NEWS,29.11.2012

The Politics of Fear

To those who were surprised that the European Union received the Nobel Peace Prize, I say: "Think twice." This was not only a deserved award for Europe's contribution to bringing peace and stabilizing democracies in the recent past  the Nobel Committee was also sending a clear warning to contemporary leaders. I could almost hear them saying: "On this difficult odyssey, don't abandon ship. In today's world, the EU is too valuable to squander."It was an indirect but powerful rebuttal to the dangerous nationalist and populist rhetoric some politicians have adopted when describing the recent financial crisis.This message couldn't have come at a better time.Like ghosts from the past, we see political violence, xenophobia, migrants being scapegoated and extreme nationalism creeping into our public debates even into our parliaments. This is a Europe diverging from its founding principles. Principles that rendered nationalistic hatreds an anathema.But it is these politics of fear that seem to have incapacitated Europe. A Europe seemingly incapable of ending this crisis, a fractious Europe. This has undermined a sense of trust between us and in our European institutions. This climate does not inspire confidence either in our citizens or the markets. Nor will our retreat into a renationalization of Europe be the solution.My recent experience in dealing with the financial crisis in Greece and in Europe has confirmed my belief that this is a political crisis more than a financial one.I am convinced that, with the political will, we could have avoided much pain, squelched market fears and stabilized the euro, while at the same time reformed ailing, unsustainable economies such as ours in Greece. Despite media hype to the contrary, it is the Greek people who first and foremost have wanted this change. Instead, we allowed fear and mistrust to overcome us. And fear begets more fear and uncertainty. Instead of understanding, we have name-calling. Instead of collective, transparent action by our institutions, we have moved into a mode where the community method is undermined by makeshift intergovernmental decision-making, with the balance of power tipping dangerously towards the very large member states. Instead of real, necessary reform and fiscal responsibility, we are implementing an overdose of austerity dealing more with symptoms and less with the root causes of the economic woes of Europe. Instead of rewarding superhuman efforts, we are condemned for our shortcomings. More than anything else, it has been this political climate that has undermined our common efforts to deal with today's financial crisis. Whether it is banks or governments, we have adopted a passive, almost defeatist, attitude, which we cloak in the language of "caution and responsibility. "It is our responsibility to break this cycle of fear and mistrust now. We are vastly underestimating our own capacities as a union. Our capacity to calm markets or create jobs. We again need to believe in the great capacity of our peoples north and south, west and east. We must rekindle the spirit that united us in 1989 when the Berlin Wall fell. We know the difficulties we then faced. But we did not cower. We decided to invest in the potential Europe and our peoples had. And there is so much hidden or untapped potential in our youth, our experience, our diversity and our cultures.But this not simply an issue of political will. We must combine this will with an understanding of our real weaknesses. Over the decades we have become more and more interdependent in Europe. This was not by chance, this was by design -- from the days of Monnet and Schuman. It is this interdependence that has made the wars of the past unthinkable.But if interdependence is important to keep the peace, it is not enough to make us effective, adaptive, powerful on the global scene. Neither does interdependence guarantee the democratic empowerment of our citizens and the liberation of our peoples' potential.In fact, this interdependence today is seen by many as a straight jacket, hindering us rather than giving us the capacity to deal with new global challenges. The debate about the breakup of the euro, or even euro-exits, is a case in point.Our citizens, therefore, wonder whether this European structure is still useful or if we should go our own separate, independent ways. As in The Odyssey, the sirens are beckoning that we change course. However sweet their song, we know their purpose is that we crash on the shallow rocks. If we are to avoid these rocks, we need to radically rethink our governance structures and policy responses so that we capitalize on our strengths and neutralize our weaknesses.Three fundamental principles must underpin a more progressive Europe.First, we must strengthen Europe's institutional capacity. Priority today must be in the financial-economic sphere. The eurozone is the world's largest economy, the euro is the world's second reserve currency and on aggregate we have strong economic fundamentals; but we are not able to leverage our strengths due to weak or missing institutions. Despite significant progress such as:

- More robust fiscal monitoring;
- The European Stability Mechanism;
- The Six-Pack to strengthen governance and oversight; and
- A broader mandate for the European Central Bank, with the recent introduction of Outright
Monetary Transactions, we must go one step further. 

We have already pooled our risks, now we must pool our strengths. Eurobonds and a federal banking union are vital tools to safeguard the EU from similar crises and set our economy on a more stable footing. Second, we need to liberate and reenergize Europe's human capacity. High unemployment needs to be offset by investment in our human capital, education, research, green growth and the necessary infrastructure for green energy and a knowledge society. In our race towards competitiveness, we are emulating models that have little to do with our traditions. In many emerging markets, a lack of collective bargaining and democratic accountability, low wages, substandard working conditions and denigration of the environment combined with tax havens which have robbed countries of huge revenues up to 11 billion euros per year in Greece alone may offer a temporary comparative advantage. But in seeking growth, we cannot race to the bottom. We must base our competitiveness on quality, not inequality. Third, we must strengthen our democratic capacity. We need innovative democratic institutions that will empower our citizens and strengthen the legitimacy of our decisions .The EU's complex decision-making process has been an outcome of a delicate historical balance between member states. Today, however, people feel they are sidelined by these decisions. In trying to confront its fiscal deficit, Europe has run up a democratic deficit. As we take the next steps towards European integration, we must give ownership of this process to the people. Policies imposed on citizens without their active consent are doomed to fail. Already, a frustrated, educated but unemployed younger generation is losing faith in our European institutions and values. This vacuum has created fertile ground for populism and extremism. When our citizens feel disempowered, they will turn to saviors or target scapegoats as they do not participate through dialogue and responsible deliberation to understand and solve common problems. Europe can regain the confidence of the markets, but first we must regain the confidence of our citizens. That is why I called for a referendum in Greece, so that people could debate and decide on their own future. There is nothing wrong with European countries ceding sovereignty in the interest of creating a stronger Europe. Indeed, they already have. But as we do so, we need to rethink how our representatives in the Union are elected and how decisions are made. An EU president, elected by a European Parliament (or even a directly elected president), European-wide referenda, forms of more direct citizen participation and the use of social media are ideas already ripe to explore. This new Europe, as I see it, will not be the product of one grandiose decision, dictated by an elite minority of powerful nations or some anonymous bureaucrats in Brussels. Small, incremental but complementary steps -made by each of us individually and all of us together -will build the values and the foundations for the Europe that we want. Democracy and education will give new capacity to our citizens and that, in the end, will empower Europe and reinforce its legitimacy in our societies and around the world. We do have a choice. Either we empower Europe and its citizens and become a catalyst for humanizing our global economy, or globalization will dehumanize our societies and undermine the European project. As a citizen of Europe, I vote for the first choice.

