NEWS,22.01.2013

Fresh fears over Spain deficit

Fresh worries surfaced Tuesday over Spain's public finances as the EU warned of missed deficit targets on the day 11 eurozone countries got the go-ahead to work on taxing financial transactions.The leaders of Germany and France promised new moves to strengthen the eurozone, as the currency club that has laboured so hard to stabilise its debt-laden reputation on money markets settles down under a new Dutch chairmanship. The eurozone is currently labouring under a record unemployment rate of almost 12%, but even Greece is doing its bit, actually beating a deficit target set with its EU-IMF creditors over the course of 2012.However, the new Eurogroup chair, Jeroen Dijsselbloem, cannot yet expect an easy ride during his 30-month initial mandate compared to that of his predecessor, Luxembourg Prime Minister Jean-Claude Juncker. Headaches including the tricky nature of negotiating over a bailout request made last summer by Cyprus, and a request by Portugal for a longer repayments schedule on its bailout - which it hopes, like Ireland, can help it get back into commercial finance markets even this year. Irish Finance Minister Michael Noonan said the 17 eurozone countries had agreed to Portugal's request, and EU Economic Affairs Commissioner Olli Rehn acknowledged that a successful return to the markets for these two countries "is both in the interests of themselves and, indeed, certainly in the interests of the entire European Union". But Spain remains the biggest active threat, not least as Dijsselbloem's sole candidacy to head the Eurogroup was opposed by Spain in the overnight vote.Spain, a member of the eurozone, is now Europe's youth unemployment black spot, with a rate of about 57%.And the European Commission warned on Tuesday that the country's 2012 and 2013 public deficit targets are again veering off target. Spain was supposed to keep the 2012 figure to within 6.3 percent of gross domestic product, but a Commission report said this would "probably not" be achieved. Brussels publishes full economic forecasts for the whole European Union on February 22, but expects Spain to register a deficit of 8.0% in 2012 and 6.1% again this year.The previous target for 2013 was 4.5%.However there was good news from Greece, which said it had narrowed its public deficit to 8.1% in 2012, marking a rare improvement over targets pledged to its EU-IMF creditors. Portugal also said it had met its 2012 public deficit target of 5.0%.Spanish Finance Minister Luis De Guindos said the "complaint" over Dijsselbloem was simple, moaning that Madrid is "under represented in the European institutions" and that this was "unjust". Almost all the top eurozone posts are now held by nationals of members which hold top triple-A credit ratings. The Netherlands, though, is sitting out the moves to launch a tax on financial transactions. However, the 27 European Union ministers voted as a whole to give 11 countries led by Germany and France the green light to continue work on the scheme, although not yet to legislate for it. Diplomats said that Britain was relaxed about the issue, and technically abstained even though it has long argued forcibly against the tax. "It is a milestone for EU tax policy, as it paves the way for more ambitious member states to progress on a tax file, even when unanimity could not be achieved," said the EU's tax commissioner Algirdas Semeta. The plans progress under a scheme first used in the field of divorce law and was last year approved a second time in the field of patents.The Financial Transactions Tax (FTT) was initially proposed by France and Germany, then joined by Austria, Belgium, Greece, Portugal and Slovenia, and later by Italy, Spain, Slovakia and Estonia.The European Commission will now begin drafting legislation sure to stir up more controversy.

ILO: World faces jobs crisis

Global unemployment rose by 4 million people last year to a total of 197 million, with another 5 million expected to raise the total to 202 million in 2013, the International Labour Organisation (ILO) said on Tuesday. The figures indicate that in these two years alone 9 million would have joined the ranks of people officially registered as unemployed, and that the cost so far of the financial crisis which began five years ago is an extra 28 million people officially without jobs. “This figure means that today there are 28 million more unemployed people around the world than there were in 2007,” before the crisis, ILO chief Guy Ryder said on Monday. Last year’s unemployment number inched up towards the all-time record of 199 million, reached at the epicentre of the crisis in 2009, but “we will beat that record in 2013“, said an expert for the ILO, which is the labour arm of the United Nations. Another 5.1 million people are expected to join the jobless ranks this year, bringing the total number to more than 202 million. That number is expected to rise by another 3 million in 2014 and should hit 210.6 million by 2017, ILO said, adding that the global unemployment rate was expected to stay steady at 6% until then. However, analysts often point out that official unemployment data reflects those people who satisfy the conditions for being registered as unemployed, and that official data does not necessarily capture large numbers of people who would like to have officially registered work but do not feature in any statistics. “The trends are very much (going) in the wrong direction,” Ryder said, lamenting a “noticable worsening of the unemployment situation around the world“. The impact of the economic crises on the global labour market had in many cases been worsened by incoherence between monetary and fiscal policies and “a piecemeal approach” to the problems, especially in the eurozone, the report said. “Weakened by faltering aggregate demand, the labour market has been further hit by fiscal austerity programmes in a number of countries, which often involved direct cutbacks in employment and wages,” it said. At the same time, “labour force participation has fallen dramatically... masking the true extent of the jobs crisis,” ILO said, pointing out that 39 million people dropped out of the labour market altogether last year as job prospects became increasingly gloomy. Young people have been especially hard-hit by the expanding jobless trend, the UN agency said, pointing out that there are currently some 73.8 million youth, aged 15 to 24, without work worldwide. “And the slowdown in economic activity is likely to push another half million into unemployment by 2014,” the report cautioned. Last year, the global youth unemployment rate stood at 12.6%, and it was expected to rise to 12.9% by 2017, according to the ILO. “The crisis has dramatically diminished the labour market prospects for young people, as many experience long-term unemployment right from the start of their labour market entry,” the UN agency said, adding that it had never seen anything similar during previous downturns. Today, about 35% of all young people on the dole in advanced economies have been out of work for six months or longer, up from just 28.5% in 2007, the report showed.

BoJ pledges unlimited easing

The Bank of Japan announced on Tuesday it’s most determined effort yet to end years of economic stagnation, saying it would switch to an open-ended commitment to buying assets next year and doubling its inflation target to 2%.It promised to reach the inflation goal "at the earliest possible time." The steps mark a break with an earlier policy of topping up a lending and asset buying programme launched in October 2010m and follow weeks of relentless pressure from new Prime Minister Shinzo Abe for a greater push to beat deflation and lift the economy out of recession. In a joint statement with the government, it affirmed a well-flagged move to commit to the inflation target. Consumer price inflation has reached 2% in only a handful of months since the late 1990s. But aware that markets had already factored in the new price goal and more asset buying and that merely meeting those expectations could trigger a negative reaction, central bankers took steps that several analysts thought would only come later. "This is very good news. For once, the BoJ has been more aggressive than the market expected," said Brian Redican, senior economist at Macquarie in Sydney. "The government is clearly forcing the pace of change, which is no bad thing." The central bank said that from 2014 it would switch to an open-ended approach of buying a certain amount of assets - ¥13 trillion - each month without setting a deadline for completing the purchases. The yen, which inched up ahead of the policy announcements, fell immediately after the decision, though later crept up higher. Several analysts pointed out, however, the BoJ could have done even more and there will be expectations that it will follow through with further steps mooted by politicians, economists and some central bank policymakers. One such step would be to scrap the 0.1% floor for short-term interest rates, while another would be for the central bank to buy longer-duration bonds. "There's still a lot of work to do, and still a lot of room for improvement," said Tadashi Matsukawa, head of fixed income at Pinebridge Investments in Tokyo. Abe, who led his Liberal Democratic Party to a landslide victory in a December 16 parliamentary election, made promises of aggressive budget and monetary stimulus a centrepiece of his campaign. His pledges to boost public spending and repeated calls for more BoJ action helped reverse a long-term rise in the yen and set off a stock market rally led by exporters and construction firms. But many economists have warned the stimulus could give the sluggish economy only a temporary jolt if the government fails to follow through with politically more difficult economic reforms such as deregulating its protected farming sector. They also warn that the push to reflate the economy could backfire if Abe's government fails to convince markets that it has a credible plan to get Japan's ballooning debt back under control. Seeking to address such concerns, the government said in the joint statement it would draw up a growth strategy and pursue structural reforms to help Japan escape deflation and pledged to maintain fiscal discipline. Economics Minister Akira Amari attended the BoJ meeting to represent the government's views. The yen has lost 13% against the dollar in the past two months to hit a two-and-a-half-year low on expectations of bolder central bank action. Tokyo stocks have gained a fifth on the view the weaker yen will boost the export earnings of the likes of Nissan and Canon. The yen's declines, however, have drawn complaints from countries like Russia and Germany, worried that it could set off destabilising currency devaluations. In a sobering reminder that Japan still faced an uphill battle in pulling out of more than a decade of low-grade deflation, the BoJ's updated economic forecasts showed core consumer prices inching down in the current fiscal year and up only 0.9% in the fiscal year ending in March 2015. "Headline says core inflation at only 0.9% in 2014 so when will they meet their inflation target of 2%?" asked Joseph Capurso, currency strategist at Commonwealth Bank of Australia in Sydney.

