Morocco threatens to cut EU ties if farm deal founders

Google map showing Morocco and neighboring countries.
Updated 06 February 2017
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Morocco threatens to cut EU ties if farm deal founders

RABAT: Morocco’s government said on Monday it would end economic cooperation with the European Union if the bloc does not honor a farming deal, weeks after an EU court ruled that trade accords do not apply to the disputed Western Sahara region.
In a statement to MAP state news agency, the agriculture ministry said the EU should resist any attempts to block Moroccan products entering into the European market but did not explain why the pact might be at risk.
“In the absence of a frank commitment from the European Union, Morocco will have to make a decisive choice whether to continue with EU trade or to undo it without looking back, and focus on building new trade routes,” the ministry said.
The European Court of Justice ruled in December that deals involving trade of agricultural products, processed agricultural products and fisheries between the EU and Morocco did not apply to Western Sahara.
The ruling was claimed as a victory by the Polisario group seeking independence for Western Sahara, which Morocco calls its own. Last month, Polisario sought to have the EU apply the ruling to block a shipment of fish oil to a French port from the territory.
Rabat had said the European court ruling would not impact current trade deals in any way. The agriculture ministry said on Monday that current agreements with EU ensured thousands of jobs and could trigger migrant flows if their implementation fails.
An EU diplomatic source told Reuters the ministry’s statement came after Energy Commissioner Miguel Arias Canete referred in a written reply to a question in the EU parliament to the “separate and distinct” status of Western Sahara.
Moroccan agriculture minister Aziz Akhannouch said Monday’s statement was not a response to Canete’s remarks, but that his comments reflected an attitude seen within EU institutions.
“It is about what the European court decision means,” the minister told Reuters by telephone. “For Morocco it means the deals should be implemented like they have been since their signature.”
Akhannouch said European officials have not yet started official talks on the meaning of the ruling but that Morocco has been preparing for its potential effects.
“We are reasonable people, we know that we need Europe and Europe needs us. But we want them to see all the efforts Morocco does to make the partnership work,” he said.
Without going into details of the trade deals, the court had signalled some EU fisheries in disputed coastal waters would be in violation of the ruling. It said agreements signed with Morocco could not include Western Saharan resources because the region’s inhabitants had not agreed to that.
Western Sahara, which has significant phosphate reserves and offshore fishing, has been contested since 1975 when Spain, the former colonial power, withdrew. Morocco fought a 16-year war with Polisario, which established a self-declared Sahrawi Arab Democratic Republic.
A 1991 cease-fire was meant to be followed by a UN-backed referendum on self-determination including the question of independence. The vote has never happened mainly because of disagreements on who could take part and Morocco since 2006 has promoted its own autonomy proposal.
The two sides often engage in diplomatic sparring but tensions on the ground have also increased since August last year, when UN peacekeepers were forced to deploy after Morocco forces and a Polisario unit faced off in a buffer zone between Morocco-controlled area and territory held by Polisario.
Last month, Morocco rejoined the African Union, having left decades ago because it had allowed Polisario recognition. Analysts expect Morocco to try use its position inside the AU to promote its own autonomy plan for Western Sahara against Polisario. (Reporting by Aziz El Yaakoubi)


Another surprise fall in UK inflation muddies Bank of England rates message

Updated 4 min 8 sec ago
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Another surprise fall in UK inflation muddies Bank of England rates message

LONDON: British inflation fell unexpectedly in April, according to figures on Wednesday that added to doubts about when the Bank of England will raise interest rates again and pushed sterling to its lowest level against the dollar this year.
Consumer price inflation cooled to 2.4 percent last month, its weakest increase since March 2017, and down from 2.5 percent this March.
The figure was below economists’ average expectation in a Reuters poll for it to hold steady at 2.5 percent and represented the second surprise fall in a row after a drop in March’s figures. “It’s a conundrum for the Bank of England which has struggled to read the direction of price changes recently,” Ed Monk, associate director for personal investing at fund manager Fidelity International, said.
“With inflation trending lower, it only makes it harder for the Bank of England to raise rates.” Investors were now pricing in a one-in-three chance of a BoE rate hike in August — the next time it updates its forecasts on the economy — down from 50/50 before Tuesday’s data.
High inflation, caused by the pound’s drop after the 2016 Brexit vote, squeezed British consumers through last year, and although it has receded from its December peak of 3.1 percent, the BoE is keeping a close eye on price pressures.
PIPELINE PRESSURE
Wednesday’s data pointed to some signs of inflation pressure still in the pipeline. Prices of goods leaving British factories increased at a faster rate than expected last month. And while consumer price inflation cooled again, the timing of the Easter holidays and their impact on air fare prices was a big contributor.
On Tuesday Bank of England Governor Mark Carney cited a new sugar tax on soft drinks, as well as higher utility bills and petrol prices, as reasons why inflation “probably tips up a bit” in the coming months before resuming a decline. The ONS said soft drink prices increased sharply over the last couple of months but the overall impact on inflation was minimal.
The latest data on prices in British factories, which eventually feed through onto the high street, were stronger than anticipated. Manufacturers increased the prices they charged by 2.7 percent year-on-year, matching March’s increase. Economists had expected a fall to 2.3 percent. Among manufacturers, the cost of raw materials — many of them imported such as oil — was 5.3 percent higher than in April 2017, up sharply from an increase of 4.4 percent in March and suggesting a long run of weakening price growth has ended.
A surprise drop in consumer price inflation in March, along weak economic growth figures for early 2018, had called into question whether the BoE would raise interest rates more than once before the end of the year.
Earlier this month it refrained from an interest rate hike that had at one point been widely expected. The BoE’s latest forecasts show inflation dropping to 2.1 percent in a year’s time, and returning to its 2.0 percent target a year later — but only if interest rates rise by 25 basis points about three times over three years.
The latest Reuters poll of economists suggests the BoE is most likely to raise interest rates at its August meeting.