Every week at the Current we round up the world’s biggest business stories. This week: South Korean stimulus, Greek referendum, British banking bonuses regulated, US economy shrinks, Europe grows, Egypt’s currency falls.
South Korea Stimulus
South Korea’s government is considering injecting $10.5 billion into the country’s underperforming economy. The bailout package is part of a broader stimulus plan designed to help the South Korean economy reach its targeted 3.1% growth rate. Slowing global demand has hurt South Korea’s export oriented economy. The plan stands in contrast to Europe’s austerity focussed economic policies. The proposed bailout is also aimed at tackling the economic and health effects of MERS (Middle East Respiratory Syndrome) which has spread to the country.
Greek Referendum
Today (Sunday July 5th) Greeks are voting in a national referendum which could shape the future of Greece, the eurozone and even the EU itself. Last Tuesday Greece went in arrears (i.e. did not pay back) on its IMF loan after having refused to come to an agreement with the troika. Greece’s left-wing Syriza government condemned the bailout offer which sought to impose harsh austerity measures. The referendum will allow the Greek people to decide for themselves if ‘Yes’ they should accept the bailout or ‘No’ they should refuse. Critics say a ‘No’ vote could lead to a ‘Grexit’ but Prime Minister Alex Tsipras has insisted that Greece will not be forced out of the eurozone. A ‘Yes’ vote could force the resignation of Tsipras and the fall of Syriza government. Current polls predict a tight vote split almost evenly. Regardless of the outcome there are sure to be monumental shifts in Greece and throughout the eurozone.
Greek Banks Closed
Last week Greek banks instituted capital controls limiting the amount of money people were able to withdraw and many remained closed for much of the week. Despite turmoil within Greece the effect on European stocks and the value of the euro has been much smaller than many might have predicted.
Music Streaming
After receiving harsh criticism from artists like Taylor Swift, Apple quickly backed down and agreed to pay artists royalties for music streamed during the services free trial period. Streaming services are increasingly looking like the future of music. In addition to the current market leader Spotify and the introduction of industry powerhouse Apple, Google has also gotten in on the act with Google Play Music. Tidal, an artist launched music streaming company owned by Jay-Z meanwhile is struggling and lost its second boss in as many months.
British Banking Bonuses
British regulators have announced plans to regulate banker’s bonuses. Bonuses to bankers who engage in risky trading can be delayed by up to seven years in order to avoid short-term bonuses that might undermine the long-term health of the sector. Banks that have received taxpayer support will no longer be eligible to receive bonuses. Banker’s bonuses have been a hot-button issue in Britain, the country has struggled since the financial crisis but banker’s bonuses have continued to rise. Although the move may not be welcomed in the City (London’s financial center) the move could improve public opinion of the banking sector and foster a healthier more long-term focused atmosphere. Many in Britain remain sceptical.
US Economy Down, Europe Up
The US economy fell by 0.2% in the first quarter of 2015, good news considering previous estimates had put the figure closer to a 0.7% decrease. Meanwhile the EU, despite the ongoing Greek drama, is experiencing second-quarter growth of 0.4%. The ECB’s stimulus program and other measures taken by the EU have boosted growth.
Egypt’s Currency Falls
The Egyptian pound has fallen to a record low against the USD for the second time since Thursday. Despite holding at 7.53 the currency fell to 7.73 on Sunday. The lower rate could prove to be a boon to Egypt’s beleaguered economy by attracting foreign investment and reducing the cost of Egyptian exports.
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