govt to support non-compliant firm’s workers

By Tawanda Musarurwa

HARARE – Government has said it will support workers of foreign firms that will have failed to comply with the indigenisation require-ments - with legal backing .

Cabinet has directed that on April 1, 2016, all l ine Minis-tries invoke section 5 of the Indigenisation and Economic Empowerment Act (Chapter 14;33) against all non-com-pliant businesses in their sectors.

Youth Development, Indi-genisation and Economic Empowerment Minister Pat-rick Zhuwao today said he does not expect companies to close on the basis of mere

‘stubbornness’.

But if in the case that any firms do have their operating licenses revoked, Govern-ment will step in to assist the workers with legal help, he said.

“Any one that runs a busi-ness and is serious about that business will com-ply, further to that I have received representation from worker organisations saying that they are concerned, and I have told them that it is the fiduciary responsibility of

the directors of such compa-nies to make sure that they look after their workers.

“I have sought legal from three lawyers, and I am also seeking legal advice from two more lawyers to make sure that I have a strong case. I will support any employee that is rendered jobless by any company closure.

“If a company stopped operating by virtue that the management and directors of that company have failed in their fiduciary responsibility I will support those workers in going from a legal point of view in going after those particular directors, both in their individual and institu-

News Update as @ 1530 hours, Wednesday 30 March 2016

Feedback: [email protected]: [email protected]

Govt to support non-compliant firm’s workers

Minister Zhuwao

tional capacity,” said Minister Zhuwao.

Corporate directors’ fiduci-ary duties or ‘duty of care” basically requires directors to make a business decision based on all available and material information and to act in a deliberate and

informed manner.

That is, they must act in good faith for the com-pany's best interest and second, they must believe that the actions promote the best interest of the com-pany based on a reasonable investigation of the options

available.

Legal experts say fiduciary duties or ‘the duty of care’ of corporate directors and officers is a special case of the duty of care imposed throughout the law under the general heading of negli-gence.●

2 NEWs

Padenga posts solid resultsBH24 Reporter

HARARE -Crocodile skin producer, Padenga posted an operating profit of $9,9 mil-lion for the year to Decem-ber 31, 2015 up from $8,9 million in the prior year, despite revenues declining during the period.

Revenue for the period was down marginally to $27,4 million from $27,9 million previously.

Management attributed the decline in revenue to lower sales in the alligator busi-ness where only 8 586 skins were sold against 14 890

skins prior year.

Overall the group man-aged to sell more crocodile skins, bigger size as well as improved quality skins.

And Padenga also bene-fited from lower input cost as a result of the depreci-ating rand, and low infla-tion. In addition to the growth in operating profit, the group’s profit margins also improved, rising to 36 percent from 32 percent previously.

At the same time profit after tax margins improved to 26 percent from 21 percent

from FY2014.

The overall positive perfor-mance was driven by the group’s flagship Zimbabwe crocodile operation, whose turnover increased by 7 percent to $25,7 million. The Zimbabwean operation accounts for 94 percent of total turnover. Earnings per share was up 21 percent to 1,34 cents.

The board has declared a dividend per share of 0,41 cents, which was a 37 per-cent bump from a dividend per share of 0,35 cents declared in the prior year comparative.●

BH24 Reporter

HARARE -Diversified miner RioZim’s gold output for the year ended December 31, 2015 rose by a significant 85 percent to 42 328,75 ounces from 22 857,5 ounces in 2014

This was on the back of the re-opening of the Kado-ma-based Cam & Motor mine in April last year, which contributed 15 873,3 ounces during the period under review.

The group’s Renco Mine, which is based in Masvingo

continued to contribute the large portion of its gold output, having produced RioZim’s entire 2014 gold production and stil l the bulk

of the 2015 output.

The overall gold operation posted an operating profit of $5,3 million during the period under review. How-

ever losses at the Empress Nickel Refinery (ENR), result-ing in the group posting a $150,000 operating loss.

Broadly, RioZim’s revenue was 14 percent down at $56,5 million, due to the weak mineral prices that pre-vailed during the period.

Going forward, the group’s management is anticipating positive outturn in the medi-um-to-long-term due to its restructured balance sheet as well as the resumption of operations at ENR for a return to sustained profita-bility.●

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7

By Funny Hudzerema

HARARE– The 2016 tobacco mar-keting season opened today at the Tobacco sales Floors with the first bale being sold at $4, 50 per kg.

