AFP

Tanzania will introduce a digital tax this year, the country’s finance minister said, in a move targeting global internet giants offering services in the East African nation.

The two-percent tax will come into effect in July and follows similar attempts by other countries to force US multinational tech companies to pay at least a portion of their revenues in local tax.

Tanzania’s Minister for Finance and Planning, Mwigulu Nchemba, announced the measure on Tuesday as he presented the nation’s annual budget.

“Tanzania Revenue Authority shall establish a simplified registration process to accommodate digital economy operators who have no presence in Tanzania,” Nchemba told lawmakers.

“This measure is intended to keep pace with rapid growth in the digital economy,” he added.

The tax needs to be approved by Tanzania’s parliament, which will vote on the budget before July.

The tax announcement follows talks in April between officials from the Tanzania Revenue Authority and US social media giant Meta — the parent company to Facebook, Instagram and WhatsApp.

Nearly 140 countries signed up to a 15-percent global minimum corporate tax last October under the auspices of the Organization for Economic Co-operation and Development (OECD).

Since then more countries, including Turkey and India, have signed up to the deal, which is expected to come into effect in 2023.

The historic agreement aims to put an end to corporations sheltering profits in low-tax haven countries.

European Central Bank policymakers called an emergency meeting on Wednesday, as more indebted eurozone states have come under pressure from rising borrowing costs.

A week after a regular gathering, the governing council will hold an “ad-hoc meeting” to discuss “current market conditions,” an ECB spokesperson said.

The ECB drew a line under years of ultra-loose monetary policy at last week’s meeting, calling an end to its massive bond-buying stimulus programme at the beginning of July.

Under pressure from soaring inflation in the eurozone, the ECB also announced its first planned interest rate hike in over a decade for the same month.

Consumer prices rose at an 8.1-percent pace in May, an all-time high for the currency club and well above the ECB’s own two-percent target.

The switch in the central bank’s policy has raised the spectre of “fragmentation” in the eurozone, where the borrowing costs for some, more indebted members rise faster than for others.

Following the meeting last week, the so-called spread between the yields for 10-year Italian bonds and those of Germany — seen as a benchmark for stability — climbed even further, reaching levels not seen since the very start of the pandemic in 2020.

Yields on Italian 10-year bonds fell following the announcement of the ECB meeting, reducing the spread with German government debt.

Eurozone stock markets also rose after falling this week ahead of a regular US Federal Reserve meeting where policymakers could hike rates even higher than expected to combat decades-high inflation.

Speaking at an event in Paris on Tuesday, ECB executive board member Isabel Schnabel said the bank would “not tolerate” unwarranted increases in borrowing costs that would “undermine” the bank’s policy. 

Schnabel said the ECB’s response to the risks of fragmentation would “depend on the situation we are facing”, but insisted that the bank’s commitment had “no limits”.

“There can be no doubt that, if and when needed, we can and will design and deploy new instruments to secure monetary policy transmission and hence our primary mandate of price stability,” she said.

– ‘Flexibility’ –

The ECB was prepared to respond in a “very short period of time” if necessary, Schnabel said.

“In that case, reinvestments from maturing securities under the PEPP can be adjusted flexibly across time,” she said.

PEPP is the ECB’s pandemic-era stimulus programme to stoke economic growth and keep credit flowing in the 19-nation currency club.

The ECB brought an end to net purchases under the 1.85-trillion-euro ($1.94-trillion) scheme in March this year.

Another option would be to design a new “tool”, Schnabel said, though its scope would depend on “the situation we are facing”.

Schnabel is only the latest senior ECB figure to intone on the risks of rising spreads.

President Christine Lagarde said the ECB would show “flexibility” in response to pressure on borrowing costs at the ECB’s regular meeting last week in Amsterdam.

– ‘Flexibility’ –

“Some spread widening amid an overall rise in yields is normal,” said Holger Schmieding, chief economist at Berenberg Bank.

“As long as it remains consistent with the inflation backdrop and the pace of nominal growth, it should not present an imminent risk even for fiscally challenged Italy,” Schmieding said.

Policymakers will meet to discuss the developments in markets from 11:00 am Frankfurt time (0900) GMT.

Normally members of the governing council meet roughly every six weeks to set the course for the ECB, with their next regular meeting planned for July 21.

Swiss airspace reopened Wednesday morning after a computer glitch grounded flights across the country for several hours, officials said.

“Swiss airspace is now open again,” the Alpine nation’s air traffic control service Skyguide said on Twitter, adding “the technical malfunction at Skyguide has been resolved”.

