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Pressure Mounts on Tunisia’s President to Salvage the Economy – The New York Times

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When President Kais Saied seized power in July, he vowed to rescue the failing economy. Tunisians are still waiting for him to fulfill that pledge.

TUNIS — During the pre-dinner rush near Tunis’s port one recent evening, Haji Mourad, 45, the proprietor of a small grocery store on the main road, greeted his customers with a smile and a joke.

They laughed as they paid for their chicken and canned tomatoes. But the humor was of the gallows variety.

“How about if you give us some dollars? And try to get me a visa to America,” he teased a visiting American, before turning serious. “People are worried, they’re scared,” he said. “Everything has gotten so expensive — eggs, meat, vegetables. It looks like there’s a monster coming.”

That monster would be the threat of economic implosion, from which their president, Kais Saied, vowed to rescue the country when he suspended Parliament and began ruling by decree in July, a power grab that threw Tunisia’s decade-old democracy into doubt.

As Mr. Saied steers Tunisia toward a national dialogue and constitutional referendum that critics say may cement his authoritarian rule, pressure is growing on him to fulfill his pledge. The question is whether he can.

Already deeply indebted and running a large deficit after years of mismanagement and the pandemic, the government recently announced that it expected to borrow nearly $7 billion this year. For that, Tunisia must turn to international lenders including the International Monetary Fund, which has demanded painful austerity measures. Those could cut into the wages of a broad swath of Tunisians and slash government subsidies just as the price of electricity and basic food items is climbing — a formula that could lead to protests and mass unrest.

Mohamed Messara/EPA, via Shutterstock

“It’s going to be a very painful year,” said Tarek Kahlaoui, a Tunisian political analyst. “It’s going to be unpopular no matter what.”

International lenders have also urged Mr. Saied to return the country to more inclusive, constitutional governance. But when it comes to his political road map, Tunisians are living in uneasy suspense.

A series of what he has described as online and in-person “consultations” with citizens over constitutional amendments, scheduled to begin this month, faces doubts over transparency and security. Members of a commission assigned to draft a new constitution have not been appointed.

The government has yet to start logistical preparations for, or budget for, the constitutional referendum set for July 25. Parliament remains suspended.

The authorities have targeted some of Mr. Saied’s critics, prosecuting or detaining several opposition politicians and businesspeople. They have also shuttered opposition news media outlets over what the government said was licensing issues.

On Friday, Tunisian security officers seized and detained Noureddine Bhairi, the deputy chairman of Ennahda, the Islamist political party that once dominated Parliament and has called Mr. Saied’s July actions a coup.

Ennahda officials said Sunday that Mr. Bhairi had still not been located, and that his health condition was deteriorating. In a letter to Mr. Saied, Rachid Ghannouchi, the party’s leader, called on the president to release him or, failing that, to allow a “medical and human rights team” to visit him.

“I very much doubt that the I.M.F. can put a program together as long as there is so much political uncertainty,” Ishac Diwan, an economics professor specializing in the Arab world at Paris Sciences et Lettres, said in an email. “And conversely, a poorly cooked program with harsh austerity will hurt the ongoing (and very important) political process.”

In other words, Tunisians feeling their wallets empty out may not stand for Mr. Saied’s plans for much longer. But despite eroding support from political parties and unions that once backed him, Mr. Saied still enjoys remarkable support across the country.

His move to seize power in July drew throngs of cheering Tunisians into the streets, producing an 87 percent approval rating in one poll at the time. Though the number of Tunisians who say they are satisfied with his performance is slumping, to between 62 and 67 percent in recent surveys, it would still please most politicians. (The percentage of those polled who would vote for him in a hypothetical presidential election stands even higher, at 76 percent.)

EPA, via Shutterstock

There have been some signs of discontent. In Tunis, the capital, hundreds of people regularly demonstrate against Mr. Saied. In Kasserine, a marginalized province in central Tunisia, hundreds have recently protested over the lack of jobs and high prices, and one demonstrator died in November after inhaling tear gas when the riot police broke up a protest over an overflowing landfill and waste-handling problems outside Sfax, Tunisia’s second-largest city.