However prices topped the $4,70 per kg level while the lowest price was $0, 50 per kg.

Officially opening the marketing season Agriculture, Mechanisa-tion and Irrigation Development Minister Dr Joseph Made said agricultural sector is expected to grow mainly anchored by tobacco. “Ladies and Gentlemen agriculture remains the mainstay of the econ-omy which is projected to grow by 3, 4 percent in 2016 mainly anchored on tobacco production.

“It is therefore expected that tobacco merchants will pay fair prices for the tobacco to ena-ble farmers to have sustainable returns on their tobacco,” he said. He added that farmers deserve better prices for them to re-in-vest in tobacco production and the expectation is that buyers will match quality tobacco with

high prices at both auction and contact floors. This year tobacco production is projected to decline by 20 percent due to reduction in tobacco growers during the 2015 growing season due to draught conditions. Dr Made also said Government has reduced the tobacco levy on tobacco growers from a rate of 1, 5 percent to 0, 75 percent with effect from January this year. TIMB board chairman Mrs Monica Chinamasa said TIMB was committed to increase the efficiency of auction system by continuously imple-ment a number of reforms. “Thus for the first time in the history of tobacco marketing in Zimbabwe, electronic marketing of tobacco will be witnessed running side by side with the conventional system of marketing on the auction floor.

“E-marketing will significantly improve transparency in the pric-ing of tobacco and there is also an added advantage of accessing sales information in real time,” she said. To date almost 72 000 growers have registered to sell during this season compared to

91 000 who registered by the same time last year. Boka Tobacco Auction Floors operations director, Mr Moses Bias said the 2016 tobacco selling season has started well with better prices despite the poor quality of the tobacco since it is the first leafs.

“We have laid down 2 500 bales as compared to 800 the same period last year due late opening of the auction floors and we can give the average price of tobacco since it is the first day,” he said. Farmers were also busy opening new accounts in compliance with the new directive where proceeds from the sale of their crop will be deposited into their accounts unlike the previous seasons where they were paid cash. Farmers were however complaining that the new payment system restricts them from accessing all their money as they are only allowed to withdrawal a maximum of $ 1000 per day. “We come from remote areas which are far from banks and it’s difficult to travel to and from the banks,” said one farmer●

8 NEWs

Tobacco season starts

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HARARE – Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya said he is sat-isfied with the level of compli-ance to the indigenisation laws of the country in the banking sector, and focus should be on increasing its role in economic development and empower-ment.

Foreign banks operating in Zimbabwe include Barclays Plc, Standard Chartered Plc, Stand-ard Bank Group Ltd, Ecobank and Banc ABC.

Cabinet last week directed that with effect from April 1, 2016, all line Ministries should issue orders to the licensing authority to cancel licenses of businesses that fail to submit their indige-nisation plans by March 31.

Some foreign firms had been reluctant to comply with the law which requires that locals control at least 51 percent of a foreign business valued at over $500 000.

Dr Mangudya told New Ziana

that most foreign owned banks had their indigenisation plans approved, but did not reveal the number of banks which were compliant.

He cited Banc ABC, which he said was now just working on implementing what was approved in its indigenisation plan.

“Banks are complying and we are satisfied with the level of compliance,” he said.

Dr Mangudya said for the economic empowerment component of the indigenisa-tion agenda to succeed, there was need to prop up banks to increase funding in the econ-omy.

“We want to make sure that banks start to provide more money to agriculture, to women and many other empowerment projects.”

The said compliance in the sector was also being guided by simplified indigenisation

guidelines that the government introduced in January this year.

Under the new indigenisation framework, introduced in Jan-uary, companies in the man-ufacturing sector have up to four years to ensure compliance while the remainder, including financial services, tourism, engineering and construction, energy and telecommunica-tions, have one year.

A total of 16 sectors are reserved for locals, while all government departments, statutory bodies and local authorities are now required to procure 50 percent of their goods from local businesses.

Besides disposal of shares, companies can comply by implementing community devel-opment projects that can earn them “empowerment credits.”

All indigenisation applications will be submitted through the Zimbabwe Investment Authority for processing.-New Ziana●

11 NEWs

RBZ satisfied with indigenisation policy compliance of banks

BH2412

BH2413

HARARE -The equit ies mar-ket s l id today fo l lowing a 1.01 retreat in the main-stream industr ia l index to c lose at 97.17.

