Talks renewed for economic recovery plan in EU

#EU leaders are negotiating an 850-billion-U.S.-dollar pandemic recovery plan. However, it hasn't been easy. #Brexit #Coronavirus

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[CK-mppq]

Where are your markets? Where is the biggest market? The answer is obvious. Even with all the population adds up together, it cannot reach the size of the China market.

[jinsoonchin]

It is a difficult time not only for Europe but the world.

[alanoh]

The EU has made 800+ billion euros available for its coronavirus support package for people and businesses ...

What has the Chinese government done to help its people and business in China??

Though not 😂😂😂

[kelvinloh]

The current economic contraction and pandemic has renewed and added risks to the global economy and financial system. The EU initiative in pooling national fiscal debt amongst member countries is good as it prevents debtor nations from defaulting as they are an indispensable part of the value chain on the continent, serving as outsourcing partners or customers. The issue of financial responsibility or prudence on the part of national governments goes to the very heart of the Union itself, in the reconcilation of national budgets, inflation and fiscal debt that have a cascading effect on domestic interest rates and NPLs, purveying a stable and low inflation EU-wide regime (1-2% appreciation range allowed), running prudent fiscal budgets (up to 7% of national GDP) in support of a strong Euro, a basis for exchange with non-EU trade partners that confers national advantages to member economies, arising from rate differentials.

The continued functioning of the EU will engender intervention to rein in fiscal spending of member countries in line with EU-wide financial prudence that have implications on the sovereignty of national economic policy-making in the formulation of budgets, inflation control and the setting of interest rates to reflect the true cost of capital, affecting employment rates, enterprise formation and business viability. Its always a challenge for EU national goverments to maintain parity in budgets, inflation levels and fiscal debt in line with EU goals. Exceptions have been made for member countries that run fiscal debt up to 10-13% of national GDP (an extreme in the policy variation even in adverse economic times) to come to parity over time in exchange for bailout by rest of the group with imposing conditions on inflation and interest rates, fiscal spending and structural economic reforms that lead to a more optimal allocation and mobilisation of resources, reducing inefficiencies and minimising wastage, enabling EU member countries to move foward as an united group with synchronised economic policies in tandem with sound macroeconomic and prudent fiscal management instead of diverging as standalone national economies, oriented on differing priorities.

There is always a need to find a balance as externally imposed fiscal austerity and interest rates may be too oppressive and scuttle economic growth, hampering the country's ability in servicing debt repayments through the generation of taxation revenues arising from higher level of economic activity. Fiscal debt carried by member economies, if left uncontrolled will impact domestic interest and inflation rates negatively, affecting the fundamentals underpinning a strong Euro-wide currency and its stability. Appreciation in inflation will raise interest rates in the long-term. This EU initiative, if approved by heads of government, will reduce risks to the EU and global financial system, mitigate the possibility of financial contagion centred on moral hazard and strengthen EU fundamentals in contributing to global growth.

With regards to fintech regulation, blockchain technology and the development of its platforms and applications is a positive. Technology in itself is a neutral medium, influenced by content creators to provide context and purpose in flow on applications. With appropriate qualification measures to ascertain the validity of transactions and transacting parties alongside platform organisers and the technology maturing, blockchain has the potential to achieve deep and significant transformative effects on the economy and financial system, leading to better governance and improved distribution of economic resources to where it is sorely needed that can make significant contributions towards global governance and growth through decentralisation and overcoming the trust deficit with the use of immutable platforms and execution orders, enabling access to funds based on the fulfilment of immutable criteria.

To dismiss blockchain would be tantamount to being myopic and the lack of strategic foresight. Blockchain has the potential to revolutionise the future of finance and governance in a big way, leading to the development of far better systems through technological use. The default position of most CBs around the world is to adopt a wait-and-see attitude in blockchain adoption as they do not fully understand the complexity and scope of the technology itself, prefering to hold onto traditional and established transaction modes that herald from the past, in the form of physical denominations in paper notes and coins or documented contracts as stores of value for exchange. Since the advent of the Internet and Internet-based technologies, consumers have progressively moved towards widespread acceptance of e-commerce and digitalized transactions and social networking that do away with the need for physical documentation or notes/coinage in facilitating transactions and interactions.

We are at the cusp of the next industrial revolution with the discovery of blockchain and AI technologies. Regulators need to develop a more in-depth understanding of blockchain and how it can meld into the financial and governance systems to produce better outcomes for stakeholders. Countries stand to lose if they do not embrace blockchain and systemise it. Its not a strategy to have a non-position on it. To learn from the experiences and failures of early adopters and getting onto the bandwagon of developer nations only when a clear trend is starting to take shape would be late in the game as first movers have an unassailable lead and advantage in shaping the future architecture and framework that leads to realising supernormal profits by fintech enterprises/accrual of government taxation revenues arising from regulation of new economic activities. A clear policy direction set out by the CB in blockchain governance would signal support of these activities and spur industry development for innovation competitiveness in fintech and economic gain.

At the extreme end of negativity, blockchain could be perceived by regulators to be suspicious and riddled with downside technological risks. A technology that could be used by nefarious would-be criminals to raise huge amounts of funds in a short time in the belief of purchasing a particular value proposition and absconding with those monies in a heist, leaving investors with entire investment losses. Such security of investment issues can be addressed by pre-qualification of platform organisers and their investment vehicles and technology. The current state of technology is advanced and matured enough to put in adequate and necessary safeguards and mechanisms to prevent errant developer behaviours, mitigate system hacking, scams and bugs and protect investors' interests. CBs' focus should be in ensuring that developers have put in place the necessary safeguards to protect investors' interests in the event of criminality and not in the development of the blockchain technology itself. CBs should only be concerned with future developments if their introduction causes a systemic change and consequently, affecting the robustness of safeguards. Government's role is to facilitate the development of technology where business enterprise sees fit in strengthening its competitiveness by creating a conducive business environment and building a supportive technological infrastructure and not hamper it. Developers are also duty bound to demonstrate to the regulators the integrity of programming codes that support their value proposition so that regulatory authorities can claim reasonable confidence in fintech enterprises' transactional activities without the need for overt supervision.