NEWS, 31.05.2012.

 Spain debt woes spur flight from risk

 

Asian shares and commodities slid while the euro fell to its lowest in almost two years against the dollar on Thursday, as surging borrowing costs in troubled Spain raised fears that it could fail to rescue its banks and may need to seek a bailout. Investors fled from risk assets to US government bonds, with the benchmark 10-year Treasury yield falling below 1.6% in early Asian trade on Thursday, its lowest in at least 60 years. The 10-year Japanese government bond yield  hit a nine-year low of 0.810%. The dollar and the yen were also beneficiaries of escalating risk aversion although gold, a traditional safe-haven asset, struggled in the face of the greenback’s strength.     MSCI’s broadest index of Asia-Pacific shares outside Japan tumbled as much as 1.6%, and was set for its worst month in eight months with a drop of nearly 12%. The pan-Asia index was down 0.3% for the year.   The index was dragged down as some key Asian bourses - Hong Kong, Australia and Korea - temporarily fell to negative territory for t h e year. Japan’s Nikkei was down 1.4% on the day and  on track for its biggest monthly drop in two years. European shares were likely to tread lower, with spreadbetters predicting major European markets    would open down as much as 0.2%. US stock futures were nearly unchanged.   "The situation in Spain at the moment is untenable, not only is there concern over the state of its banking sector but there is little confidence its government will actually be able to bail them out,” said Michael Creed, an economist at the National Australia Bank. A caution by Spain’s central banker that Madrid will miss deficit targets for this year pushed Spanish 10-year yields  above 6.7%, close to 7%, a level seen as unsustainable and which could push Spain to seek a bailout just as Greece, Portugal and Ireland have done. The cost of insuring against a Spanish default scaled a record high near 600 basis points while Italy, which is also struggling with huge public debt, saw its 10-year yield  top 6% for the first time since January. Yields on all German bond maturities hit record lows on Wednesday, pushing the premium investors demand to hold Spanish debt over German debt to its highest since the launch of the euro at around 543 basis points. Firm dollar slams commodities Oil prices extended losses and copper hit 2012 lows near $7 422 a tonne on Thursday. US crude futures eased 0.3% at $87.59 a barrel and were set for their worst month since late 2008. Brent crude fell 0.3% at $103.15 a barrel, on track for its worst month in two years.     “Investors were already exposed to the problems in Spain, but what really disturbed the market were oil prices and US bond yields which broke out of range to hit long-period lows,” said Lee Seung-wook, an analyst at Kiwoom Securities. The dollar index, measured against a basket of major currencies, extended its rally to 83.11, its highest since September 2010.   The strong dollar and intensifying risk aversion sent the Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, tumbling 1.7% to its lowest levels since September 2010 on Wednesday. A stronger dollar typically weighs on dollar-based commodities. The dollar index was on the verge of closing above its 100-month moving average at 81.82, which would generate a buy signal which in turn could spur a sustained period of dollar strength for the next couple of years to as high as 101.00-106.00, some analysts said. The index has in the past 30 years generated four successful buy signals which have resulted in significant dollar moves, they added.Euro under fire     The euro fell to a 23-month low of $1.2358 and a four-and-a-half month low against the safe-haven yen at ¥97.36. “There is no exit in sight currently for the euro to get out of this downtrend because there is no shortage of negative news,” said Hisamitsu Hara, chief FX manager at Bank of Tokyo-Mitsubishi UFJ. “Problems in Spain, a large eurozone economy, heighten fears while the risk of Greece leaving the euro bloc raises contagion concerns. The euro remains depressed, with players  cautiously testing the downside”. Hara added that the euro could weaken until support at the$1.19 level. The euro last dipped below $1.19 in June 2010. The yen rose to a three-and-a-half month high against the dollar at ¥78.71. Hara said wariness over Japanese authorities intervening to prop up the dollar was likely to prevent the US currency from falling sharply further.The European Commission threw Spain two potential lifelines, offering more time to reduce its budget deficit and offering direct aid from a eurozone rescue fund to recapitalise distressed banks. But any relief from the news was quickly offset by the latest Greece polls showing parties for and against a bailout neck-and-neck or very close to each another, ahead of a June 17 election that may decide whether Greece remains in the euro. Asian credit markets weakened, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 8 basis points.  

Oil prices extend losses

 

 Oil extended losses in Asian trade on Thursday, with prices hitting multi-month lows as Spain's banking woes intensified worries about the eurozone, analysts said.New York's main contract, West Texas Intermediate crude for delivery in July was down nine cents to $87.73 per barrel while Brent North Sea crude for July shed 29c to $103.18 in the afternoon.Prices had slumped Wednesday as the dollar rose to two-year highs against the European single currency, making dollar-priced oil more expensive and hurting demand.WTI crude had plunged $2.94 on Wednesday to its lowest level since October, while Brent declined $3.21, its lowest close since December 16."Right now, the market is wide open. There is still scope for more downside pressure on prices if the bearish sentiment about the eurozone's future keeps up," said Nick Trevethan, senior commodities strategist at ANZ Research.Spain's economic woes were sharply in focus as its 10-year borrowing rates approached the 7% mark considered too high for governments to be able to service their debts.Economists fear Madrid will have to seek an international bailout - following Greece, Ireland and Portugal - despite assurances from Prime Minister Mariano Rajoy.The European Commission weighed in on Wednesday, placing the debt-wracked country at the head of a critical list of 12 economies ordered to carry out sweeping reforms this year to try to stabilise the eurozone debt crisis."Concerns about a possible Greek exit and the risks of contagion from the periphery remain and in the absence of a policy response, oil prices are likely to remain under pressure," said Barclays Capital in a commentary.

NEWS, 30.05.2012.

IMF chief riles Greeks

 

Political leaders in Athens and thousands of internet users have rounded on International Monetary Fund (IMF) chief Christine Lagarde for branding Greeks tax dodgers, as parties went on the campaign trail for next month's elections.Socialist leader Evangelos Venizelos accused Lagarde on Sunday of trying to "humiliate" the debt-stricken country, which is facing its second election in six weeks, a vote seen as crucial to the future of the eurozone.Radical left-wing leader Alexis Tsipras, whose Syriza party is one of the two top contenders for the June 17 vote, insisted "Greek workers pay their taxes, which are unbearable".Greek web users waged Facebook war against Lagarde, with the IMF's French managing director receiving more than 10 000 messages, many of them obscene, on her page on the online social network.By late Sunday afternoon a separate Facebook page had sprung up titled "Greeks are against Lagarde".Their anger was sparked by comments Lagarde made in Britain's Guardian newspaper on Friday that Greeks must "help themselves collectively" by all paying taxes, saying she was more concerned about Africans in poverty than Greeks in the economic crisis.Among the online messages posted by angry Greeks, Iakovos Magdakis wrote: "Who are you to tell me to pay? My wife has been unemployed for four years, I have been unemployed for five months and we have a four-month-old baby."Lagarde responded to the flood of angry online messages by responding on Facebook that she was "very sympathetic to the Greek people and the challenges they are facing"."That's why the IMF is supporting Greece in its endeavour to overcome the current crisis," she said on the social networking site.The comments by the French IMF head came as parties squared off for the election that could determine whether Greece continues to receive European Union-IMF funds as part of a multi-billion euro bailout package and stays in the eurozone.Tsipras seized on her comments to assert his stance as a defender against economic cuts, which drove many Greeks to vote for him in an inconclusive election on May 6, putting him second ahead of Venizelos's Pasok party."The last thing we seek in Greece is her sympathy. Greek workers pay their taxes, which are unbearable," Tsipras said in a statement, taking a swipe at Pasok and the conservative New Democracy party which came first in May."For tax evaders, she should turn to Pasok and New Democracy to explain to her why they haven't touched the big money and have been chasing the simple worker for two years."In France, whose Socialist President Francois Hollande has defended Greece's place in the eurozone and pushed for a more growth-orientated strategy in the crisis, government spokesperson Najat Vallaud-Belkacem described Lagarde's comments as "rather simplistic and stereotypical".Venizelos welcomed Lagarde's Facebook message, after saying an election rally: "Nobody can humiliate the Greek people during the crisis."Greece made a deal in 2010 to receive hundreds of billions of euros from the IMF and the EFSF, a European Union bailout fund, to rescue it from financial collapse. Lagarde took the reins of the global lender in May 2011.The country will head to the polls for a second time in six weeks on June 17 since political parties failed to form a coalition after the May 6 election.Syriza, which has threatened to renege on the bailout accords, has led at times in the opinion polls, but a series of polls published Sunday indicated New Democracy had taken the lead.New Democracy and Pasok each defend the bailout agreement they signed as partners in a coalition government, but have proposed to amend it.Venizelos said he wants to extend the loan repayments."The country needs a government that will unite the people and revise the loan agreement, but assure we stay in the euro," he said Sunday.Former prime minister Lucas Papademos has warned that Greece may run out of money by the end of June if international bailout funds are cut off following the election, To Vima newspaper reported Sunday.Campaigning on Saturday, New Democracy leader Antonis Samaras said a victory for Syriza would cause "catastrophe" and send Greece out of the euro.