 

EU outlines stop-gap 2013 budget

European Union negotiators have provisionally agreed to fix the bloc's spending at nearly 133 billion euros ($209 billion) in 2013, as part of a deal that adds 6 billion euros to spending this year.The agreement which must now be approved by EU governments and the European Parliament ensures stable funding for EU programmes next year.It also guarantees the continuation of several employment, education and research programmes this year that had been threatened with cancellation because of a funding gap."There was an agreement on the draft package for the 2013 budget that will be submitted to the European Council and Parliament in the coming days," a spokesman for the European Commission said in a statement.But one EU official warned that the approval of governments and lawmakers was far from guaranteed. "I'm not sure that everyone is going to be happy with this package, particularly among some MEPs," said the official, speaking on condition of anonymity. A successful conclusion to the 2013 budget row would allow governments and officials to focus on the far thornier subject of the bloc's next long-term budget, for 2014-2020.EU leaders failed to reach a deal on that 1 trillion euro ($1.57 trillion) budget at a summit in Brussels last week, and are expected to try again early next year.As part of Thursday's deal, EU payments next year will be limited to a maximum of 132.84 billion euros ($US208.97 billion).That would have represented an increase of 2.9% compared with this year far below the rise of 6.8%demanded by the European Parliament and the executive Commission, and only a small real increase after inflation is taken into account. But the extra 6 billion euros agreed for this year means that spending in 2012 will now amount to 135 billion euros the highest level ever and as a result, the budget will actually fall by 1.6% next year. During previous rounds of talks, the Commission had insisted that an extra 9 billion euros was needed to fill the 2012 funding shortfall. But at Thursday's meeting, the EU's executive said it could forgo some of the extra funds while it checked whether all the conditions for payment had been met.About three-quarters of the EU's annual budget is spent on farm subsidies and funding for new motorways, bridges and other public infrastructure projects in poorer eastern and southern European member countries.

BoE urges UK banks to boost capital

British banks need to act now to bolster their defences against financial shocks, as many have underestimated the cost of loans going sour and future fines for misconduct, the Bank of England (BoE) has said.Underlining a growing sense of urgency about capital defences, outgoing BoE Governor Mervyn King said that while the problem was "manageable", he wanted the banks' regulator to report back by March on what steps banks were taking, and warned that he did not want them to cut lending."Our primary concern has been to ensure that UK banks have sufficient capital ... so that they are on a solid footing to support economic growth," King told a news conference."The problem is manageable, and is already understood at least in part by markets. But it does warrant immediate action," he added.King made the comments as he presented the half-yearly report by the BoE's Financial Policy Committee, which from next year will take charge of British bank regulation.He said that the government would not need to put extra money into Royal Bank of Scotland or Lloyds Banking Group, the two banks in which it has held controlling stakes since the financial crisis. Instead, he said banks could raise funds by issuing contingent debt that converts into equity in a crisis, or by restructuring actions - often a euphemism for asset sales. The BoE said that British banks' true capital position was probably worse than relatively healthy official numbers imply, and this was already hurting investors. "Progress by banks in raising capital has slowed and investor confidence remains low," the BoE said in its half-yearly Financial Stability Report. "Market concerns are likely to reflect in part uncertainty about bank capital adequacy."he BoE has repeatedly urged British banks to raise capital levels, and November's report marks a stepping up of these recommendations, despite a slight reduction in the risks facing the financial system due to an easing in euro zone tensions. "UK banks' capital buffers, available to cushion losses and maintain the supply of credit following realisation of a stress scenario, are not as great as headline regulatory capital ratios imply," it said.King also confirmed the new effort would apply to international banks with British subsidiaries which are regulated by the Financial Services Authority.The BoE identified three main areas where banks were over-optimistic about how much capital they had.First, information from supervisors suggested some British banks would suffer bigger losses on loans than they had made provision for, according to the report.Second, it said banks had also persistently underestimated the scale of fines they would face for past misconduct, adding that external analysts had suggested further costs of 4 billion to 10 billion pounds ($7.8 billion to $31 billion) for missold payment protection insurance and the LIBOR rate-rigging scandal. Finally, the BoE criticised the "complex and opaque" system banks use to calculate the riskiness of its assets, with the amount of capital that banks estimated they needed sometimes varying threefold between banks for the same type of assets.The report also revealed muted results from the BoE's June effort to get banks to boost lending, by paving the way for up to 500 billion pounds of liquidity reserves held by the banks to be run down.But it noted that just 31 billion pounds had been released and that it was mostly used to repay debt rather than provide direct support to credit growth.The BoE cautioned that it was "too early" to judge the impact of the initiative.

US stocks and euro sell-off on Boehner comments

US stocks and the euro sold off after US House Speaker John Boehner said there had been "no substantive progress" in talks to avoid the fiscal cliff.Republican Boehner made the comments after speaking with President Barack Obama and Treasury Secretary Timothy Geithner, saying there was a real danger no agreement would be reached to avoid $US607 billion of automatic tax increases and spending cuts that kick in on January 1. Democrats had "yet to get serious about spending cuts," Boehner said.There was no mention of the optimism he cited 24 hours ago that gave a boost to Wall Street and was echoed around the globe.The Congressional Budget Office has warned that falling off the fiscal cliff could drive the US jobless rate back up to 9.1% by the end of 2013 and send the world's biggest economy back into recession.The dollar pared its decline against the euro, which traded recently at $US1.2967, having early touched $US1.30.US stocks did recover some ground after the selloff.The Dow Jones Industrial Average was up 0.2% and the Standard & Poor's 500 Index up 0.4%."One minute the portents for a deal on the fiscal cliff are negative, the next minute they are positive," Mike Mason, a senior trader at Sucden Financial Private Clients in London, told Reuters."This is likely to be the pattern all the way up to the deadline on January 1. Equities are sure to remain volatile and trading subdued until there is any concrete outcome to these negotiations."Economic data in the US was mixed, though the revised reading for gross domestic product in the third quarter was 2.7%, up from the 2% pace previously published.That just missed the estimate in a Bloomberg survey of 2.8% and marks an acceleration from the second quarter's 1.3% growth.Consumers, though, were subdued. Household spending rose a revised 1.4%, down from the first reading of 2%, according to the Commerce Department. Economists were hoping the revision would only be down to 1.9%.Yet the US trade deficit shrank for revised to US$US403 billion from an initial estimate of $US413.7 billion and inventories turned positive.And an index of pending home resales beat estimates by rising 5.2%, according to the National Association of Realtors, while the number of Americans applying for jobless benefits fell 23,000 to 393,000 last week, according to the US Labor Department.Stocks in the UK rallied, as did equity markets across Europe, which closed before Boehner made gloomier noises about the US fiscal cliff.The FTSE 100 advanced 1.2%, with Rio Tinto up 5.1%. Germany's DAX 30 climbed 0.8% and France's CAC 40 was up 1.5%.In the UK, Lord JusticeLeveson's long-awaited report into media ethics that followed the phone hacking scandal at Rupert Murdoch's News Corp called for a new independent media regulator to stamp out unethical behaviour.UK Prime Minister David Cameron, who himself was tarnished by associations with Murdoch's lieutenants in Britain, have a tepid welcome to the report while saying he wouldn't support new law to enshrine such a body.

