DPC Youngstown, Ohio. Steel mill and Mahoning River 1902
This has so much more downside to it.
A renewed sell-off in oil and metals has shaken investors as fears grow that falling demand for commodities is signalling a sharper slowdown in China’s resource-hungry economy. Copper, considered a barometer for global economic growth because of its wide range of industrial uses, fell to a six-year low below $5,000 a tonne on Thursday. Oil, which has tanked almost 20% since a shortlived rally in October, dropped to under $45 a barrel on Thursday, less than half the level it traded at for much of this decade. The Bloomberg Commodity Index, a broad basket of 22 commodity futures widely followed by institutional investors, has fallen to its lowest level since the financial crisis.
Commodity prices have become a barometer for the health of China’s economy, whose rapid industrialisation over the past 10 years has been the engine of global growth. While markets already endured a commodity sell-off in August, traders and analysts say the drop is more worrying this time as it appears to be driven by concerns about demand rather than a glut of supply. “Whether it was power cable production [in China] or air conditioner data … activity in October continued to show deep contraction”, said Nicholas Snowdon, analyst at Standard Chartered. The slowdown is particularly concerning as many analysts and investors had expected an easing in Chinese credit conditions to stoke a modest increase in consumption in the fourth quarter.
Goldman Sachs said this week that recent data pointed to shrinking demand in China’s “old economy” as Beijing tries to manage a transition to more consumer-led growth. By some measures commodity prices are back where they were before China started on its path to urbanisation more than a decade ago. Other leading commodity indices are back at levels last seen in 2001, while shares in Anglo American fell to their lowest since the company s UK listing in 1999 on Thursday. A stronger US dollar has also weighed on raw material prices. “There are signs that oil demand growth is slowing down significantly relative to earlier this year”, said Pierre Andurand, one of the top performing energy hedge fund managers last year. “World GDP growth will keep on being revised down”.
U.S. Federal Reserve officials lined up behind a likely December interest rate hike with one key central banker saying the risk of waiting too long was now roughly in balance with the risk of moving too soon to normalize rates after seven years near zero. Other Fed policymakers argued that inflation should rebound, allowing the Fed to soon lift rates from near zero though probably proceed gradually after that. In New York, William Dudley said: “I see the risks right now of moving too quickly versus moving too slowly as nearly balanced.” Dudley, who as president of the New York Fed has a permanent vote on the Fed’s policy-setting committee, said the decision still required the central bank to “think carefully” because of the risk that the United States is facing chronically slower growth and low inflation that would justify continued low rates.
But his assessment of “nearly balanced” risks represents a subtle shift in the thinking of a Fed member who has been hesitant to commit to a rate hike, but now sees evidence accumulating in favor of one. For much of Janet Yellen’s tenure as Fed chair, policymakers at the core of the committee, and Yellen herself, have said they would rather delay a rate hike and battle inflation than hike too soon and brake the recovery. But Dudley said the current 5% unemployment rate “could fall to an unsustainably low level” that threatens inflation, while seven years of near-zero rates “may be distorting financial markets.” “I don’t favor waiting until I sort of see the whites in inflation’s eyes,” he said about monetary policy timing. Going sooner and more slowly, he said at the Economic Club of New York, may now be best for the Fed’s “risk management.”
In Washington, Fed Vice Chair Stanley Fischer said inflation should rebound next year to about 1.5%, from 1.3% now, as pressures related to the strong dollar and low energy prices fade. The second-in-command also noted that the Fed could move next month to raise rates, which could be taken as yet another signal the central bank is less willing to let low inflation further delay policy tightening. “While the dollar’s appreciation and foreign weakness have been a sizable shock, the U.S. economy appears to be weathering them reasonably well,” Fischer told a conference of researchers and market participants at the Fed Board.
I’d like to know what bad loans are at in the shadow banking sector.