Greece's crime bonanza

 

Andreas and Emilia Karabalis, who are both 80, feared their bank in Greece would collapse, so they withdrew their €80 000 ($100 000) savings and stashed it at home for safety. Days later, the thieves came in the night. "We were sleeping. The two masked burglars came to our bed and tied us up. They hit us. "They robbed us - they didn't leave anything, it was torture," said Emilia, who still trembles when she recalls the attack this month on the island of Lefkada. Husband Andreas added: "Our life is black now. They took our life's savings. We lost everything." No one knows just how much cash lies stashed in Greek homes, secreted in cupboards, at the back of the ice-box, beneath the floor or under the mattress. But by any guess it is well in the billions, and burglars are after their share of loot which is both highly portable and virtually impossible to recover. Greece's debt crisis has plunged it into five straight years of economic contraction, thrown half of its young people out of work and may see it ejected from the eurozone. In the past two years, Greeks have withdrawn from banks more than €72bn - or close to €7 000 for every man, woman and child in the country. And much of that has been taken in cash. No money in robbing banks Police say that gangs who may have once eyed "hard targets", - like the banks themselves, or jewellers - are now going after homes of ordinary people, where there is far less risk and often large stashes of cash freshly withdrawn from savings accounts. "Many people have withdrawn their money from the banks fearing a financial crash, and they either carry it on them, find a hideout at home or in storage rooms," said national police spokesperson Thanassis Kokkalakis. "We urge people to trust the banking system, leave their money there, or at least in a safe place, not hide it at home, where they must anyway take the basic security measures," he said. "Some people don't even lock their doors and windows." The unexpected bonanza is attracting foreign crime networks, he said, including two from ex-Soviet Georgia which police dismantled in recent months, blaming them for 300 burglaries. Crime is just one hazard for people storing unusually large hoards of cash, most of which are not insured. There are tales of savings going up in smoke in fires or, as in one case, being lost when a pensioner withdrew his life savings - then died suddenly, before telling his family where they were hidden. Theft, though, seems the biggest risk and the crime wave has spread far beyond the big cities into rural areas where robbery was little known. Carpenter George Psychogios, 30, withdrew his savings of €8 000 and kept them in his house at Arta, a small town 350km from Athens and known principally for its Byzantine stone bridge and a 13th-century church. "I hid the money in two different places before leaving for a trip. When I came back it was all gone," he said. "They broke into the house through a balcony door and they took it all." "We used to sleep outside with the doors unlocked. Now we don't feel safe even when we lock up. They break into homes, shops, businesses. There is a surge in robberies here." In Iraklion, a working class neighbourhood of Athens, local people say some thieves have become so brazen that they often prowl in broad daylight, even when a family is in. "We were sitting on the front veranda chatting when they jumped from the roof to the back yard and got into the house," said pensioner Mattheos Michelakakis, 61. Before he realised what had happened, they had made off with his family's gold. "Burglars hear that people are scared and withdrawing money and they hit homes randomly hoping they will be lucky," he said. "I feel like I've been naive. We always used to leave all the doors open; we had nothing to worry about." Hoarding in troubled times According to the central bank, Greeks withdrew €72bn from bank accounts between January 2010 and March 2012, leaving just €165bn behind. Since then, withdrawals have accelerated further after an inconclusive May 6 election led Eurtopean Union leaders to talk openly of Greek exit from the single currency. Some of that money was wired abroad and some spent, but much of it was hidden in homes, either in cash or converted to gold. If Greece leaves the common currency area, any money left in Greek banks would probably be turned into drachmas worth a good deal less. Euros stashed in a box at home would still be euros. "People have already taken their money out of the bank. The rest are doing it now because they are afraid we will be kicked out of the eurozone," said one police officer. Among cases he said he had come across in the past week: a man reported €30 000 in cash and gold stolen from a storage room next to his house and an elderly woman had her life savings of €100 000 stolen from her apartment. That woman's home also happened to be packed full of cartons of long-life milk and boxes of pasta - in case, she explained, the economic crisis led to food shortages. Stashing cash is as old as Greece. The countryside is dotted with archaeological sites where the ancients squirrelled away their silver drachmas to hide them from marauding armies. Greek museums are rich in treasure whose owners never made it back. "Hiding valuables - small or larger amounts of coins, golden, silver, even bronze - was very widespread in antiquity, especially in times of war, crisis or difficulty," said George Riginos of the Association of Greek Archaeologists. "Sometimes the owner would perish and this is how they reached us, hidden in the ground, in holes in the wall, small vases under the floor or leather bags." Future archaeologists may yet stumble on some of the buried treasure of the eurozone crisis of 2012. A senior banker tells the story of a family on the island of Rhodes who recently visited their local branch, trying desperately to figure out how much their late father had withdrawn before he died. Not trusting the bank, the old man had taken out his life savings. But he hadn't told anyone where he hid it. His children were searching everywhere, tearing down walls in the house trying to find it, but with no luck.

NEWS, 29.05.2012.

Greek Socialist leader slams IMF chief’s tax comments

 Greece's socialist leader Evangelos Venizelos accused the IMF chief Christine Lagarde on Sunday of trying to humiliate the country. His comments come after Lagarde had urged Greece to "help themselves" by "paying their taxes". 