NEWS,21.11.2012

Debt deal for Greece fails again

International lenders failed for the second week to reach a deal to release emergency aid for Greece and will try again next week, but Germany signalled that significant divisions remain.Euro zone finance ministers, the International Monetary Fund and the European Central Bank were unable to agree in 12 hours of overnight talks in Brussels on how to make the country's debt sustainable.They want a solution before paying the next loan tranche which is urgently needed to keep Greece afloat.Several European officials played down the delay, saying the disagreements were technical and a deal would be reached when they meet again on November 26.German Finance Minister Wolfgang Schaeuble said he was confident the funding gap could be filled by a mixture of letting Greece buy back its own debt at a discount, tapping ECB profits on Greek bond purchases, and lowering interest rates on government loans to Athens, but not below the cost to lenders."Additional measures are needed and we have spoken about this intensively with the International Monetary Fund. We agree essentially that the gap can and will be filled, that a buyback programme of Greek debt on the market will be carried out," he told reporters.Schaeuble earlier told conservative lawmakers at a closed-door briefing that the lenders were split over how to define debt sustainability and fill a hole in Greek finances."He sees the extension of the debt sustainability goal as one of the main bones of contention. The other is how to cover the Greek financing gap of 14 billion euros through 2014," said one lawmaker who attended the meeting of Chancellor Angela Merkel's centre-right Christian Democrats in parliament.European governments want to give Greece an extra two years, until 2022, to cut its debt to a sustainable level of 120% of GDP but the IMF does not agree.The Europeans, led by Germany, are refusing to write off any loans. Both options would make it easier for Greece to meet the targets in the bailout programme.Merkel told the lawmakers the gap could be plugged by lowering interest rates on loans to Greece, extending their maturity to 30 years from 15, and increasing guarantees provided to the euro zone's temporary EFSF bailout fund, in which Germany would take its share, a participant said."I believe there are chances, one doesn't know for sure, but there are chances to get a solution on Monday," she told the Bundestag lower house of parliament during a debate.Any options that cost the German taxpayer more money come with a heavy political price tag with elections less than a year away and would have to voted through by an increasingly restive Bundestag."If we get the impression we are being cheated, we won't come to the rescue anymore when you need our support," Social Democrat leader Peer Steinbrueck warned in a speech to the chamber just before Merkel took the podium.Until now Merkel has been able to count on the support of parties like the SPD and Greens to help push through controversial bailout votes in the lower house.Greece needs the next 31 billion euro aid tranche to keep servicing its debt and avoid bankruptcy. Its next major repayment is in mid-December.Athens says it has carried out the tough reforms required in the bailout programme but needs more time to reach fiscal targets agreed with lenders because its economy keeps shrinking.French Finance Minister Pierre Moscovici said agreement was close, echoing overnight comments from Eurogroup chairman Jean-Claude Juncker, who said talks were stuck on technicalities."We are a whisker away from a deal. I am very confident we will get there on Monday," Moscovici told Europe 1 radio.GREEK ANGERGreece is increasingly frustrated about the repeated delays in releasing the aid and says it has done what is necessary."Greece did what it had committed it would do. Our partners, together with the IMF, also have to do what they have taken on to do," Prime Minister Antonis Samaras said in a statement."Any technical difficulties in finding a technical solution do not justify any negligence or delays."Samaras will meet Juncker in Brussels on Thursday and has cancelled a trip to Qatar next week to monitor the talks, a government spokesman said.The prime minister is under growing pressure from his own coalition allies and the opposition after pushing through deeply unpopular austerity measures that he said were the only way to get more aid to avert bankruptcy."The euro zone cannot use Greece as an alibi to justify its weakness in dealing effectively and definitively with the crisis," said Evangelos Venizelos, head of the co-ruling PASOK party. Opposition leader Alexis Tsipras, whose party is rising in polls, said Samaras had lost all credibility.Investors were disappointed with the news. Greek banking stocks fell nearly 6% in morning trade. Most of Greece's next aid instalment has been earmarked to shore up the country's tottering banks.The euro, European shares and the prices of higher-yielding euro zone debt lost ground but later recovered some of the losses.NO WRITE DOWNA document prepared for the Brussels meeting and seen by Reuters showed Greece's debt cannot be cut from 170% of GDP to 120%, the level deemed sustainable by the IMF, unless either euro zone member states write off a portion of their loans to Greece or the IMF extends its deadline by two years.Germany and other EU states say writing down their loans would be illegal. The European Central Bank, a major holder of Greek bonds, has refused to take a "haircut" on its holdings.Berlin contends a debt haircut would not tackle the roots of Greece's debt problems and would be unfair to other euro zone countries that have taken tough steps to improve their finances."It would cost money, it would be a fatal signal to Ireland, Portugal and possibly Spain, as they would immediately ask why they should accept difficult conditions and push through difficult measures ... and it would have consequences under budget law," Norbert Barthle, budget spokesman forMerkel's Christian Democrats said.Without corrective measures, the Eurogroup document said, Greek debt would be 144% in 2020 and 133% in 2022.Juncker said after a meeting a week ago that he wanted to extend the target date to reduce Greek debt by two years to 2022, but Lagarde insists the 2020 goal should stand. She is believed to favour euro zone member states taking a writedown.Under a buy-back plan, Greece would offer to purchase bonds from private investors at a sharp discount to their face value. Options are under consideration including using about 10 billion euros of EFSF money to buy back bonds at between 30 and 35 cents on the euro.There are also proposals to reduce the interest rate on loans already extended by euro zone countries to Greece, to allow a long moratorium on interest payments and lengthen the maturities on loans, all of which would cut the debt burden.