Chinese banks’ troubled loans swelled to almost 4 trillion yuan ($628 billion) by the end of September, more than the gross domestic product of Sweden, according to figures released by the industry regulator. Banks’ profit growth slumped to 2% in the first nine months from 13% a year earlier, according to data released on Thursday night by the China Banking Regulatory Commission. The numbers come as a debt crisis at China Shanshui Cement Group Ltd. prompts lenders including China Construction Bank Corp. and China Merchants Bank Co. to demand immediate repayments and as weakness in October credit growth shows the risk of a deeper economic slowdown. While the official data shows non-performing loans at 1.59% of outstanding credit, or 1.2 trillion yuan, that rises to 5.4%, or 3.99 trillion yuan, if “special mention” loans, where repayment is at risk, are also included.
The amount of bad debt piling up in China is at the center of a debate about whether the country will continue as a locomotive of global growth or sink into decades of stagnation like Japan after its credit bubble burst. “Evergreening,” which is when banks roll over debt that hasn’t been repaid on time, may contribute to the official bad-loan numbers being understated. The Bank for International Settlements cautioned in September that China’s credit to gross domestic product ratio indicated an increasing risk of a banking crisis in coming years. Bad-loan provisions, shrinking lending margins and weakness in demand for credit are eroding banks’ profits just as financial deregulation boosts competition. Ramped-up stimulus, with the central bank cutting interest rates six times in a year, failed to prevent the nation’s broadest measure of new credit slumping to the lowest in 15 months in October.
“New Chinese factories are forecast to add a further 10% in capacity in 2016—despite projections that sales will continue to be challenged.”
For much of the past decade, China’s auto industry seemed to be a perpetual growth machine. Annual vehicle sales on the mainland surged to 23 million units in 2014 from about 5 million in 2004. That provided a welcome bounce to Western carmakers such as Volkswagen and General Motors and fueled the rapid expansion of locally based manufacturers including BYD and Great Wall Motor. Best of all, those new Chinese buyers weren’t as price-sensitive as those in many mature markets, allowing fat profit margins along with the fast growth. No more. Automakers in China have gone from adding extra factory shifts six years ago to running some plants at half-pace today—even as they continue to spend billions of dollars to bring online even more plants that were started during the good times.
The construction spree has added about 17 million units of annual production capacity since 2009, compared with an increase of 10.6 million units in annual sales, according to estimates by Bloomberg Intelligence. New Chinese factories are forecast to add a further 10% in capacity in 2016—despite projections that sales will continue to be challenged. “The Chinese market is hypercompetitive, so many automakers are afraid of losing market share,” says Steve Man, a Hong Kong-based analyst with Bloomberg Intelligence. “The players tend to build more capacity in hopes of maintaining, or hopefully, gain market share. Overcapacity is here to stay.” The carmaking binge in China has its roots in the aftermath of the global financial crisis, when China unleashed a stimulus program that bolstered auto sales.
That provided a lifeline for U.S. and European carmakers, then struggling with a collapse in consumer demand in their home markets. Passenger vehicle sales in China increased 53% in 2009 and 33% in 2010 after the stimulus policy was put in place. But the flood of cars led to worsening traffic gridlock and air pollution that triggered restrictions on vehicle registrations in major cities including Beijing and Shanghai. Worse, the combination of too many new factories and slowing demand has dragged down the industry’s average plant utilization rate, a measure of profitability and efficiency. The industrywide average plunged from more than 100% six years ago (the result of adding work hours or shifts) to about 70% today, leaving it below the 80% level generally considered healthy. Some local carmakers are averaging about 50% utilization, according to the China Passenger Car Association.
We should use ‘apparent’ for all Chinese offcial data.
Apparent steel consumption in China, the world’s biggest producer and consumer, fell 5.7% to 590.47 million tonnes in the first 10 months of the year, the China Iron and Steel Association (CISA) said on Friday. The figure was disclosed by CISA vice-secretary general Wang Yingsheng at a conference. China’s massive steel industry has been hit by weakening demand and a huge 400 million tonne per annum capacity surplus that has sapped prices. Producers have relied on export markets to offset the decline in domestic demand, but crude steel output still declined 2.2% in the first 10 months of the year, according to official data.
