NEWS,18.06.2012

Greek leaders seek coalition, want to ease bailout

Greece's conservative leader has pushed for a new coalition government after a narrow election victory, pledging to soften the debt-laden country's punishing austerity programe despite opposition from Germany.A brief relief rally on international financial markets after Sunday's Greek vote quickly fizzled out as it became clear that Antonis Samaras's New Democracy had failed to win a convincing popular mandate to implement the deep spending cuts and tax increases demanded by the European Union and the IMF.Radical left-wing bloc SYRIZA and a host of smaller parties opposed to the punishing conditions attached to the $206 billion bailout won around half the votes cast, though fewer seats because the electoral system rewards the first placed party disproportionately.Samaras received a mandate to form a coalition government from the president today, but talks looked set to run into at least tomorrow. He said the country would meet its commitments under a bailout saving the country from bankruptcy and a dramatic exit from the euro zone.But Samaras added: "We will simultaneously have to make some necessary amendments to the bailout agreement, in order to relieve the people of crippling unemployment and huge hardships."Samaras met with SYRIZA's charismatic leader Alexis Tsipras, who ruled out joining the government, and with the third-placed PASOK Socialists, who did not commit. PASOK leader Evangelos Venizelos said negotiations "must be wrapped up" on Tuesday.The small Democratic Left party indicated it would be ready to support Samaras if the bailout deal could be softened.Greece's economy is forecast to contract 5% this year after shrinking 7% last year. Protests regularly choke the centre of Athens, some hospitals are running short of medicines, thousands of businesses have closed and beggars and rough sleepers are multiplying.During the election campaign, Samaras called for cuts in taxes, hikes in unemployment benefits, pension rises and two more years to meet fiscal targets.But Germany, already irritated at what it sees as the slow pace of Greek reform, ruled out more than minor delays to some targets in the rescue package - Greece's second since 2010.Chancellor Angela Merkel, speaking at a meeting of G20 leaders in Mexico, said any loosening of Greece's agreed reform pledges would be unacceptable and reiterated that Athens had to stick to the commitments it had already made.Germany says deal "not negotiable" Samaras voted in 2010 against the first $174 billion rescue because he thought it was too harsh. He now said Greece should have until 2016, not 2014, to meet fiscal targets set by under the bailout. Venizelos wants a further year to reform.German Foreign Minister Guido Westerwelle said the substance of the bailout agreement was "not negotiable", but he said creditors might be willing to offer some flexibility on timing for some of the targets, given the time lost in campaigning."We're ready to talk about the time frame as we can't ignore the lost weeks, and we don't want people to suffer because of that," he told German radio today.There was frustration in Berlin that Samaras had campaigned on a promise to renegotiate the bailout, given the scale of resistance among those stumping up the cash.European Central Bank Executive Board member Joerg Asmussen warned that extending the 2014 deadline for Greece to cut its budget deficit to below three percent of GDP would mean fresh money for Athens."I can only generally point out that if one is pressing to shift fiscal targets, one should be so honest to also say that as long as a country is running a primary deficit, extending the fiscal targets will automatically mean that there will be an additional external financing need," Asmussen said.With an emboldened SYRIZA bloc led by former communist student leader Tsipras at the head of a powerful opposition, the new government could face protests soon after taking office. SYRIZA almost doubled its share of the vote since a previous election on May 6, which produced stalemate.

US and EU haggle over trade barriers

The United States and the European Union, stung by past failures to liberalize trade, are struggling over how to tackle regulatory barriers in areas ranging from financial services to chemicals that pose the biggest obstacle to a transatlantic free trade pact.A joint US-EU working group is due to deliver interim recommendations this month on how to leverage one of the world's largest trade relationships to create more jobs on both sides of the Atlantic and bolster economic growth.Businesses both in the United States and Europe want Washington and Brussels to strike a deal that removes trade hurdles by requiring both to accept each other's consumer- and environmental-protection standards.They envision an agreement in which a car tested for safety in the United States would not have to be tested again in Europe, or a drug deemed safe by Brussels would not have to be approved by US government experts.There's a good chance the upcoming report from the team led by US Trade Representative Ron Kirk and European Union Trade Commissioner Karel De Gucht will be no more than a "stock-taking" of the talks so far, with the real meat of the recommendations in a final report near the end of the year.Peter Rashish, vice president for Europe and Eurasia at the US Chamber of Commerce, said he hopes for a forward-leaning document that sets the stage for ambitious talks that would begin when the final report is put out."We need a strong statement that a US-EU trade deal would be a big boost to jobs and growth, given the challenges both the US and the EU economy face right now," Rashish said.The United States and the EU have proven records of sealing bilateral free trade agreements, including deals each has struck with South Korea that some have suggested be used a template for a transatlantic pact.Also, tariffs on manufactured goods traded between the two economic blocs are generally low, and there are few sectors where dismantling the remaining tariffs would create political opposition to a pact. That has raised hopes a deal to eliminate the remaining duties could be struck quickly once talks begin.Drag on for years Even so, US and EU officials worry about launching negotiations that could drag on for years without success, such as the Doha round of world trade talks, which started in 2001 and never reached an agreement.A joint effort late in the administration of former President George W. Bush to eliminate European barriers to US poultry exports flopped so badly that the United States in frustration filed a case against the EU at the World Trade Organization."What you've got is a deep-seated suspicion on each side that the other side can't deliver," said Bill Reinsch, president of the National Foreign Trade Council, which represents major US exporters like Boeing, Caterpillar and Microsoft.Reinsch noted that the United States has disappointed the EU in recent talks on allowing foreign firms to bid on more US state and local government contracts."So there's this extensive poking around to figure what can be delivered," Reinsch said.Recent consultations have driven home how difficult it could be to address regulatory differences that impede trade in areas from food to chemicals to financial services, although both sides see a potentially big payoff from achieving that."What is really bothering companies on both sides of the Atlantic right now is not so much tariffs, but the duplication of regulatory requirements," a European official said.Those are harder to tackle because they involve regulators such as the US Food and Drug Administration, the European Medicines Agency and the European Food Safety Authority that are outside the purview of typical trade agreements."I think the regulatory piece is certainly the most challenging and I think we have to agree on what success would look like on regulatory matters" within the 18 to 24 months both sides hope it will take to reach a deal, Rashish said.That would probably require a recognition that some issues will still need further work after an initial free trade agreement is signed, he said.The US Chamber of Commerce has proposed starting with areas, such as autos, chemicals and pharmaceuticals, where the two sides have comparable, high-level standards to protect consumers and the environment but different specific requirements for The idea would be that after determining that US and EU regulatory regimes produce similar levels of protection, agreements would be reached to recognize each other's requirements in those areas as essentially equivalent, thereby removing them as barriers to trade, and setting a foundation for moving into additional areas, Rashish said.