CURRENT SITUATION REFLECTS CALM BEFORE EURO ZONE STORM - Yields on Irish and Italian debt came down again yesterday and the euro strengthened against the dollar. The developments came as euro zone finance ministers gather in Dublin for an informal summit today. Cyprus, the small island that recently reawoken the euro zone crisis, will undoubtedly be on the agenda.
Peter Brown, Founder of the Institute of Financial Trading, says what we are seeing is likely a calm before another euro zone storm. He adds that what is happening now is largely technical in nature.
"At the moment there's a lull in Europe. We've had Cyprus. But Slovenia and Luxembourg are causing concerns. Luxembourg's economy is based largely on banking, like Cyprus," Mr Brown states. He says that the massive stimulus in Japan is dramatically devaluing the yen. ''There's a massive outflow of cash from Japan and it's pouring into euros and into dollars. They're looking for yield, so Irish and Italian bonds look attractive in that situation," he explains.
Peter Brown believes Europe is slowly shifting away from the policy of austerity. "The austerity model hasn't worked in Europe. All it's doing is destroying economies. Europe needs to shift to a model of aggressive stimulus to create growth. The outlook now is for lower growth and that will lead to higher unemployment. The ECB have to be taken off their track of austerity only. I would think that over the next months, we will change the policy in Europe to a policy of stimulus," he concludes.
MORNING BRIEFS - Ryanair is at the centre of a political storm in Norway where politicians have been raising the terms of employment for cabin crews based in Norway. The country's Prime Minister was confronted on the floor of parliament about the issue earlier in the week with politicians asking why the terms were below Norwegian standards and had not been clamped down on before. Michael O'Leary defended the contracts yesterday and said nobody was forced to work for Ryanair - they had decided to do so. He said the people making the complaints had invented false claims after they were let go.
*** A PricewaterhouseCoopers tax partner is pointing out what he says is an ageist element in new tax rules that come into effect next year that could be challenged in court. Dermot Reilly points out that from next January if a family business worth over €3m is transferred to an heir, the owner will incur a capital gains charge if they are over 65. It is an effort to get people to hand over their business to successors earlier that they otherwise might have. But PWC warns that it could have the opposite effect.