“Fiscal spending jumped 36.1% from a year earlier..”
China’s government spending surged four times the pace of revenue growth in October, highlighting policy makers’ determination to meet this years’ growth target as a manufacturing and property investment slowdown weigh on the economy. Fiscal spending jumped 36.1% from a year earlier to 1.35 trillion yuan ($210 billion), while fiscal revenue rose 8.7% to 1.44 trillion yuan, the Finance Ministry said Thursday. In the first ten months of the year, spending advanced 18.1% and revenue increased 7.7%. China is turning to increased fiscal outlays as monetary easing, a relaxation on local government financing, and an expansion of policy banks’ capacity to lend, struggle to stabilize growth in the nation’s waning economic engines.
Meantime, government revenue has been strained as companies face overcapacity, factory-gate deflation and the slowest annual economic growth in a quarter century. “With downward economic pressure and structural tax and fee cuts, fiscal revenue will face considerable difficulties in the next two months,” the Ministry of Finance said in the statement. “As revenue growth slows, fiscal expenditure has clearly been expedited to ensure that all key spending is completed.” The stepped-up stimulus effort had taken the fiscal-deficit-to-gross-domestic-product ratio to a six-year high by the end of September, according to an October report by Morgan Stanley analysts led by Sun Junwei in Hong Kong.
“The central government has been taking the lead in fiscal easing to support growth” as local governments’ off budget spending through financing vehicles have slowed, the analysts wrote. The country plans to raise the quota for regional authorities to swap high-yielding debt for municipal bonds by as much as 25%, according to people familiar with the matter. The quota of the bond-swap program will be increased to as much as 3.8 trillion yuan to 4 trillion yuan for 2015, according to the people, who asked not to be identified because the move hasn’t been made public. Increases have been made throughout the year from an originally announced 1 trillion yuan.
“..companies don’t need to invest and they’re already straining under mountainous debt loads they can’t service.”
Earlier this week, MNI suggested that according to discussions with bank personnel in China, data on lending for October was likely to come in exceptionally weak. That would mark a reversal from September when the credit impulse looked particularly strong and the numbers topped estimates handily. “One source familiar with the data said new loans by the Big Four state-owned commercial banks in October plunged to a level that hasn’t been seen for many years,” MNI reported. Given that, and given what we know about rising NPLs and a lack of demand for credit as the country copes with a troubling excess capacity problem, none of the above should come as a surprise. Well, the numbers are out and sure enough, they disappointed to the downside. RMB new loans came at just CNY514bn in October – consensus was far higher at CNY800bn. That was down 6.3% Y/Y. Total social financing fell 29% Y/Y to CNY447 billion, down sharply from September’s CNY1.3 trillion print.
As noted above, this is likely attributable to three factors. First, banks’ NPLs are far higher than the official numbers, as Beijing’s insistence on forcing banks to roll souring debt and the suspicion that nearly 40% of credit is either carried off the books or classified in such a way that it doesn’t make it into the headline print. Underscoring this is the rising number of defaults China has seen this year. Obviously, you’re going to be reluctant to lend if you know that under the hood, things are going south in a hurry. Here’s Credit Suisse’s Tao Dong, who spoke to Bloomberg: “Banks are still unwilling to lend. This is quite weak, even stripping out the seasonality. The rebound in bank lending, boosted by the PBOC’s injection to the policy banks, has been short lived.” Second, it’s not clear that demand for loans will be particularly robust for the foreseeable future. The country has an overcapacity problem. In short, companies don’t need to invest and they’re already straining under mountainous debt loads they can’t service.
Here’s Alicia Garcia Herrero, chief Asia Pacific economist at Natixis: “The reason is simple: too much leverage.” With those two things in mind, consider thirdly that this comes against the backdrop of lackluster economic growth. As Goldman points out, “China is likely to continue to slow credit growth over the medium to long term given credit growth is still running at roughly double the rate of GDP growth.” In short, it’s not clear why anyone should expect these numbers to rebound. Back to Bloomberg: “The “big miss for China’s credit growth in October rings alarm bells about the strength of the economy and significantly increases the chances of continued aggressive easing,” Bloomberg Intelligence economist Tom Orlik wrote in a note. “It lends support to the idea that a combination of falling profits, the high cost of servicing existing borrowing and uncertainty about the outlook has significantly reduced firms’ incentives to borrow and invest. That’s similar to the problem that afflicted Japan during its lost decades.”