Shares climb amid hope for Greece

World shares advanced as policymakers in Europe reassured markets that a deal on releasing emergency aid to Greece was close, although the failure of lenders to come to an agreement on their own kept investors cautious.Euro zone finance ministers, the International Monetary Fund and the European Central Bank will gather again next week, after nearly 12 hours of talks overnight in Brussels failed to produce a consensus on how to shrink Greece's debts.After the meeting ended, French Finance Minister Pierre Moscovici said a deal was just "a whisker away," while European paymaster Germany said a plan was being developed to provide Greece with funding until 2016.Shares in Europe rebounded from early losses. The FTSEurofirst 300 index of top shares closed 0.3% higher, while the Euro STOXX 50 recouped from an earlier drop to add 0.5%."European exchanges themselves are doing okay, so investors are saying 'we didn't really expect a resolution (on Greece),' just kind of learning to live with it," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.US stocks gained in trading thinned by a national holiday Thursday for Thanksgiving. The Dow Jones industrial average was up 53.21 points, or 0.42%, at 12,841.72.The Standard & Poor's 500 Index was up 3.27 points, or 0.24%, at 1,391.08. The Nasdaq Composite Index was up 9.56 points, or 0.33%, at 2,926.24.Investors in the US digested the latest data, including weekly jobless claims that met expectations and a final read on November consumer sentiment that was below forecasts.Market participants remained anxious about tax and spending changes - known as the fiscal cliff poised to come into effect in the new year, though policymakers are not expected to get back to negotiations until after Thanksgiving.The benchmark 10-year US Treasury note was down 6/32, with the yield at 1.6882%.The euro rose 0.1% to $1.28, also rebounding from earlier weakness of as much as 0.5%.Prices for German debt, the safest in the euro zone, had eased slightly, sending 10-year yields down modestly to 1.431%.However, a sale of 3.25 billion euros ($4.2 billion) of new German 10-year debt, which paid an interest rate of 1.5%, drew solid demand from investors worried about the outlook.Before the Greek impasse, world equity markets had come under pressure after Federal Reserve Chairman Ben Bernanke warned that the central bank lacked the tools to cushion the impact of a potential US fiscal crisis.Bernanke said worries over fiscal negotiations, aimed at preventing a series of mandatory tax increases and spending cuts early next year, had already damaged growth in the world's largest economy.His comments snapped a two-day rally on Wall Street Tuesday, but the MSCI world equity index later rose 0.3%.Asian shares had initially fallen Wednesday in reaction to the Greek aid payment delay, but closed modestly higher, buoyed by gains in mainland Chinese markets and in Tokyo.MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.2%, while Japan's Nikkei stock average closed up 0.9% at a two month-high.The Nikkei's gains came as shares of exporters rose, after the yen hit a seven-month low against the dollar, on expectations a new government will aggressively push the Bank of Japan to expand monetary stimulus.Japan's opposition Liberal Democratic Party, tipped to win next month's general election, also promised to boost spending as it emerged that exports had fallen in annual terms for a fifth straight month in October.The yen rose 0.9% to the dollar, rebounding from its weakest level since early April. The US dollar was off 0.1 against a basket of currencies, while Brent crude erased earlier losses to trade flat at $109.91 per barrel.Oil was flat, after earlier having been supported by mounting tensions in the Middle East amid days of fighting between Israel and Hamas, which many feared could disrupt oil flows.Concerns about Greece and the impact that could have on international growth, however, weighed on crude prices."There are opposing forces where the uncertainty in Europe and the United States meets with the bullish uncertainty in the Middle East ... so I think we're going to see a volatile market," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

NEWS,08.11.2012

Draghi open to ECB rate cut

The euro zone economy shows little sign of recovering before the year-end despite easing financial market conditions, European Central Bank President Mario Draghi said today, leaving open the possiblity of an interest rate cut in the months ahead.But after keeping rates on hold, Draghi said the ECB cannot do much more to help Greece with its debt burden and gave Spain none of the assurance it wants that ECB bond buying will lower its borrowing costs."The ECB is by and large done," Draghi told his monthly news conference when asked what the bank could do for Greece.The euro zone is grappling to find a formula to make Greek debt sustainable, with Germany and the International Monetary Fund at odds over the need for governments and the ECB to take a "haircut" on Greek bonds they hold to make the numbers add up.The ECB agreed earlier this year to hand over to euro zone governments profits on its Greek bonds but has refused to take a hit on the value of the paper, saying that would be "monetary financing" which it is prohibited from doing.The ECB held its main rate at 0.75%, deferring any cut while it waits for a cue to use its new bond-purchase plan. That wait may be prolonged after Spain completed its 2012 funding at affordable rates on capital markets on today.A  poll had given an 80% chance the ECB would hold its main rate, but most of the 73 analysts polled expect it will be cut to a new record low of 0.5% within the next few months.Draghi said ECB monetary policy is "very accommodative". He declined to comment when asked whether markets were right to expect a rate cut next month and said the policymaking Governing Council had not discussed what it would do next year.Economist Howard Archer at IHS Global Insight said: "Draghi appeared to ease open the door to a cut in interest rates over the coming months and potentially as soon as December." Not everyone expects a cut that soon. "Our sense is that the ECB is firmly on hold," said JP Morgan economist Greg Fuzesi, though he added: "Next year, the ECB will act if growth disappoints more fundamentally." Describing "a picture of weaker economies" in the euro zone, Draghi said this would influence new ECB economic forecasts due next month. Inflation would remain above the ECB's target for the rest of the year, before falling below 2% in 2013."We certainly continue monitoring economic activity and we stand ready to act," he said." We stand ready to act with OMT (bond-purchase plan) once the prerequisites are in place. We also stand ready to act with the rest of standard, normal monetary policy instruments. "Recent survey evidence gave no sign of improvement towards the year-end and the risks surrounding the euro area remain on the downside, Draghi said. As he spoke, the euro fell against the dollar and hit a session low in early New York trade.Gloomy data this week indicated the euro zone economy will shrink in the fourth quarter, which the ECB could eventually respond to by cutting rates.Before making any decision to cut rates further, the ECB will focus on making sure that its looser policy reaches companies and households across the euro zone, a mechanism that has been broken by the bloc's debt crisis.The new bond-purchase plan - dubbed Outright Monetary Transactions (OMTs) is the ECB's designated tool for this but can only be activated once a euro zone government requests help from the bloc's rescue fund and accepts policy conditions and strict international supervision.So far no request has been made, but the announcement of the policy alone has calmed markets."We are ready to undertake OMTs which will help to avoid extreme scenarios, thereby clearly reducing concerns about the materialisation of destructive forces," Draghi said.Asked whether he could imagine an extreme scenario in which the bank began buying bonds without conditions, he said the answer was 'no'.Investors and euro zone policymakers have been urging Spain to seek aid but Prime Minister Mariano Rajoy has so far held off a request, saying he wants assurances that ECB intervention would bring down Spain's debt costs.Draghi gave Rajoy no comfort."The Governing Council will take the final decision in total independence," he said of any decision on whether to use the OMT programme."In so doing, it cannot give any assurance ex ante".Spain sold 4.8 billion euros of debt including its first longer-term issue in 18 months on Thursday, enough to complete its 2012 financing programme and begin raising funds for next year. So there is little immediate pressure on that front.Yields on Spanish government bonds have dropped by around 2 percentage points since Draghi said in late July the ECB was ready to do "whatever it takes to preserve the euro" - a pledge that heralded the bond-buying plan.

