Economic Concerns Extend Beyond Fiscal Cliff

Fiscal Cliff Negotiations Continue But Little Progress Noted
The worry about the fiscal cliff weighed on Tuesday’s markets as a resolution continued to prove elusive. Both the short- and long-term concerns about deficit spending and entitlements certainly will be on the mind of business leaders as they meet with Obama today.

Businesses already are preparing for the potential increase in taxes. According to the Financial Times, since the beginning of the fourth quarter “a record 103 companies have announced  they will pay special dividends before the end of the year, according to Markit.  The data firm is forecasting that 123 companies will announce special  fourth-quarter dividends, compared to the previous average of just 31.”

Fiscal Cliff Is Just The Beginning Of Needed Reforms Sebastian Mallaby notes in the Financial Times that Obama cannot merely increase taxes on the wealthy. Rather, he must “consider what looms in the future. According to the Congressional Budget Office’s “alternative fiscal scenario”, which assumes that current policy continues, today’s net debt ratio of 73 per cent of GDP is on track to hit 100 per cent 12 years from now.”

US, Europe Receive Warning On Fiscal Concerns The Organization for Economic Cooperation and Development issued a warning to Europe and the US that a continued failure by policymakers to address their fiscal woes could result in another recession.

There was some good news – at least for Spain. The European Union has approved Spanish banks’ restructuring plans, which will allow the disbursal of funds from the European Stability Mechanism.





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