So if these kind of numbers continue to emanate from China, expect the calls for fiscal stimulus to get much louder. Indeed consider that fiscal spending soared 36% on the month (via Bloomberg again): “China’s government spending surged four times the pace of revenue growth in October, highlighting policy makers’ determination to meet this years’ growth target as a manufacturing and property investment slowdown weigh on the economy. Fiscal spending jumped 36.1% from a year earlier to 1.35 trillion yuan ($210 billion), while fiscal revenue rose 8.7% to 1.44 trillion yuan, the Finance Ministry said Thursday. In the first ten months of the year, spending advanced 18.1% and revenue increased 7.7%.”
“Total credit outstanding was up just 12% from a year earlier, close to its slowest pace in over a decade.” That’s still twice as fast as even the official GDP growth number..
The People’s Bank of China has been easing policy for nearly a year, but the economy hasn’t bounced back. Capital outflows and a tapped out banking system are holding it back. Data out Thursday showed lending in October to be decidedly lackluster. Banks extended 513.6 billion yuan ($80.7 billion) of new loans, down 3.3% from a year earlier. Total social financing, a broader measure of credit that includes various kinds of shadow loans, was also weak. Total credit outstanding was up just 12% from a year earlier, close to its slowest pace in over a decade. This will be disappointing to the central bank, which has been bending over backward to stimulate credit. Since November last year, it has slashed benchmark interest rates six times and cut the required level of reserves, which frees up funds for lending, four times.
Demand for loans is weak, as companies see fewer opportunities for profitable investment in a slowing economy. What’s more, disinflationary pressures mean that real, inflation-adjusted lending rates have fallen by not much or none at all, depending on what price index is used. Banks are also hesitant to lend aggressively, says Credit Suisse economist Dong Tao, as they are already facing a buildup of nonperforming loans. In the third quarter, profit growth at the country’s eight biggest lenders was close to zero, due to rising provisions for bad loans. Capital outflows are also making the PBOC’s job harder. Figures out on Wednesday indicated that there was a massive $224 billion of investment outflows in the third quarter.
Facing this, the PBOC has been intervening to keep the currency from depreciating, selling off dollars and buying up yuan. Unfortunately this shrinks the domestic money supply, thus counteracting much of the PBOC’s easing measures. The alternative would be to let the currency depreciate. That would lead to more outflows in the near term, until the currency falls to a level that would bring money back in. But if the economy keeps stalling, pressure for depreciation may be too strong to resist. Investors who have seen the yuan stabilize since the botched August devaluation shouldn’t rest too easy. The outflow situation appeared to improve in October. The PBOC’s forex reserves unexpectedly ticked up for the month, suggesting it didn’t have to intervene as much in the currency markets.
But economists such as Daiwa’s Kevin Lai believe the central bank was merely intervening more stealthily, for example by borrowing dollars from forward markets instead of spending its reserves. Regardless, unless the Chinese economy surges back soon, outflow pressures are likely to intensify again, especially if the Federal Reserve raises interest rates as expected in December. That will make it even more difficult to stimulate growth in China. Fiscal policy, including more infrastructure stimulus, will likely be needed to supplement monetary easing. Otherwise, the PBOC will just keep pushing on a string.
The $30 handle is not far away.
Oil prices tumbled almost 4% on Thursday, accelerating a slump that threatens to test new six-and-a-half year lows, with traders unnerved by a persistent rise in U.S. stockpiles and a downbeat forecast for next year. Benchmark Brent crude fell below $45 a barrel for the first time since August, its sixth decline of a seven-day losing streak of more than $6 a barrel, or 12%, in a slump that will vex traders who thought the year’s lows had already passed. The latest decline was triggered by data showing that U.S. stockpiles were still rising rapidly toward the record highs reached in April, despite slowing U.S. shale production. Weekly U.S. data showed stocks rose by 4.2 million barrels, four times above market expectations.
