These are stories Report on Business is following Monday, May 6, 2013.
IMF slams Greece
The International Monetary fund today praised Greece for some of its economic measures, but slammed the government for failing on several fronts, notably in fighting tax evasion.
The IMF also noted that the country’s achievements have been on the back of “unprecedented” bailout support from its international lenders, to the tune of €173-billion ($230-billion Canadian).
In the report on its consultations with Athens, the IMF warned that “insufficient structural reforms have meant that the adjustment has been achieved primarily through recessionary channels,” and the pain in the embattled country has not been shared by all.
Its three key points:
1. “Very little progress has been made in tackling Greece’s notorious tax evasion. The rich and self-employed are simply not paying their fair share, which has forced an excessive reliance on across-the-board expenditure cuts and higher taxes on those earnings a salary or a pension.”
2. Labour reforms are pushing down wages, but prices have not dropped as quickly “because of a failure to liberalize closed professions and more generally open up to competition.” This, too, has taken its toll on wage earners and those on fixed incomes.
3. Jobless levels are surging in the private sector, notably among youth, but “the over-staffed public sector has been spared, because of a taboo against dismissals.”
The IMF called for decisive action, adding there is “no more room” for tax hikes and spending cuts.
“A strong recovery will need to be built primarily on deepening structural reforms,” the IMF said.
“The focus should be on invigorating Greece’s export and import competing industries,” it added in the report.
“This will require a more determined and ambitious effort to reduce barriers to entry into various markets, including opaque and lengthy licensing procedures. Moreover, too many assets remain in state hands.”
- Read the report
- Eric Reguly: ECB has stepped up, it's time for feckless politicians to follow
- EU sees deeper euro zone recession in 2013, slower deficit cuts
Onex in trade show deal
Onex Corp. is taking over a U.S. trade show operator in a $950-million (U.S.) cash deal, The Globe and Mail's Bertrand Marotte reports.
Toronto-based private equity firm Onex said today it has agreed to acquire Nielsen Expositions from its parent, an affiliate of Neilsen Holdings NV.
Nielsen Expositions is a major operator of business-to-business tradeshows in the United States in nine different markets, including general merchandise, sports, hospitality and retail design, jewelry and photography.
“Nielsen Expositions’ strength in the U.S. business-to-business tradeshow industry is evidenced by its high renewal rates, long-standing exhibitor relationships, and the brand strength of the underlying shows,” Onex managing director Kosty Gilis said in a statement.
CRTC hearing begins
Canada’s broadcast regulator warned BCE Inc. and Astral Media Inc. today that they must prove their $3-billion merger is in the best interest of Canadians if they hope to have their deal approved, The Globe and Mail's Steve Ladurantaye reports.
“We will determine if this transaction would benefit Canadians, as well as the Canadian broadcasting system,” said Jean Pierre Blais, chairman of the Canadian Radio-television and Telecommunications Commission.
Mr. Blais was speaking at the opening of a weeklong hearing into the deal, which is a modified version of a deal the commission rejected a year ago. The deal has been modified – the companies have struck deals to sell off some of their English-language television channels, such as Teletoon and Disney XD, to reduce their combined market share; BCE will sell 10 radio stations; and the company made a promise about keeping its head office in Montreal.
On central bank independence
Louis Rasminsky probably best summed up how central bank independence should work in a democracy.
“In a democratic country you couldn’t have a situation, as I see it, where a part of government was not answerable to anyone except their own conscience,” the third governor of the Bank of Canada once told me.
“On the other hand, it would be dangerous to have a system where monetary policy was a departmental concern and every shot would be called by the minister of finance or the deputy minister of finance representing the minister.”
Mr. Rasminsky was referring to how the system should work when the central bank governor and the finance minister disagree, but the same concept applies to the issue playing out today: Finance Minister Jim Flaherty’s surprise choice for the next governor.
To recap, Mr. Flaherty stunned Bay Street last week by choosing an outside candidate, Export Development Canada chief Stephen Poloz, to succeed Mark Carney as governor when the latter heads to the Bank of England this summer.
In doing so, Mr. Flaherty skipped over Tiff Macklem, the current senior deputy governor, who most believed would get the job.
As The Globe and Mail’s Kevin Carmichael and Tavia Grant report, this has raised troubling questions among some as to whether the government is influencing monetary policy, which it’s not supposed to do.
We don’t know whether Mr. Flaherty ignored the recommendation of the selection committee of the central bank’s board and went for his own choice because we don’t know who the committee recommended.
What we do know is that Mr. Macklem was the obvious candidate on Bay Street, and that Mr. Poloz certainly has the credentials, though he’s been away from the central bank for quite some time.
Mr. Poloz could be seen as favouring the Harper government’s forceful trade push, given his expertise, but economists widely reject the suggestion that he could use his position to drive down the Canadian dollar to give ailing exporters a boost.
(True, he could talk about the loonie more, but he’s not going to actually manipulate its value in the market. The Bank of Canada doesn’t take that approach and the government has pledged not to do it.)
While central bank independence is sacrosanct, it doesn’t mean the government doesn’t get its say on who’s at the helm.
Remember that Mr. Carney was a surprise choice for the job, and he went on to become the world’s best central banker.
Or go back further to the case of John Crow, who wasn’t reappointed in the mid-1990s after the Liberals decimated the Conservatives in the 1993 election in the wake of a devastating recession.
Mr. Crow had been driving publicly for zero inflation, and during his term unemployment spiked to about 12 per cent.
He could not reach an agreement with the new finance minister, Paul Martin, and, as a result, his senior deputy, Gordon Thiessen was chosen as his successor.
This was the government having its say, though it opted for an insider.
The system designed by Mr. Rasminsky – under which the finance minister must issue a directive to the governor in the case of a disagreement, and if it wants a shift in policy – is a good one in a democracy.
It ensures the government doesn’t tinker for political purposes, while it’s protected from a governor going rogue.
Central bank independence is indeed sacrosanct, but the suggestion that the government doesn’t get a say in who is governor, or any lack of accountability, for that matter, has never been in question.
- Stephen Poloz: Man with a mission
- Dark clouds to greet Stephen Poloz's first day at his dream job
- Kevin Carmichael, Tavia Grant in Economy Lab: Selection of central bank chief may raise questions about independence
- Armine Yalnizyan's Economy Lab: Nine things about new Bank of Canada chief Poloz
- Economists speculate on why Flaherty went outside for central bank chief
- Sean Silcoff in ROB Insight (for subscribers): Only surprise about next central banker is that anyone is surprised
- Boyd Erman's Streetwise (for subscribers): Carney's goodbye: the most uncomfortable party in town?
- William Robson: The new governor may be a surprise, but the bank's role is firm
Streetwise (for subscribers)
ROB Insight (for subscribers)
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