Foreign investors set to sue Spain
Foreign investors in
renewable energy projects in Spain have hired lawyers to prepare potential
international legal action against the Spanish government over new rules they
say break their contracts.It is unclear how much claims might be worth, but
international funds have more than €13bn of renewable energy assets in Spain
and say that the government has reneged on the terms of their investment.The
Spanish Parliament approved a law on Thursday that cuts subsidies for alternative
energy technologies, backtracking on its push for green power.That measure,
along with other recent laws including a tax on power generation that hit green
energy investments especially hard, will virtually wipe out profits for
photovoltaic, solar thermal and wind plants, sector lobbyists say.International
commercial law firm Allen & Overy on Thursday that it is
representing a group of investors in concentrated solar power plants in
relation to potential claims under the international Energy Charter
Treaty."International investment funds are consulting with legal advisers
on how to proceed with action. There will be various lawsuits," Luis
Crespo, secretary general of Spain's solar thermal association.He said that
investors from the United States, Japan and the United Arab Emirates are among
those pursuing action through the Brussels-based Energy Charter, an
internationally ratified treaty that binds members to rules on energy and
arbitration.Allen & Overy is already handling an earlier claim against
Spain, filed in 2011 on behalf of photovoltaic investors. The investors it is
representing for potential new claims are in the solar thermal industry.Spain's
Industry Minister Jose Manuel Soria defended the law in Parliament on Thursday,
saying that the measures were necessary to eliminate the accumulated €28bn
tariff deficit in the electricity system.That deficit, built up
through years of the government holding down electricity prices at a level that
would not cover regulated costs including renewables premiums, is at the heart
of Spain's energy sector woes.A spokeswoman for the ministry said that its
policy was not to comment on legal issues."I don't know why anyone would
put another penny in investment in the sector in Spain," said one leading
investor whose firm is studying possible claims.The same source, who asked to
remain anonymous, said that the reforms could drive some solar industry
projects, particularly ones that are highly leveraged, into bankruptcy.Foreign
investors poured money into Spanish wind and solar projects, drawn to generous
subsidies during a decade-long economic boom that helped the country to become
one of the biggest markets for investments in green energy.The problem was that
the cost of the subsidies were not passed on fully to consumers because that
would have pushed prices to unprecedented highs.Spanish companies such as
Acciona and Abengoa have also been hit hard by the new rules, but because it is
passed as a decree by the government, Spain-based companies have virtually no
form of appeal and will not join the claims being studied by foreign
investors.Listed foreign companies with investments in the sector include
Germany's E.ON and Japan's Mitsubishi and Mitsui, several sources from the
energy sector said.Some of the funds planning legal action are also among the
11 investors who sent a letter to Prime Minister Mariano Rajoy in July to
complain of another energy reform with a retroactive impact on investments, the
sources said.
EU finance trade tax applicable globally
A financial
transactions tax to be adopted by 11 EU states should raise €30-35bn each year
but the levy will apply worldwide, the European Commission said Thursday,
sparking a sharp reaction from opponents led by Britain.The Financial
Transaction Tax (FTT) imposes a tax of 0.1% on a trade in shares and bonds, and
of 0.01% for derivative instruments.The Commission said that if any of these
investments originate in one of the 11 FTT states, then they can be taxed
wherever they are traded, giving them a global reach.The British government,
which led opposition to the original 2011 proposal on concern over its impact
on the giant London financial centre, said this "unilateral (tax) ... will
hit growth for the countries taking part, which is why Britain was right not to participate in such a measure."Business
organisation the Institute of Directors in London was scathing, rejecting any
suggestion the 11 EU states could enforce the tax in Britain, which like all EU
members, retains full national control over taxation."This is a daft idea
which will throw grit in the wheels of the market, catching not just banks but
also customers, pension funds and businesses," said Simon Walker, head of
the group."Any attempt to extend it to the UK by the back door
would violate the (EU) single market. We are fully entitled to transact
business in financial products issued in France, Germany or the other countries
on our own terms, under our own tax regime," Walker added.After failing to
get support from all 27 EU states, France and Germany pushed ahead with the tax
under the EU's Enhanced Cooperation procedure and they were joined by Austria,
Belgium, Estonia, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.EU
finance ministers last month cleared the tax, seen as a way of clawing back
state money spent in propping up the banking sector during the debt crisis.EU
Tax Commissioner Algirdas Semeta said the FTT "is an unquestionably fair
and technically sound tax, which will strengthen our Single Market and temper
irresponsible trading."Asked by reporters how the FTT could apply to
countries refusing to sign up, Semeta said he saw no problem and that
discussions would resolve such issues.The FTT has three main objectives, Semeta