In its monthly report, OPEC said its output dropped in October but at current levels it could still produce a daily surplus above 500,000 barrels by 2016. Brent futures settled down $1.75, or 3.8%, at $44.06 a barrel. The tumble of the past week has left Brent less than $2 away from its August lows and a new 6-1/2 year bottom. U.S. crude futures finished down $1.18, or 2.8%, at $41.75. Its low in August was $37.75. “We’re going to have a lot of oil on our hands with the builds we’re seeing, talk of rising tanker storage and the yawning discount between prompt and forward oil,” said Tariq Zahir at New York’s Tyche Capital Advisors.
And everyone’s pumping.
Surplus oil inventories are at the highest level in at least a decade because of increased global production, according to OPEC. Stockpiles in developed economies are 210 million barrels higher than their five-year average, exceeding the glut that accumulated in early 2009 after the financial crisis, the organization said in a report. Slowing non-OPEC supply and rising demand for winter fuels could “help alleviate the current overhang,” enabling a recovery in prices, it said. The group’s own production slipped last month because of lower output in Iraq. “The build in global inventories is mainly the result of the increase in total supply outpacing growth in world oil demand,” OPEC’s research department said in its monthly market report. Oil prices have lost about 40% in the past year as several OPEC members pump near record levels to defend their market share against rivals such as the U.S. shale industry.
While inventories peaked in early 2009 before OPEC implemented record production cuts, this time the group has signaled it won’t pare supplies to balance global markets and U.S. output is buckling only gradually in response to the price rout. The current excess is bigger than the surplus of 180 million barrels to the five-year seasonal average that developed in the first quarter of 2009, according to the report. The 2009 glut was the only other occasion in the past 10 years when the oversupply has topped 150 million barrels, it said. “The massive stockpile overhang is one more indicator, along with the ongoing slump in prices, that Saudi Arabia’s oil strategy isn’t working so far,” said Seth Kleinman, head of energy strategy at Citigroup Inc. in London. “The physical oil market is falling apart just as we are hitting the winter, when it’s all supposed to be getting better.”
The entire market is collapsing, but the IEA sees a positive: ““Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions..”
Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency. This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside OPEC will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry. “Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.”
Oil prices have lost about 40% in the past year as the OPEC defends its market share against rivals such as the U.S. shale industry, which is faltering only gradually despite the price collapse. Oil inventories are growing because supply growth still outpaces demand, the 12-member exporters group said in its monthly report Thursday. Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline, according to the agency. The pace of gains slowed to 1.6 million barrels a day in the third quarter, from 2.3 million a day in the second, although growth remained “significantly above the historical average.” There are signs the some fuel-storage depots in the eastern hemisphere have been filled to capacity, it said.
Excuse me? … “..younger households are forgoing the opportunity to accumulate wealth..”
The share of U.S. homes sold to first-time buyers this year declined to its lowest level in almost three decades, raising concerns that young people are being left out of an otherwise strong housing-market recovery. First-time buyers fell to 32% of all purchasers in 2015 from 33% last year, the third straight annual decline and the lowest%age since 1987, according to a report released Thursday by the National Association of Realtors, a trade group. The historical average is 40%, according to the group, which has been recording such data since 1981. The housing market is on track for its strongest year for sales since 2007, but the dearth of younger buyers could pose long-term challenges, economists said.
Without them, current owners have difficulty trading up or selling their homes when they retire. If home prices continue to rise sharply it will become even more difficult for new buyers to enter the market. The median price of previously built homes sold in September was $221,900, up 6.1% from a year earlier, according to the NAR. The median price for a newly built home rose to $296,900 in September from $261,500 a year ago, according to the Commerce Department. “The short answer is they can’t afford it,” said Nela Richardson, chief economist at Redfin, a real-estate brokerage. By delaying homeownership, younger households are forgoing the opportunity to accumulate wealth, said Ms. Richardson.