Combined with other, smaller, scattered protests, the overall number of demonstrations in the months since Mr. Saied took power has topped that of the same period for the two years prior, according to data collected by the Tunisian Forum for Economic and Social Rights.

“He’s adding to the problems,” said Dhoha Hamami, 36, who was shopping for groceries on a recent afternoon in Tunis’s port neighborhood, La Goulette, citing the president’s troubled rollout of a coronavirus vaccination registry and plans to freeze public sector salaries. “He doesn’t live in the real world.”

Still, the protests have been minor in a country where demonstrations over economic stagnation have become a regular winter feature, especially since the country’s 2011 Arab Spring revolution failed to deliver on its promises of better jobs and better lives.

If anything, analysts said, they had expected more demonstrations as Mr. Saied’s pledges of economic rescue remain unfulfilled.

That could still happen, as Mr. Saied’s critics confidently predict.

“When you hold too many powers in one hand, that makes you accountable for everything,” said Said Ferjani, an Ennahda member of Parliament. “He’s had it for many months and he hasn’t delivered.”

Houssem Zouari/Agence France-Presse — Getty Images

To reduce the deficit, the government said last week that it would impose or increase a variety of small taxes, including one on transportation and another on paper receipts for shoppers, which will add up quickly for Tunisians already struggling to afford necessities. As wheat prices have soared worldwide and Tunisia’s budget faces a shortfall, the country may not be able to continue subsidizing bread for citizens, economists warn.

Tunisia may also have to consider privatizing some of its state-run companies and cutting its huge public-sector wage bill, which accounts for more than half of public spending.

Mr. Saied’s one-man rule has exempted his actions from oversight, so his budget has gone undebated by legislators, his economic agenda has been shaped out of sight and his political proposals have remained murky. His authoritarian tendencies and populist rhetoric have frightened businesspeople, said Issam Ayari, a director at Tunisie Valeurs, a financial services firm, pushing foreign investment at the end of the third quarter to its lowest level since 2010.

On the political front, the online and in-person consultations are set to take place over the next three months, with citizens invited to answer multiple-choice questions and offer comments on topics including Tunisia’s electoral process, development, educational system, health care and the economy.

But analysts said it was unclear how transparent the process would be, since the government had not announced whether the results would be public or how they would influence the new constitution, which is to be drafted by a commission appointed by Mr. Saied.

“I think it’s just a way to legitimize the decision they’re already going to make,” Mohamed-Dhia Hammami, a Tunisian political researcher and analyst, said of the consultations.

Ivor Prickett for The New York Times

There are also questions about the security of the online consultations, given that the government recently struggled to protect its online coronavirus vaccine registry from tampering. (The platform crashed just days before Tunisians were required to start showing proof of vaccination to enter public places.)

Amid the political uncertainty and deepening economic hurt, Tunisia has also seen what human rights advocates say is a subtle, but alarming, deterioration in freedoms since Mr. Saied seized power, recalling the days when Tunisia’s ex-dictator, Zine el-Abidine Ben Ali, ruled the country.

A former president, Moncef Marzouki, was sentenced to four years in jail in absentia after calling Mr. Saied a “dictator” and urging France to stop supporting him.

A gay rights activist was beaten by the police in October, showing what activists said was increased targeting by the police since July 25. Several politicians and social media commentators and a television host have been prosecuted in civilian and military courts for criticizing the president — a type of prosecution Mr. Saied has publicly endorsed.

“If you are publicly criticizing Saied and calling what he did a ‘coup,’ you are inviting prosecution,” said Eric Goldstein, the acting Middle East and North Africa director at Human Rights Watch. “It’s bad enough to get prosecuted for criticizing the president. To be prosecuted for it before a military court is a double whammy we didn’t see in the worst years of Ben Ali’s presidency.”

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Ahead of election, Macron banks on rosy French economy, new jobs – Financial Post

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PARIS — President Emmanuel Macron will on Monday tout 21 new foreign investment projects in France and a booming economy as proof his economic reforms have been bearing fruit less than three months before a presidential election in which he is expected to run.