said in a statement, firstly strengthening the EU Single Market by
"reducing the number of divergent national approaches to financial
transaction taxation."Secondly, it will ensure that the financial sector
makes a fair and substantial contribution to public revenues. "Finally,
the FTT will support regulatory measures in encouraging the financial sector to
engage in more responsible activities, geared towards the real economy,"
he said, highlighting the political drive to make the financial sector pay for
some of the excesses blamed for causing the debt crisis.The statement said the
FTT will to be based on a "residence principle" which could have
far-reaching implications"This means that the tax will be due if any party
to the transaction is established in a participating Member State, regardless
of where the transaction takes place," it said.The "residence
principle" is expressly aimed "to safeguard against the relocation of
financial transactions," according to background notes provided.The tax
will also incorporate an "issuance principle" as a further safeguard
against avoidance of the tax, the statement said. "This means that
financial instruments issued in the 11 Member States will be taxed when traded,
even if those trading them are not established within the
FTT-zone."Supporters of the tax such as Oxfam pressed for speedy adoption
of the FTT."The smart design and the scope of the FTT ... will make it
difficult for financial institutions to avoid or evade the tax," the
charity said in a statement."It is vital that this proposal is adopted in
full to ensure the financial sector contributes its fair share to the costs of
the crisis, which is hurting hundreds of millions around the world."
The FTT proposals now
go to the European Parliament and EU leaders for approval.
Gold demand losing its glitter
Demand for gold fell
last year for the first time since 2009 as Asians bought less jewellery and
Western investment dipped, the World Gold Council said in a report.Gold output
fell by 21.2% in volume terms in December, Statistics South Africa said on
Thursday.The WGC, which is funded by the gold industry, said on Thursday that
gold consumption was expected to be steady this year but added that it may be
some time before it revisits the high levels seen in the worst of the financial
crisis."It's hard to see a major move up in demand (this year). I know
there are bears out there who are starting to call the end of the bull market
in gold, but we don't agree," said the WGC's managing director for
investment, Marcus Grubb. "Demand will remain high, but we're talking
small single-digit (percent) numbers in terms of growth from the current
tonnage level," he said.In 2012 demand was down 4% from the previous
year's total, the WGC report said. "The tonnage last year was 4 405 tonnes
for consumer demand, and if you add in over-the-counter demand, it's another
100 tonnes higher," Grubb added. "We would expect 2013 to be quite
similar."Grubb said he saw gold prices, which have traded between $1 625
and $1 695 an ounce this year, staying in their current trading range, although
events that could destabilise the market, such as US budget talks, could push
them higher.The gold price is down 1.4% so far this year after posting its
biggest quarterly drop since 2008 in the last three months
of 2012. Credit Suisse, Goldman Sachs and GFMS have all forecast a turn in
gold's bull cycle this year."Unless something major changes in the macro
landscape, this (report) does back up the idea that investors' attention is
much more focused elsewhere at the moment," Credit Suisse analyst Tom Kendall
said. Jewellery demand fell 3% last year to 1 908.1 tonnes, with the biggest
absolute drop noted in India, the largest gold consumer, where a weak rupee led
to record-high local prices.In the fourth quarter it rose 11%, however, helped
by a 35% rebound in Indian jewellery demand. "Jewellery could have a good
year in 2013," Grubb said. "Western demand might at last improve as
the US economy and others improve."China, the second-biggest gold buyer
behind India, saw a 1% drop in jewellery demand to 510.6 tonnes, its first
annual decline since 2002.Overall demand was flat in China in the full year and
fell 12% in India, although buying rose in the final quarter as buyers
scrambled to avoid a widely anticipated rise in import duty that was announced
in January."Provided we see no more increases in import duty, we still
think we will see India continue to recover
from what was a difficult year in 2012 overall," Grubb said. He said a
higher number of auspicious gold-buying occasions in the first quarter of 2013
would probably favour the metal.When you look at the full year, we're
anticipating that we'll see 865-965 tonnes of demand," he said. In China, demand is expected
to recover to between 780 and 880 tonnes this year, against 776.1 tonnes last
year."The jury's out on a major re-acceleration of growth in Chinese gold
demand," Grubb said. "Last year we saw the first significant slowdown
in the Chinese economy in years. That did affect these numbers. What you're
seeing in January and February is a re-acceleration in the Chinese
economy."Buying by various central banks continued its upward trend to hit
a 48-year high at 534.6 tonnes. Grubb said he expected the official sector to
match last year's buying in 2013, partly because monetary easing by developed
countries was undermining confidence in the value of currencies."Emerging
country central banks regard quantitative easing policies as divisive and
(believe they) affect the value of the assets that they hold - the dollar and
euro, for example," he told at the Global Gold Forum."They are
diversifying away from traditional currencies and buying gold as a hedge."