Obama mulls new cabinet picks

US President Barack Obama, fresh from re-election and facing a new clash with congress, got back to work on Thursday, with an important item on his to-do list, stocking his new cabinet.Obama is expected to lose his heavyweights including Treasury Secretary Tim Geithner, Secretary of State Hillary Clinton and Defence Secretary Leon Panetta, for most if not all of his second four-year term.The president will also likely have to make changes to his White House staff with some senior aides, exhausted by a crisis-strewn four years, expected to move on and others shifting to different administration jobs.Speculation is already rife about who will replace Clinton, who has reiterated that she wants to reclaim a private life put on hold by decades in the spotlight of top level politics. Clinton has said she has no interest in another White House race, but the campaign blitz for Obama by her husband former president Bill Clinton, and the power couple's passion for politics, has sparked renewed speculation.Until Clinton makes her final decision known, the Democratic Party's other possible 2016 presidential candidates will likely hold their fire, as the former first lady would be a prohibitive favourite if she did run.UN ambassador Susan Rice, who has been close to Obama for years, has long been seen as a likely replacement for Clinton at the state department, despite being caught up in the furore over the raid in the US consulate in Benghazi.Another possible contender is John Kerry, chairperson of the senate foreign relations committee, whose stock rose in Obama world after he played Republican nominee Mitt Romney in Obama's practice dry runs for the presidential debates.Rice would be the second African American woman to hold the post after Condoleezza Rice, to whom she is not related. She is known at the United Nations for an assertive manner and not shy about pounding home the US point of view.A report in Russia's Kommersant newspaper on Thursday said that Moscow, with whom Rice has clashed heatedly over Syria, would prefer to see Kerry get the job, at a sensitive time between Obama and restored Russian President Vladimir Putin."It would be more difficult for Moscow to work with Washington" if Rice became secretary of state, the unnamed Russian official was quoted as saying.Kerry would have to step down from the senate, however, and there is concern that his Massachusetts perch could fall prey to Republican Scott Brown, who lost a race with Democrat Elizabeth Warren for the state's other senate seat.White House sources said that the usual timetable for replacing cabinet members  in plenty of time for confirmation by the Senate after the presidential inauguration in January could slip this time.Geithner and Panetta are key figures in the year-end budget and tax showdown looming with Republicans, and may not move on until the so-called "fiscal cliff" drama is resolved.Some insiders talk about White House chief of staff Jacob Lew, himself a budget specialist, as a possible successor for Geithner while others speculate that Obama may reach for someone with business credentials to improve his shaky standing with the corporate world.Panetta is expected to leave the administration at some point, but did not serve for the full four-year first term, having taken over just last year from Robert Gates, a holdover from the previous Bush administration.Also known as a budget specialist, Panetta may stay in place until expected spending reductions are factored in to the Pentagon's budgetary plan to return to his walnut farm in California's Carmel Valley.The current favourite to succeed him is Michele Flournoy, who served as under secretary of defence for policy early in Obama's first term.Her appointment may appeal to Obama's sense of history as she would be the first woman to hold the role.Should Flournoy not get the job, some defence analysts think that the current deputy defence secretary Ashton Carter could be in the frame.There may also be other cabinet departures. It is unclear whether Attorney General Eric Holder, a close associate of Obama who has had a bruising from Republicans, will stay on.Education Secretary Arne Duncan is expected to remain in place to pilot through congress Obama's reform programme, likely a highlight of his second term agenda.Obama may also have some shuffling to do at the White House, especially if Lew moves to Treasury. His political guru, David Plouffe, is expected to leave and there may be other high profile departures.The president sparked speculation on Tuesday when he said he wanted to sit down with Romney to work out how they could take the country forward.Obama's first term "Team of Rivals" approach of choosing former political foes like Clinton, modelled on that of his hero Abraham Lincoln, could apply in Romney's case, perhaps in a job like Commerce Secretary.However, it is unclear whether Romney would be prepared to swallow his pride and work for the man who vanquished him in a bitter White House campaign.

Iran not ruling out nuclear talks with US

Iran, reeling from international sanctions over its nuclear programme and facing four more years with Barack Obama as leader of arch-enemy the United States, does not rule out direct talks with Washington but says they will not come overnight.Obama's re-election drew an ambiguous response from President Mahmoud Ahmadinejad, who dismissed the US elections as a "battleground for the capitalists," at a forum on democracy in Indonesia.Without directly commenting on Obama's victory, he lambasted democracy in the West as having "turned into the rule of a minority over the majority".But behind the flamboyant rhetoric, senior regime figures have expressed cautious signs of interest in the election of Obama, who four years ago famously "extended his hand" to Tehran and may be preparing to do so again.Not overnight An influential cleric among the ruling conservatives, judiciary chief Ayatollah Sadeq Larijani, did not rule out Tehran and Washington coming "to the negotiating table" one day but warned it would not happen "overnight."Larijani said on Wednesday that "relations with the United States are not simple".The United States, which Tehran dubs the "Great Satan", severed diplomatic relations with Iran after the 1979 takeover of the US embassy in Tehran, and the two have been in a tense stand-off ever since."Four years ago, Obama was elected on a platform for change and said he was extending his hand for co-operation with Iran, but he acted otherwise and unprecedented sanctions were imposed," Larijani said.Obama has rallied US allies against Iran, toughening sanctions, with Tehran's oil exports and access to world financial systems being key targets.The United States and other world powers, including Tehran's arch-enemy Israel, accuse Iran of using its nuclear programme to mask a drive for atomic weapons. Tehran denies that, saying it is for purely peaceful purposes.The last offer called for Iran to cease enriching uranium to purities of 20% - technically not far from the 90% needed for a nuclear weapon. It also wanted Iran to close its Fordo enrichment facility and to export existing stockpiles of 20% purity uranium.Iran rejected that, saying it did not offer sufficient relief from sanctions that have begun to cause real economic problems.Larijani's brother and international affairs adviser, Mohammad Javad Larijani, reiterated that negotiating with Washington "is not taboo," but any decision to renew contact "is a prerogative of the supreme leader"."If the interest of the regime requires it, we are prepared to negotiate with the Satan in the pits of hell," he said on Wednesday.A Western ambassador in Tehran said the regime "gives the impression of being willing to be more realistic in its negotiations with major powers, providing they offer it an honourable way out of the crisis".This could include, according to many Western diplomats in Iran, the revival of bilateral contact with the United States.Another European ambassador said "both sides have shown some interest (in such a revival), but the question is what the Iranians are going to ask for, and if Washington is willing to give it."In recent months, Washington has repeatedly expressed readiness for direct talks with Iran. Tehran has declined, saying its conditions were not met.Foreign ministry spokesperson Ramin Mehmanparast has said Iran "respects the vote of the American people".But "the wall of mistrust can only be reduced if the US government respects the will and the rights of the Iranian people and changes its past mistaken policies".The second European ambassador sees hope nonetheless."Whether it's nuclear talks or a possible resumption of dialogue with Washington, the Iranians are insisting on what they call the recognition of their rights as well as mutual respect," he said."The wording is vague enough to allow solutions if both parties are open to it," he added. "The re-election of Obama in any case opens a window of a few weeks or months to overcome the crisis."As it stands, a new round of talks between Iran and six world powers, the first since June, is expected by the end of the year, or in early 2013, analysts say.Mark Fitzpatrick, nuclear expert at the International Institute for Strategic Studies in London, said "it's pretty clear that the United States and its European allies are gearing up to try again for diplomatic engagement. But the question is, what will be on the table? Iran won't be making concessions unless it gets some form of sanctions relief," he said.As put by Mark Hibbs, at the Carnegie Endowment for International Peace: "There is reason for some optimism, but it is guarded optimism because in the final analysis it depends on whether Iran will 'play.' If they won't, all bets are off."

Greece passes crucial austerity bill

 

Greece's parliament passed a crucial austerity bill early on Thursday in a vote so close that it left the coalition government reeling from dissent.The bill, which will further slash pensions and salaries, passed 153-128 in the 300-member Parliament. It came hours after rioters rampaged outside parliament during an 80 000-strong anti-austerity demonstration, clashing with police who responded with tear gas, stun grenades and water cannons.Approval of the cuts and tax increases worth €13.5bn ($17bn) over two years was a big step for Greek efforts to secure the next installment of its international rescue loans and stave off imminent bankruptcy.The country's international creditors have demanded that the bill and the 2013 budget, due to be voted on Sunday, pass before they consider releasing an already delayed €31.5bn installment from Greece's €240bn bailout. Without it, Prime Minister Antonis Samaras says Greece will run out of money on November 16."Greece made a big decisive and optimistic step today. A step toward recovery," Samaras said, adding that he was "very happy" with the result.Development and growth for the country, which faces a sixth year of a deep recession in 2013, will come "only with a lot of work, with coordinated action, with investments," he said.But the close vote was a major political blow to the three-party coalition government, which holds a total of 176 seats in Parliament. The result shows support for continued austerity three years into Greece's financial crisis is dwindling fast."The government now has very little margin to take measures like this again," said Dimitris Mardas, associate professor of economics at the University of Thessaloniki. "But unless it takes various obvious actions like limiting the black economy, addressing tax evasion and improving the country's investment framework, we may end up needing new measures. And then things will be very difficult."Straight after the vote, two of the three coalition parties  Samaras' conservatives and former finance minister Evangelos Venizelos' socialists  expelled a total of seven dissenting deputies from their ranks.Lawmakers from the third, the small Democratic Left, mostly abstained from the vote in accordance with their party's line. Leader Fotis Kouvelis had said he could not back labour reforms included in the bill.During hours of acrimonious debate in parliament, Samaras acknowledged that some of the measures in the bill were unfair, but insisted they were vital to avoid bankruptcy and Greece being forced out of the euro zone and back to its old currency, the drachma."This (bill) will finally rid the country of drachmophobia," he said."Many of these measures are fair and should have been taken years ago, without anyone asking us to," Samaras said. Others are unfair cutting wages and salaries and there is no point in dressing this up as something else." But, he said, the alternative was bankruptcy that would trigger financial chaos as the country would likely have to leave the 17-country euro bloc.The measures are for next year and 2014, and include new, deep pension cuts and tax hikes, a two-year increase in the retirement age to 67, and laws that will make it easier to fire and transfer civil servants who are currently guaranteed jobs for life.The reforms aim to lower public debts but will in the process also hurt the economy, which is set to enter a sixth year of recession with unemployment at a record 25%."You are throwing people onto to the street, people who need a few more years till they get their pensions," said Panagiotis Lafazanis of the main opposition Syriza, or Radical Left, party. "What will happen to them? Will they starve?"