For now, they look stuck with nowhere to turn.
Striking Greeks took to the streets on Thursday to protest austerity measures, setting Alexis Tsipras’ government its biggest domestic challenge since he was re-elected in September promising to cushion the impact of economic hardship. Flights were grounded, hospitals ran on skeleton staff, ships were docked at port and public offices stayed shut across the country in the first nationwide walkout called by Greece’s largest private and public sector unions in a year. As Greece’s foreign lenders prepared to meet in central Athens to review compliance with its latest bailout, thousands marched in protest at the relentless round of tax hikes and pension cutbacks that the rescue packages have entailed.
Tensions briefly boiled over in the city’s main Syntagma Square, where a Reuters witness saw riot police fired tear gas at dozens of black-clad youths who broke off from the march to hurl petrol bombs and stones and smash shop windows near parliament. Some bombs struck the frontage of the Greek central bank. Police sources said three people were detained before order was restored. Five years of austerity since the first bailout was signed in 2010 have sapped economic activity and left about a quarter of the population out of work. “My salary is not enough to cover even my basic needs. My students are starving,” said Dimitris Nomikos, 52, a protesting teacher told Reuters. “They are destroying the social security system … I don’t know if we will ever see our pensions.”
Losses wherever you look.
European banks are on the retreat all across Latin America Societe Generale announced in February that it’s dismissing more than 1,000 workers while exiting the consumer-finance business in Brazil. In August, HSBC sold its unprofitable Brazilian unit, with more than 20,000 employees. Two months later, it was Deutsche Banks turn. The German lender said it’s closing offices in Argentina, Mexico, Chile, Peru and Uruguay and moving Brazilian trading activities elsewhere. Barclays is shrinking its operations in Brazil too. The exodus threatens to deepen Latin America’s turmoil, making it harder for companies and consumers to obtain financing. The region already is out of favor as sinking commodity prices drive it toward the worst recession since the late 1990s.
European banks, meanwhile, are looking to cull weak businesses as they struggle to generate profits and meet tougher capital requirements back home. “All large European banks are under great pressure from regulatory changes and low stock prices to change their business models,” Roy Smith, a finance professor at New York University’s Stern School of Business, said in an e-mail. “These changes have to be quite significant to make enough difference.” The exits are opening opportunities for local rivals and global banks from the U.S., Spain and Switzerland willing to wait out the economic slump. Latin America’s economy will probably contract 0.5% this year, squeezed by falling commodity prices and a slowdown in Brazil that’s predicted to be the longest since the Great Depression.
That would make it the first recession in the region since 2009 and the biggest since 1999. Demand for investment-banking services is tumbling, with fees plunging 45% this year through Oct. 15 to a 10-year low of $817 million, Dealogic said. “European banks have fairly weak profits right now and in some cases low capital levels,” Erin Davis, an analyst from Morningstar, said in an e-mail. That leaves “little wiggle room” to absorb losses or low profits from Latin America, even if they believe in its long-term potential, Davis said.
“..from 2002 to 2014 the area of the glacier’s floating shelf shrank by a massive 95%..”
A major glacier in Greenland that holds enough water to raise global sea levels by half a metre has begun to crumble into the North Atlantic Ocean, scientists say. The huge Zachariae Isstrom glacier in northeast Greenland started to melt rapidly in 2012 and is now breaking up into large icebergs where the glacier meets the sea, monitoring has revealed. The calving of the glacier into chunks of floating ice will set in train a rise in sea levels that will continue for decades to come, the US team warns. “Even if we have some really cool years ahead, we think the glacier is now unstable,” said Jeremie Mouginot at the University of California, Irvine. “Now this has started, it will continue until it retreats to a ridge about 30km back which could stabilise it and perhaps slow that retreat down.”