Bar and coin investment fell sharply in the United States and Europe last year, with US offtake dropping by
more than a third and European buying down 29%. Overall investment demand last
year fell 10% to 1 534.6 tonnes. Investment via gold-backed exchange-traded
funds rose, however, with ETF demand up by more than half at 279
tonnes."Overall for the year (coin and bar demand) was weak, and it reflects
the fact that in Europe the announcements by the European Central Bank took away tail risk in
the mind of the investor," Grubb said."The announcement of
(bond-buying) in Europe and quantitative easing in the United States also mitigated fears of a near-term crisis, and I think that's why bar
and coin demand fell. Institutional investors and private wealth took a
different view you see the ETF tonnages went up 51 percent and
over-the-counter (demand) had a strong year." He said while more optimism
over the outlook for the global economy was likely to encourage investment in
other assets like stocks, the fact that much of that was driven by extremely
loose monetary policy meant gold investment was unlikely to
fall."Investors are trying to call a turn in the asset cycle," Grubb
said. "The jury's still out on whether this will be the year when it
actually happens. Even if you do start to look at the world more optimistically
in 2013, it doesn't mean there isn't a role for gold in your portfolio."
US jobless claims drop
The number of
Americans filing new claims for unemployment benefits fell more than expected
last week, pointing to a continued steady improvement in labour market
conditions.Initial claims for state unemployment benefits dropped 27 000 to a
seasonally adjusted 341 000, the Labour Department said on Thursday. The prior
week's claims figure was revised to show 2 000 more applications received than
previously reported.Economists had expected claims to fall to
360 000.A Labour Department analyst said claims for Illinois and snowstorm-hit
Connecticut had been estimated.Nevertheless, because most claims are filed
online, the blizzard that slammed the East Coast appeared to have little effect
on the broader claims data, he said.While companies are no longer aggressively
laying off workers, they appear to be in no hurry to step-up hiring against the
backdrop of still lackluster demand.The economy has struggled to grow much more
than 2% since the 2007 to 2009 recession ended.ob gains averaged 181 000 per
month in 2012, far less than the at least 250 000 that economists say is needed
to significantly reduce the ranks of unemployed.The four-week moving average
for new claims, a better measure of labour market trends, rose 1 500 to 352
500.The prior week's drop to a near five-year low was probably exaggerated by
difficulties at the start of the year smoothing out the data for seasonal
fluctuations.The number of people still receiving benefits under regular state
programs after an initial week of aid dropped 130 000 to 3.11 million in the
week ended February 2. That was the lowest level since July 2008 and could
reflect people exhausting their benefits.So-called continuing claims had
hovered around 3.2 million since late November and economists had viewed that
as an indication of little change in the unemployment rate. The jobless rate
rose 0.1 percentage point to 7.9% in January.