NEWS,18.10.2012

Clashes erupt at Greek anti-austerity protests

Greek police clashed with anti-austerity protesters hurling stones and petrol bombs on the day of a general strike that brought much of the near-bankrupt country to a standstill.In the second major walkout in three weeks, almost 40,000 protesters marched in Athens in a bid to show EU leaders meeting in Brussels that new wage and pension cuts will only worsen their plight after five years of recession.Tensions mounted when a small group of protesters began throwing pieces of marble, bottles and petrol bombs at police barricading part of the square in front of parliament, prompting riot police to fire several rounds of teargas to disperse them.A 65-year old protester died of a heart attack, hospital sources. Another three people were injured. Police detained about 50 protesters suspected of attacking them.Most business and public sector activity ground to a halt at the start of the 24-hour strike called by the country's two biggest labour unions, ADEDY and GSEE."Enough is enough. They've dug our graves, shoved us in and we are waiting for the priest to read the last words," said Konstantinos Balomenos, a 58-year-old worker at a water utility whose wage has been halved to 900 euros and who has two unemployed sons.It was the third time since late September that tens of thousands of Greeks have taken to the streets holding banners and chanting slogans to show their anger at austerity policies imposed by EU and IMF lenders in exchange for aid.Some were carrying Greek, Spanish and Portuguese flags and shouted: "EU, IMF out"."Agreeing to catastrophic measures means driving society to despair and the consequences as well as the protests will then be indefinite," said Yannis Panagopoulos, head of the GSEE private sector union, one of two major unions that represent about 2 million people, or half of Greece's workforce.Greece is stuck in its worst downturn since World War Two and must make at least 11.5 billion euros of cuts to satisfy the "troika" of the European Commission, European Central Bank and IMF, and secure the next tranche of a 130-billion-euro bailout.Lenders demand austerity European Union leaders will try to bridge their differences over plans for a banking union at a two-day summit which starts on Thursday. No substantial decisions are expected, reviving concerns about complacency in tackling the debt crisis which exploded three years ago in Greece.The austerity policies being pursued in Europe's indebted Mediterranean countries at the behest of Germany and other rich euro zone members will drive the euro apart, protesters warned."This can't go on. We sure need measures but not as tough as the ones (German Chancellor Angela) Merkel is asking for," said Dimitris Mavronassos, a 40-year-old shipyard worker who has not been paid for six months.The strike emptied streets and offices in Athens. Ships stayed in port, Athens public transport was disrupted and hospitals were working with emergency staff, while public offices, ministries, bakeries and other shops were shut.Newspaper kiosk owners, lawyers, taxi drivers and air traffic controllers were among those protesting over the cuts, which include further drastic reductions in welfare and health spending.Opinion polls show rising anger with the terms of the bailout keeping the economy afloat, and Greeks becoming increasingly pessimistic about their country's future."The new, painful package should not be passed," the ADEDY public sector union said in a statement."The new demands will only finish off what's left of our labour, pension and social rights."During Hundreds of youths pelted riot police with fire bombs, bottles and chunks of marble Thursday as yet another Greek anti-austerity demonstration descended into violence, less than a month after more intense clashes broke out during a similar protest.Authorities said around 70,000 protesters took to the street in two separate demonstrations in Athens during the country's second general strike in a month as workers across the country walked off the job to protest new austerity measures the government is negotiating with Greece's international creditors.Thursday's strike was timed to coincide with a European Union summit in Brussels later in the day, at which Greece's economic fate will likely feature large.Riot police responded with volleys of tear gas and stun grenades in the capital's Syntagma Square outside Parliament as protesters scattered during the clashes, which continued on and off for about an hour. Another general strike in late September had also seen limited, but much more intense, clashes between protesters and police.A 65-year-old protester suffered a fatal heart attack during the demonstration but efforts to revive him failed. The organizers of the protest march he participated in said the man had fallen ill before any rioting had broken out.Four demonstrators were injured after being hit by police, volunteer paramedics said. The Health Ministry said two of the protesters were treated in hospital and that their injuries were not serious. Three policemen also required hospital treatment.Hundreds of police had been deployed in the Greek capital ahead of the demonstration. Police said seven people were arrested Thursday, out of more than 100 detained.The strike grounded flights, shut down public services, closed schools, hospitals and shops and hampered public transport in the capital. Taxi drivers joined in for nine hours, while a three-hour work stoppage by air traffic controllers led to flight cancellations. Islands were left cut off as ferries stayed in ports.Athens has seen hundreds of anti-austerity protests over the past three years, since Greece revealed it had been misreporting its public finance figures. The country has been surviving since then with the help of two massive international bailouts worth a total (EURO)240 billion ($315 billion). To secure them, it has committed to drastic spending cuts, tax hikes and reforms, all with the aim of getting the state coffers back under some sort of control.But while significantly reducing the country's annual borrowing, the measures have made the recession worse. By the end of next year, the Greek economy is expected to be around three quarters of the size it was in 2008. And with one in four workers out of a job, Greece has, along with Spain, the highest unemployment rate in the 27-nation European Union."We are sinking in a swamp of recession and it's getting worse," said Dimitris Asimakopoulos, head of the GSEVEE small business and industry association. "180,000 businesses are on the brink and 70,000 of them are expected to close in the next few months."The country's four-month-old coalition government is negotiating a new austerity package with debt inspectors from the EU, International Monetary Fund and European Central Bank. The idea is to save (EURO)11 billion ($14.4 billion) in spending largely on pensions and health care and raise an extra (EURO)2.5 billion ($3.3 billion) through taxes."In 2011, only 20 percent of businesses were profitable," Asimakopoulos said. "So these new tax measures present small businesses with a choice: Dodge taxes or close your shop."After more than a month and a half of arguing, a deal seems close. On Wednesday, representatives from the EU, International Monetary Fund and European Central Bank, said there was agreement on "most of the core measures needed to restore the momentum of reform" and that the rest of the issues should be resolved in coming days.