Greece's Socialist party leader accused IMF chief Christine Lagarde of trying to "humiliate" the crisis-hit country by saying Greeks dodge taxes as he campaigned Sunday for crucial June elections."Nobody can humiliate the Greek people during the crisis, and I say this today addressing specifically Ms. Lagarde... who with her stance insulted the Greek people," Evangelos Venizelos told an election rally.Lagarde told Britain's Guardian newspaper in an interview published Friday that Greeks must "help themselves collectively" by all paying their taxes, saying she was more concerned about sub-Saharan Africans in poverty than Greeks hit by the economic crisis.Her comments came as Venizelos's Pasok and other Greek parties squared off for a June 17 election that could determine whether it continues to receive IMF funds and stays in the eurozone.Lagarde's remarks drew thousands of comments on her Facebook page, many from annoyed Greeks.On Saturday the IMF chief responded: "I am very sympathetic to the Greek people and the challenges they are facing. That's why the IMF is supporting Greece in its endeavour to overcome the current crisis.""An important part of this effort is that everyone should carry their fair share of the burden, especially the most privileged and especially in terms of paying their taxes."Venizelos told a news conference on Sunday, the morning after his campaign rally: "Ms. Lagarde had to revise her comments. I am glad she did it because that means she takes into account a proud nation."Greece made a deal in 2010 to receive hundreds of billions of euros (dollars) from the IMF and the EFSF, a European Union bailout fund, to rescue it from financial collapse.The country will head to the polls for a second time in six weeks on June 17 since political parties failed to form a coalition after an inconclusive election on May 6.In that election, voters fed up with salary and pension cuts demanded by the bailout terms handed second place to radical left-wing party Syriza, which has threatened to renege on the bailout accords.Former prime minister Lucas Papademos warned on May 11 that Greece may run out of money by the end of June if international bailout funds are cut off following the election, To Vima newspaper reported Sunday.That could lead Greece to default on its debt and leave the eurozone."From late June onwards, the ability of the government to fund its obligations fully depends on the approval of the subsequent instalments of loans from the EFSF and the IMF," To Vima quoted Papademos as saying in a leaked memo."The available funds in the Greek government will be reduced gradually from about 3.8 billion euros on May 11 to about 700 million euros on June 18 and from June 20 will enter negative territory at the level of around one billion euros."Ahead of the June 17 election, Syriza has led at times in the opinion polls, but a series of polls published Sunday indicated conservative party New Democracy had taken the lead.Campaigning on Saturday, New Democracy leader Antonis Samaras said a victory for Syriza would cause "catastrophe" and drag Greece out of the euro.The new surveys by five separate polling groups forecast a New Democracy victory ranging between 23.3 percent and 25.8 percent, a result that would still require the party to join up with allies to form a viable government.Syriza polled in second place ahead of Pasok, which like New Democracy defends the bailout agreement while proposing to amend it.Venizelos said he wants to extend the loan repayments."The country needs a government that will unite the people and revise the loan agreement, but assure we stay in the euro," he said Sunday.One survey by pollster Marc, carried out on 1,075 households on May 22-24, showed that 82.4 percent of Greeks wished to stay in the eurozone.

IMF chief tells Greeks to ‘pay their taxes’

 IMF chief Christine Lagarde told Greeks on Friday to pay their dues and help drag their country out the crippling economic crisis. Lagarde said Greeks could "help themselves" by "all paying their taxes". 

The head of the International Monetary Fund on Friday urged Greeks to pay their taxes, saying she is more concerned about sub-Saharan Africans in poverty than Greeks hit by the economic crisis.Christine Lagarde told the Guardian newspaper in an interview published online Friday, "As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax."The IMF managing director said Greeks should "help themselves collectively" by "all paying their tax", adding that she thought "equally" about those deprived of public services by the crisis and those involved in tax avoidance.Caught in a fifth straight year of recession, Greece is struggling to apply a tough austerity overhaul in return for EU-IMF loans, but has already made drastic cuts to public services.On children affected by the cuts, Lagarde said their parents needed to take responsibility."Parents have to pay their tax," she was quoted as saying."I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education," she added."I have them in my mind all the time. Because I think they need even more help than the people in Athens."Asked whether it was "payback time" for Greece and other debt-ridden eurozone economies, she responded, "That's right", the newspaper said.Greece in 2010 committed itself to a reform programme in return for hundreds of billions of euros (dollars) in bailout funds from the EU and the International Monetary Fund to prevent a default.Many of the reforms are currently in limbo, however, as Greece awaits a new general election on June 17 after an inconclusive vote on May 6.The IMF, along with European leaders, has said it will not bend on tough conditions attached to its loans to Greece, with fears rising that the debt crisis could culminate in a Greek exit from the eurozone.

NEWS, 28.05.2012.

Greek Exit Fears Cause Wealthy Greeks To Transfer Money To Safer Northern Banks

 

After Greece's inconclusive elections on May 6 led to political deadlock and heightened doubts about the country's future in the euro zone, Nikos, a successful businessman in the pharmaceutical supply industry, sent 7 million euros to a bank in Luxembourg."I have worked hard all my life and took risks in business. I am 62 years old now and cannot risk my money becoming drachmas. Most Greeks want to stay in the euro, that's what polls show, but it's better to be safe than sorry," he said.His precaution reflects a trend among southern Europe's wealthy. Greeks fear devaluation while Spaniards and Portuguese fret about the health of their banks so they are sending money to banks in the stronger economies of northern Europe.Nikos sent his cash to a Swiss bank offering much lower interest rates than his Greek bank paid but he said the sacrifice is worth it for peace of mind.Financial advisers and private bankers whose clients have accounts too large to be covered by a Europe-wide guarantee on deposits up to 100,000 euros, are reporting a "bank run by wire transfer" that has picked up during May.Much of this money has headed north to banks in London, Frankfurt and Geneva, financial advisers say."It's been an ongoing process but it certainly picked up pace a couple of weeks ago We believe there is a continuous 2-3 year bank run by wire transfer," said Lorne Baring, managing director at B Capital, a Geneva-based pan European wealth management firm."Where there is liquidity it is moving to the safest part of Europe and the perceived safest part of Europe is in the North... It's a no brainer," he said.Another private banker specialising in Spanish clients at a global banking group said Spain's wealthy remembered Argentina's 'corralito' a decade ago when authorities restricted withdrawals to prevent bank runs."We are taking calls from new clients who want part of their money outside of Spain because of the potential risk of a corralito though we don't think that will happen and we don't incentivise our clients to do that," the banker said.As deposits in European banks are guaranteed up to 100,000 euros, all but the wealthiest savers would get their money back in the event of a bank failure.But if a country left the euro, as economists think could happen to Greece, bank accounts would be redenominated into a new currency that could then devalue, eroding the value of deposits.Depositors could also face controls to prevent capital flight and further devaluation, or a freeze on withdrawals to defend the banks.One senior private banker based in London said colleagues had taken calls from Greeks "very keen" to open accounts in the UK to protect their wealth if Greece leaves the euro and returns to its old currency, the drachma.However, there is much legal uncertainty surrounding a potential exit from the euro zone and lawyers say moving money abroad may not necessarily protect it from conversion into the new currency."It is clear that Greek investors are looking to find ways to hold euros that will not get converted into drachmas," said Damian Bloom, partner at law firm Berwin Leighton Paisner."There is a concern whether euro deposits held by a Greek person in a non-Greek account would also get converted, or indeed whether Greek issued euro notes held by non-Greek persons would be converted. I don't know if these practical issues have yet been resolved."

