures, but thus far the economy has shown few signs of improvement.

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Premier Ford Meets with Mayors to Grow the Economy and Deliver Better Services – Government of Ontario News

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Ontario’s Government for the People Renews Commitment to Municipal Partnerships

TORONTO — Premier Doug Ford met with Ontario mayors at Queen’s Park today to discuss their shared priorities, such as improving transportation infrastructure, increasing the supply of housing to bring down costs and making sure that municipalities are open for business.

“Ontario has some fantastic mayors, and we have some great working relationships. Today, we strengthened those relationships,” said Ford. “We’re going to work together to get things done. We’re going to build transit and infrastructure. We’re going to make sure everyone can afford a place to call home. And we’re going to show the world that Ontario is open for business.”

In a series of meetings throughout the day, Premier Ford met with Guelph Mayor Cam Guthrie; Kawartha Lakes Mayor Andy Letham; London Mayor Ed Holder; Mississauga Mayor Bonnie Crombie; Oro-Medonte Mayor Harry Hughes; Ottawa Mayor Jim Watson; and Windsor Mayor Drew Dilkens.

During one-on-one meetings with each mayor, Premier Ford discussed upcoming plans for the private retail sale of cannabis and restated his commitment to public health, public safety and protecting Ontario’s youth. He also discussed ways to deliver better services to the people of this province and get more money back in the taxpayer’s pocket.

All leaders committed to meeting regularly to make progress on the issues that matter most to people across Ontario’s municipalities.

“When it comes to Ontarians’ day-to-day lives, municipalities make the most direct impact,” said Ford. “Today, I had some great conversations with Ontario mayors about how to tackle the issues that people face every day. We’re committed to working for the people and respecting the taxpayer.”

For high-resolution photos from the meetings, click here.

Quick Facts

  • There are 444 municipal governments in Ontario.
  • Ontario’s Government for the People recently signed a joint memorandum of understanding (MOU) with the Association of Municipalities of Ontario (AMO) committing to regular consultation on provincial legislation or regulations that have a significant impact on municipalities.

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