Tuesday, January 30
US POLITICS
Trump to deliver economy-focussed State of the Union
Later today, Donald Trump will deliver his first State of the Union address as President of the United States.
Since Mr Trump’s victory in the 2016 election, the US economy has hit several notable milestones. The US unemployment rate stands at just over 4%, the lowest level since 2000. The S&P 500 rose 18% in Trump’s first 11 months in office, while the Dow Jones Industrial Average recently reached a new record of 26,000. Consumer confidence also stands at a 17-year high.
However, campaign promises regarding infrastructure reform, immigration, trade and national security have yet to be legislatively fulfilled. Details regarding an infrastructure bill remain murky. Significant opposition persists to both a border wall and the continuation of the Dreamers program. A reform bill of US trade policies and a comprehensive military funding bill also do not currently exist.
Consequently, expect Trump’s speech to devote significant attention to the economic achievements he attributes to his administration’s pro-growth, “America First” policies, while also doubling down on calls for continued progress toward the legislative reform he has been promising since he first began campaigning.
Furthermore, expect Trump to call on Congress to take legislative strides toward a comprehensive infrastructure bill, welfare reform and perhaps another attempt to decisively dismantle the Affordable Care Act.
CATALAN SEPARATISM
Showdown expected after Puigdemont reinstatement vote
Catalonia’s parliament is scheduled to hold a controversial vote of confidence today in favour of Carles Puigdemont for the region’s presidency.
Facing charges of sedition and rebellion, Puigdemont was ousted by Madrid as regional president in October and has been living in exile in Brussels since.
Madrid imposed direct rule on the Spanish region shortly after its declaration of independence. Prime Minister Mariano Rajoy’s plan to defuse the crisis by calling for new regional elections in December backfired when separatist parties ended up winning a new majority. Despite threats from Madrid to appeal Puigdemont’s reinstatement, the regional parliament proposed him as the sole candidate for the presidency.
If elected, Puigdemont faces the decision of whether or not to risk arrest by returning to Spain to exercise his duties. The possibility Puigdemont assumes the presidency remotely and in exile is also on the table, although Spain’s Constitutional Court ruled that he has to physically attend a swearing-in session to become regional leader.
Madrid faces the decision of further exasperating separatist sentiments by arresting Puigdemont should he return, or appealing his candidacy to the Council of State. Look out for a continued exchange of threats from both sides, and eventually concessions—perhaps in the form of a kind of amnesty agreement for Puigdemont—as this crisis in Spain continues to unfold.
CHINESE ECONOMY
China’s Central Bank governor likely to retire as debt rises
The standing committee of China’s top legislative body concludes its two-day annual meeting today. Strong signals out of Beijing suggest Zhao Xiaochuan, the incumbent central bank governor, is going to retire before March. Reviewing new appointments is one of the big agenda items of the meeting.
A successor will need to deal with national debt at 260% of GDP and a slumping real estate sector which holds $158 billion in corporate and local government debt, most of which must be repaid later this year. But debt continues to rise, up 16% rise in 2017.
Chinese authorities say they will bring debt under control within 3 years but also want to retain high growth rates. The new governor will be under immense pressure to implement a monetary policy designed to achieve these goals. But he (it’s almost certain to be a man) may face difficulties striking the right balance; tightening lending rates will impact on growth and cause displeasure to many. Expect more credit-equity swaps, mass refinancing of corporate and public debt and some defaults if Beijing fears their growth targets will not be met.
A SWORN OPPONENT
Kenyan opposition leader stages shadow inauguration
Opposition leader Raila Odinga is scheduled to take the presidential oath of office in Nairobi today in protest of Uhuru Kenyatta’s presidency and election victory last year.
After boycotting October’s election rerun, Odinga has continued to contest the president’s legitimacy, culminating in today’s ceremony. The aim is for the opposition leader to become “the people’s president” heading a shadow parliament. That body would then agitate for fresh elections and electoral reforms, such as changing to a system of proportional representation.
The event may be marred by violence, with police saying that the gathering is unlawful as they have received no notice of a registered political event. This has led to concerns that they will crack down on the inauguration, following other protestor-police clashes in the election aftermath.
Going through with the shadow inauguration could exacerbate Kenya’s current political crisis, with little real hope of seeing Kenyatta’s being replaced. However, if a large turnout shows that Odinga has the popular support to pressure the incumbent, the move could see the two eventually brought to the negotiating table.