NEWS,28.11.2012

Wall Street reverses earlier losses

Stocks on Wall Street reversed earlier losses after US House Speaker and senior Republican John Boehner said he was optimistic that a deal could be reached to head off the looming fiscal cliff.Boehner said he was willing to put revenues on the table for negotiation if accompanied by spending cuts and that he was optimistic lawmakers could "avert this crisis sooner rather than later".The Dow Jones Industrial Average rose 0.6% and the Standard & Poor's 500 Index was up 0.3%, having been down nearly 1% earlier in the session.Yet US Treasuries also strengthened as fixed interest investors betted there was a chance negotiations would falter.The yield on the 10-year note fell 2 basis points to 1.617%.US President Barack Obama is seeking a budget agreement to avoid $US607 billion of automatic tax increases and spending cuts that kick in on January 1, just 33 days away.Obama is embarking on a series of meetings with company executives including Goldman Sachs chief Lloyd Blankfein to press his case and is set to meet his presidential election rival Mitt Romney tomorrow.But there's plenty of noise to suggest markets will be held captive to Washington for the next few weeks or longer.Erskine Bowles, who was co-chairman of Obama's 2010 fiscal commission, gave a 33% probability of a deal by the end of the year and the same odds that no deal would be reached."That still leaves that one-third that we could actually have real chaos and no deal, and I think that would be a disaster," Bowles said in breakfast meeting in Washington, Bloomberg reported."I'm really worried. I believe the probability is we're going over the cliff," Bowles told journalists on the edges of the meeting.Boehner also said he continued to oppose the expiration of tax cuts for top earners.While according to the Huffington Post, Republican Tom Cole told colleagues that even though he doesn't want the top tax rate bumped up to 39.6% from 35% his party should take that deal for now.The willingness of Republicans to take the standoff down to the wire is not clear.Last year they effectively allowed America's credit rating to be downgraded before allowing the debt ceiling to be raised and ensuring the federal government could pay its bills.The Congressional Budget Office says failure to avert the crisis could push the economy back into recession and drive the jobless rate up to 9.1% by the end of 2013 from 7.9% currently.Economic data out of the US wasn't reassuring either.Sales of new homes fell 0.3% to an annual pace of 368,000 last month, Commerce Department figures showed.That missed the forecast in a Bloomberg survey of 390,000 sales.The Federal Reserve's Beige Book business survey, based on accounts from the 12 district Fed banks, was scheduled for release at 2pm Washington time (8am NZT), and is expected to show the world's biggest economy is continuing to grow at a modest pace.On the London Stock Exchange, shares of BP slipped 0.4% to 429.40 British pence.The energy giant has been temporarily banned from new US federal contracts as part of the punishment meted out for the Deepwater Horizon oil spill in 2010.BP has already agreed to plead guilty to criminal misconduct over the spill and pay fines of $US4.5 billion.Equity markets in Europe were broadly stronger. Germany's DAX 30 gained 0.2% and France's CAC 40 was up 0.4 percent. The Stoxx 600 rose just 0.1%.In Spain, banks rescued as part of the European bailout announced they would shrink in size to regain control of their balance sheets.BFA-Bankia will eliminate 6,000 jobs, sell assets and close branches and is forecasting a 19 billion euro loss this year. It aims to return to profit next year.

Walmart, Disney used deadly factory

Amid the ash, broken glass and melted sewing machines at what is left of the Tazreen Fashions factory, there are piles of blue, red and off-white children's shorts bearing Walmart's Faded Glory brand. Shorts from hip-hop star Sean Combs' ENYCE label lay on the floor and are stacked in cartons.An Associated Press reporter searching the factory on Wednesday found these and other clothes, including sweaters from the French company Teddy Smith, among the equipment charred in the fire that killed 112 workers on Saturday. He also found entries in account books indicating that the factory took orders to produce clothes for Disney, Sears and other Western brands.Garments and documents left behind in the factory show it was used by a host of major American and European retailers, though at least one of them - Walmart - had been aware of safety problems. Walmart blames a supplier for using Tazreen Fashions without its knowledge.The fire has elevated awareness of something labour groups, retailers and governments have known for years: Bangladesh's fast-growing garment industry second only to China's in exports is rife with dangerous workplaces. More than 300 workers there have died in fires since 2006.Police on Wednesday arrested three factory officials suspected of locking in the workers who died in Saturday's fire, the deadliest in the South Asian country's less than 35-year history of exporting clothing.Local police chief Habibur Rahman said the three will be questioned amid reports that many workers trying to escape the blaze had been locked inside. He said the owner of the factory was not among those arrested.The three officials were arrested on Wednesday at their homes in Savar, the Dhaka suburb where the factory is also located. Rahman did not identify the officials or give their job status.About 1 400 workers worked at the plant, about 70% of them women. Most are from the north, the poorest region of Bangladesh.Workers who survived the fire say exit doors were locked, and a fire official has said that far fewer people would have died if there had been even one emergency exit. Of the dead, 53 bodies were burned so badly they could not be identified; they were buried anonymously.The fire started on the ground floor, where a factory worker named Nasima said stacks of yarn and clothes blocked part of the stairway.Nasima, who uses only one name, and other workers said that when they tried to flee, managers told them to go back to their work stations, but they were ignored.Dense smoke filled the stairway, making it hard to see, and when the lights went out the workers were left in total darkness. Another worker, Mohammad Rajib, said some people used their cellphones to light their way."Everyone was screaming for help," Nasima said. "Total chaos, panic and screaming. Everyone was trying to escape and come out. I was pulling the shirt of a man. I fainted and when I woke up I found myself lying on the road outside the factory."I don't know how I survived."Rajib said the factory conducted a fire drill just three days before the fire broke out, but no one used the fire extinguishers. "Only a selected group of workers are trained to use the extinguishers. Others have no idea how to use them," he said.The AP reporter who examined the factory on Wednesday saw dozens of fire extinguishers with tags indicating they were inspected early this month. Many appeared unused.Workers expressed support for the factory owner, Delwar Hossain. Rajib said he is "a gentle man" who heeded workers when they protested for more pay and against rough behaviour by some managers."He took action and fired some of them," he said. "He did not sack any worker. He told us: 'You are my people. If you survive, I will survive.'"Most the fire's devastation took place on the second and third floors. Sewing and embroidery machines and tables burned to ashes, ceiling fans melted and floor and wall tiles were broken, apparently because of excessive heat. Thick black ash covers everything in the upper floors of the eight-story building.Much of the clothing on the lower floors was incinerated. Nightgowns, children's shorts, pants, jackets and sweat shirts were strewn about, piled up in some places, boxed in others. Cartons of kids' hooded sweaters, off-white with red and black print, were marked "Disney Pixar."There were also at least four register books listing buyers including Walmart, Disney, Sears and other companies. Also listed was Li & Fung, a Hong Kong-based buying house that is among the biggest suppliers of garment products from Bangladesh. Li & Fung issued a statement Monday saying it placed orders at the factory for just one company, Kids Headquarters, and that the value of those orders totalled just $111 000.Prime Minister Sheikh Hasina and Interior Minister Muhiuddin Khan Alamgir have said arson is suspected. Police say they have not ruled out sabotage. Walmart had received an audit deeming the factory "high risk" last year, said it had decided to stop doing business with Tazreen, but that a supplier subcontracted work to the factory anyway. Walmart said it stopped working with that supplier on Monday. Calls made to The Walt Disney Company and to Sears Holdings were not immediately returned. Local TV reports said about 3 000 garment workers held protests over the fire on Wednesday, blocking roads and throwing stones at some factories and vehicles. It was the third straight day of demonstrations, and as they did previously, factories in the area closed to avoid violence. Police used batons to disperse the protesters, but no injuries were immediately reported. According to local television, most factories in the area closed after opening briefly because of the protests - a common tactic to avoid violence.