The downturn was dr iven by losses in Natfoods, which lost a hefty $0,1000 to trade at $2,1000, whi le Hippo Val-ley shi f ted down $0,0670 to $0,2700 and Dawn Proper-t ies s l ipped $0,0039 to c lose at $0,0161.

Banker Barc lays was down $0,0021 to sett le at $0,0279 and crocodi le skin producer Padenga eased $0,0005 to c lose at $0,0600.

However, g iant insurer Old Mutual advanced by $0,0713 to trade at $2,1713 whi le ZBFH increased by $0,0050 to $0,0300.

Also on the upside was te l-

ecoms giant Econet and NicozDiamond, which both went up by $0,0010 to set-t le at $0,2430 and $0,0160, respect ively.

The mining index was f lat

at 19.53 as Bindura, Fal-gold, Hwange and RioZim maintained previous pr ice levels at $0,0100, $0,0050, $0,0300 and $0,1040 respec-t ively- BH24 Reporter ●

ZsE14

Industrials slide

MovERs CHANGE TodAy PRICE UsC sHAKERs CHANGE TodAy PRICE UsC

ZBFH 20.00 3.00 HIPPO -19.88 27.00

NICOZDIAMOND 6.66 1.60 DAWN -19.50 1.61

OLD MUTUAL 3.39 217.13 BARCLAYS -7.00 2.79

ZIMRE 2.85 1.80 NATFOODS -4.54 210.00

OK ZIM 1.44 3.50 PADENGA -0.82 6.00

ECONET 0.41 24.30 DELTA -0.07 56.25

SEEDCO -0.03 63.98

INdEx PREvIoUs TodAy MovE CHANGE

INDUSTRIAL 98.18 97.17 -1.01 points -1.03%

MINING 19.53 19.53 +0.00 POINTS +0.00%

15 ZsE TABlEs

ZsE

INdICEs

Stock Exchange

Previous

today

16 dIARy oF EvENTs

The black arrow indicate level of load shedding across the country.

PoWER GENERATIoN sTATs

Gen Station

30 March 2016

Energy

(Megawatts)

Hwange 551 MW

Kariba 422 MW

Harare 30 MW

Munyati 16 MW

Bulawayo 20 MW

Imports 0 - 300 MW

Total 1058 MW

• Analyst briefing - Old Mutual Zimbabwe, Steward Room, Meikles Hotel, March 30, 1430hrs

THE BH24 dIARy

JoHANNEsBURG - South Africa's rand rallied to a 3-1/2 month high against the US dollar on Wednesday and government bonds firmed after Federal Reserve chair Janet Yellen said the US cen-tral bank should be cautious in raising interest rates.

The rand has been under pressure since Dec. 9 after President Jacob Zuma fired respected finance minister Nhlanhla Nene and replaced him with an unknown back-bencher, triggering a dra-matic sell-off in the cur-rency.

Although Zuma rescinded his decision within a few days, returning Pravin Gordhan, also liked by investors, to the finance minister post, investors are now worried about undue political inter-ference in key economic departments.

Despite Wednesday's gains, which left the rand at its strongest since mid-Decem-ber, it was stil l far off the 14,6000 level it closed at the day before Nene's sacking.

At 0839 GMT, the rand traded at 14,9765 per dollar, 1,21 percent firmer than Tuesday's New York close. It briefly scaled a high of 14,9010 earlier on Wednes-day.

"Emerging markets curren-cies across the spectrum have strengthened into the London open. This follows on from Fed chair Yellen

comments which have been interpreted as rather dov-ish," ETM Analytics econo-mist Jana van Deventer said.

"Markets are scaling back expectations for the Fed to hike interest rates as soon as April and the Fed rate hike trajectory is being lowered."

Government bonds also firmed, and the yield for the

benchmark government bond due in 2026 slid 17.5 basis points to 9,17 percent.

The Top-40 stock index was up 1,26 percent while the broader all-share rose by 1,3 percent.

Locally, focus was on whether Gordhan would answer questions from the elite Hawks police unit about a suspected spy unit estab-lished while he was head of the South African Revenue Service (SARS).

"If there are any difficulties surrounding this topic then we could see the rand give back some of the gains," van Deventer said. The Treasury did not immediately respond to Reuters questions on the issue.