During a visit to Alsace in the east, Macron will announce a 300-million-euro ($342 million) industrial project by German chemical giant BASF, one of 21 new projects worth 4 billion euros and 10,000 jobs as part of a drive to attract foreign investors, his office said.

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As the presidential race heats up, his aides are keen to shift the debate away from immigration and law-and-order issues and put the spotlight on the economy, which has been recovering strongly from the COVID-19 pandemic.

“This is the result of all the reforms that were carried out since the start of the mandate,” a presidential aide told reporters.

“Three months before an election, we could have expected investors to be in wait-and-see mode because of the uncertainty of an election. Instead, we see very strong confidence from foreign investors in the president’s economic policy,” he said.

Since 2017, Macron has pushed through a cocktail of supply-side economic reforms meant to boost businesses’ competitiveness, cut taxes on investors and loosen strict labor market rules.

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Critics say he has acted as “president of the rich” who wants to do away with France’s cherished social safety nets and has cut welfare benefits for some of the poorest.

But three months ahead of the April election, indicators show the French economy is booming, with growth expected to have hit 6.7% in 2021 and France having returned closer to pre-pandemic levels than any G7 peer bar the United States.

Macron supporters also received an unexpected boost from economist Paul Krugman on Friday.

“In fact, among major advanced economies, the star performer of the pandemic era, arguably, is … France,” he wrote in his New York Times column https://www.nytimes.com/2022/01/14/opinion/france-economy-pandemic-socialism.html. ($1 = 0.8761 euros) (Reporting by Michel Rose; Editing by Emelia Sithole-Matarise)

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Dollar finds a footing as traders brace for hawkish Fed

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The dollar clung to a late week bounce on Monday as investors braced for January’s U.S. Federal Reserve meeting and raised bets it will chart a year ahead holding several rate hikes, while China surprised analysts with a benchmark cut.

Chinese economic growth data, due later on Monday (0200 GMT), a Bank of Japan policy meeting which concludes on Tuesday, British inflation data on Wednesday and Australian jobs figures on Thursday are also in view as traders gauge the global policy outlook.

The dollar was 0.2% higher at 114.45 yen early in the Asia session, about 0.8% above a Friday low. It also edged about 0.1% firmer on the euro to $1.1403.

The moves follow the dollar’s jump on Friday along with U.S. yields and underscore support for the greenback from the hawkish rates outlook, even if momentum for gains has started to wane.

The U.S. dollar index, which declined sharply last week until Friday’s leap, sat at 95.225 in Asia on Monday.

“Friday’s move suggest to me that the interest rate driver for dollar strength is not dead and buried,” said National Australia Bank’s head of foreign exchange strategy Ray Attrill.

He said it may not necessarily return to drive new dollar highs, but added: “We’ve had a hawkish twist out of every Fed meeting since June last year.”

The Fed meets Jan. 25-26 and is not expected to move rates, but there is a growing drumbeat of hawkish comments coming from within and outside the central bank.

Last week, J.P. Morgan CEO Jamie Dimon remarked that there could be “six or seven” hikes this year and billionaire hedge fund manager Bill Ackman floated on Twitter over the weekend the possibility of an initial 50 basis point hike to tame inflation.

The cash Treasury market was closed for a holiday on Monday but 10-year futures were sold to a two-year low and Fed funds futures also fell, reflecting a strengthening conviction in the market of at least four hikes in 2022.

The Australian and New Zealand dollars, which dropped sharply on Friday, remained under pressure on Monday. The Aussie was last down 0.2% at $0.7200, ending for now a brief foray above resistance around $0.7276. [AUD/]

The kiwi edged 0.2% lower to $0.6791.

In China, bonds rallied and the yuan slipped after the central bank cut borrowing costs for medium-term loans for the first time since April 2020, defying market expectations.

Ten-year government bond futures rose to their highest since June 2020 after the move and the yuan began onshore trade marginally softer at 6.3555 per dollar.

Chinese gross domestic product figures due at 0200 GMT are expected to show annual growth at its slowest in 18 months as a property downturn drags on demand.