Cubans to start paying tax

Most Cubans have not paid taxes for half a century, but that will change under a new code starting January 1.The landmark regulations will change the relations of Cubans with their government and are a signal that market-oriented reforms, launched since President Raul Castro succeeded his brother, Fidel Castro, in 2008, are here to stay.The recently published code constitutes the first comprehensive taxation in Cuba since the 1959 revolution abolished just about all taxes. In the 1990s after the collapse of the Soviet Union, the country's main benefactor, the Cuban government imposed a few scattered taxes, but mostly preferred to maintain low wages so it could fund free social services.The government's free market reforms introduced over the last two years, are designed to encourage small businesses, private farming and individual initiative, along with plans to pay state workers more. Under the new tax code the state hopes to get its share of the proceeds.The government also envisions replacing subsidies for all with targeted welfare, meaning that the largely tax-free life under a paternalistic government is on its way out. "This radically changes the state's relationship with the population and taxes become an irritating issue," said Domingo Amuchastegui, a former Cuban intelligence analyst who lives in Miami and writes often about Cuba. The new code covers 19 taxes, including such things as inheritance, environment, sales, transportation and farm land, various license fees and three contributions, including social security. A sliding scale income tax - from 15% for earnings of more than 10,000 pesos (about $400) annually, to 50% for earnings of over 50,000 pesos, (about $2 000) - adopted in 1994, remains in the new code for the self-employed, small businesses and farms, but it also includes a series of new deductions to stimulate their work. For example, farmers may deduct up to 70% of income as costs, and small businessmen, who are taxed by income not profit, up to 40%, plus various fees and secondary taxes they pay. A labor tax of 20% will gradually be reduced to 5% by 2017, and small businesses with five employees or less are exempt. Eventually all workers will pay income taxes as well as a new 2% property tax, but both measures are suspended until "conditions permit" them to go into effect. The government admits, with an average pay of about 450 pesos per month, or $19, many workers do not earn enough to make ends meet. "They collect taxes for all these things around the world, it's normal," said Havana economist Isabel Fernandez. "But here we face two problems. On the one hand we are not used to paying for anything and on the other our wages are so low we can't spare a single peso," she said. Under the old system, large and small state-run companies, which accounted for more than 90 percent of economic activity, simply handed over all their revenues to the government, which then allocated resources to them. The reforms call for large state-run businesses to be moved out of the ministries and become more autonomous. Under the new tax system they will pay a 35% tax on their profits, but can take advantage of a myriad of deductions ranging from amortization and travel to sales taxes, insurance and environmental protection. Many smaller businesses will become cooperatives or be privately leased and taxed based on income. The state-owned Cuban National News Agency said Cuba had studied the tax systems of a number of other countries, including several with capitalist economies. "The experiences of China, Vietnam, Venezuela, Brazil, Spain and Mexico were taken into account, but they were refined to the particularities and conditions of the island," the new agency said. The new code is not etched in stone it can be amended each year as part of the annual budget passed by the National Assembly, and temporarily modified for different reasons by the executive branch of government. "Like the reforms, it is a work in progress, a work that has barely begun and will take time to put in place," said a Western businessman who has worked in Cuba for almost two decades. But, he added, "this is of course a major step forward toward the 21st century and a modern state."

NEWS,27.11.2012

OECD: Eurozone crisis to hamper recovery

The OECD cut growth forecasts for most countries in the European Union's eastern wing on Tuesday and urged Hungary to do a deal with international lenders even as most analysts give such a deal less than even odds of happening.The Organisation for Economic Cooperation and Development said the euro zone crisis and austerity drives by emerging Europe's governments would sap recovery in most of the region.In a regular report, the group said the economies of Poland, Slovakia, and Estonia would grow both this year and next.It said inflationary pressure implied monetary easing was on the cards for Poland, but interest rate cuts in Hungary could destabilise price stability and undermine policy credibility.

Hungary

The OECD said closing an aid deal with the European Union and IMF was "critical to growth" because it would lower Budapest's borrowing costs, improve investor confidence and boost domestic lending.Under the assumption that a deal will materialise, the organisation forecast economic contractions of 1.6% this year and 0.1% in 2013.In May, the OECD forecast shrinkage of 1.5% for 2012 and growth of 1.1% next year. Analysts give only a 30% chance that Prime Minister Viktor Orban will sign a deal.The OECD said the fiscal deficit would narrow from 3% of gross domestic product (GDP) this year to 2.7% in 2013 and 2014.It said recent interest rate cuts by the central bank risked upsetting price stability and undermining policy credibility, and it added that rate setters should ease monetary policy only once inflation fell back below the bank's 3% target."Failure to conclude a financial agreement with the multilateral organisations could undermine already weak confidence, endanger fiscal sustainability and destabilise the exchange rate," the OECD said.

Poland

The weak European economy and fiscal consolidation will hit Poland, according to the OECD, which cut its growth forecast for the region's biggest economy to 2.5% this year, from 2.9% in May. It saw growth of 1.6% in 2013.It said headline inflation would fall to the lower end of the central bank's 1.5% to 3.5% target band. Along with the slowdown in growth, that implies that rate setters should ease policy to support the economy, the OECD said.The fiscal deficit should fall to 3.5% of gross domestic product  in line with the government's target  before falling to 2.9% next year.The organisation also said the government should push on reforms to sell state owned assets, improve the tax structure, reduce red tape for businesses, end special pension schemes and reform farmers' health and pension systems to boost growth.

Czech Republic

The OECD deepened its forecast for a Czech economic contraction to 0.9%, from an estimate of 0.5% in May. It sees a recovery emerging in 2013 with 0.8% growth, expanding to 2.4% in 2014.The organisation said the public finance deficit should stagnate at 3.3% of gross domestic product this year and next, above the European Union's 3% ceiling.It will fall to 2.7% of GDP in 2014, it said, because of structural improvements in the budget and stronger growth.

Estonia

Estonia should lead EU OECD countries with growth of 3.1% in 2012, the OECD said, raising its forecast from 2.2% in May. That should accelerate to 3.7% next year.The country's public finances should fall into a deficit of 1 percent of GDP this year, but then creep closer to a balanced result over the next two years.

Slovakia

The OECD sees Slovakia's car-export-driven economy expanding by 2.6% this year, unchanged from a May forecast. It said a weak labour market and fiscal retrenchment would squeeze growth to just 2% in 2013, down from an earlier estimate of 3%. The following year, however, growth should pick up to 3.4%, the OECD said.

Slovenia

Austerity measures and deleveraging by foreign-owned banks and companies will hit Slovenia's economy next year, the OECD said, predicting a contraction of 2.1%. It saw the fiscal deficit hitting 4.3% of GDP in 2012 and falling to the EU's 3% ceiling only by 2014.