Mouginot and his colleagues drew on 40 years of satellite data and aerial surveys to show that the enormous Zachariae Isstrom glacier began to recede three times faster from 2012, with its retreat speeding up by 125 metres per year every year until the most recent measurements in 2015. The same records revealed that from 2002 to 2014 the area of the glacier’s floating shelf shrank by a massive 95%, according to a report in the journal Science. The glacier has now become detached from a stabilising sill and is losing ice at a rate of 4.5bn tonnes a year. Eric Rignot, professor of Earth system science at the University of California, Irvine, said that the glacier was “being hit from above and below”, with rising air temperatures driving melting at the top of the glacier, and its underside being eroded away by ocean currents that are warmer now than in the past.
Wow, really?! Foreigners controlling your borders?: “..a pact that would see Turkey patrolling the EU’s southern border with Greece..”
The German chancellor, Angela Merkel, and other EU leaders are racing to clinch a €3bn (£2.4bn) deal with Turkey’s strongman president, Recep Tayyip Erdogan, to halt the mass influx of migrants and refugees into Europe. All 28 national EU leaders are expected to host Erdogan at a special summit in Brussels within weeks to expedite a pact that would see Turkey patrolling the EU’s southern border with Greece and stemming the flow of hundreds of thousands of refugees, mainly from Syria. In return, Ankara would get €3bn over two years and the EU would also probably agree to resettle hundreds of thousands of refugees in Europe directly from Turkey. No EU country, not even Germany, has committed to paying its share of the €3bn bill except Britain.
In what appears to be a unique event in David Cameron’s chequered history of relations with the EU, the prime minister, while in the Maltese capital of Valletta, offered €400m for the Turkey plan, the only financial pledge yet delivered. That figure is roughly in line with a breakdown of expected national contributions by the European commission and would make Britain the second biggest participant after Germany. The prospect of a breakthrough with Turkey is tantalising for Merkel, for whom the refugee crisis has posed the biggest problem in 10 years of power. This week her finance minister, Wolfgang Schaeuble, likened the arrival of almost 800,000 newcomers in Germany this year to an avalanche and appeared to blame the chancellor for the situation by stating that “careless skiers can trigger avalanches”.
Facing tumult within her governing coalition and her own party, Merkel looks like a leader seeking relief in a hurry. An emergency EU summit in Valletta heard from EU negotiators on Thursday that Erdogan was demanding two quick moves by the Europeans to pave the way for a deal – €3bn over two years and a full summit. Senior EU sources said the message from Ankara was that the price tag would rise if it was not accepted now. Merkel wasted no time in agreeing, witnesses to the closed-door summit exchanges said. She told her fellow EU leaders that she was ready to put money on the table and proposed 22 November as the summit date. She later said the date was not set because it had to be agreed with Ankara, but that it would be around the end of the month.
It’s a start.
Prime Minister Justin Trudeau will use his first international trip as an opportunity to show other nations there is an economic – as well as humanitarian – case for welcoming large numbers of Syrian refugees. Less than two weeks after being sworn in as Prime Minister, Mr. Trudeau will participate in a summit of G20 leaders hosted by Turkey, Syria’s northern neighbour that is currently home to more than two million refugees. Mr. Trudeau said he expects Canada’s plan to settle 25,000 Syrian refugees this year will have a greater impact in terms of setting an example to others. “I think one of the things that is most important right now is for a country like Canada to demonstrate how to make accepting large numbers of refugees not just a challenge or a problem, but an opportunity; an opportunity for communities across this country, an opportunity to create growth for the economy,” he said.
Mr. Trudeau is departing on a whirlwind of foreign travel that will test his political skills as he attempts to strike positive first impressions with the world’s most influential leaders. The Liberals are promoting the trips as a message that Canada will now play a more constructive role in international affairs. The Prime Minister said his focus at the G20 will be to encourage global growth through government investment rather than austerity. The G20 pledged last year in Brisbane, Australia, to boost economic growth by 2% partly by increased spending on infrastructure, a plan that is in line with Mr. Trudeau’s successful election platform. The global economy has since moved in the opposite direction. The IMF has lowered its global growth forecasts for this year and next.