Britain's Blair faces grilling over ties to Murdoch

 

Tony Blair's decision to openly court Rupert Murdoch to win power and ensure favourable coverage during his decade-long tenure as British prime minister will come under scrutiny when he faces a media inquiry today.The inquiry, ordered by Prime Minister David Cameron after Murdoch's now defunct News of the World tabloid admitted hacking phones, has tarnished Britain's elite by laying bare the collusion between politicians, the police and the media.Blair kicks off an important week at the Leveson inquiry by answering questions about his often obsessive media management which included courting Murdoch.The inquiry has so far focused on the conduct of the media and the close ties between Murdoch's empire and serving ministers, helping the opposition Labour Party leader Ed Miliband consolidate his position with attacks on Cameron.But the grilling of Blair, who recast the relationship between the media and politicians by 'spinning' news to gain the most favourable coverage, could undermine Miliband's attempt to portray Labour as a party above courting media tycoons.While Blair is no longer active in British politics, the inquiry may still prove uncomfortable as it examines issues such as his decision after stepping down as prime minister to become a godfather to Murdoch's daughter Grace at a ceremony on the banks of the river Jordan."Blair led the way in having no shame about courting Murdoch," said Ivor Gaber, professor of political journalism at City university."He set the style and the standard and if you regard Cameron as the 'heir to Blair' then it's not exactly surprising that he followed suit."Murdoch told the inquiry last month that he had never asked a prime minister for anything.Blair set the tone for his relationship with Britain's press when he flew to Australia in 1995 to speak before a gathering of Murdoch's executives who had previously used their British tabloids to vilify his Labour Party predecessors.The decision infuriated much of his left-of-centre party who saw the Australian-born tycoon as a right-winger who had helped to keep them out of power for years."People would be horrified," Blair said later in his autobiography. "On the other hand ... not to go was to say carry on and do your worst, and we knew their worst was very bad indeed.""The country's most powerful newspaper proprietor, whose publications have hitherto been rancorous in their opposition to the Labour party, invites us into the lion's den. You go, don't you?"The speech received a standing ovation and Murdoch indicated for the first time that he could be willing to switch the allegiance of his newspapers to the Labour Party."If our flirtation is ever consummated Tony then I suspect we will end up making love like porcupines, very, very carefully," he told him.With the backing of Murdoch's top-selling Sun tabloid, Blair swept to power in 1997 and again in 2001 and 2005. But with an ever increasing reputation for public relations 'spin', he started to face questions over his sincerity."Tony Blair quickly became famous in Fleet Street for inviting in one group of newspaper people and telling them how sceptical he was about Europe; and then inviting in another lot and telling them how keen he was on Europe," Andrew Marr, a senior BBC journalist, told the inquiry."But the different groups compared notes, and his reputation was not hugely enhanced."Much of that came to a head when Blair and then US President George W. Bush agreed to invade Iraq, going against the public opinion in Britain.Blair is likely to be asked why he spoke to Murdoch three times in the days leading up to the Iraq war and whether this had any impact on the fact that all Murdoch's papers supported the unpopular invasion.He will also be asked whether his reliance on Britain's press meant that he did not properly scrutinise their role in society and whether any group, such as Murdoch's News International, had too much control of the market."There was a desperation to get the Sun onside and to get News International on side, basically at all costs," Liverpool University's political professor Jonathan Tonge, told Reuters."And if that meant sacrificing a serious analysis of the relationship and the health of the relationship, then so be it."

NEWS,27.5.2012

Cuba waits anxiously for oil dreams to materialize

 In this Jan. 12, 2012 file photo, Alfonso Arias rides his horse next to an oil pump operated by the state oil company Cuba Petroleos, Cupet, in Santa Cruz del Norte, Cuba. It was supposed to be Cuba's economic savior: vast untapped reserves of black gold buried deep under the rocky ocean floor. But the first attempt in nearly a decade to find Cuba's hoped-for undersea oil bonanza has come up dry.It was supposed to be Cuba's economic savior: vast untapped reserves of black gold buried deep under the rocky ocean floor.

But the first attempt in nearly a decade to find Cuba's hoped-for undersea oil bonanza has come up dry, and the island's leaders and their partners must regroup and hope they have better luck - quickly.Experts say it is not unusual that a 3-mile (4.8-kilometer) deep exploratory well drilled at a cost of more than $100 million by Spanish oil giant Repsol was a bust. Four out of five such wells find nothing in the high-stakes oil game, and petroleum companies are built to handle the losses.But Cuba has more at stake, and only a few more spins left of the roulette wheel. The enormous Scarabeo-9 platform being used in the hunt is the only one in the world that can drill in Cuban waters without incurring sanctions under the U.S. economic embargo, and it is under contract for only one to four more exploratory wells before it heads off to Brazil."If oil is not found now I think it would be another five to 10 years before somebody else comes back and drills again," said Jorge Pinon, the former president of Amoco Oil Latin America and a leading expert on Cuba's energy prospects. "Not because there is no oil, but because the pain and tribulations that people have to go through to drill in Cuba are not worth it when there are better and easier options in places like Angola, Brazil or the U.S. Gulf of Mexico."A delay would be catastrophic for Cuba, where 80-year-old President Raul Castro is desperately trying to pull the economy out of the doldrums through limited free-market reforms, and has been forced to cut many of the subsidies islanders have come to expect in return for salaries of just $20 a month.It could also leave the Communist-governed island more dependent on Venezuela, where President Hugo Chavez is ailing with cancer. Chavez provides Cuba with $3 billion worth of heavily subsidized oil every year, a deal that might evaporate if he dies or fails to win re-election in October.An oil find, on the other hand, would potentially improve Cuba's long-bitter relations with the United States, some analysts suggest. They say the U.S. oil industry could lobby Congress to loosen the embargo so it could get in on Cuba's oil game. At the very least, coordination between the Cold War enemies would be necessary to prepare for any spill that could coat beaches in the U.S. and Cuba with black goo.The Cuban government has not commented on Repsol's announcement May 18 that the first well came up dry, and declined to make any oil officials or experts available to be interviewed for this article.Next in line for using the drilling rig in Cuban waters is Malaysia's Petronas, which holds the rights to explore an area in the Florida Straits known as the Northbelt Thrust, about 110 miles (180 kilometers) southwest of Repsol's drill site. Wee Yiaw Hin, Petronas' executive vice president of exploration and production, told The Associated Press that drilling has begun and he expects results by the end of July.After that, two industry experts said, Repsol is under contract to drill a second well, though it could get out of the deal by paying a penalty to Saipem, the Italian company that owns the rig. Kristian Rix, a spokesman for Repsol in Madrid, said a decision on whether to sink another well was still being evaluated.Venezuela's PDVSA and Sonangol of Angola have options to drill next, but are under no obligation if they don't like their odds. While both countries are strong allies of Cuba, at $100 million a well, the decision to drill will likely be based solely on economics.Even if oil is found, the Scarabeo-9 is under contract to power up its eight enormous thrusters and sail to Brazil after that, with no date set for its return to Cuba. The bottleneck highlights the difficulties Cuba faces, and why it could be well into the 2020s before the island sees any oil windfall."Assuming they're successful in finding oil, to bring the oil to market will take years of development efforts," said Victor Shum, an energy analyst with consulting firm Purvin & Gertz in Singapore.Once an exploratory well finds oil, companies generally drill between 10 and 20 additional wells nearby to get a sense of the reservoir's size. The process can take several years even under normal circumstances, and circumstances are not normal in Cuba.The Scarabeo-9 was built in Asia with less than 10 percent U.S.-made parts to avoid violating Washington's embargo, making it the only rig in the world that meets the requirement. That means no other rig could be used in Cuba without risking U.S. sanction, and the additional wells would have to be drilled by the rig one at a time, with each taking about 100 days to complete. At about three wells a year, it could take up to six years for this second phase - assuming the rig is available.After gauging a reservoir's size, an oil company then must assess whether the economics of a field make it a prime spot for exploitation, or whether to concentrate resources elsewhere.If exploitation does go forward, complicated equipment is required to pull oil from such depths. Several industry experts said the only country that produces the necessary apparatus is the United States, although Brazil and other countries are working to catch up. Unless they do, the oil could not be removed unless the U.S. embargo was lifted or altered."A lot of folks are looking at the energy sector in Cuba because they are looking at a Cuba of five years from now, or 10 years from now," said Pinon. "So a lot of people are betting that either the embargo is going to be lifted, or the relationship between the U.S. and Cuba is going to improve in some way."Still, the benefits of hitting a gusher would be enormous for Cuba, and the impact could be felt long before any oil was pumped.Because of the embargo, Cuba is shut off from borrowing from international lending institutions, and the island's own poor record of repayment has left most other creditors leery. Cuba, for instance, owes the Paris Club of creditor nations nearly $30 billion.An oil find could change the game, with Cuba using future oil riches as collateral to secure new financing, economists say. They point to China and Brazil as potential sources of new funding, but say neither is likely to put money into the island without reasonable confidence they will get their investment back.Lee Hunt, the recently retired president of the Houston-based International Association of Drilling Contractors, said the stakes are enormous for Cuba that one of the wells hits oil before the Scarabeo-9 leaves. Hunt has worked to bring U.S. and Cuban industry and environmental groups together."If the only rig you can work with is gone, it's like somebody took your shovel away," Hunt said. "You are not going to dig any holes without a shovel, even if you know the treasure is down there."