Israel

The OECD said growth should slow from 3.1% this year to 2.9% in 2014, while an acceleration in price growth that should begin in the second quarter of next year would require monetary tightening.It added that the government's deficit targets of 3% and 2.75% for 2013 and 2014 would be hard to hit, and instead forecast shortfalls of 4.1% and 4%.

 

OECD warns of downward spiral in Portugal

Portugal's economy will contract twice as much as previously expected in 2013 and the bailed-out country risks falling into a fiscal and financial downward spiral, the OECD said on Tuesday.The Paris-based Organisation for Economic Cooperation and Development also warned in its economic outlook that further budget tightening will "likely" be needed to meet deficit targets set out under the €78bn EU/IMF bailout.The OECD now forecasts a 1.8% contraction in 2013, more than the 0.9% it forecast in July and far more than the -1% predicted by the Portuguese government."If the demand effects of the required fiscal retrenchment turn out higher than expected, this could lead the economy into a downward spiral of worsening economic, financial and fiscal conditions," the OECD wrote.It said Portugal will only return to growth late next year as export growth eventually offsets weak domestic demand.The economy contracted 1.7% last year and is expected to fall 3.1% in 2012, marking debt-burdened Portugal's worst recession since returning to democracy in 1974.Lisbon has slashed spending and raised taxes since it received the bailout last year but economists have warned of a recessive spiral which could mean the country needs more aid.The Portuguese face the biggest tax hikes in their modern history in 2013, which the OECD said could drag on growth and private consumption, which it forecast would fall by 3.5% next year, more than the 2.2% the government estimates."Compliance with the headline deficit targets of 4.5% and 2.5% of GDP for 2013 and 2014, respectively, are likely to require additional consolidation measures due to the weak economy," the OECD wrote.Record unemployment will also rise further, it said.Besides updating its macroeconomic scenario, the OECD said deleveraging of Portugal's financial sector was inevitable but that it should work to prevent credit from contracting too fast."The economy will remain sensitive to a further deterioration in credit conditions and worsening conditions in other euro area economies," it said.

 

Parking spots become latest investment

Ivestors looking for new places to park their cash in Hong Kong are driving up prices for parking spaces, sparking fears of a bubble in the Asian financial center.Prices for parking spots in Hong Kong are nearing historic highs, the side effect of government curbs to cool the housing market amid worries of overheating following the latest round of monetary stimulus in the US two months ago.There are "a lot of speculators in the market, especially for car parks," said Buggle Lau, senior analyst with Midland Realty. A bubble is "definitely forming."Over the weekend, a developer sold about 500 parking spots at a new suburban apartment complex at prices up to 1.3 million Hong Kong dollars ($167 000) per space.In a commercial building near the city's financial district on Hong Kong Island, an investor has put 34 parking spaces on sale for HK$100m ($12.9m), according to a report last week in the Ming Pao newspaper. A parking spot in the exclusive Repulse Bay neighborhood sold for HK$3m, the paper also said, citing Land Registry data.On Thursday, a single parking spot in a building in the popular Mid-Levels residential neighborhood will be auctioned off with the opening bid at HK$680 000.Second-hand parking spaces changed hands in the third quarter for an average of HK$640 000. That's up 16.4% over the year before, according to research by property company Centaline. It's also not far off the record HK$660 000 in the fourth quarter of 1997, shortly before the city's property market collapsed.The rising prices are a side-effect of recent measures to cool Hong Kong's housing prices, which have doubled since the end of 2009 and are among the highest in the world.Hong Kong's government has introduced three separate sets of curbs on property purchases since the summer in a bid to cool the market. US policymakers' continuing efforts to stimulate the economy by keeping interest rates at an ultralow level and buying tens of billions in bonds each month has raised concerns in Hong Kong about money flooding into the southern Chinese city, pushing asset prices higher as investors chase profits in the property market.The latest curbs don't cover nonresidential properties such as parking spots so investors have been piling in as they look for higher returns. Hong Kong had the world's third-highest monthly parking charges last year, according to real estate company Colliers International."In some car parks, especially in urban areas where supply is limited, the sales price of some car parks can be as high as two to three million (Hong Kong) dollars" each, said Lau of Midland Realty.Nearly 8 400 parking spaces worth HK$5.6bn changed hands in the first 10 months of this year, compared to 8 300 such transactions worth HK$5.4bn for all of 2011, according to Land Registry data compiled by Midland.Some of that increase comes from developers like Cheung Kong Holdings, Sun Hung Kai Properties and Chinachem Group selling off parking spaces at their apartment complexes. It's a break from the usual practice of renting them out to residents, and is a sign that the developers realize it's a "pretty good time" to sell because of the prices they can get, Lau said.Because Hong Kong's currency is pegged to the US dollar, policymakers cannot take conventional measures to cool property prices like raising interest rates.So the government tightened restrictions on property purchases, including bringing in a new stamp duty on foreign buyers. But parking spots and other non-residential property are exempt."The latest overseas buyers' stamp duty will just put some fuel onto that fire, and is making the whole parking space investment market go out of control," said Josh Wong, whose Hong Kong City Parking owns about 200 parking spots at eight lots around Hong Kong.Many investors who buy spaces rent them out to car owners. Wong said he typically looks for an annual yield, or return, of 5% to 6%, but because prices have risen, yields have been falling to about 4% to 5%. He said has even heard of investors making as little as 1.8% on their investment.Wong, who also runs Parkinghk.com, a website for buyers and sellers of parking spots, said the market was heating up because investors didn't need a lot of money to get started."One million Hong Kong dollars ($129 000) cannot buy anything in Hong Kong. You cannot buy a shop, you cannot buy anything except car parking and that would help the car park investment go even more crazy," he said.

 

French unemployment hits 14-year high

The number of people out of work in France soared again in October to hit its highest level in 14 and a half years, piling pressure on Socialist President Francois Hollande who has promised to halt the relentless rise by the end of 2013.Labour Ministry data showed the number of jobseekers in mainland France rose by 45,400, or 1.5%, to hit 3.103 million, marking the 18th consecutive monthly increase and taking the total to its highest level since April 1998.The increase was only slightly smaller than in October which saw the biggest jump in jobless rolls since April 2009, showing the deterioration in the job market is accelerating as recession in the broader euro zone hits demand.France's 1.9 trillion euro ($2.99 trillion) economy has been virtually stagnant since grinding to a halt at the end of last year, and many economists expect it to contract in the months ahead despite a surprise 0.2% rise in the third quarter.With the economy still struggling, the Labour Ministry said there was a risk the figures could get even worse.But it noted that new measures to bolster company investment and the youth job market that will kick in from next year have yet to produce results."This run of negative figures on employment only increases our resolve to do something to reverse the trend between now and the end of next year," Labour Minister Michel Sapin said in a statement.Hollande won power in May on a pledge to cut unemployment, but has since had to grapple with a wave of layoff announcements that have damaged his popularity and sapped public morale.The government unveiled a set of measures at the start of November, including sweeping tax rebates for companies, aimed at boosting industrial competitiveness and safeguarding jobs.French business newspaper Les Echos said Hollande was now planning a faster rollout of the rebates so that they reach full speed within two years instead of the three year build-up initially envisaged.Meanwhile, Industry Minister Arnaud Montebourg has been increasingly vocal in his criticism of companies mulling job losses. He shocked steelmaker Arcelor Mittal this week, fanning tensions over two threatened blast furnaces, by saying its CEO was no longer welcome in France.With the pace of job losses rising steadily, surveys show the public wants more than promises to save the economy, and economists want deeper structural reforms.The Labour Ministry data is the most frequently reported domestic jobs indicator for France, although it is not prepared according to widely used International Labour Organisation (ILO) standards nor expressed as a rate of the number of job seekers compared with the total work force.

