Every week we bring you a roundup of all the biggest currency and business stories. This week: CETA is passed by the European Parliament, the EU and IMF come to terms on the structure of Greece’s debt repayment, Unilever rebuffs a takeover bid from Kraft Heinz, and Yellen hints at raising rates.
CETA is Settled
Eight years after negotiations began, the EU Parliament approved the landmark CETA (Comprehensive Economic and Trade Agreement) with Canada despite protesters gathered outside of the parliament. The deal will remove 98% of tariffs between the EU and Canada, reducing tariffs by about half-a-billion euros per year. The full implementation of CETA still requires EU member states (and their regional legislatures) to approve aspects of the deal. Proponents argue that it will not lower safety or quality standards in the EU (which has some of the highest standards in the world) and will boost the EU and Canadian economies.
IMF EU Standoff
The deadlock between the IMF (International Monetary Fund) and the European Union seem to have reached an agreement about how to proceed with Greece’s bailout structure. The IMF has argued that Greece needed more leeway to pay off its massive debts. Until these debts are repaid Greece cannot unlock the next tranche of funds. Eurozone officials had taken a much more draconian position. Both the IMF and EU have said that a haircut (whereby the debt owed is ‘trimmed’ down) is off the table, and the latest analysis from the European Stability Mechanism (responsible for Greece’s bailout) is positive. Greece will likely not need to borrow the maximum agreed-upon loan size of EUR 86 billion. Greece also recently paid back EUR 2 billion, indicating they are able and willing to continue to abide by the current agreement.
Unilever and Kraft Heinz
Unilever shares fell by over 7% after news that Kraft Heinz’s proposed takeover had fallen through. The deal would have been the largest in history, as both the American Kraft Heinz, and the Anglo-Dutch Unilever own dozens of household brands. Kraft Heinz is controlled by Warren Buffet and a Brazilian private equity group and is notorious for its cost cutting measures to pad the bottom line. Unilever, in contrast is regularly hailed as a beacon of corporate responsibility. Unilever’s steadfast refusal means that Kraft Heinz would have to launch a costly hostile takeover to secure the company.
Fed Lending Rate
Speaking to Congress, Federal Reserve Chair Janet Yellen has indicated that it may be the right time to raise interest rates. Waiting too long, she said, would mean that the Fed would have to make a more significant adjustment later on, which could prove disruptive. Instead Yellen indicated her preference for small incremental adjustments. The Fed lending had remained near zero for seven years, but was raised in December 2015. Raising lending rates will strengthen the USD, but will also make borrowing more expensive which could cool the stock market and real estate industry.
Stay informed. Stay Current.