NEWS, 26.05.2012.

I made Russia a freer country: Medvedev

 

President Dmitry Medvedev said on Thursday that Russia had become a freer nation during his four-year term, citing the mass protests of recent months as evidence of change."Spring has come to us, both literally and figuratively. I congratulate you," Medvedev said in a live television interview, his last before he hands the presidency back to Vladimir Putin."Freedom," Medvedev sighed and smiled, "is such a unique feeling that everyone interprets differently."Freedom is a sense of self. And in this sense we've done a lot," he told a group of liberal journalists,who are usually sidelined for their sceptical stance towards the government.Medvedev's political mentor Putin, who became his prime minister after being barred by the constitution from serving more than two successive presidential terms, announced plans in September to return to the Kremlin in a job swap with his close ally.That announcement coupled with fraud-tainted parliamentary polls in December led to the largest protests since the Soviet era, when tens of thousands rallied in Moscow protesting Putin's comeback.Protests lose stingBoth Medvedev and Putin have in the past sought to stress that the protests were the hallmark of a democratic society, and introduced cosmetic political reforms that many analysts called a concession to protesters."Let's ask people who took to various squares whether they are free or not," Medvedev said."It is not important who they support: 'the white', 'the red' or 'the blue'. I am absolutely confident that the overwhelming majority of them will say: 'Yes, I am free because I stand here, I have my own position, I do not like a lot, or on the contrary, I like practically everything, don't you dare touch it. I am free'.""The current accelerated movement towards democracy will not lead to chaos," Medvedev added. "Society has matured."The nascent protest movement has lost much of its sting since Putin's crushing 4 March presidential victory, although it still hopes to muster another major demonstration in Moscow the day before Putin's 7 May inauguration.Medvedev defended his decision to cede the country's top job which has earned him mockery from the liberal opposition and many ordinary Russians calling him a mere seat-warmer incapable of promoting true reform.Hunger strike"We've achieved the political results we were hoping for," said Medvedev, who expects to be appointed prime minister when Putin moves back to the Kremlin."The decisions that were announced in September have been confirmed by political practice and it, as we know, is a criterion of truth.""We've thought it all up not to warm ourselves up but to receive a concrete political result. And we've received it, we've received a mandate to rule," he said.But the outgoing president also spoke disparagingly of the recent 40-day hunger strike by opposition politician Oleg Shein in the southern city of Astrakhan in protest at alleged violations in mayoral elections that he contested."I do not blame anyone. But 'Hunger Games' - I will remind you, is a rather mediocre Hollywood blockbuster, I don't know whether you've watched it or not, I have - whoever does it very often pursues a very obvious political goal."He defended his presidential decisions including the sacking of governors and the reform of the bloated police force, reiterating that Russia's most prominent prisoner Mikhail Khodorkovsky would not be allowed to walk free unless he asked for pardon."Without a request there cannot be a review. This is my firm position."Once Russia's richest man, Khodorkovsky is set to stay in jail until 2016 after being convicted in two fraud trials in what his supporters say is a case of personal vendetta on the part of Putin.

 

Iran: Enriched uranium traces a 'technical issue'

 

A top Iranian nuclear negotiator said that traces of enriched uranium discovered at an underground bunker came from a "routine technical issue," the country's official IRNA news agency reported Saturday.Ali Asghar Soltanieh, Tehran's envoy to the International Atomic Energy Agency, was responding to a report by the U.N. nuclear watchdog that said it had found radioactive traces at an Iranian nuclear site. The uranium found had been enriched to a level that is slightly closer to the threshold needed for nuclear weapons than Iran's previous highest-known enrichment grade.The IAEA said in the confidential report obtained Friday by The Associated Press that it was asking Tehran for a full explanation about the traces. But the report was careful to avoid any suggestion that Iran was intentionally increasing the level of its uranium enrichment.Tehran said the find was a technical glitch, according to the report. Analysts and diplomats said Iran's version sounded plausible.The West suspects Iran is pursuing a weapons program. Tehran denies the charge, saying its nuclear program is aimed at peaceful purposes like power generation and cancer treatment.Soltanieh said the report on Iran's nuclear activities was "historic evidence" that proved the peaceful nature of Iranian nuclear activities, while the uranium discovery was blown out of proportion for political reasons."This issue shows that some intend to damage the existing constructive cooperation between Tehran and the International Atomic Energy Agency," he was quoted as saying.The higher the enrichment, the easier it becomes to re-enrich uranium to the 90 percent needed for weapons grade. As a result, the finding of traces at 27 percent at the Fordo enrichment plant in central Iran sparked international interest.Iran denies any plans to develop nuclear weapons, but has for years declined offers of reactor fuel from abroad, including more recent inducements of 20-percent material if it stops Aproducing at that level. The Islamic Republic says it wants to continue producing 20 percent uranium to fuel its research reactor and for medical purposes.But its refusal to accept foreign offers has increased fears Tehran may want to turn its enrichment activities toward producing such arms. The concerns have been fed by IAEA suspicions that Iran has experimented on components of an atomic arms program — suspicions Tehran also denies.The report cited a May 9 letter from Iranian officials suggesting any enrichment at 27 percent was inadvertent. The letter said the particles were produced "above the target value" and could have been for "technical reasons beyond the operator's control."But the IAEA report did detail some progress in talks between the U.N. nuclear agency and Iran that the agency hopes will relaunch a long-stalled probe into the suspicions that Tehran has worked on nuclear-weapons related experiments.Amano will handover the report on Iran's nuclear activities to the board of directors of the agency later in June.IRNA also reported that Iran's nuclear chief, Fereidoun Abbasi, said Saturday that Tehran will not open the Parchin site until the agency convinces the country it is necessary."If a visit to Parchin is to happen, they should convince us in advance. So far, no reason and evidence has been handed to us," Abbas was quoted as saying.After a short visit to Tehran last week, Amano said Iran and the agency will sign an agreement on inspection to the site, soon.