Eurozone falls deeper into recession
The eurozone slipped
deeper into recession in the last three months of 2012 after its largest
economies, Germany and France, shrank markedly at the end of the year.It marked
the currency bloc's first full year in which no quarter produced growth,
extending back to 1995. Economic output in the 17-country region fell by 0.6%
in the fourth quarter, the EU's statistics office Eurostat said on Thursday,
following a 0.1% drop in output in the third quarter.The drop was the steepest
since the first quarter of 2009 and more severe than the average forecast of a
0.4% drop in a poll of 61 economists. For the year as a whole, gross
domestic product (GDP) fell by 0.5%.Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there are no figures
available yet for Ireland, Greece, Luxembourg, Malta and Slovenia. The big economies set the tone. Germany contracted by 0.6% on the
quarter, official data showed, marking its worst performance since the global
financial crisis was raging in 2009.France's 0.3% fall was also slightly worse
than expectations. Worryingly for Berlin, it was export
performance the motor of its economy that did most of the damage although
economists expect it to bounce back quickly. "In the final quarter of 2012
exports of goods declined significantly more than imports of goods," the
German Statistics Office said in a statement.The euro hit a session low against
the dollar after the weaker than forecast German reading and dropped again
after the release of full eurozone figures. Back revisions to the French
figures showed its output fell by 0.1% in each of the first and second quarters
of 2012, meaning the country has already experienced one bout of recession in
the last twelve months.While the European Central Bank's pledge to do whatever
it takes to save the euro has taken the heat out of the bloc's debt crisis,
even its stronger members are gripped by an economic malaise that could push
debt-cutting drives off track.French Prime Minister Jean-Marc Ayrault
acknowledged for the first time on Wednesday that weak growth was putting his
government's deficit goal for 2013 out of reach.Economists say the eurozone may
also shrink in the first quarter of 2013 although more resilient Germany is
expected to rebound."The chances that the (German) economy will return to
growth at the beginning of this year are very good. The early indicators are
all pointing upwards," said Andrea Rees, chief German economist at
UniCredit."The question is how strong the first quarter will be. We expect
growth of 0.3% but it could be more."Dutch GDP dropped 0.2% over the quarter,
keeping it in recession, while the Austrian economy shrank at the same rate.For
the more embattled members of the currency bloc, matters are of course
worse.Italy suffered its sixth successive quarterly fall in GDP his time by a
sharp 0.9% putting it into a longer slump than it suffered in 2008/2009.Its
recession has been deepened by austerity measures that outgoing Prime Minister
Mario Monti introduced to stave off a debt crisis.With an election due on
February 24/25, all sides in a three-way race between Monti's centrist bloc,
Pier Luigi Bersani's centre-left coalition and Silvio Berlusconi's centre-right
are pledging to cut taxes to try to kickstart economic growth.Spain, the
eurozone's fourth largest economy, released figures two weeks ago which showed
it remained deep in recession after a 0.7% contraction in the fourth
quarter.Madrid is also pressing on with harsh austerity measures to cut its
debt but may be given more time to meet its deficit targets by the European
Commission if its economy worsens further.There are signs that countries like
Spain are starting to benefit from harsh internal devaluations marked by wage
falls and job losses aimed at making companies leaner and more productive.The
ECB predicts the eurozone will pick up later in the year although its currency,
if it keeps strengthening, could quickly snuff out any of those hard-won
competitive advantages for its high debt members.More recent data for January
have already suggested some upturn in the first months of 2013, in the bloc's stronger members at least, and if improvement comes it is
likely to be seen in Germany first."The debt crisis has ebbed
significantly and the global economy has turned up," said Joerg Kraemer at
Commerzbank. "Therefore all the important early indicators for Germany are pointing upwards. I expect noticeable economic growth again in the
first quarter."
Dubai to build giant Ferris wheel
Dubai's ruler approved
a $1.6bn island development project that would be home to what's billed as the
world's biggest Ferris wheel.The project reflects a renewed appetite in Dubai
for extravagance as the economy rebounds from a debt-driven slump during the
past three years.The official WAM news agency said Wednesday that the Ferris
wheel, dubbed the Dubai Eye, will stand 210 meters (688 feet), exceeding the
London Eye's 135 meters (443 meters). Construction is set to begin this year.Dubai has proposed a series of
mega projects reminiscent of its boom years before the downturn hit in 2009.
The projects include theme parks and a satellite city named for Dubai's ruler, Sheik
Mohammed bin Rashin Al Maktoum.
Strikes cripple German airports
A strike by security
staff over pay hit two key regional airports in Germany for the second day in a
row on Friday and was set to resume next week.At Hamburg airport, 147 flights
were cancelled out of a total of 358 scheduled for Friday, a spokesperson for
the northern German airport told AFP.The day before some 117 departures and
arrivals had been cancelled in Hamburg.At Cologne/Bonn airport in the west of
Germany, 107 flights were scrapped, or more than half of those scheduled for
the day, according to a statement on its website.The Verdi services union
called the strike for security staff responsible for checking passengers and
hand luggage, in a dispute with management over pay deals.The union said the
strike would be suspended over the weekend before resuming Monday.On Thursday,
Duesseldorf airport had also been affected by the walkouts.