Why Spain's Economic Doldrums Could Be Good For Startups

 

Spain is having a rough month. Again.Standard & Poor's downgraded its rating on the country by two notches last week, which has brought Spain close to junk status. On Saturday, thousands of people marched through the streets of Madrid, where they protested the Spanish government's latest austerity cuts. And the country's hiring situation remains bleak, with unemployment hovering around 25 percent.But could this kind of sour environment ultimately turn out to be a sweet one for start-ups?"This landscape is perfect for entrepreneurship," says Josemaria de Churtichaga, associate dean for IE School of Architecture in Madrid. "I'm not defending the crisis but in some way the crisis is helping to change or should help to change the attitude within the young people, which I think is the mass that is suffering more -- and, at the same time, is the mass that has been living too well for the last decades, too protected from their parents, too protected by the state."Certain universities in Spain are more aggressively pushing for the creation of homegrown entrepreneurs who could launch and oversee new ventures and the Spaniards who might work there. One tactic, besides teaching courses on entrepreneurship: getting students from business schools as well as engineering or science departments to participate in startup or acceleration labs, and prepping recent grads to pitch their business plans in front of potential investors. But the academic efforts may also mean students both those wanting to launch a business, and others seeking a job at an existing organization need to be taught to become much more competitive as a way to survive in Spain's uncertain economy. "I sometimes wonder whether we should emphasize more some facets of managerial personality, like competition," says Santiago Iniguez de Onzono, dean of IE Business School in Madrid. "Should we make our graduates more fierce, more willing to compete in a really tough way as some others do?"Companies are also playing a nurturing role in the growth of new startups. Everis, a technology consultancy that is headquartered in Madrid, hosts speed dating-like meetings between entrepreneurs and investors, who boast more than 40 million euros in funds to help grow startups during the first stage of operation. The initiative could spur innovation and job creation in the country's tech sector, says David Garcia Hernandez, a director at Eversis.Creative minds have also carved out a space in an old garage near Madrid's CaixaForum Museum for entrepreneurs who want to start or nurture enterprises with a socially driven mission. Known as Hub Madrid, which launched three years ago, it is designed to be a shared working space where member entrepreneurs "are challenging you, provoking you, inspiring you to do what it is you're passionate about and also makes an impact," says Max Oliva, a Hub Madrid co-founder. Around 300 members have been paying between 15 to 300 euros a month to garner access to this shared space. It encourages collaboration through rounded desks, where there is no hierarchical "head" of the table, as well as non-ergonomic seats that regularly "encourage" people to get up and mingle near the kitchen or a library built of old wine cases. A second floor is being completed, where giant holes punched through the walls are supposed to encourage more discussion flow and better opportunities for eavesdropping, which could lead to new collaborations. "It's an ever-changing space to provoke sparks, to provoke accidents, to provoke failures that are positive failures," says Churtichaga, who helped design Hub Madrid.Other companies are working closely with local universities to provide additional training to students who are looking for a leg up in a tough hiring climate. Emzingo, for one, sends MBA candidates from Spain and other countries from around the world to South Africa and Peru, where students work with NGOs to improve and expand operations through mini-consulting projects. The for-profit social enterprise provides students with leadership development training as part of the experience and is a growing network of alumni (more than 75 so far), including some who have landed jobs at companies such as McKinsey, PwC, Bayer and Johnson & Johnson. "We're working now [on] placement after the MBA, so that's an extra benefit that you get for going through the program," says Pablo Esteves, who is based in Madrid and works as Emzingo's director of branding and partnerships.

Exhibition explores love, hate of money

New York - How does money make you feel? Fearful, stressed, happy?

US financial guru Suze Orman has teamed with the producer of the popular Body Worlds exhibits for a new traveling show to look at how we relate to and understand money.Orman, media star and author of best-selling books on personal finance, described the finance-themed exhibit as "an extension of my life's work as a financial educator, and an innovative way to teach people about money".The interactive, multi-media exhibit, "Economia: Money Matters," will begin a five-year, nationwide next year, starting in Chicago. The admission-charging show will move on to other venues that include science and natural history museums.Gail Vida Hamburg, who designed and developed the exhibition, said she hit on the idea several years ago."I found a study about worry, stress and depression and their links to money or rather the lack of money ... I realized that I could synthesize all of this information into a designed exhibition with multimedia and interactives (displays)," said Hamburg, who designed the Body Worlds traveling exhibition of preserved human corpses that has toured Europe, North America and Asia.The Money Matters exhibit spans 7 000 square feet with galleries on phases of life ranging from College Road to Third Phase, or retirement. It aims to meet national and state financial literacy goals for children and adults.Hamburg, who founded museum exhibit firm Rainworks Omnimedia in 2010, believes the show's appeal is universal because money is something that everyone has a relationship with throughout life.Orman has described the show as a walk through the life of money, and the effect it can have on you."It will be entertaining," she said in a statement, "and when you're having fun learning, the lessons stay with you."Hamburg said she addressed finance's fear factor by engaging people with various exhibits and displays."How do you make it easy for visitors to understand the power of compounding?" she asked, adding that it has traditionally been taught with graphs or charts or calculators.She decided to approach it differently using visitor prompts, and entry into a computer terminal and to show the results through the growth of actual physical objects."We should all be so smart with money and channel our inner Suze Orman. But we're not and we don't. Unless you're an MBA or an economist or a freak, you don't want to read about SEP-IRA or social security or student loan interest rates."The goal of the exhibition "is to give visitors the tools and resources for financial self actualization," she added.

NEWS,17.10.2012

Putin says Russia will not be dictated to on arms sales

President Vladimir Putin said today that only the UN Security Council could restrict Russian weapons sales abroad, a remark that appeared aimed at defending the Kremlin against criticism of its arms supplies to the Syrian government."Only sanctions imposed by the UN Security Council can serve as a basis for limiting weapons supplies," Putin said, according to state-run Itar-Tass news agency."In all other cases, nobody can use any pretext to dictate to Russia on how it should trade and with whom," he was quoted as telling a meeting of a state commission on the arms trade.The West has criticised Russia for vetoing, along with China, three UN Security Council resolutions aimed at putting pressure on Syrian President Bashar al-Assad to end a conflict that has killed an estimated 30,000 people in 19 months.Russia sold Syria $1 billion worth of weapons last year and has made clear it would oppose an arms embargo in the Security Council because of what it says are concerns rebels fighting Assad's government would get weapons illegally anyway.Putin said in June that Russia was not delivering any weapons to Syria that could be used in a civil conflict.Turkey said on October 11 that a Syrian passenger plane grounded en route from Moscow to Damascus was carrying weapons. Moscow said the cargo included radar parts that were of dual civilian and military use but were fully legal.Moscow in 2010 scrapped plans to deliver high-precision air defence missile systems to Iran, citing sanctions imposed by the UN Security Council over Tehran's nuclear programme, a move welcomed by the United States and its European allies.Russia denies trying to prop up Assad, who allows Russia to maintain a naval supply facility in the port of Tartus that is its only military base outside the former Soviet Union.But Moscow says Syria's crisis must be resolved without foreign interference, particularly military intervention.

Greece declares progress as inspectors depart

Inspectors from Greece's international lenders will leave Athens after making substantial progress on talks to unlock aid for the near-bankrupt country but without agreement on crucial labour reforms, officials said today.After months of often heated and testy negotiations, Athens and its European Union and International Monetary Fund lenders appeared to be in the home stretch toward a comprehensive deal on spending cuts and reforms needed to avoid a Greek bankruptcy."I'm confident we're doing everything we have to do in order to get it (a deal) and get it soon, so that we can move towards a recovery," Prime Minister Antonis Samaras said at a meeting of European centre-right parties in Bucharest.A senior Greek government official earlier said the two sides had reached agreement on all issues except labour reforms.In a rare statement to reporters during talks late on Tuesday, the IMF's mission chief for Greece, Poul Thomsen, also declared that the two sides had agreed on "most policy issues", with agreement on the rest expected soon.Thomsen and his European Commission and European Central Bank counterparts are due to depart Athens today in order to brief leaders at a two-day European Union summit, where Greece's future will loom large despite not being the focus of talks.Once a deal on the austerity package and reforms is clinched, the so-called troika of EU, ECB and IMF lenders are due to present a report on Greece's progress in meeting the terms of its bailout and whether it can cut its debt down to sustainable levels.That report is expected to show that Greece is hugely off track on its commitments, which critics blame on a lack of political will, political paralysis during repeat elections this year and a deeper than expected recession.But with Greece due to run out of money next month and Europe determined to avoid fresh market turmoil that drags down bigger economies like Spain and Italy, Athens is expected to ultimately secure its next 31.5 billion euro aid tranche.Still, Athens needs the blessing of the troika on a 11.5 billion euro austerity package as well as a long list of reforms first to be able to unlock that aid.Talks on both fronts have moved slowly since July, with signs of progress tempered by tension and mistrust over the ability of Greece's political brass to push through public sector reform and generate savings."Hard red line" On Tuesday, the two sides resolved differences on the extent of Greece's recession next year and issues related to health spending cuts after hitting an impasse on labour reforms during an earlier round of talks, officials said.They agreed Greece's economy would contract 4.2% next year - a key estimate in calculations to determine whether Greek debt will be viable - after Athens initially predicted a 3.8% tumble and lenders forecast a 5% contraction.Officials also suggested that most of the issues related to the long-discussed spending cuts package had been resolved apart from disagreement over the use of brand name or generic drugs in the state healthcare system."There has been substantial progress on all fronts and only some issues remain open, mainly labour and structural," a second Greek government official said."We are confident these will also be resolved in time."