NEWS,25.5.2012

Higher enrichment at Iranian site

The UN atomic agency has found evidence at an underground bunker in Iran that could mean the country has moved closer to producing the uranium threshold needed to arm nuclear missiles, diplomats said on Friday.The International Atomic Energy Agency (IAEA) has found traces of uranium enriched up to 27% at Iran's Fordo enrichment plant, the diplomats told The Associated Press.That is still substantially below the 90% level needed to make the fissile core of nuclear arms. But it is above Iran's highest-known enrichment grade, which is close to 20%, and which already can be turned into weapons-grade material much more quickly than the Islamic Republic's main stockpile, which can only be used for fuel at around 3.5%.The diplomats - who demanded anonymity because their information is privileged - said the find did not necessarily mean that Iran was covertly raising its enrichment threshold toward weapons-grade level. They said one likely explanation was that the centrifuges that produce enriched uranium initially over-enriched at the start as technicians adjusted their output - an assessment shared by nonproliferation expert David Albright.Albright, whose Washington-based Institute for Science and International Security looks for signs of proliferation, said a new configuration for the cascades set up in tandem at Fordo means they tend to "overshoot 20%" at start up.Sanctions"Nonetheless, embarrassing for Iran," he wrote in an e-mail to the AP.Calls to Ali Asghar Soltanieh, Iran's chief delegate to the IAEA, were rejected and the switchboard operator at the Iranian mission said he was not available. IAEA media officials said the agency had no comment.Iran is under several rounds of UN sanctions for its failure to disclose information on its controversial nuclear programme. Tehran says it is enriching uranium to provide more nuclear energy for its growing population, while the US and other nations fear that Iran doing that to have the ability to make nuclear weapons.The latest attempts to persuade Iran to compromise and let UN experts view its nuclear programme ended inconclusively on Wednesday at a meeting in Baghdad. At the talks, six nations - the United States, Russia, China, Britain, France and Germany - failed to gain traction in efforts to persuade Tehran to freeze its 20% enrichment. Envoys said the group will meet again next month in Moscow.Iran started enriching to 20% last year, mostly at Fordo, saying it needed the material to fuel a research reactor and for medical purposes. HopeStill, its long-standing refusal to stop enrichment and accept reactor fuel from abroad has sparked fears it wants to expand its domestic programme to be able to turn it toward making weapons.Those concerns have increased since it started higher enrichment at Fordo, which is carved into a mountain. That, say Iranian officials, makes it impervious to attack from Israel or the United States, which have not ruled out using force as a last option if diplomacy fails to curb the Islamic Republic's nuclear programme.Even though Wednesday's talks were unproductive, diplomats saw hope in the promise of another meeting."It is clear that we both want to make progress and that there is some common ground," European Union foreign policy chief Catherine Ashton, who is formally leading the talks, told reporters. "However, significant differences remain. Nonetheless, we do agree on the need for further discussion to expand that common ground."Significant differencesSaeed Jalili, Iran's top nuclear negotiator, offered a lukewarm assessment of Wednesday's negotiations, in light of European and American refusal to lift tough sanctions against Iran as Tehran had hoped."The result of the talks was that we were able to get more familiar with the views of each other," Jalili told reporters.In Washington, Secretary of State Hillary Clinton said significant differences remain between the two sides and that it's now up to Iran "to close the gaps"."Iran now has the choice to make: Will it meet its international obligations and give the world confidence about its intentions or not?" Clinton said.Iran went into Wednesday's talks urging the West to scale back on recently toughened sanctions, which have targeted Iran's critical oil exports and have effectively blackballed the country from international banking networks. The 27-nation European Union is set to ban all Iranian fuel imports on 1 July, shutting the door on about 18% of Iran's market.Experiments The diplomats said a confidential IAEA report on Iran's nuclear programme to be released later on Friday to the agency's 35-nation board will mention of the traces of 27% enrichment found at Fordo.Iran already has around 700 centrifuges churning out 20% enriched uranium at Fordo. The diplomats said the report will also note that - while Iran has set up around 350 more centrifuges since late last year, at the site - these machines are not enriching.While the reason for that could be purely technical, it could also serve as a signal from Tehran that it is waiting for progress in the negotiations.The report is also expected to detail the state of talks between the UN nuclear agency and Iran that the agency hopes will re-launch a long-stalled probe into suspicions that Tehran has worked on nuclear-weapons related experiments - charges that Tehran denies.

Next stop Moscow for Iran nuclear talks

Iran and six world powers achieved little in two days of intense nuclear talks in Baghdad except arranging another meeting in Moscow next month and establishing they are poles apart on crucial issues.The latest diplomatic push between Iran and the P5+1 - the United States, Russia, China, Britain, France and Germany - at one stage even looked unlikely to take place until desperate eleventh-hour efforts managed to salvage the process - for now."We remain determined to resolve this problem in the near term through negotiations, and will continue to make every effort to that end," Catherine Ashton, the EU foreign policy chief, said after two "very intense" days of talks."What we have now is some common ground and a meeting in place where we can take that further forward," she said, announcing the next round would take place in Moscow on 18-19 June.She added however that there remained "significant differences" and that Iran must take "concrete and practical steps to urgently meet the concerns of the international community".The main bone of contention was - and will remain in Moscow - the speed at which the P5+1 eases sanctions in return for the Islamic republic scaling back the most sensitive parts of its nuclear programme.SweetenersAshton put forward in the Iraqi capital on behalf of the six powers a new package of proposals that clearly went down badly with the Iranians.The P5+1 want Iran to restrict to purities of 20% the enrichment of uranium, the area of Iran's activities that most raises their suspicions that Iran is seeking to develop a nuclear arsenal.In return reports indicated the international powers are prepared to offer a variety of sweeteners, including fuel plates for a reactor producing medical isotopes, relaxing restrictions on aircraft parts and nuclear safety assistance.But this falls short of the lifting of the whole raft of UN Security Council and unilateral Western sanctions that have been hit Iran's economy for years.Reflecting official thinking in Tehran, state media ran reports slammed the package, with the IRNA news agency calling it as "outdated, not comprehensive, and unbalanced".Iran meanwhile is loath to give up what its chief negotiator in Baghdad, Saeed Jalili called its "absolute right" to uranium enrichment.Oil embargo
In the end, with the Baghdad talks extended several times - they were originally only meant to last one day - the two sides agreed to differ, setting the stage for what may be a make-or-break gathering in the Russian capital.Neither side can afford to keep the process going indefinitely without some tangible progress.Iran is threatened with an EU oil embargo, due to take full effect from 1 July, that will also bar EU firms from insuring crude tankers heading to countries such as India, South Korea and Japan, all major buyers of Iran's oil.Israel, which is widely considered to have the Middle East's sole if undeclared nuclear arsenal, sees itself as Tehran's number-one target if Iran acquires the bomb and is highly sceptical that diplomacy will work.Like the United States, it has refused to rule out military strikes on Iran's nuclear facilities to prevent it developing a weapons capability.Oil prices have risen higher as a result, hurting global growth just as the eurozone crisis threatens to return with a vengeance and as US President Barack Obama seeks re-election in November on the back of an improving economy.Military optionObama, who campaigned in 2008 for his first term promising to reach out to Tehran, is also wary of his Iran policy being branded as soft and a failure by his Republican challenger Mitt Romney."A freeze on new sanctions in exchange for a freeze on new enrichment activity is still possible," Mark Fitzpatrick at the International Institute for Strategic Studies think-tank in London said."The danger is that if they drag on too long, diplomacy will be seen to have failed by many in Israel and elsewhere, which will bring renewed talk of a military option."