Luhabe: World needs economic revolution
In a world rife with
inequality and unemployment there is a crying need for a new breed of
entrepreneur who can combine profit with a social conscience, said acclaimed
author and social entrepreneur Wendy Luhabe.Speaking at the Entrepreneurs Unite
conference which took place in Stellenbosch this week, Luhabe said: "The
global economy is at a crossroads in most parts of the world."We are
experiencing an explosion of extreme wealth and inequality, and the confluence
of these two factors is making it impossible to tackle poverty and address many
vested interests in the economy."Luhabe pointed out that the widening gap
between the top 1% and the rest of society - as well as the inequality of
resource allocation and opportunity - are at their highest levels since the
time of the Great Depression. Little wonder then that the World Economic Forum
identified inequality as a global risk for 2013.But market forces, said Luhabe,
do not exist in a vacuum. "We shape them by the decisions that we make...
we shape them with poor leadership or we even shape them with moral
bankruptcy."She lauded Brazil one of the world's
fastest-growing economies for shaping market forces "in ways that have
lowered inequality while creating more opportunities and higher
growth".The worldwide trend of shrinking employment is not likely to
change, said Luhabe. "We need an economic revolution therefore that can
produce a new dynamic and innovative generation of entrepreneurs, but who in
addition to creating great enterprises is prepared to determine a new
socioeconomic contract. "The education system worldwide, said Luhabe, is
"totally out of alignment with the reality of the 21st century". She
identified inequality, unemployment and education as this century's biggest
timebombs. "Time is running out," cautioned Luhabe. "The world
needs a different economic logic where human capital, social and environmental
objectives become a top priority. "Turning to Africa, Luhabe said the International
Monetary Fund believes the economy of the continent has the potential to
outstrip Brazil's growth over the next five years. "Much of that growth will come
from startups which will bring the mobile internet to consumers" and
businesses which until recently have not had internet access, said Luhabe. She
further identified e-commerce, health and education as areas primed for
growth."There is an entirely new generation of entrepreneurs that are
changing the face of Africa.... Moral of the story is therefore that the future of the global
economy will be shaped by entrepreneurs who are sensitive to the social
challenges that exist in their environment."They will have the ability to
create sustainable businesses which are profitable yet at the same time address
social challenges, said Luhabe.
ECB officials rebuff FX targeting
The head of the
European Central Bank and its two German policymakers pushed back against
political pressure to target the euro's exchange rate ahead of meeting of Group
of 20 financial leaders on Friday.Speaking ahead of the meeting in Moscow, ECB
President Mario Draghi said recent loose talk on currencies was
"inappropriate, fruitless and self-defeating".Bundesbank chief Jens
Weidmann, a strong voice on the ECB's 23-man Governing Council with whom Draghi
in the past has been at odds, earlier weighed in to say the euro was not
seriously overvalued and that the ECB would not change monetary policy based on
its impact on inflation alone."All this chatter that has been undertaken
in the past few weeks is either inappropriate or fruitless in all cases it's
self defeating," Draghi said in opening remarks at a news conference after
meeting with Russian central bank officials.The Italian head of the bank had
said last Thursday that the ECB would monitor the economic impact of the
strengthening euro, feeding expectations the climbing currency could open the
door to an interest rate cut.Both Weidmann and Joerg Asmussen, the German
member of six-member Executive Board that forms the nucleus of the Governing
Council, said the ECB would not target the euro's exchange rate."I don't
think that Mario Draghi was trying to talk the euro up or down," Weidmann
said, adding that the ECB "will abstain from manipulating or directly
targeting the exchange rate."French President Francois Hollande last week
raised the possibility of political interference in exchange rate policy when
he called for a medium-term target for the euro's value, a move to counter its
recent appreciation."I fear a politicization of the exchange rate,"
Weidmann told news agency Bloomberg in an interview."I saw indications of
that in Japan but you could as well refer to recent statements by European
politicians not too far from here," he added in a thinly veiled rebuff of
Hollande's call for a currency target.The G20 forum, which put together a huge
financial backstop to halt a market meltdown in 2009, is back in the spotlight
after a week in which the Group of Seven rich nations tried, and spectacularly
failed, to speak on currencies with one voice. The G7 issued a joint statement
on Tuesday reaffirming "our longstanding commitment to market determined
exchange rates". Yet the show of unity was quickly undermined by
off-the-record briefings critical of Japan."In the last
couple of days the Group of Seven biggest industrial nations made clear once
again that currency exchange rates should be market-based and that we have no
exchange rate targets and that's true for us at the ECB too," Asmussen
told Germany's Deutschlandfunk radio.The euro hit a 15-month peak of $1.3711 on
Feb. 1, before easing slightly. The euro's strength "is one factor among
many in determining future inflation rates", Weidmann, who heads Germany's Bundesbank said in the Bloomberg interview conducted on Feb. 13.He
added: "We will certainly not justify any monetary policy decision with
one single factor".
