NEWS,17.12.2012

Putin touts record Russian arms sales

Russian arms exports reached a record $14 billion this year, President Vladimir Putin said today, extending a run of record-breaking sales in recent years. The world's second biggest exporter has cultivated new weapons clients in Southeast Asia and Africa, despite criticism that it is failing to deliver the technological benefits of Western suppliers or the low costs of emerging weapons exporter China. "Let's talk about our results they are positive. We are reaching a record level of weapons exports. Their total volume was above $14 billion," Putin said in a televised meeting with officials. He said Russia had signed over $15 billion in new export contracts this year alone. He did not spell out when deliveries on those deals were expected.Russia has faced Western criticism over its weapons sales to the Syrian government, worth nearly $1 billion in 2011.Moscow says its arms deliveries to Syria, a long-time ally, do not violate international law and are not intended to help President Bashar al-Assad's government fight a 21-month-old uprising, but rather to fulfil Soviet-era commitments. Russia has made clear it would use its UN Security Council Vote to veto an arms embargo against Damascus, contending such a move would be one-sided when rebels are able to obtain weapons via smuggling into territory they now control. Moscow has reported no major arms deals with Syria this year. A major order of fighter jets was not completed, although it remains unclear as to why. Putin gave no specifics on Russia's main weapons buyers.Top weapons clients also include Soviet-era client and regional Asian heavyweight India, as well as Vietnam and other Southeast Asian nations wary of China's growing military might.Putin said a major part of Russia's weapons business includes upgrades and refurbishment of Soviet-era technology and hardware. "We understand that competition in this sector of the international economy is very high and very serious," he said. Exports from the world's top producer, the United States, have hovered around $30 billion annually in recent years.State arms exporter Rosoboron export accounts for around 80% of all Russian arms sales in a given year and nearly 20 independent firms comprise the rest with sales of spare parts and upgrades.

EU holds back on eurozone overhaul

European leaders doused hopes of a radical eurozone overhaul on Friday, after brokering deals to control banks and refloat Greece seen as adequate to stem the immediate crisis.The last EU summit of a year that saw Greece close to bankruptcy and bigger Latin countries pressured to overhaul their economies in line with German demands saw a series of ambitious proposals effectively kicked into the long grass.Despite worries over political uncertainty in Italy, flagship plans to fix fundamental flaws criticised since the introduction of the single currency were put to one side until late 2014 at the earliest.Europe's effective paymaster, German Chancellor Angela Merkel, hinted that "financial aid" could in the future be given to countries committing to reforms as part of moves towards greater economic co-ordination in the bloc.In the eurozone alone, joblessness is heading towards the 20 million mark after a year of devastation and with recession set to last throughout much of 2013.However, the sense of imminent panic on financial markets that dominated much of 2012 decision-making has receded significantly since the European Central Bank (ECB) issued a long-resisted but near-unlimited guarantee in the summer to stand behind countries in financial difficulty." No doors were closed," said Jose Manuel Barroso, the head of the executive European Commission. Yet ideas heavily promoted by EU President Herman Van Rompuy over the last six months, including a central eurozone budget, seemed to fizzle out.Van Rompuy said he would present another report to leaders in June 2013, as well as proposing that national governments sign up to contracts with the EU on reforms."All the hard work is beginning to pay off. A lot has been achieved over the course of a year," he insisted. "This work is not over: the dynamic will carry on in the coming year," pledged Van Rompuy. French President Francois Hollande said that late-2014, when a new Commission is installed, "would be the time we could envisage a new phase with a modification of the treaties. "The resumption of loans to Greece followed a successful plan to wipe tens of billions of euros from the country's debt pile.A first payment of €34.3bn would be flowing to Athens "as early as next week," said outgoing Eurogroup chair and Luxembourg Prime Minister Jean-Claude Juncker.The accord prompted Greek Prime Minister Antonis Samaras to declare that "Grexit", the idea that Greece would be forced out of the 17-nation bloc, was "dead." "Greece is back on its feet," declared an ecstatic Samaras, who has pushed through painful economic reforms demanded by international creditors, sometimes in the face of violent street protests. Meanwhile, the deal for the eurozone's largest banks to come under the aegis of the ECB from March 2014 was hailed by its head Mario Draghi as "an important step towards a stable economic and monetary union, and towards further European integration".Despite a noticeably more bullish tone at the summit, fears over Italy lurked in the background, after Prime Minister Mario Monti, credited with important reforms there, said he was stepping down soon. Former leader Silvio Berlusconi had hinted that he might stand for a fourth time but appeared to row back, telling Belgian television that he had "so much to do" outside politics. Hollande downplayed the chance Berlusconi would run in a future election, saying: "I don't think there is a very serious likelihood" of this."Merkel underlined a closing of ranks at the summit. "I made clear that the government of Mario Monti has done a great deal of helpful work for the confidence that Italy is now enjoying again," she said. Leaders were to reconvene later Friday at 10:00am (09:00 GMT) to discuss moves towards a common security and defence policy as well as to take a position on the Syria crisis.