NEWS, 24.05.2012

EU urges Greece to stay in euro

 

European Union leaders, advised by senior officials to prepare contingency plans in case Greece decides to quit the single currency, urged the country to stay the course on austerity and complete the reforms demanded under its bailout programme.After nearly six hours of talks held during an informal dinner, leaders said they were committed to Greece remaining in the euro zone, but it had to stick to its side of the bargain too, a commitment that will mean a heavy cost for Greeks."We want Greece to stay in the euro, but we insist that Greece sticks to commitments that it has agreed to," German Chancellor Angela Merkel told reporters after a Wednesday evening summit in Brussels dragged long into the night.Three officials told Reuters the instruction to have plans in place for a Greek exit was agreed on Monday during a teleconference of the Eurogroup Working Group (EWG) - experts who work for euro zone finance ministers.The Greek finance ministry denied there was any such agreement but Belgian Finance Minister Steven Vanackere, said: "All the contingency plans (for Greece) come back to the same thing: to be responsible as a government is to foresee even what you hope to avoid."Two other senior EU officials confirmed the call and its contents, saying contingency planning was only sensible.In its monthly report, Germany's Bundesbank said the situation in Greece was "extremely worrying" and it was jeopardising any further financial aid by threatening not to implement reforms agreed as part of its two bailouts.It said a euro exit would pose "considerable but manageable" challenges for its European partners, raising pressure on Athens to stick with its painful economic reforms.Greek officials have said that without outside funds, the country will run out of money within two months and there remains the threat that if it crashes out of the euro zone, other member states could be brought down too.A document seen by Reuters detailed the potential costs to individual member states of a Greek exit and said that if it came about, an "amiable divorce" should be sought with the EU and IMF possibly giving up to 50 billion euros to ease its path.Although EU leaders' minds will have been focused by that prospect, disagreements have flared over a plan for mutual euro zone bond issuance and other measures to alleviate two years of debt turmoil, such as giving countries like Spain an extra year to make the spending cuts demanded of them."The idea is to put energy into the growth motor. All the member countries don't necessarily share my ideas. But a certain number expressed themselves in the same direction," new French President Francois Hollande told reporters.For the first time in more than two years of crisis summits, the leaders of France and Germany did not huddle beforehand to agree positions, marking a significant shift in the axis which has traditionally driven European policymaking.Instead, Hollande met Spanish Prime Minister Mariano Rajoy in Paris to discuss policy, before the pair travelled to Brussels by train.Despite fears Greeks could open the departure door if they vote for anti-bailout parties at a June 17 election, Spain, where the economy is in recession and the banking system in need of restructuring, is at the front line of the crisis.After meeting Hollande, Rajoy said he had no intention of seeking outside aid for Spain's banks, which are laden with bad debts from a property boom that bust and still has some way to go before it touches bottom.But his government said its rescue of problem lender Bankia would cost at least 9 billion euros and it is also seeking ways to help its highly indebted regions meet huge refinancing bills.Shifting sands Socialist Hollande's election victory has significantly changed the terms of the debate in Europe, with his call for greater emphasis on growth rather than debt-cutting now a rallying cry for other leaders.That has set up a showdown with conservative Merkel, whose primary objective is budget austerity and structural reform.At his first EU summit, Hollande chose to make a stand on euro bonds - issuing common euro zone debt - despite consistent German opposition to the idea. "I was not alone in defending euro bonds," he said.Merkel showed no sign of dropping her objections to the proposal, which she has said can only be discussed once there is much closer fiscal union in Europe. "There were differences in the exchange about euro bonds," she said bluntly.The Netherlands, Finland and some smaller euro zone member states support her.No major decisions were made at Wednesday's summit, which was intended to promote ideas on jobs and growth ahead of another meeting at the end of June.But debate was intense, not just over euro bonds but over how to rescue banks and whether to give more time to struggling euro zone countries to meet their budget deficit goals."We haven't come together to confront each other ... but we have to say what we think - what are the right instruments, the right methods, the right steps, the right initiatives to raise growth," Hollande said.The leaders discussed broad measures to stem the fallout from a winding up or restructuring of bad banks, EU officials said, with the European Central Bank pressing for the bloc to stand behind its struggling lenders but with Merkel's approval seen as far from guaranteed.At the heart of the discussion are proposals from the European Commission for a legal framework to wind up or reorganise insolvent banks so as to avoid a repeat of the multi-trillion-euro taxpayer bailouts during the financial crisis.Another suggestion is for the euro zone's rescue funds to be allowed to recapitalise banks directly, rather than having to lend to countries for on-lending to the banks. But that is another idea with which Germany is uncomfortable.Having rallied on Tuesday, European stocks dropped 2.2 percent as investors priced in a lack of dramatic policy action. The euro tumbled against the dollar to its lowest since August 2010 and Spanish and Italian borrowing costs climbed.A German two-year debt auction gave a stark illustration of how money is dashing for safe havens. Investors snapped up the 4.5 billion euros of paper on offer even though it came with a zero coupon - offering no return at all.Search for growth With the euro zone registering no growth in the first quarter and threatening to slip back into recession, policymakers touted three ideas to provide stimulus:- 'Project bonds' backed by the EU budget to finance infrastructure projects alongside private sector investment.- Doubling the paid-in capital of the European Investment Bank, the EU's co-financing arm, to a little over 20 billion euros.- Redirecting structural funds which tend to flow to poorer countries, to other areas where they might reap more immediate growth rewards.Even if all three proposals were to be activated quickly, economists say they will not provide a sufficient shot in the arm to the euro zone and the wider EU economy.

NEWS,23.05.2012.

Euro zone to prepare for Greek exit scenario say sources

 

Each euro zone country will have to prepare a contingency plan for the eventuality of Greece leaving the single currency, euro zone sources said today.Officials reached the consensus on Monday afternoon during an hour-long teleconference of the Eurogroup Working Group (EWG).As well as confirmation from three euro zone officials, Reuters has seen a memo drawn up by one member state detailing some of the elements that euro zone countries should consider.The EWG consists of officials who prepare meetings of finance ministers and also form the board of the temporary bailout fund, the European Financial Stability Facility (EFSF).It consists mostly of deputy finance ministers and senior treasury officials."The EWG agreed that each euro zone country should prepare a contingency plan, individually, for the potential consequences of a Greek exit from the euro," said one euro zone official familiar with what was discussed on the call."Nothing was prepared so far on the euro zone level for now, for fear of leaks," the official said.A second official confirmed the EWG agreement. The situation in Greece, which faces elections on June 17, seems certain to be discussed at an EU summit later today.The Greek finance ministry denied in a statement that there was agreement to prepare contingency plans."The Ministry of Finance categorically denies the reports stating that during the teleconference of the Euro Working Group on May 21st 2012, it was agreed that each eurozone country should prepare contingency plans for the potential consequences of a departure of the Hellenic Republic from the single currency area," the statement said.But Belgian Finance Minister Steven Vanackere, asked by reporters ahead of the EU summit, said:"All the contingency plans (for Greece) come back to the same thing: to be responsible as a Government is to foresee even what you hope to avoid.""We must insist on efforts to avoid an exit scenario but that doesn't mean we are not preparing for eventualities. I believe many countries have their contingency plans for the things they want to avoid at all cost, like terrorist attacks, and to say that we don't have a contingency plan would be irresponsible," Vanackere said.The Greek election, the second in two months, is widely seen as a referendum on whether the debt-laden country should stay in the euro zone and undertake painful reforms and austerity, or leave and try its luck with its own currency.Polls suggest the vote could go either way.50-billion-euro goodbye? The document detailed the potential costs to individual member states of a Greek exit and said that if it came about, an "amiable divorce" should be sought.It also said that if Greece were to decide to leave, the EU/IMF could give it up to 50 billion euros to ease its path.The document said Athens would bear huge costs if it decided to abandon the currency, while other euro zone countries would have more limited costs.But the paper said that the risk of knock-on effects that could hit other euro zone countries under market scrutiny now was underestimated."The markets will definitively distrust the euro," the paper said.Germany's Bundesbank said yesterday a Greek exit from the euro would be "manageable".The German central bank also said euro zone states should have a say on further payments of aid to Greece under its 130 billion euro bailout programme.So far the euro zone has disbursed 38.4 billion euros from the second bailout programme to Greece.The emergency lending is linked to conditions of tough reforms, which most Greeks oppose.The euro zone also lent Greece 34.5 billion euros to help Athens complete a debt restructuring in which private investors had to write off almost three quarters of what Greece owed them."Greece is threatening not to implement the reform and consolidation measures that were agreed in return for the large-scale aid programmes," the Bundesbank said."This jeopardises the continued provision of assistance. Greece would have to bear the consequences of such a scenario."