Analysts said another risk for the rand was South Africa's Constitutional Court ruling on Thursday on whether Zuma should pay back some of the 240 million rand ($16 million) spent by the state on renovating his private Nkandla home- Reuters●

REGIoNAl NEWs 17

Rand rallies to 3-1/2 month high after Yellen's dovish comments

The dollar headed for its worst month in more than five years after Federal Reserve Chair Janet Yellen doused speculation the US central bank would pick up the pace of interest-rate increases. The yen strength-ened.

A gauge of the greenback approached the lowest since June after Yellen said the Fed would act “cautiously” as it looks to raise rates against a backdrop of deteriorating global economic growth.

During the past two days, the index lost almost all of the gains made last week, when policy makers includ-ing St. Louis Fed President James Bullard and San Francisco Fed President John Williams said an increase as soon as next month was pos-sible. The dollar has dropped against all its 16 major counterparts in March.

“The Yellen effect was quite strong” in weakening the dollar, said Philip Wee, a senior currency economist at DBS Group Holdings Ltd. in Singapore. “She’s emphasiz-

ing patience.”

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, fell 0,3 percent as of 8:24 a.m. Wednesday in London, after declining 0,8 percent the day before. The gauge has slumped 3,7 percent in March, set for the worst month since Septem-ber 2010.

The dollar slid 0,4 percent to 112,20 yen after dropping 0,7 percent on Tuesday. The US currency weakened 0,3 percent to $1,1319 per euro. The yen strengthened 0,2 percent to 127,03 per euro.

Trouble Abroad

Global developments, par-ticularly those in China, pose ongoing risks to the Fed’s outlook, Yellen said in a speech to the Economic Club of New York on Tuesday. Appreciation by the dollar is stil l expected to weigh on inflation in months to come, she said.

Traders slashed the likeli-hood of a rate increase in April to zero, down from 6 percent on Monday, and low-ered the probability of one in June to 28 percent from 38 percent, based on the assumption that the effective fed funds rate will trade at the middle of the new Fed’s target range after the next increase.

“Yellen indicated that core Fed members take into account the global context more than regional officials,” said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp. in New York. “A June rate hike would be difficult as global finan-cial turmoil earlier this year affects the real economy with a time lag.”

Commonwealth Bank of Aus-tralia, the country’s largest lender, has revised down its forecasts for the greenback, while raising those for the Australian and New Zealand dollars, the euro and the yen.

“The actual US dollar decline has been more dramatic than we expected," currency strategists led by Richard Grace at Commonwealth Bank in Sydney, wrote in a note to clients.

“We have subsequently revised lower the extent to which we believe the Fed will l ift interest rates both in the short-term and in the long-term." – Bloomberg●

INTERNATIoNAl NEWs 18

Yellen sends Greenback to worst month since 2010 as Yen advances

Janet Yellen

By Dan Steinbock

continued from yesterday -

The re-think intensified after the Islamic State’s (IS) terror attack in Paris. As EU states began to re-impose tempo-rary border controls, the EC proposed a major amend-ment to Schengen. As the refugee crisis has escalated, divisions among EU member states have intensified along the migrant routes causing a virtual domino effect.

After record number of migrants flooded southern Germany from Hungary, via Austria, Germany re-imposed its border controls with Aus-tria. Austria began to limit road and rail traffic on its border with Hungary, which built a fence on its border with Serbia, as even Denmark and Sweden started to step up controls to reduce migrant inflows. When Copenha-gen adopted the notorious “jewelry” bill to seize asylum seekers' assets to cover their expenses, all gloves were off.

Yet, member states may rein-state internal border controls for up to two years in “excep-tional circumstances.”

As borders are closing within the Fortress Europe, the migrant bottlenecks – especially the Aegean Sea between Greece and Turkey – are at a boiling point, as reflected by EC President Donald Tusk’s recent plea: “Do not come to Europe! Do not risk your lives and

your money!" It was a day when the founders of the EU turned in their graves. The old pretense of open and multicultural, democratic and peaceful Europe was gone. Instead, the new plan would see refugees being forcefully shipped back from Europe across straits patrolled by NATO warships, with Greece as its halfway house and Tur-key as its waiting room.

Anti-EU opposition

According to an EC report, the reintroduction of border controls within the Schen-gen area could reduce EU economic output by €500 billion to €1,4 trillion. In 2010, these arguments could still have shaped the debate. However, today, it is the non-economic fears, political divisions, ethnic and reli-gious anxieties that dominate the headlines. As a result, the support for Merkel and the EU’s remaining integra-

19 analysis19 ANAlysIs

The European 'Union'?


tionists is weakening across the region. As long as the migration crisis will linger, it fuels the rise of the anti-EU opposition across old party lines.