Thousands march in Rio over oil dispute

As many as 200 000 people demonstrated in Rio de Janeiro on Monday to urge Brazilian President Dilma Rousseff to veto a bill that local officials say could cost Rio state billions of dollars in lost oil revenue and cripple plans to host the World Cup and Olympics.Late on Monday, a person familiar with the president's plans said Rousseff is planning to veto at least part of the bill, particularly a portion that redefines royalty payments for existing oil production in Brazil. The president, the person added, instead will propose that Rio and Espirito Santo, the two states with most of Brazil's oil output, continue to get a level of royalties from current production similar to what they received last year. The partial veto would not change parts of the bill that redefine oil royalties from production at new fields.For Rousseff, the protest raised the stakes on what may be the most sensitive decision she has faced in her nearly two-year-old government: How to distribute tens of billions of dollars in expected revenues from a massive offshore oil field that Brazil discovered in 2007.The bill, passed by Congress this month, would spread the windfall more evenly to Brazil's 26 states and federal district. As submitted for her approval, however, it would also alter royalties on existing production, angering Rio and other southeastern states where most of Brazil's oil is located.Rousseff has until Friday to veto the bill, but is expected to decide on the partial veto on Thursday, the person said.Monday's event had attracted about 200 000 demonstrators by early evening, according to police calculations.The protest began with a march through Rio's colonial centre and was followed by a series of speeches, concerts, and impromptu revelry that at times gave it a festive air. In recent days, state officials plastered streets and buildings with banners advertising the protest in large black and white lettering and a command in red for the president: "Veto, Dilma."Rio is spending tens of billions of dollars to build stadiums and other infrastructure for the 2014 soccer World Cup and the 2016 Summer Olympics - two marquee events expected to attract hundreds of thousands of visitors.Rio Governor Sergio Cabral, an ally of the president, led the protest. He has cast the debate in dire language that analysts say may exaggerate the financial stakes but has nonetheless intensified political pressure on Rousseff.The bill "would devastate the state budget and compromise the future of Rio. The state would be inviable," Cabral told journalists after the protest.He urged Rousseff to veto parts of the bill dealing with royalties for existing production, which he said would cost producer states and cities 6.5bn reais ($3.1bn) in 2013 alone.Approving the bill could hurt Rousseff's relations with Cabral's PMDB party, a large and ideologically shape-shifting group that is a linchpin of the broad coalition that supports her ruling Workers' Party.Rousseff has vowed to further Brazil's efforts to reduce poverty, in part by redistributing the windfalls from its growing commodity exports - from oil and iron ore to foodstuffs.Throughout the day on Monday, police had cordoned off large swaths of Rio's centre, along the river-like bay that gives the city its name. State and municipal officials facilitated attendance by waiving subway and ferry fees and providing buses from far-flung towns outside the capital.

NEWS,26.11.2012

Obama drafts Geithner to crack budget

US President Barack Obama has made Treasury Secretary Timothy Geithner lead White House negotiator in budget talks with Congress aimed at averting the fiscal cliff, a report said Monday The Wall Street Journal said Geithner was viewed on Capitol Hill as a straight-shooter who had a better chance of brokering a deal than Jacob Lew, Obama's former budget chief who has burnt his bridges with some Republicans.If no deal is reached before the end of the year, a poison pill law of tax hikes and massive spending cuts, including slashes to the military, comes into effect with potentially catastrophic effects for the fragile US economy.The report said Geithner, who is preparing to leave his post as treasury secretary early in Obama's second term, has spent months already preparing for the fiscal talks, which will begin this week in earnest in Washington.Geithner will be joined by White House budget and tax experts, including Lew, now Obama's chief of staff, and National Economic Council Director Gene Sperling, the Wall Street Journal said.They will try to hammer out an elusive compromise with congressional aides but final decisions will be made by political leaders such as Obama and Republican House Speaker John Boehner, the report said.In recent days, several leading Republicans have indicated a willingness to accept a deal that includes more revenue from ending loopholes in the tax code in return for cuts in funding to Democrats' beloved welfare programs.Geithner, 51, is not affiliated with any party and has spent his career in government finance and on the political sidelines.He first joined the Treasury at age 27. When George W. Bush became president in 2001, he went to work for the Council on Foreign Relations and the International Monetary Fund.At 42, he was tapped to be head of the Federal Reserve Bank of New York, considered the Fed's second-most influential post because the New York bank interacts directly with a powerful constituency that includes Wall Street.Despite holding high office in the years leading up to the 2008 financial collapse, when regulatory authorities are accused of having been asleep at the wheel, he was tapped by Obama to lead the recovery.Upon assuming office in early 2009, he was charged with overseeing two major bailout packages worth more than $1.5 trillion and aimed at shoring up the country's distressed banking sector.The administration has said that the stimulus, while costly, averted another Great Depression, while conservative critics have branded it a costly expansion of government that has failed to revive the economy.

 

Medvedev does not rule out Kremlin return

Prime Minister Dmitry Medvedev said he is not ruling out a return to the Kremlin after his 2008-2012 single term as Russian head of state but was happy working as premier under his mentor Vladimir Putin."If I have sufficient strength and health, if our people trust me in the future with such a position, then of course I do not rule such a turn of events," Medvedev said in an interview with Agence France-Presse and Le Figaro when asked if he had the ambition for another Kremlin term.Medvedev, who on Monday embarks on a working visit to France, served as president after Putin stepped aside following the maximum two consecutive terms allowed by the constitution after his 2000-2008 stint.But Putin, aged 60, stayed on as a powerful prime minister and Medvedev, aged 47, never fully emerged from the shadow of his fellow Saint Petersburg native, an impression strongly reinforced when Putin returned to the Kremlin in May 2012.Medvedev, who in turn was then appointed prime minister in May, failed to bring about lasting change through a much-trumpeted modernisation programme in his one term as president.But in his interview with AFP, he revealed he had not lost his political ambition. "This returning to the presidency depends on a whole range of factors." "Never say never, especially as I swam in that river once and this is a river that you can swim in twice," he said.Russia will only go to the polls to vote for a president again in March 2018 and in the next half decade society is expected to see major change as the middle class grows and internet use explodes. Putin has also not ruled out standing again.This year's tightly choreographed job swap was criticised for being played out far from the public, and frustration over the return of Putin to the Kremlin fuelled the opposition protests that rocked Russia in the last year.Medvedev acknowledged the protests that began last December had shown a transformation in Russian society that the authorities could no longer ignore."Our society changed, it had become more active and the authorities needed to take account of this and react," said Medvedev, saying the government had done this by introducing electoral reform.Some of Medvedev's supporters who saw him as a possible champion of a refreshed, innovative and more pro-Western Russia were hugely disappointed by his apparent surrender of the Kremlin back to Putin.But Medvedev played up the tight links between the two men, saying he would find it impossible to work under anyone else."I would hardly have become prime minister under another president, I cannot imagine it at all," he said."If there is someone you can work with comfortably as prime minister after being president it is just one person, Vladimir Putin."However Medvedev has distanced himself from Putin on some issues, notably the case of feminist punk rockers Pussy Riot, two of whom have been sent to prison camps for performing a song against the Russian strongman in a church.Reaffirming his belief that they should be released, he said: "I think they have already tasted what prison is... So further punishment in the form of prison is not necessary. This is my personal position."On the case of Russia's best known prisoner, the former tycoon Mikhail Khodorkovsky, Medvedev said court decisions had to be respected but noted that the convict had never made a bid for clemency from the Kremlin.Medvedev admitted that his modernisation drive had so far fallen short but expressed hope there was still time to put his ideas into place."It's true that for the moment modernisation has not turned into a national idea and there has been no kind of radical progress reached."