It did not say what had caused the problem that shut Swiss airspace for hours Wednesday morning, but said that “air traffic over Switzerland and operations at the national airports of Geneva and Zurich are resuming”.

Those airports too announced that flights had begun taking off.

“Good news! Air traffic has gradually resumed since 8:30 am (0630 GMT),” Geneva airport said in a tweet, warning that a number of flights had been cancelled and urging passengers to check with their airlines.

Zurich airport also said flight operations were “running again” at full capacity by 10:00 am (0800 GMT).

But it warned that “delays are to be expected today. We still recommend passengers to check with their airline about the status of their flight.”

– ‘Vacation could fall through’ –

At Geneva airport, where the first morning flights were delayed by more than three hours, dozens of travellers crowded around the information screens, with phones stuck to their ears.

Airport spokesman Ignace Jeannerat told AFP that around 2,000 people had seen their flights affected, adding that while flights were resuming, there would not be a return to normal before early Thursday.

“We are trying to find a solution,” Sandrine Vert, 52, told AFP, after her family’s easyJet flight to Split in Croatia was cancelled.

She, her husband and teenage daughter, who drove to the airport from Annecy in France, had been told there were now no flights from Geneva to Split until Friday, putting their one-week holiday plans on the line.

“Our vacation could fall through,” she said.

The chaos erupted when Skyguide announced it had “experienced a technical malfunction in the early hours of this morning, which is why Swiss airspace has been closed to traffic for safety reasons”.

It said it regretted “this incident and its consequences for its customers, partners and passengers.”

The closure blocked all overflight of the country, and forced a number of flights to be rerouted to airports in neighbouring countries.

The Swiss news agency ATS said some international flights to Switzerland had been re-routed to Milan in northern Italy.

Zurich airport’s website meanwhile showed that a United Airlines flight from New York had been rerouted to Frankfurt in western Germany, while a Singapore Airlines flight from the city state had been sent to the southern German city of Munich. 

Zurich is Switzerland’s largest airport, with more than 10.2 million passengers going through its terminals in 2021.

But with Covid restrictions lifted, air traffic has picked up significantly since then, with 1.9 million passengers registered there in May alone. For this summer season, it is serving flights to 191 destinations.

Geneva airport saw 5.9 million passengers pass through during the Covid pandemic year of 2021. There too, traffic has been rapidly picking up, and it now sees around one million passengers a month.

Swiss airspace reopened Wednesday morning after a computer glitch grounded flights across the Alpine nation for several hours, officials said.

“Swiss airspace is now open again,” Swiss air traffic control service Skyguide said in a tweet, adding “the technical malfunction at Skyguide has been resolved”.

It did not say what had caused the problem that shut Swiss airspace for hours Wednesday morning, but said that “air traffic over Switzerland and operations at the national airports of Geneva and Zurich are resuming”.

Those airports too announced that flights had begun taking off.

“Good news! Air traffic has gradually resumed since 8:30 am (0630 GMT),” Geneva airport said in a tweet, warning that a number of flights had been cancelled and urging passengers to check with their airlines.

At the airport, where the first morning flights were delayed by more than three hours, dozens of travellers crowded around the information screens, with phones plastered to their ears.

Zurich airport also said flight operations were “running again”, although flight operations would be at 50-percent capacity until 9:30 am, and 75-percent after that.

“We recommend passengers to pay attention to the flight information of the airline.”

The chaos erupted when Skyguide announced it had “experienced a technical malfunction in the early hours of this morning, which is why Swiss airspace has been closed to traffic for safety reasons”.

It said it regretted “this incident and its consequences for its customers, partners and passengers.”

The Swiss news agency ATS-Keystone said international flights to Switzerland had been re-routed to Milan in northern Italy.

The Zurich airport website meanwhile showed that a United Airlsines flight from New York had been rerouted to Frankfurt in western Germany, while a Singapore Airlines flight from the city state had been sent to the southern German city of Munich. 

Zurich is Switzerland’s largest airport, with more than 10.2 million passengers going through its terminals in 2021.

But with Covid restrictions lifted, air traffic has picked up significantly since then, with 1.9 million passengers registered there in May alone.

Equities were mixed Wednesday with investors nervously awaiting a Federal Reserve interest rate decision that has taken on greater significance since a forecast-busting inflation report sent shockwaves through world markets.

Trading floors saw a sea of red at the start of the week after data showed US consumer prices soared at their fastest pace in four decades last month, confounding hopes they were stabilising and putting pressure on officials to act.