NEWS,22.05.2012.

Deal on probe reached with Iran: UN

Despite some remaining differences, a deal has been reached with Iran that will allow the UN nuclear agency to restart a long-stalled probe into suspicions that Tehran has secretly worked on developing nuclear arms, the UN nuclear chief said on Tuesday.

 

The news from International Atomic Energy Agency (IAEA) chief Yukiya Amano, who returned from Tehran on Tuesday, comes just a day before Iran and six world powers meet in Baghdad for negotiations and could present a significant turning point in the heated dispute over Iran's nuclear intentions. The six nations hope the talks will result in an agreement by the Islamic Republic to stop enriching uranium to a higher level that could be turned quickly into the fissile core of nuclear arms.Iran denies it seeks nuclear arms and says its reactors are only for power and medical applications.By compromising on the IAEA probe, Iranian negotiators in Baghdad could argue that the onus was now on the other side to show some flexibility and temper its demands. Although Amano's trip and the talks in Baghdad are formally separate, Iran hopes progress with the IAEA can boost its chances on Wednesday in pressing the US and Europe to roll back sanctions that have hit Iran's critical oil exports and blacklisted the country from international banking networks.Differences no obstacleIt was unclear, though, how far the results achieved by Amano would serve that purpose, with him returning without the two sides signing the deal, despite his upbeat comments.After talks in Tehran between Amano and chief Iranian nuclear negotiator Saeed Jalili, "the decision was made... to reach agreement" on the mechanics of giving the IAEA access to sites, scientists and documents it seeks to restart its probe", Amano told reporters at Vienna airport after his one-day trip to Tehran.Amano said differences existed on "some details", without elaborating but added that Jalili had assured him that these "will not be an obstacle to reach agreement". He spoke of "an almost clean text" that will be signed soon, although he could not say when.Western diplomats are sceptical of Iran's willingness to open past and present activities to full perusal, believing it would only reveal what they suspect and Tehran denies - that the Islamic Republic has researched and developed components of a nuclear weapons programme. They say that Tehran's readiness to honour any agreement it has signed is the true test of its willingness to co-operateThe United States is among those sceptics. In a statement released soon after Amano's announcement, Robert A Wood, America's chief delegate to the nuclear agency, said Washington appreciated Amano's efforts but remained "concerned by the urgent obligation for Iran to take concrete steps to co-operate fully with the verification efforts of the IAEA, based on IAEA verification practices".Good intentions"We urge Iran to take this opportunity to resolve all outstanding concerns about the nature of its nuclear programme," said the statement. "Full and transparent co-operation with the IAEA is the first logical step."German Foreign Minister Guido Westerwelle also urged Iran to put professed good intentions into action."Enduring and substantial co-operation by Iran with the International Atomic Energy Agency to clear up the open questions surrounding the Iranian nuclear programme would be an important and at the same time overdue step in the right direction," he said in a statement.
On the Baghdad talks, "the aim is to make progress not just atmospherically but also on substance," he said, reflecting Western views that the feel-good effect achieved at a previous round in Istanbul last month must now be built upon with concrete steps aimed at reducing international concerns over Tehran's nuclear agenda.For the six powers - the United States, Russia, China, Britain, France and Germany - a main concern is Iran's production of uranium enriched to 20%, which is far higher than needed for regular energy-producing reactors but used for one Iran says it needs for medical research.The US and its allies fear the higher-enriched uranium could be quickly boosted to warhead-grade material.Israel against concessionsUS officials have said Washington will not backpedal from its stance that Iran must fully halt uranium enrichment. But speculation is increasing that the priorities have shifted to block the 20% enrichment and perhaps allow Iran to maintain lower-level nuclear fuel production - at least for now.Iranian officials could package such a scenario as a victory for their domestic audience. In Israel, it would likely be greeted with dismay and widen rifts between President Barack Obama's US administration and Israeli officials who keep open the threat of military action against Iran's nuclear sites.Israeli Prime Minister Benjamin Netanyahu has warned against concessions, saying world powers should make "clear and unequivocal demands" that Iran stop all of its nuclear enrichment activity.
"Iran wants to destroy Israel and it is developing nuclear weapons to fulfil that goal," Netanyahu said at a conference in Jerusalem. "Against this malicious intention, leading world powers need to display determination and not weakness. They should not make any concessions to Iran."Jalili, Iran's top nuclear negotiator who met with Amano and will also be the lead envoy at the Baghdad talks, said his country hopes for a new beginning when the talks start on Wednesday."We hope that the talks in Baghdad will be a kind of dialogue that will give shape to ... co-operation," Jalili said after arriving in Baghdad late on Monday.More inspections As part of any agreement, Amano and his agency are focused on getting Iran to let agency experts to probe various high-profile Iranian sites, including the Parchin military complex southeast of Tehran, where the agency believes Iran in 2003 ran explosive tests needed to set off a nuclear charge. The suspected blasts took place inside a pressure chamber.
Iran has never said whether the chamber existed, but describes Parchin as a conventional military site. Iran, however, has blocked IAEA requests for access to sites, scientists and documents needed for its investigation for more than four years.Amano's talks included Jalili as well as Iran's foreign minister and other officials including the head of Iran's nuclear agency, Fereidoun Abbasi.Iranian lawmaker Heshmatollah Falahtpisheh saids on Monday that Tehran will likely accept more inspections of Parchin "if it feels there is good will within the [IAEA]".But Falahtpisheh warned that this new openness will likely come with expectations that the West would in return ease international sanctions on Iran.Flexibility"In opening up to more inspections, Iran aims at lowering the crisis over its nuclear case," he said. "But if the sanctions continue, Iran would stop this."A political analyst in Tehran, Hamid Reza Shokouhi, said Iran is carefully watching to see if the West shows more "flexibility and pays attention to Iranian demands" during Amano's trip."Then Iran will show flexibility, too," Shokouhi said.
But some Iranian media was critical of Amano and the IAEA, possibly reflecting internal divisions on how far to go compromise on nuclear issues.In a sign of ebbing market worries, oil prices have steadily fallen since Iran and world powers resumed talks in April in Istanbul. Fears of supply disruptions because of military conflict or Iranian shipping blockades helped drive prices above $106 a barrel earlier this year. Oil rose to slightly above $92 per barrel on Monday in New York.