 

Euro zone to seek Greek aid deal without write-off

Euro zone finance ministers and the International Monetary Fund made their third attempt in as many weeks to agree on releasing emergency aid for Greece today, with policymakers saying a write-down of Greek debt is off the table for now.Greek Finance Minister Yannis Stournaras said he was confident the ministers would reach a deal after Greece fulfilled its part of the deal by enacting tough austerity measures and economic reforms."I'm certain we will find a mutually beneficial solution today," he said on arrival for what was set to be another marathon meeting.Greece, where the euro zone's debt crisis erupted in late 2009, is the currency area's most heavily indebted country, despite a big "haircut" this year on privately-held bonds. Its economy has shrunk by nearly 25% in five years.EU Economic and Monetary Affairs Olli Rehn said it was vital to disburse the next 31 billion euro tranche of aid "to end the uncertainty that is still hanging over Greece". He urged all sides to "go the last centimetre because we are so close to an agreement".Negotiations have been stalled over how Greece's debt, forecast to peak at 190-200% of GDP in the coming two years, can be cut to a more sustainable 120% by 2020.Without agreement on how to reduce the debt, the IMF has held up payments to Athens because there is no guarantee of when the need for emergency financing will end.The key question is: Can Greek debt become sustainable without the euro zone writing off some of the loans to Athens?IMF Managing Director Christine Lagarde said on arrival that the solution must be "credible for Greece".A source familiar with IMF thinking said the global lender was demanding immediate measures to cut Greece's debt by 20 percentage points of GDP, with a commitment to do more to reduce the debt stock in a few years if Greece fulfills its programme.Under the source's scenario, Greece's debt could be reduced to around 125% of GDP by 2020 using a variety of methods including a debt buyback, reducing the interest rate on loans and returning euro zone central bank 'profits' to Greece, but further steps would still be needed to hit the 120% goal.The ministers took an extended break in mid-afternoon while experts worked on how to formulate a link between short-term measures and a credible assurance of eventual debt relief.Germany and its northern European allies have so far rejected any idea of forgiving official loans to Athens.German Finance Minister Wolfgang Schaeuble told reporters on arrival that a debt cut now was legally impossible, not just for Germany but for other euro zone countries, if it was linked to a new guarantee of loans."You cannot guarantee something if you're cutting debt at the same time," he said. That might not preclude debt relief at a later stage if Greece has completed its adjustment programme and no longer needs new loans.The source familiar with IMF thinking said a loan write-off once Greece has established a track record of compliance would be the simplest way to make its debt viable, but other methods such as foregoing interest payments, or lending at below market rates and extending maturities could all help.The German banking association (BDB) said a fresh "haircut" or forced reduction in the value of Greek sovereign debt, must only happen as a last resort.Two European Central Bank policymakers, vice-president Vitor Constancio and executive board member Joerg Asmussen, said debt forgiveness was not on the agenda for now.Asmussen told Germany's Bild newspaper the package of measures would include a substantial reduction of interest rates on loans to Greece and a debt buy-back by Greece, funded by loans from a euro zone rescue fund.So far, the options under consideration include reducing interest on already extended bilateral loans to Greece from the current 150 basis points above financing costs.How much lower is not yet decided - France and Italy would like to reduce the rate to 30 basis points (bps), while Germany and some other countries insist on a 90 bps margin.Another option, which could cut Greek debt by almost 17% of GDP, is to defer interest payments on loans to Greece from the EFSF, a temporary bailout fund, by 10 years.The European Central Bank could forego profits on its Greek bond portfolio, bought at a deep discount, cutting the debt pile by a further 4.6% by 2020, a document prepared for the ministers' talks last week showed.Not all euro zone central banks are willing to forego their profits, however, the German Bundesbank among them.Greece could also buy back its privately-held bonds on the market at a deep discount, with gains from the operation depending on the scope and price. Officials have spoken of a 10 billion euro buy-back at around 30 cents on the euro, that would retire around 30 billion euros of debt, although since the idea was raised the potential gain has fallen as prices have risen.But the preparatory document from last week said that the 120% target could not be reached in 2020, only two years later, unless ministers accept losses on their loans to Athens, provide additional financing or force private creditors into selling Greek debt at a discount.The latest analysis for the ministers showed the debt could come down to 125% of GDP in 2020, one euro zone official with insight into the talks said.

NEWS,25.11.2012

Thousands of Italians rally against austerity

Tens of thousands of students and workers rallied across Italy today, to protest against austerity measures imposed by Prime Minister Mario Monti's technocrat government.Appointed a year ago when Italy came close to a Greek-style debt crisis, Monti has pushed through painful tax increases and spending cuts to try to rein in public finances at a time when schools and universities say they desperately need more support."We need to fight for our rights. This government doesn't represent us and these austerity measures and all the cuts they've introduced are totally anti-democratic," said student protester Tommaso Bernardi, attending a rally in Rome.Far-right group Casapound marched through the capital Rome later on Saturday, chanting "Monti, go away!". Anti-fascists staged a counter-demonstration in another part of town."This government is making the nation starve and is destroying the social welfare system," said Casapound president Gianluca Iannone. "The weakest are hit hardest - the disabled, students and single-income families."Police organised different routes and times for the rallies to reduce the risk of violence after scuffles broke out between police and demonstrators during protests on November 14 that saw the police criticised for heavy-handed tactics.Several thousand students and workers also rallied in other cities including Naples, Florence and Catania.No clashes were reported but the widespread protests highlighted the scale of discontent in the recession-hit country ahead of parliamentary elections next year."We need to change this country, starting from investments in schools, universities and culture," said Michele Orezzi, a university union coordinator, adding that Italy's education system was "crumbling into pieces".With youth unemployment at about 35%, more than three times the national average, and Monti's austerity policies biting into education spending, school pupils and university students have taken an active role in anti-government protests.Much anger is focused on an education reform bill going through parliament that would give schools more autonomy and allow them to accept other sources of funding than the state. Protesters believe this is intended to encourage privatisation.Students have occupied schools around Rome in recent weeks to express their anger and frustration at repeated funding cuts, chaining gates shut and camping inside classrooms.Monti has defended his austerity plan, saying he believes his technocrat government will be remembered for having helped Italy pull itself out of a deep economic crisis without needing to resort to external aid.Italy has been the European Union's most sluggish economy for more than a decade, fuelling investor concerns about its ability to bring down public debt of around 126% of output.