Wall Street rises on US housing data

Global stocks rose and the euro hit a one-month high today, helped by brighter prospects for resolving Spain's debt woes, while better-than-expected housing data and gains among financials lifted the US equity market.US and German government debt prices fell after Spain avoided a damaging ratings downgrade from Moody's and stronger-than-expected US housing data pointed to an improving economy, which reduced safe-haven demand.Growing speculation that Spain will ask for a bailout next month lifted the euro. A possible line of credit to Spain and some easing of German opposition to aid for Greece and Spain were also likely to support the euro in the near term.Wall Street was mostly higher, putting the S&P 500 on track for a third day of gains, but disappointing results from Intel Corp and IBM weighed on the Dow.Intel slumped 3.0% to $21.68 while IBM lost 5.2% to $200.08. Both were among the biggest drags on the Dow and Nasdaq 100.M&T Bank jumped 5.2% to $102.48 after posting third-quarter results, helping to lift the KBW Bank index 1.5%, while the S&P financial services index rose 1.1%, the biggest gainer among the 10 S&P 500 sectors."It seems like it's a classic earnings period reaction. Either people are too exuberant and expectations are raised too high to beat when the actual number comes out or people are too pessimistic and the earnings are just not as low," said Rick Meckler, president of hedge fund Liberty View Capital Management in Jersey City, New Jersey.The Dow Jones industrial average was down 7.52 points, or 0.06%, at 13,544.26. The Standard & Poor's 500 Index was up 6.30 points, or 0.43%, at 1,461.22. The Nasdaq Composite Index was up 10.01 points, or 0.32%, at 3,111.19.European shares rose for a third consecutive session after Spain clung to its top grade credit rating, bolstering expectations the euro debt crisis can be contained."Spain is in a better place for now," said Richard Robinson, a fund manager at Ashburton who recently bought shares of Spanish bank Bankinter and Italian bank Intesa on prospects of improved euro zone economic problems.The FTSE Eurofirst 300 index of top European shares gained 0.5% to close at 1,118.62. MSCI's all-country world equity index rose 0.8% to 338.24, extending Tuesday's 1.2% gain.The euro was up 0.55% at $1.3124, its highest since mid-September.Bond losses accelerated after data showed that groundbreaking on new US homes surged in September to its fastest pace in more than four years, another sign that the housing sector's budding recovery is gaining traction."The housing starts and permits are both up a ton. The market was already selling off, it started overnight with Moody's affirming Spain's investment grade rating," said James Newman, head of Treasuries and Agency trading at Keefe, Bruyette and Woods in New York.Benchmark 10-year notes fell 19/32 in price to yield 1.79%.Brent crude futures fell further and US crude turned lower in choppy trading after a report from the Energy Information Administration showed US crude oil stocks rose more than consensus expectations last week.December Brent fell 92 cents to $113.08 a barrel. US oil for November fell 21 cents to $92.88.

NEWS,16.10.2012

More 'energetic' Obama predicted for debate

President Barack Obama's camp is promising that the American public will see a more energised and visionary incumbent in the second presidential debate later today.Republican challenger Mitt Romney's campaign got a much-needed shot in the arm two weeks ago when the Republican came out swinging in the first matchup between the two candidates, while Obama appeared passive and tongue-tied at times.The strong debate performance helped Romney reverse his slide in the polls, and recent surveys put the race for the White House at a virtual dead heat just three weeks ahead of the November 6 election.In a Ipsos daily tracking poll on Tuesday, Obama gained ground on Romney for the third straight day, leading 46% to 43%."I think you'll see somebody who will be strong, who will be passionate, who will be energetic, who will talk about... not just the last four years but what the agenda is for the future and how we continue to move... our economy forward," Obama's senior campaign adviser Robert Gibbs said.The 90-minute debate at Hofstra University in New York begins at 9pm EDT (2pm today NZT).Velvet glove Both men will have to deal with a more intimate town hall format, which often inhibits political attacks as the candidates focus on connecting with the voters asking the questions.It also offers an element of uncertainty as the candidates cannot predict what the audience of undecided voters might ask, which could range from tax policy to job creation to foreign policy."Almost all of the pressure will be on Obama this time, given how poorly he performed in the first debate and how much that seemed to help Romney and change the race," said political scientist Andrew Taylor of North Carolina State University.The town hall format lets the candidates "talk directly to people and look them in the eye and try to connect, which has not been a strength for either of them," Taylor said."But you can still make strong points with a velvet glove."Repairing damage During the first debate, Obama was widely criticised for not challenging Romney on exactly how he plans to give Americans a big tax cut without adding to the deficit, and for not calling attention to the more moderate views Romney appeared to present during the matchup.A Gallup/USA Today poll published on Tuesday showed the two had similar favorable ratings from registered voters. But the survey showed Romney ahead of Obama by four percentage points among likely voters in the 12 battleground states.The Reuters/Ipsos poll that gave Obama an edge showed the number of undecided voters had increased, indicating a drop of support for Romney among the coveted voting bloc.The online survey of 1,846 likely voters was conducted between October 12 and October 16.The precision of the poll is measured using a credibility interval, which is plus or minus 2.6 percentage points for likely voters.For Obama, trying to repair damage from the last debate, the challenge will be to confront Romney on the issues without seeming nasty or too personal.Romney, a wealthy former private equity executive often accused of failing to connect with ordinary people, would be happy with a steady performance to keep up his momentum.Economy The economy is expected to be a dominant topic. Obama is able to tout the latest jobs report, which showed that the unemployment rate unexpectedly dropped to 7.8% in September and reached its lowest level since Obama took office.Romney has countered that the labor market is not healing fast enough.Glenn Hubbard, one of Romney's top economic advisers, told Reuters that the Republican candidate was prepared to question Obama's record on the economy."His objective is to continue the conversation with voters about what the right economic policies are for the country," Hubbard said on the sidelines of an economic conference in New York. "He did that really well last time and I'd be stunned if he doesn't do it well tonight."Since the last debate, both sides have also focused on new lines of attack that are likely to come up in today's debate. Romney was expected to stay on the offensive over the administration's handling of diplomatic security in Libya before the attacks there that killed the US ambassador and three other Americans.The debate comes a day after Secretary of State Hillary Clinton assumed responsibility for the lack of security that failed to protect against the deadly attack."It's a matter of leadership; it's a matter of straight answers," Republican National Committee chairman Reince Priebus."I just get a feeling that this president hasn't been straight with the American people."Democrats, hoping to make more inroads with women voters, have hit Romney and his running mate Paul Ryan for their opposition to abortion rights.