Elsewhere a month-long rally for sterling has petered out around its 200-day moving average. It held at $1.3669 on Monday, but analysts say it could resume gains if inflation data makes the case for higher interest rates.

“Interest rate markets are currently pricing an 80% + chance of a 25 bp rate hike by the Bank of England on 3 February,” said Commonwealth Bank of Australia strategist Joe Capurso.

“A quicker pace of inflation could see pricing move closer to 100%.”

========================================================

Currency bid prices at 0139 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.1402 $1.1417 -0.13% +0.29% +1.1425 +1.1401

 

Dollar/Yen

114.4500 114.2250 +0.20% -0.50% +114.5050 +114.2800

 

Euro/Yen

130.51 130.36 +0.12% +0.15% +130.5500 +130.3200

 

Dollar/Swiss

0.9156 0.9140 +0.17% +0.37% +0.9158 +0.9143

 

Sterling/Dollar

1.3665 1.3685 -0.14% +1.05% +1.3675 +1.3665

 

Dollar/Canadian

1.2549 1.2557 -0.06% -0.74% +1.2555 +1.2539

 

Aussie/Dollar

0.7200 0.7218 -0.24% -0.95% +0.7224 +0.7199

 

NZ

Dollar/Dollar 0.6790 0.6810 -0.28% -0.78% +0.6820 +0.6791

 

 

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

 

(Reporting by Tom Westbrook; Editing by Jacqueline Wong)

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China’s Economy Slowed Late Last Year on Real Estate Troubles – The New York Times

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Economic output climbed 4 percent in the last quarter of 2021, slowing from the previous period that ran July through September. Growth has faltered lately as home buyers and consumers become cautious.

BEIJING — Construction and property sales have slumped. Small businesses have shut because of rising costs and weak sales. Debt-laden local governments are cutting the pay of civil servants.

China’s economy slowed markedly in the final months of last year as government measures to limit real estate speculation hurt other sectors as well. Lockdowns and travel restrictions to contain the coronavirus also dented consumer spending. Stringent regulations on everything from internet businesses to after-school tutoring companies have set off a wave of layoffs.

China’s National Bureau of Statistics said Monday that economic output from October through December was only 4 percent higher than during the same period a year earlier. That represented a further deceleration from the 4.9 percent growth in the third quarter, July through September.

The world’s demand for consumer electronics, furniture and other home comforts during the pandemic has kept exports strong, preventing China’s growth from stalling. Over all of last year, China’s economic output was 8.1 percent higher than in 2020, the government said. But much of the growth was in the first half of last year.

CHINATOPIX, via Associated Press

The snapshot of China’s economy, the main locomotive of global growth in the last few years, adds to expectations that the broader world economic outlook is beginning to dim. Making matters worse, the Omicron variant of the coronavirus is now starting to spread in China, leading to more restrictions around the country and raising fears of renewed disruption of supply chains.

The slowing economy poses a dilemma for China’s leaders. The measures they have imposed to address income inequality and rein in companies are part of a long-term plan to protect the economy and national security. But officials are wary of causing short-term economic instability, particularly in a year of unusual political importance.

Next month, China hosts the Winter Olympics in Beijing, which will focus an international spotlight on the country’s performance. In the fall, Xi Jinping, China’s leader, is expected to claim a third five-year term at a Communist Party congress.

With growth in his country slowing, demand slackening and debt still at near-record levels, Mr. Xi could face some of the biggest economic challenges since Deng Xiaoping began lifting the country out of its Maoist straitjacket four decades ago.

“I’m afraid that the operation and development of China’s economy in the next several years may be relatively difficult,” Li Daokui, a prominent economist and Chinese government adviser, said in a speech late last month. “Looking at the five years as a whole, it may be the most difficult period since our reform and opening up 40 years ago.”

China also faces the problem of rapid aging that could create an even greater burden on China’s economy and its labor force. The National Bureau of Statistics also said that China’s birthrate fell sharply last year and is now barely higher than the death rate.

As costs for many raw materials have risen and the pandemic has prompted some consumers to stay home, millions of private businesses have crumbled, most of them small and family owned.