Chancellor Merkel has warned that border controls have potential to fragment the EU “into small states” that are not equipped to cope with a globalised world. Indeed, with its more than 500 mil-lion people, a truly integrated Europe could absorb even 2-3 million refugees. In the short term, that would cause a modest increase in GDP growth – particularly in main destination countries (Ger-many, Sweden, Austria) – and energise the region’s stag-nating economy and greying demographics. The medi-um-term growth effect would depend on the refugees’ inte-gration into the labor market.

However, in the absence of common institutions, the influx of immigrants into Europe is undermining the Schengen, disintegrating

the EU, inflating differences among member states and boosting the support of euro-skeptical opposition parties from Heinz-Christian Strache’s right-wing Freedom Party of Austria and Czech President

Milos Zeman to Marine Le Pen’s Front National in France and the increasingly xenopho-bic Alternative for Germany (AfD). Indecision virtually ensures mounting support for radicalisation and anti-EU views. In German regional elections, the AfD eroded the power of the Chris-tian Democratic and Social Democratic coalition, while unleashing a debate within the former whether Merkel will be a liability in the 2017 federal elections. In Eastern Europe and Balkans, Schen-gen is already largely history as fences prevail among most states.

Yet, labeling all the opposi-tion parties as "populist" or worse will not mitigate the reality of the issues they

address, including unemploy-ment, income inequality, and the fear of foreigners. If the moderate middle fails to lead out from economic stagna-tion, the not-so-moderate groups will always offer a way.

Geopolitical friction

In March 2014, Washing-ton and Brussels initiated sanctions against Russia in response to developments in Crimea and Eastern Ukraine. Since then, the hope has been that sanctions and the Ukraine crisis would quash President Putin’s politics and boost Ukraine’s economy. In reality, Ukraine has been pushed to a default, while the sanctions have united Russians behind Putin whose popularity rating remains 83%.

Critics of the sanctions argue that the ultimate US/EU objective is not to encour-age pro-market policies in Russia but to clip Russia’s economic future in a new

Cold War. Meanwhile, sanc-tions have deepened stagna-tion in Europe, and reduced the impact of euro econo-mies’ fiscal policies and the effectiveness of the ECB’s quantitative easing (QE). The repercussions are reflected in diminished global growth.

The showdown with Russia and Ukraine is also a reflec-tion of Europe’s increasing assertiveness, which has been prominent particularly in the EU members’ interven-tions amid the ‘Arab Spring.’ In the early 2000s, Presi-dent George W. Bush’s White House believed that the War in Iraq would achieve a virtuous domino effect in the region, supplanting “authori-tarian tyrants” with “genuine democracies.”

In the early 2010s, France, Britain and the NATO seized the opportunity for regime change in Europe’s southern periphery. Years of misguided policies in the Middle East and North Africa, coupled with the unwillingness to


cooperate with Putin’s Russia amplifying destabilisation across the region and the very refugee crisis that Brus-sels would now like to contain to its periphery (Greece, Turkey).

Eclipse of monetary effect

Currently, the prime reason for the semblance of stability in Europe is the ECB, which - after the disastrous rate hikes of Jean-Claude Trichet - opted for US-style non-tra-ditional monetary policies. Since fall 2011, an elusive calm has been sustained by Mario Draghi’s pledge to defend the euro “at any cost,” record-low interest rates and rounds of quantitative easing. Yet, realities are different, as evidenced by the euro's dras-tic 23 percent plunge from $1,45 in fall 2008 to $1,13.

Recently, the ECB launched a relatively large easing pack-age, cutting all policy rates and further expanding QE to €80 billion per month. Yet,

markets were no longer that impressed. Just as the Fed’s Bernanke a while ago, Draghi has been forced to acknowl-edge that even non-tra-ditional monetary policies cannot overcome structural challenges.

That is the job of fiscal policy, which would require the kind of common insti-tutions that Brussels lacks. As a result, economic uncer-tainty, political divisions, and strategic friction are likely to be reinforced by increasing market pessimism as the ECB has few alternatives but to continue to exhaust its policy tools.