The Euro: Bad Idea, Poorly Executed, Hard to Fix

When the Norwegian Nobel Committee awarded the 2012 Peace Prize to the European Union (EU), they cited advances in "peace, democracy, and human rights." The common currency zone we call the Euro Area isn't mentioned, unless it's implied by the phrase "grave economic difficulties." If the EU has been a success, the European Monetary Union (EMU) is revealing itself to be the opposite. One might argue that the euro was a mistake from the start, that the history of fixed exchange systems is littered with failure. We have some sympathy with that view, but we'd like to make two different points. First, flaws in the design and implementation of the EMU have made the crisis worse. Second, the decentralized decision-making process of the EU, with political power concentrated in countries rather than Europe, makes effective crisis management nearly impossible. The euro crisis combines, in our view, a sovereign debt crisis and a banking crisis, with mutually adverse feedback between the two. But design flaws in the system magnified their impact and feedback. The most important flaws were: Inadequate fiscal discipline. Limits on debt and deficits (the Stability and Growth Pact) failed early on when France and Germany ignored them. That paved the way for countries with weaker fundamentals, including Greece and Portugal, to issue more debt than they could support. When the crisis struck, the no-bailout clause of the Maastricht Treaty also proved to be vacuous. Compare that to the federal system in the United States. Fiscal difficulties in Illinois or New Jersey come with clear precedent against bailouts and have little impact on other states, the federal government, or the monetary system. . Symmetric treatment of sovereign debt. National bank regulators regulation remains a national activity, not a European one decided to treat the debt of Euro Area members as risk-free for capital requirements. The European Central Bank compounded the mistake, accepting all such debt as collateral on similar terms until recently. It's not hard to imagine this made the debt of weak states more attractive and allowed them to issue debt on better terms than their fundamentals indicated. These policies further weakened the credibility of the no-bailout commitment. National regulation, deposit insurance, and bank resolution. Consider a system with no limit on cross-border capital flows, but with national responsibility for regulation, deposit insurance, and resolution of insolvent banks. Add regulatory tolerance of home-country bank risk and sovereign debt problems and you have the perfect environment for a cross-border credit expansion followed by an international bank run. Add national guarantees of banks and you have a feedback amplifier linking banks and sovereigns. The feedback intensifies when bank and fiscal consolidation hit the economy. Leaks in the payments system. The Euro Area payments system (TARGET2) allowed weak banks to borrow from the European Central Bank to replace their evaporating deposit base. While this avoided a collapse of the euro, it subsidized weak banks, delayed their recapitalization, and reinforced the ongoing disintegration of the Euro Area financial market. Official funds continue to flow on a large scale from the ECB to banks in weak countries. When they buy home-country debt, the financial system becomes riskier, fragmentation more permanent, and market discipline on sovereigns less effective. The enormous growth of TARGET2 balances also makes the creditor countries worry about their exposure to a potentially fragile union. As of September, the Bundesbank's TARGET2 claims was nearly 700 billion euros. No exit strategy. The authors of the Maastrict Treaty suggested that membership in the Euro Area was irreversible: there were no provisions for exit or expulsion. The threat to leave, however, gives weak countries more leverage than strong ones. They threaten contagion to others, whose membership is revealed to be revocable, and ask for financial help to void the threat. Consider the contrasting situation of Ecuador, which decided to use the US dollar as its currency. Ecuadorians made this decision on their own, and they can change it any time they wish, with no perceivable impact on the U.S. or any other country. None of these features of European Monetary Union were essential to a common currency system. They were, in a sense, implementation details, but details or not, they made the crisis worse. We see the results now all over Europe. On top of this, the decentralized nature of political power in Europe makes it extremely difficult for anyone to respond effectively to the crisis. Political power, particularly the power to raise revenue, still resides in countries, not in Europe or a euro-area agency. Many important decisions require unanimous approval of the member states. That leads to concerns about whether (say) Finland will approve a measure to deal with the crisis. The best minds of Europe have come up with some creative workarounds, but it shouldn't have been this hard. The political structure has taken a difficult problem and made it nearly impossible. That was always the inherent tension at the heart of the system: collective monetary policy vs. national political power. It was never a good combination. If you could do it over again, you wouldn't do it this way. Where will this lead? Maybe Greece will leave, maybe it won't, but the rest probably will continue to muddle along from crisis to crisis. Even if the system holds together for a time, the cost is likely to be an extended period of poor economic performance  in our view, more extended than it has to be. I would love to be wrong.

 

Chinese Warships Off Japan Cross Near Island Of Yonaguni

 

Japanese military officials said they closely watching seven Chinese warships spotted in waters off a southern island Tuesday. It was unclear whether the ship movements were related to a territorial dispute that has prompted both countries to show off their maritime muscles.The Chinese ships were sighted about 49 kilometers (30 miles) from the island of Yonaguni, in Japan's Okinawa prefecture (state), according to Japan's Defense Ministry. They were about 200 kilometers (125 miles) from a chain of small islands that have sparked a heated dispute between Japan and China.The ships were believed to be returning to China after training in the Pacific.Defense Minister Satoshi Morimoto said Japan is monitoring the ships' movement. Japan considers the area part of its contiguous waters, but it is not illegal for foreign vessels to transit them.It is not unusual for the Chinese navy to transit waters around Okinawa en route to the Pacific, but this is the first such operation observed this year, according to public broadcaster NHK. The ships included frigates, a guided missile destroyer, a refueler and two submarine rescue vessels.It was unclear if their mission was directly related to the territorial issue, or whether they were trying to avoid an approaching typhoon.China's Defense Ministry said the ships were on a scheduled cruising exercise and were acting in a manner that was "appropriate and legal."Underscoring China's sharper stance, it also protested the scrambling of a Japanese military plane in the direction of the disputed islands, calling that a "gross violation" of Chinese sovereign rights."The Chinese military is closely following the actions of the Japanese side and demands Japan halt all actions complicating or escalating the situation," the ministry said in a short statement on its website.Japan angered China last month by nationalizing part of the chain of uninhabited East China Sea islands called Senkaku in Japanese and Diaoyu in Chinese. The move sparked violent protests in China.Chief Cabinet Secretary Osamu Fujimura said Tokyo has urged Beijing to "avoid any actions that would go counter to the mutual benefit."Nearby Taiwan also claims the islands, which are uninhabited but surrounded by rich fishing grounds and possibly lucrative undersea energy deposits.China and Japan have recently stepped up naval activities in the area around Okinawa because of the dispute, but there have been no clashes between their warships, which have generally stayed away from the islands themselves.Wary of missteps that could lead to a sudden escalation of tensions, the countries have instead sent less threatening coast guard ships. Over the past week, however, both have made a point of showing off their naval prowess.Chinese websites were abuzz Monday with photographs of navy pilots practicing touch-and-go landing exercises on China's first aircraft carrier. It wasn't clear when the pictures were taken, and they did not appear on the Defense Ministry's website or in official media.The carrier was launched last month without aircraft or an accompanying battle group, and actual flight operations could be years away. But it is widely seen as a symbol of China's ambitions to be a leading Asian naval power, especially as it faces sharpening territorial conflicts with Japan and other countries.Japan's navy, meanwhile, marked its 60th anniversary with a major exercise on Sunday. Japan also plans to hold a joint exercise with the U.S. military later this year, reportedly using a scenario of taking a remote island back from a foreign intruder.Asked how China sees the reported scenario, Chinese Foreign Ministry spokesman Hong Lei said, "To maintain the peace and stability of Asia-Pacific is beneficial to all sides." He added: "Increasing tension is against the bigger trends of regional security, peace and the buildup of political and security trust. We reserve the right to take further action."Defense Minister Morimoto declined to confirm the scenario or give other details.In Sunday's exercise, about 40 ships – including state-of-the-art destroyers, hovercraft able to launch assaults on rough coastlines and new conventionally powered submarines took part in Fleet Review 2012, the maritime equivalent of a military parade.About 30 naval aircraft, mostly helicopters, also participated. For the first time, Japan's navy was joined by warships from the United States, Singapore and Australia. Representatives from more than 20 countries, including China, attended the event staged in waters south of Tokyo.