That is a big concern because private companies are the backbone of the Chinese economy, accounting for three-fifths of output and four-fifths of urban employment.

Kang Shiqing invested much of his savings nearly three years ago to open a women’s clothing store in Nanping, a river town in southeastern China’s Fujian Province. But when the pandemic hit a year later, the number of customers dropped drastically and never recovered.

As in many countries, there has been a broad shift in China toward online shopping, which can undercut stores by using less labor and operating from inexpensive warehouses. Mr. Kang was stuck paying high rent for his store despite the pandemic. He finally closed it in June.

“We can hardly survive,” he said.

Another persistent difficulty for small businesses in China is the high cost of borrowing, often at double-digit interest rates from private lenders.

Chinese leaders are aware of the challenges private companies face. The central bank is taking steps to encourage the country’s state-controlled commercial banks to lend more money to small businesses. Premier Li Keqiang has promised further cuts in taxes and fees to help the country’s many struggling small businesses.

On Monday, China’s central bank made a small move to reduce interest rates, which could help reduce slightly the interest costs of the country’s heavily indebted real estate developers. The central bank pushed down by a tenth of a percentage point its interest rate benchmark for some one-year loans, to 2.85 percent.

The building and fitting out of new homes has represented a quarter of China’s economy. Heavy lending and widespread speculation have helped China erect the equivalent of 140 square feet of new housing for every urban resident in the past two decades.

This autumn, the sector faltered. The government wants to limit speculation and deflate a bubble that had made new homes unaffordable for young families.

China Evergrande Group is only the largest and most visible of a lengthening list of real estate developers in China that have run into severe financial difficulty lately. Kaisa Group, China Aoyuan Property Group and Fantasia are among other developers that have struggled to make payments as bond investors become more wary of lending money to China’s real estate sector.

Gilles Sabrié for The New York Times

As real estate companies try to conserve cash, they are starting fewer construction projects. And that has been a big problem for the economy. The price of steel reinforcing bars for the concrete in apartment towers, for example, dropped by a quarter in October and November before stabilizing at a much lower level in December.

The decline in home prices in smaller cities has hurt the value of people’s assets, which in turn made them less willing to spend. Even in Shanghai and Beijing, apartment prices are no longer surging.

There have been faint hints of renewed government support for the real estate sector in recent weeks, but no sign of a return to lavish lending by state-controlled banks.

The financial distress of Evergrande “is a signal that money will be pushed from real estate to the stock market,” said Hu Jinghui, an economist who is the former chairman of the China Alliance of Real Estate Agencies, a national trade group. “The policies can be loosened, but there can be no return to the past.”

The slowdown in the housing market has also hurt local governments, which rely on land sales as a key source of revenue.

The International Monetary Fund estimates that government land sales each year have been raising money equal to 7 percent of the country’s annual economic output. But in recent months, developers have curtailed land purchases.

Starved of revenue, some local governments have halted hiring and cut bonuses and benefits for civil servants, prompting widespread complaints on social media.

In Hangzhou, the capital of Zhejiang Province, a civil servant’s complaint of a 25 percent cut in her pay spread quickly on the internet. The municipal government did not respond to a fax requesting comment. In northern Heilongjiang Province, the city of Hegang announced that it would not hire any more “low-level” workers. City officials deleted the announcement from the government’s website after it drew public attention.

Some governments have also raised fees on businesses to try to make up for the shortfall.

Bazhou, a city in Hebei Province, collected 11 times as much money in fines on small businesses from October through December as it did in the first nine months of last year. Beijing criticized the city for undermining a national effort to reduce the cost of doing business.

Exports are setting records. Families around the world have responded to being stuck at home during the pandemic by spending less on services and more on consumer goods now made mainly in Chinese factories.

Some areas of consumer spending have been fairly robust, notably the luxury sector, with sports cars and jewelry selling well.

CHINATOPIX, via Associated Press

Few anticipate that the government will allow a severe economic downturn this year, ahead of the Communist Party congress. Economists expect the government to soften its restrictions on lending and step up government spending.

“The first half of the year will be challenging,” said Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance. “But then the second half will see a rebound.”

Li You contributed research.

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