World Week Ahead: Deal or no deal for Greece?

Two deals might help extend last week's momentum on equity markets in the US and Europe -one that helps the US avoid its fiscal cliff and a second that would end the immediate threat of Greece defaulting on its debt.Optimism was fuelled on both fronts last week, though the timing for an agreement by US lawmakers on preventing automatic tax increases and spending cuts worth about US$607 billion set to kick in on January 1 remains more open-ended. Officials from the White House and Congress will resume negotiations this week.US President Barack Obama said on November 18 he was "confident" a new US budget deal would be reached. Meanwhile, EU commissioner Olli Rehn on Thursday said he saw no reason a deal on Greece could not be concluded tomorrow when euro-zone finance ministers, the International Monetary Fund and the European Central Bank meet again.Greek Finance Minister Yannis Stournaras expressed confidence that the IMF would ease earlier deficit targets imposed on the debt-stricken nation, thus opening the door to the transfer of more funds."It's a done deal," Stournaras told reporters in Brussels on Friday after meeting with EU officials and IMF Managing Director Christine Lagarde, Bloomberg reported.Commitment to resolving budgetary and debt issues that risk hampering both US and European economies bolstered stocks last week.In the Thanksgiving holiday shortened week in the US, the Dow Jones Industrial Average gained 3.3%, the Standard & Poor's 500 advanced 3.6% and the Nasdaq Composite climbed 4%.In the past five days, the benchmark Stoxx Europe 600 Index jumped 4%. It is the first time the gauge has gained every day of the week since July 1, 2011, according to Bloomberg.The advance in European stock prices came even though EU leaders struggled to see eye to eye in talks about the next seven-year budget for the region and a two-day meeting late last week ended in failure.European Council President Herman Van Rompuy said they decided to abandon the special summit on the 2014-2020 EU budget, worth about 1 trillion euros, and would try to reach a compromise early next year, according to Reuters.On the US economic front in the days ahead, investors will eye the latest reports on durable goods orders and consumer confidence on Tuesday, weekly jobless claims on Thursday, the Chicago Purchasing Managers Index and personal income and outlays on Friday. The Federal Reserve's beige book is due on Wednesday.Also, three reports on the housing market might confirm the recent data indicating strength and optimism in this industry's pace of recovery.The S&P/Case-Shiller home price index for September, due Tuesday, is expected to show the eighth straight month of increases, while new home sales for October, due Wednesday, and October pending home sales data, due Thursday, are also expected to show a stronger housing market.The US Treasury is set to auction US$35 billion of two-year notes on Tuesday, US$35 billion of five-year securities Wednesday and US$29 billion of seven-year debt on Thursday.The first clues on how retailers fared on Black Friday, the day after Thanksgiving, will also provide a helpful indicator on the state of the American consumer. The National Retail Federation predicts sales during the holiday season to increase 4.1% this year, down from last year's 5.6% growth.On Friday, Europe offered some surprisingly good economic news. The Ifo institute's business climate index unexpectedly rose, climbing to 101.4 in November from 100 in October, the first increase in eight months.That helped the euro finish what had already been a good week on an even more positive note, rising 1.8% against the greenback and climbing 3.2% against the Japanese yen in the past five days."Certainly sentiment towards euro has changed," Camilla Sutton, chief currency strategist in Toronto at Bank of Nova Scotia, told Bloomberg News. The euro "rallied slightly again after we got German confidence numbers, which highlighted better-than-expected business sentiment."

International arbitration for tax disputes

The United States is undefeated in the nearly two years since it began settling corporate tax disputes with Canada through a winner-takes-all process popularly known as baseball arbitration.Tax lawyers and accountants in both countries said the US Internal Revenue Service had won three of the binding decisions and Canada none. They said the IRS had collected a significant sum of money, possibly in excess of $100m.Launched in December 2010, the arbitrations follow the rules for resolving salary disputes between Major League Baseball players and their teams. In the tax game, however, the companies forced to pay and the payments remain confidential. The United States has had similar agreements with France since 2004 and Belgium and Germany from 2006, but no cases involving them have gone to baseball arbitration, the tax experts said.Baseball arbitration plans are in pending tax treaties with Hungary, Luxembourg and Switzerland. Future treaties with the United Kingdom and Japan may have the same provisions, tax experts said.The arbitration process arises often in tax questions involving a multinational company's transfer pricing taxes, where two countries disagree over which of them should collect corporate taxes. The winning country gets the tax revenue. The loser goes home empty-handed. Companies like the baseball arbitration provision because it lends certainty to their tax bills. Companies can request that countries go to arbitration if revenue agents cannot settle their tax disputes in two years.Aiming too high?The arbitration panels are made up of three experts, one chosen by each country and the third by the other two experts. Revenue agents from each country submit a tax bill number to the panel. The panel picks the number it thinks is closest to the right answer. Tax experts on both sides said Canada had lost all three disputes because it was trying to hit home runs  seeking too much in taxes during arbitration."Canada has lost three in a row," said Dale Hill, a former manager of Canada's cross-border tax negotiations with the United States and a partner with Gowling Lafleur Henderson LLP in Ottawa. "Maybe Canada has been more aggressive," Hill said.David Rosenbloom, a Washington, DC-based US tax lawyer at Caplin & Drysdale, said: "The Canadian Revenue Agency has developed over the years a habit of taking really extreme and unwarranted positions. It's almost as though they're unaware arbitration is in the treaty." Richard McAlonan, who directs the IRS negotiating program,his month that the agency had resolved a "handful" of the cases. He declined further comment. The Canadian Revenue Agency said in a statement that it prefers to resolve its tax disputes with the United States "at the negotiating table". Going to arbitration "would be the last resort", the CRA said. It declined to comment on the cases, citing confidentiality rules in the treaty. Canada's losses may mean its revenue agents will be more cautious in tax negotiations with the United States. The countries negotiate 75 to 100 cases a year, Hill said. "It's going to get tougher for Canada to negotiate," he said. Treaties pending The tax treaties with Hungary, Luxembourg and Switzerland passed the US Senate Foreign Relations Committee in 2011. But Republican Senator Rand Paul has so far prevented all three treaties from going before the full Senate.A spokesperson for Paul could not be reached for comment. Paul has previously objected to the treaties' provisions that require more sharing of US taxpayer information. New treaty arbitration provisions with Switzerland and the UK would especially benefit the pharmaceutical industry, while auto companies would appreciate the provision in a Japanese treaty, said Lorraine Eden, a professor at Texas A&M University.Companies in both sectors have a lot of transfer pricing tax uncertainty and can face double taxation if unable to force countries into binding arbitration, she said.UK-based GlaxoSmithKline reached a $3.4bn transfer pricing settlement with t he IRS in 2006. But the UK did not accept the US settlement, and Glaxo faced UK taxes on the same profits, Eden said."Would they like the opportunity to go to binding arbitration and settle this? Absolutely," Eden said.