The news ramped up bets that the central bank would hike interest rates at a steeper and faster pace than expected as it struggles to retain credibility.

Before Friday’s data, the Fed had been tipped to lift borrowing costs by half a point when its policy meeting ends Wednesday but investors are now widely anticipating a three-quarter point increase, with some even suggesting one percentage point.

The moves fuelled worries that the tighter monetary conditions will deal a blow to the US economy and potentially send it into recession next year.

Still, many observers say acting now is the only option available to policymakers if they want to rein in prices and prevent stagflation.

“The sooner they are going to be clear about how quickly they are going to raise rates and what is an acceptable rate of inflation for them, the sooner markets will calm down,” Wincrest Capital’s Barbara Ann Bernard told Bloomberg Television.

And StoneX Financial’s Matt Simpson added: “A bullish outcome for risk-appetite is the well-telegraphed 75-basis-point hike, conviction from the Fed that they’ll manage a soft landing, alongside a downwardly revised CPI forecast for good measure”.

But he warned that a half-point increase “could inadvertently weigh on sentiment as markets are concerned the Fed aren’t taking inflation seriously enough”.

While most of Wall Street and Europe ended down, they saw less turbulent action than Friday and Monday.

In Asia markets were mixed with some seeing a pick-up on bargain-buying.

Hong Kong and Shanghai enjoyed some healthy buying after data showed an improvement in Chinese retail sales and factory output last month thanks to an easing of Covid restrictions in major cities.

The readings lifted hopes that government support can help lift the world’s number two economy out of its torpor.

Singapore and Mumbai were also in positive territory, while Tokyo, Sydney, Seoul, Taipei, Manila, Bangkok and Jakarta slipped.

London, Paris and RFrankfurt rose at the open, with traders following The European Central Bank after it said policymakers would hold an exceptional meeting Wednesday to “discuss current market conditions”.

The announcement saw the euro rally against the dollar on hopes for details on how officials will tackle the eurzone’s embattled bond market. Observers are predicting the single currency could rise back above $1.05. 

While there is a little calm ahead of the Fed announcement, commentators warn that uncertainty will continue to course through trading floors for some time.

Strategist Louis Navellier said markets could go one of two ways after the meeting.

“The big unknown is will the market have a relief rally thinking that inflation is finally being seriously addressed and will therefore be tamed sooner than feared?

“Or will the move create new sellers from fears that the Fed is panicking and may hasten a recession by overshooting as it chases inflation?

“Either way, rates will be rising in an attempt to slow demand in order to slow inflation and further volatility is almost guaranteed.”

In company news, the management agency of K-pop supergroup BTS plunged by a quarter in Seoul after the band announced they were taking an indefinite break.

The seven members, who have generated billions of dollars for South Korea’s economy, made the shock announcement on Tuesday.

On Wednesday morning the band’s label HYBE collapsed about 27 percent, wiping $1.6 billion off its market valuation.

– Key figures at around 0720 GMT –

Tokyo – Nikkei 225: DOWN 1.1 percent at 26,326.16 (close)

Hong Kong – Hang Seng Index: UP 1.0 percent at 21,271.14

Shanghai – Composite: UP 0.5 percent at 3,305.41 (close)

London – FTSE 100: UP 0.5 percent at 7,221.50

Euro/dollar: UP at $1.0469 from $1.0420 late Tuesday

Pound/dollar: UP at $1.2028 from $1.1993

Dollar/yen: DOWN at 134.66 yen from 135.33 yen 

Euro/pound: DOWN at 87.03 pence from 86.84 pence

Brent North Sea crude: UP 0.3 percent at $121.54 per barrel

West Texas Intermediate: UP 0.3 percent at $119.25 per barrel

New York – Dow: DOWN 0.5 percent at 30,364.83 (close)

China’s factory output and retail sales remained weak in May, official data showed Wednesday, with tepid demand and lingering Covid restrictions putting a damper on growth in the world’s second-largest economy.

The government is persisting with a zero-Covid strategy to stamp out clusters as they emerge, but this has placed companies and consumers at the mercy of snap, economically damaging lockdowns.

Retail sales sank 6.7 percent on-year in May, the National Bureau of Statistics (NBS) said, though that was an improvement from April’s 11.1 percent drop.

The figure was also slightly better than forecasts from analysts polled by Bloomberg.

“In May, our economy gradually overcame the adverse impact of the pandemic,” NBS spokesman Fu Linghui told reporters.