Greece's lenders warn of 'very large' risks to bailout

Political resistance and potential court challenges are among "very large" risks to reforms required for Greece's bailout programme, the country's European lenders said today. The long-awaited report from the European Commission and the European Central Bank details the findings of the "troika" of the EC, ECB and the International Monetary Fund on Athens' efforts to meet targets under its latest rescue package.The report formally confirmed that Greece deserved further aid under the 130 billion euro ($202-billion) bailout, and a Greek finance ministry source said Athens had received a long-delayed instalment of over 34 billion euros in aid today. But the lenders warned Athens still risked falling short on its commitments. "The key risks concern the overall policy implementation, given that the coalition supporting the government appears fragile and some components of the programme face political resistance, despite the determination of the government," the report said." Important budgetary measures are likely to be challenged in courts, which could lead to the need to fill a fiscal gap emerging as a consequence." Greece, which has been bailed out twice by the EU and IMF since the debt crisis erupted, has a long history of missed targets and failure to meet promises to overhaul its bloated state sector and liberalise its recession-hit economy. A separate report by an EU task force today said by the end of October Greece had completed only 88 of the targeted 300 audits of large tax payers and 467 of 1300 audits of high-wealth individuals. Despite the lingering doubts on Greece's commitment and ability to reform, the country's lenders last week agreed to disburse aid to Athens after it bought back its own debt at a fraction of face value, cutting its debt burden. The decision to unlock aid - expected to total over 52 billion euros by the end of March removed the spectre of a Greek bankruptcy and euro zone exit. Even so, Moody's ratings agency said only further debt relief from official creditors, such as governments, would put its debt back on sustainable footing. The agency classified the bond buyback scheme as a "distressed exchange" and, as a result, a default on the Greek government debt held by private bondholders. Prime Minister Antonis Samaras's conservative-led government has promised to restore the country's credibility but his coalition has faced attacks both from within and outside on its plan to push through a new round of austerity. The troika's report warned those spending cuts next year could hurt the weak economy more than expected, though that could be stemmed by the government paying bills that have been in arrears. Greece's economy will contract by about 6% this year its fifth in recession and by a further 4.2% next year before growing 0.6% in 2014, the report said. But growth would not return without a business reform drive. Criticising influential business lobbies, it said reviving the economy would require "breaking the resistance (to reform) of vested interests and the prevailing rent-seeking mentality of powerful pressure groups".The report acknowledged that privatisation proceeds had been disappointing so far but that the programme had gained some momentum since September. It forecast revenue of 8.5 billion euros by 2016 from the asset sales, roughly a billion lower than Athens' own estimates in a mid-term fiscal plan. "Doubts on the effectiveness of the governance of the privatisation process however continue to persist," it said.

Wall Street gains as Obama and Boehner meet

Wall Street gained as a meeting between US President Barack Obama and House Speaker John Boehner at the White House today bolstered optimism a budget agreement will be reached soon Wall Street took heart from the 45 minute gathering about which no further details were released. In afternoon trading in New York, the Dow Jones Industrial Average rose 0.62 %, the Standard & Poor's 500 Index gained 1.03%, while the Nasdaq Composite Index advanced 1.01%. The stakes are high for the budget talks aimed at avoiding US$600 billion of tax increases and spending cuts from taking effect on January 1; failure to reach an agreement might push the US into recession in the first half of next year.Indeed, a report today showed that manufacturing in the New York region contracted more than expected in December, underpinning the fragility of the economy that prompted the US Federal Reserve to expand its stimulus program last week."It's a historic tug of war: pulling on one side is the fiscal cliff, pulling the other side is continued global monetary easing," David Sowerby, a portfolio manager at Boston based Loomis Sayles & Co, told Bloomberg News. "The most positive thing for the market is valuation and an accommodative Fed policy. "In Europe, the Stoxx 600 Index finished the session with a 0.1% decline from the previous close. European Central Bank President Mario Draghi reminded investors of the challenges ahead, even as he predicted a recovery in the second half of 2013 in comments at the European Parliament's Economic and Monetary Affairs Committee. "We expect economic weakness to extend into next year with a very gradual recovery in the second half of the year," Draghi said. Still, "the medium-term outlook for economic activity remains challenging."The central bank's new supervisory powers over banks in the region will help restore confidence, Draghi said. Equity investors in Japan applauded the Liberal Democratic Party's victory as leader Abe Shinzo plans aggressive fiscal and monetary stimulus measures to revive the nation's economy that just tipped into recession. The Nikkei 225 closed with a 0.9% gain.It's considered bad news for the yen, however, which was last 0.4% weaker against the US dollar. Earlier in the session, the yen dropped as low as 84.48 per dollar, the weakest since April 12, 2011, according to Bloomberg. The Bank of Japan is scheduled to start a two-day policy meeting on Wednesday. Switzerland's UBS will pay around US$1.5 billion to settle charges that a group of traders at its Japanese unit rigged Libor interest rates, Reuters reported, citing a source familiar with the matter. UBS will admit that about 36 of its traders around the globe manipulated yen Libor between 2005 and 2010, according to the source, with a final deal not expected before Wednesday. Shares of Apple fell initially after Citigroup cut its rating for the stock amid concern about tapering demand for its iPhone 5. The stock rebounded, last up 1.2%.