Recently Eurozone banks have also been hit by a slate of shocks, while equity sell-off has sparked concerns about their profitability. In Italy, non-performing-loans (NPLs) have soared, which has resulted in efforts to “resolve” some local banks. French banks are suffering from the ECB’s squeezed

rates. In Germany, Deutsche Bank suffered a loss of €6.8 billion in 2015, after scan-dals and lawsuits, while the regional state-owned Landesbanken are coping with adverse markets. With heavy debt burden, Spanish banks’ NPLs remain at elevated levels.

As the EZ banks grow more fragile, they are less likely to support the ECB’s monetary easing in the real economy. By the same token, a sys-temic banking crisis, coupled with political repercussions, can no longer be excluded.

Changing sovereign risks

The erosion of Europe is not inevitable. Currently, finan-cial and monetary conditions in the Eurozone actually reflect a slight improvement suggesting that the region is still on a rebound. However, economic indicators sug-gest that growth is slowing, because of the region’s new threats and the weight of the

old ones.

If the ECB’s policy tools continue to soften, banking system remains fragile and Brussels cannot defuse the new threats, Europe’s sover-eign creditworthiness could face substantial downside risks – despite half a century of integration.

A Brexit alone could spark a downgrade to the UK, while providing another push for independence movements from Scotland to Catalonia. Such moves would shift spot-light on the fragile sovereigns in Western Europe’s southern periphery, force new scrutiny of indebted core economies (France, Spain) and increase scrutiny of several EU mem-bers in Central and Eastern Europe (CEE), which cur-rently benefit from the EU’s enhanced creditworthiness.

Of the 19 Eurozone sover-eigns, 16 are investment grade today, while three remain speculative grade


(Portugal, Greece, Cyprus) and two have negative out-looks (France, Finland). With a major shakeup, downside risks would increase signif-icantly for those with spec-ulative grade and negative outlooks, while investment grade positions would begin to soften.

If the migration crisis has inflamed the Brexit debate and is fueling Schengen’s erosion, anti-EU opposition and geopolitical friction, is it likely to de-escalate in the foreseeable future? Well, as Merkel’s support is eroding in Germany, the chancellor has sought an agreement with Turkey, which is already hosting 2,7 million refugees from the 5-year-old Syrian civil war.

Recently the EU and Turkey reached an agreement that will force asylum seekers (of whom 40 percent are chil-dren) who take clandestine routes to be sent back. In exchange, Turkey will receive €6,6 billion in aid, visa-free

access for its citizens in the Schengen zone and the eventual resumption of talks on its EU membership. The deal has been denounced as impractical, legally suspect, hard to enforce and inhuman.

In the short-term, coordi-nated immigration policies could actually provide a tem-porary boost in several EU economies, while alleviating the adverse impact of aging populations over time. In the medium-term, more concilia-tory policies with Russia and Ukraine, Syria and the Middle East would go a long way to defuse tensions.

However, in the absence of credible, coordinated and medium-term immigration policies, uncontrolled immi-gration is likely to continue to undermine Schengen, boost anti-EU forces, and contribute to further geopolitical friction within and around Europe’s periphery – especially in Greece, which is amid its Great Depression and Turkey that’s amid multiple frictions

internally and externally.

What if these are the “good years”

While Europe's growth poten-tial has been significantly diminished in the past half a decade, it is supported by record-low policy rates, rounds of QE, the collapse of oil prices and cheaper euro. It is thus tempting to ask If these truly are the “good years" of the rebound, how will Europe cope with the “bad years” in the future?

What the European economy needs is more fiscal accom-modation and investment to translate lingering growth to structural recovery. Yet, only structural reform efforts have the potential to solidify the future of Europe, with or without the euro. In the medium-term, the region's economic uncertainty contin-ues to be fueled by the splut-tering US recovery, Japan’s contraction and China’s deceleration.

In a very long-term perspec-tive, what we are witness-ing is the steady erosion of Europe’s economic power, political clout and strategic weight.

Today, Europe still accounts for about 24 percent in the world economy. As long-term projections suggest, that share is likely to halve by 2050, in part because of the region’s secular stagnation and because of the relatively faster growth of emerging economies.

However, the erosion of Europe in the world econ-omy can be accelerated or decelerated. The past half a decade shows the poten-tial of deceleration, which has pushed Europe to the brink. In the coming months, the challenge is to halt and reverse that trajectory.

The longer procrastination prevails in Brussels and the core member states, the harder will be the challenge. – EconomyWatch●