“But we also have to see that the international environment has become more complex and severe, and the domestic economic recovery still faces many difficulties and challenges.”

It was the third straight month of contraction in retail sales, according to official data, suggesting nervous consumers are tightening their purse strings with the persistent threat of lockdowns.

But industrial production was up 0.7 percent after falling 2.9 percent in April, while the urban unemployment rate ticked down to 5.9 percent.

Shanghai, China’s most populous city, started emerging from a gruelling two-month lockdown in June, providing a boost to economic sentiment.

Tommy Wu, lead China economist at Oxford Economics, speculated that “the worst of lockdowns is probably behind us.”

However, he added that it will be “difficult for household consumption to recover strongly” while China’s zero-Covid strategy remains in place.

Meanwhile, concerns are mounting over the trend in unemployment as millions of students graduate in the summer, Zhiwei Zhang, of Pinpoint Asset Management, said.

Unemployment among rural migrant workers remained elevated, data showed, while home sales in the first five months dropped 34.5 percent.

Observers remain cautious in part because of a property sector slump and the government’s reluctance to transition away from zero-Covid despite recent fine-tuning.

“There is no guarantee that a new wave will not hit in coming months,” Nomura analysts said Wednesday.

Alan Li no longer sees any future for his family in China after harsh Covid rules decimated his business, upended his son’s education and left his country out of step with the rest of the world.

He has given up hope of a return to normal after months of lockdowns in Shanghai, and now plans to close his firm and move to Hungary, where he sees better opportunities and his 13-year-old son can attend an international school.

“Our losses this year mean that it’s over for us,” he told AFP wearily, asking to withhold his real name.

“We have been using our own cash savings to pay 400 workers (during the lockdown). What if it happens again this winter?”

Shanghai’s long shutdown, which brought food shortages and protests, has driven some to reconsider staying in a country where livelihoods and lifestyles can vanish at the whim of the state.

Schools have been closed and exams called off, including assessments for applying to American universities.

Li is frustrated that his son’s expensive bilingual schooling has been mostly online for two years, and he is anxious about the way Beijing has tightened oversight of the curriculum.

“This is a waste of our children’s youth,” Li said.

Being fairly well off, he has been able to take advantage of a European investment scheme that grants him and his family residency in Budapest.

“Many people know that if they sold all their assets they could ‘lie flat’ in a European country,” he said, using a slang phrase meaning to take it easy.

Beijing-based immigration consultant Guo Shize told AFP his company has seen an explosion of enquiries since March, including a threefold increase in Shanghai clients.

Even after the lockdown eased, requests continued flooding in at more than double the usual level.

“Once that spark has been lit in people’s minds, it doesn’t die down quickly,” he said. 

– Exit ban –

Censors have sought to suppress discussion of emigration, prompting nimble internet users to adopt the term “run” instead.

Searches for the term on messaging app WeChat peaked during Shanghai’s shutdown.

But as more people consider ways to leave, Beijing has doubled down on strict exit policies for Chinese citizens.

All “unnecessary” travel out of the country has been banned. Passport renewals have been all but halted, with authorities blaming the risk of Covid being carried into the country.

In the first half of 2021, immigration authorities issued only two percent of the passports given out in the same period in 2019.

One woman who emigrated to Germany told AFP she receives dozens of messages from Chinese people looking for tips on escaping.

Emily, who did not want to use her real name, tried to help a relative obtain a new passport to take up a job in Europe, but the application was denied.

“It’s like being a child who wants to go to their friend’s house to play but their parents won’t let them leave,” she said, adding that she has heard of passports being sold for up to 30,000 yuan ($4,500) on the black market.

– ‘Absolutely insane’ –

A Chinese freelancer told AFP he was turned back by immigration officers while attempting to fly to Turkey for work last October, despite having already checked in.

“My itinerary sounded too suspicious to them. They took my passport into an office and 15 minutes later told me I do not meet the requirements” for leaving, he said on condition of anonymity. “It was absolutely insane.”

He managed to leave weeks later by entering semi-autonomous Macau on a different travel document, before catching an onward flight.

Some are disillusioned with Beijing’s growing controls, which have been ramped up during the pandemic.

“I just want to live in a country where the government won’t crudely interfere in my personal life,” said Lucy, a 20-year-old student at an elite Beijing university involved in LGBTQ and Marxist activism.

The virus policies had “allowed the government to control and monitor everything”, she said.

“Perhaps rather than accepting and adapting to this system, we must go elsewhere and create a new life.”